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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.18pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.15pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.21pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
fault+2
adversely+1
incidents+1
difficulty+1
threat+1
Positive rising
leadership+3
able+2
advantages+2
achieve+1
better+1
Risk Factors (Item 1A)
15,166 words
ITEM 1A. RISK FACTORS
Our business is subject to significant risks and uncertainties, and they should be carefully considered along with all of the information in this 2025 Annual Report. We believe that the information in this Item 1A., "Risk Factors" identifies the material risks and uncertainties most likely to affect Hertz Global and Hertz; however, these are not the only risks and uncertainties that we encounter in our operations. Additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of operations, financial condition, liquidity and cash flows in future periods. In such a case, you may lose all or part of your investment in Hertz Global's common stock or The Hertz Corporation's debt securities. You should carefully consider each of the following risks and uncertainties. Any of the following risks and uncertainties could materially and adversely affect our business, results of operations, financial condition, liquidity and cash flows in future periods.
RISKS RELATED TO OUR FLEET
The mix of program and non-program vehicles in our fleet, as well as declining values of our non-program vehicles, can subject us to an increased residual value risk.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
losses+3
disclosed+3
litigation+2
unfavorable+2
terminated+2
Positive rising
gains+4
gain+4
strengthening+2
improvements+1
strengthened+1
MD&A (Item 7)
14,316 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Hertz Global Holdings, Inc. is a holding company and its principal, wholly owned subsidiary is The Hertz Corporation. Hertz Global consolidates Hertz for financial statement purposes, and Hertz comprises approximately the entire balance of Hertz Global’s assets, liabilities and operating cash flows. In addition, Hertz’s operating revenues and operating expenses comprise nearly 100% of Hertz Global’s revenues and operating expenses. As such, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") that follows herein is for Hertz and also applies to Hertz Global in all material respects, unless otherwise noted. Differences between the operations and results of Hertz and Hertz Global are separately disclosed and explained.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
We sometimes use the words “we,” “our,” “us” and the “Company” in this MD&A for disclosures that relate to all of Hertz and Hertz Global.
The statements in this MD&A regarding industry outlook, our expectations regarding the performance of our business and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 1A, "Risk Factors.” The following MD&A provides information that we believe to be relevant to an understanding of our consolidated financial condition and results of operations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. You should read the following MD&A together with the sections entitled “ Note Regarding Forward-Looking Statements and Summary of Risk Factors,” Item 1A, "Risk Factors” and our consolidated financial statements and related notes included in Part II, Item 8 of this 2025 Annual Report.
We use program and non-program vehicles in our fleet. With program vehicles, vehicle manufacturers agree to repurchase the vehicles at a specified price or guarantee the depreciation rate on the vehicles during a specified time period. Using program vehicles in our fleet reduces our residual value risk and effectively provides fixed depreciation on those vehicles. Additionally, program vehicles provide flexibility because we may be able to sell certain program vehicles at a higher value during certain time periods than what we could for a similar non-program vehicle, enabling us to better manage our vehicle supply for our peak rental demand periods. These benefits diminish when there are fewer program vehicles in our fleet, which had generally been the case in recent years, but is improving. There can be no guarantee that we will be able to obtain the right mix of program and non-program vehicles in our fleet.
The significant majority of vehicles in our fleet are non-program vehicles. Overall, the percentage of our non-program fleet that we hold exposes us to residual value risk. Decreases in residual values of our non-program vehicles, or the failure of residual values to follow historical patterns, could result in a substantial loss on the sale of such vehicles, or accelerated depreciation while we own the vehicles. Each of these outcomes can materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Vehicle residual values are variable and subject to market conditions, as well as seasonal fluctuations. If vehicle residual values decline, we may experience a greater risk of loss on vehicle sales, an increase in depreciation expense, a negative impact on our results of operations, and we may also experience challenges in meeting collateral requirements in our fleet financing facilities.
If there is a decline in residual values for non-program vehicles in our fleet and those residual values fail to improve, it may cause us to hold vehicles longer, sustain a substantial loss on the sale for such vehicles or require us to depreciate those vehicles at a more accelerated rate than previously anticipated while we own them.
If the market value of the vehicles in our fleet is reduced or our ability to sell vehicles in the used vehicle marketplace were to become severely limited, we may have difficulty meeting collateral requirements under our asset-backed financing arrangements, requiring us to either reduce the outstanding principal amount of debt or provide more collateral (in the form of cash, vehicles and/or certain other contractual rights) to the creditors under any such affected arrangement.
If we sustain substantial losses on sale of vehicles, depreciation is accelerated or our access to, or the terms of, our asset-backed debt financing are adversely affected, it could have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
We may be unable to purchase adequate supplies of competitively priced vehicles or the cost of the vehicles we purchase may increase significantly without a compensating increase in vehicle rental rates or residual values.
Our vehicle purchase strategies have historically been and may in the future be affected by commercial, economic, market, seasonal and other conditions, including a reduction of supply from auto manufacturers and any rebates or other incentives offered by them for our purchases. Purchases of vehicles from manufacturers are generally made pursuant to a master agreement or framework agreements and are generally subject to potential delay or cancellation by manufacturers. Although we work with manufacturers on a continuous basis to gain a mutual understanding of their supply of, and our demand for, vehicles, the process by which we normally purchase vehicles does not always guarantee the availability of the desired vehicles on a timely basis, or provide us with remedies for any unavailability. Used vehicle supply and pricing can be impacted by the same factors relevant to the available supply and pricing of new vehicles, or the new vehicle market itself. Consequently, there is no guarantee that we can purchase a sufficient number of vehicles, whether new or used, at competitive prices and on competitive terms and conditions, or that we would be able to compensate for increased acquisition costs through vehicle rental rates or residual values. In addition, if we are unable to purchase new vehicles at competitive prices to refresh our fleet, increased maintenance costs in relation to our existing fleet may adversely affect our results of operations, financial condition, liquidity and cash flows.
We may not be able to effectively dispose of non-program vehicles, at the times or through the channels, that we desire.
The significant majority of vehicles in our fleet are non-program vehicles. We sell our non-program vehicles through a variety of channels, including auction, dealer direct wholesale, direct sales to third parties and retail in an effort to maximize sale prices and have access to an array of sales channels to dispose of vehicles in a timely manner. However, there are many factors that can affect the market for used vehicles. Vehicle purchases are typically discretionary for consumers and the market for used vehicles is subject to many economic factors, such as demand, consumer interests, inventory levels, pricing of new car models, interest rates, inflation, fuel costs, tariffs and other general economic conditions. Any combination of these factors can make it more difficult for us to successfullydispose of vehicles and optimize our fleet mix. Similarly, combinations of these factors may make our retail sales channels less capable of providing stable or desirable vehicle prices compared to the wholesale disposition channels. If we are unable to sell vehicles at our preferred times and through our preferred channels, or at all, it may adversely affect our results of operations, financial condition, liquidity and cash flows.
Our vehicle carrying costs, customer service scores and ability to dispose of vehicles at acceptable prices and times may be negatively impacted if we lengthen the age of our fleet.
We have at times in recent years increased, and from time to time may increase, the percentage of pre-owned vehicles in our fleet, which could be influenced by a variety of factors, including reduced new vehicle OEM offerings, supply chain constraints, capital constraints, greater customer acceptance of higher mileage vehicles, our strategic revenue initiatives (such as ride share and reinvigoration of our value brands) and choices that we make in light of residual value dynamics at any given time. However, aged vehicles present additional risks to our operations, including risk of higher depreciation costs, risk of higher maintenance costs while in the fleet and lower customer satisfaction scores. In addition, it may be more difficult for us to sell highly aged vehicles at reasonable prices, or through our preferred retail channels, or at all, or at the time that we prefer. Our inability to rotate aged vehicles for newer vehicles may have an adverse effect on our results of operations, financial condition, liquidity and cash flows.
Our business, results of operations and financial condition are dependent on the efficient operation of a complex global supply chain. Disruption in that supply chain may adversely affect our ability to service demand, or to do so efficiently.
Our supply chain, particularly with respect to access to new vehicles, is complex and reliant on raw goods and finished materials that are obtained from or manufactured by many different market participants, both within and
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ITEM 1A. RISK FACTORS (Continued)
outside the U.S. The global automotive supply chain has been negatively impacted by the military conflicts between Russia and Ukraine, and in the Middle East. Governments in the U.S., U.K. and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. Shortages in materials and increased costs for transportation, energy and raw materials, particularly with respect to raw materials extracted from, or components produced in, Russia and/or Ukraine, which are important to the vehicle manufacturing industry, including the production of EV batteries, can impact vehicle production volumes, delivery schedules and costs. The price of new cars and their components may be impacted by tariffs. We cannot predict what further action may be taken with respect to tariffs or trade relations between the U.S. and other governments. The Trump Administration has imposed and significantly increased tariffs on foreign imports into the U.S., particularly from Canada, China and Mexico. In response, many foreign countries have implemented or increased tariffs on imports into their countries. These tariff increases can adversely impact the global automotive supply chain. In addition, the global supply chain can be impacted by logistics provider capacity issues, inflationary pressures, increased freight costs, depleted inventory levels, labor shortages and demand peaks. As a result of the foregoing and other factors, various automotive manufacturers have been forced to delay or stall new vehicle production in recent years, which caused limitations in supply and delays in our receiving new vehicles. These conditions may continue, or other global and regional supply chain disruptions may in the future cause similar issues. Consequently, there is no guarantee that we will be able to purchase a sufficient number of new vehicles at competitive prices and on competitive terms and conditions to fulfill demand, or to do so efficiently.
The failure of a manufacturer of our program vehicles to fulfill its obligations under a repurchase or guaranteed depreciation program could expose us to losses on those program vehicles.
If any manufacturer of our program vehicles does not fulfill its obligations under its repurchase or guaranteed depreciation agreement with us, whether due to default, reorganization, bankruptcy or otherwise, then we would have to dispose of those program vehicles without receiving the benefits of the associated repurchase programs. In addition, we could be left with a substantial unpaid claim against the manufacturer with respect to program vehicles that were sold back to the manufacturer but not paid for, or that were sold for less than their agreed repurchase price or guaranteed value.
The failure by a manufacturer to pay such amounts could cause a credit enhancementdeficiency under our asset-backed financing arrangements, requiring us to either reduce the outstanding principal amount of debt or provide more collateral (in the form of cash, vehicles and/or certain other contractual rights) to the creditors under any such affected arrangement.
If one or more manufacturers were to adversely modify or eliminate repurchase or guaranteed depreciation programs in the future, our access to and the terms of our asset-backed debt financing could be adversely affected, which could in turn have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
Manufacturer safety recalls could require costly and time-consuming repairs to our fleet.
The Raechel and Jacqueline Houck Safe Rental Car Act of 2015 prohibits a rental car company from renting or selling vehicles with open federal safety recalls until the underlying fault is remedied. If a large number of vehicles are the subject of a recall at one time, if fixes for the underlying fault have not been developed by the OEMs, or if needed replacement parts or skilled labor are not in adequate supply, we may not be able to service all of our available demand for a significant period of time. The potential impact of a recall may be particularly severe if it impacts a model that comprises a significant proportion of our fleet, or parts that are common across numerous model types. These types of disruptions could jeopardize our ability to fulfill existing or future contractual commitments or satisfy demand for our vehicles and could also result in the loss of business to competitors whose fleets are not similarly impacted. Depending on the severity of any recall, it could materially adversely affect, among other things, our revenues, create customer service problems, present liability claims, reduce the residual value of the recalled vehicles, impact our ability to return and the payment timing of certain program vehicles, and harm our general reputation.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
RISKS RELATED TO OUR BUSINESS
Our vehicle rental business is particularly sensitive to reductions in the levels of business and leisure travel.
The vehicle rental industry is particularly affected by changes in the demand for business and leisure travel, especially with respect to levels of airline passenger traffic. Reductions in levels of air travel, whether caused by general economic conditions, such as inflation, higher airfare costs or other events such as work stoppages, military conflicts, terrorist incidents, civil unrest, cybersecurity incidents, natural disasters, epidemic or pandemic diseases, government shutdowns, recessions or other economic or labor market downturns, or the response of governments to any of these events, could have a material adverse effect on the demand for vehicle rentals overall and for our rental vehicles in particular.
For example, business and leisure travel were significantly adversely affected in all global markets by the COVID-19 pandemic and the unprecedented measures taken by governments and businesses in response resulted in a material adverse effect on our results of operations, financial condition, liquidity and cash flows. If a similar global or regional health crisis were to occur, or reoccur in the case of COVID-19 or variants thereof, business and leisure travel may be negatively impacted which may adversely impact our results of operations, financial condition, liquidity and cash flows.
In addition to the impact of broad-based travel trends, our results of operations and financial condition are also impacted by regional and local trends. We derive significant revenues from key leisure destinations, including California, Florida, Hawaii, New York and Texas in the U.S. and major cities in Europe. Travel to leisure destinations is dependent upon the ability and willingness of consumers to travel on vacation, which in turn is impacted by a variety of factors, including weather and climate-related events, geopolitical dynamics in a location and the effect of economic cycles on consumers’ discretionary travel. Uncertainty in overall consumer sentiment in the current economic environment, coupled with military conflicts, such as between Russia and Ukraine, and in the Middle East, may adversely affect leisure travel to certain key markets, and thus have a negative impact on our business.
Our business is highly seasonal, and any occurrence that disrupts rental activity during our peak periods could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
The second and third quarters of the year have historically been the strongest quarters for our vehicle rental business due to increased levels of leisure travel during the summer months in the geographies where we generate most of our revenue. We seek to manage seasonal increases in demand by increasing our available fleet and staff during peak periods, but we may not always be successful in doing so. Any circumstance, occurrence or situation that disrupts rental activity during our peak periods, or our inability to effectively meet heightened demand in those periods, could have a materially adverse effect on our results of operations, financial condition, liquidity and cash flows.
We may be unable to accurately estimate future levels of rental activity and adjust the number, location and mix of vehicles used in our rental operations accordingly.
Vehicle costs typically represent our largest expense and vehicle purchases are often made weeks or months in advance of the expected use of the vehicle. Accordingly, our business is dependent upon the ability of our management to accurately estimate future levels of rental activity and consumer preferences with respect to the mix of vehicles used in our rental operations and the location of those vehicles. If we are unable to purchase a sufficient number of vehicles, or the right types of vehicles, to meet consumer demand, we may lose revenue or market share to our competitors. If we purchase too many vehicles, our Vehicle Utilization could be adversely affected and we may not be able to dispose of excess vehicles in a timely and cost-effective manner. If our fleet management systems are unable to accurately estimate future levels of rental activity and determine the appropriate mix of vehicles to purchase and maintain in our rental operations, the results may be obsolescence and excessive aging of fleet, the inability to sell fleet at adequate prices, sub-optimal fleet size and utilization, increased fleet costs, lower customer satisfaction, lost or missing fleet assets, reduced margins and cash flows and other unfavorable
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THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
consequences, which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Our EV fleet exposes us to a number of risks.
We had previously emphasized an EV strategy that was focused on electrification and advancing mobility. While we have de-emphasized the use of EVs, we continue to own a number of EVs and expect that we will continue to purchase EVs in the future. There are a number of risks associated with our EV fleet, including, but not limited to, the following:
• volatility in the pricing of new EVs by manufacturers, which can impact the residual values of EVs in our fleet;
• demand for EVs, which may be impacted by customer sentiment regarding EVs overall, including the reliability and safety of EVs and access to charging infrastructure;
• the frequency of damage and collision to EVs, which may be impacted by the lack of familiarity with EVs by drivers;
• our ability to successfully deploy EVs to ride share drivers;
• costs associated with maintaining or repairing EVs and related infrastructure, which may remain elevated until the market for labor and parts for EV and EV infrastructure repair and maintenance matures;
• our ability to attract, retain and train talent that is capable of managing an EV fleet;
• risks related to the battery cells on which EVs depend, including the safety of such products and the associated need to maintain and significantly grow access to battery cells and raw materials;
• risks related to the data connectivity and the technology upon which the success of these initiatives will rely, such as risks of unauthorized access to modify or use such technology;
• uncertainty with respect to government regulations and economic conditions; and
• the possibility that our EVs are not as attractive to our customers, especially our ride share customers, as anticipated.
Although we source EVs from a growing number of manufacturers, in the near term, we remain exposed to a number of risks related to the potential concentration of EV makes and models in our fleet, including the risk that a malfunction, recall or lack of availability of replacement parts or skilled labor for a particular EV make and model could have an outsized impact on our ability to offer EVs, or that demand from our customers for the particular EVs may not be aligned with our current EV fleet.
We generally believe that demand for EVs by ride share drivers is a growth opportunity, and that, as a result, our ride share rentals are subject to the factors described above. Furthermore, the success of our ride share rentals are dependent on the continuation of our partnerships with key ride share companies, and any disruption or termination of those partnerships could materially adversely affect ride share rentals.
In addition, the results of our use of EVs generally depend on the economic factors ultimately associated with EVs, including depreciation rates and residual values of EVs, as well as the cost of financing EVs. These factors, which are evolving due to the development of the EV market, will impact the attractiveness of EVs to us and to our customers.
Government and economic incentives — including certain tax exemptions, tax credits and rebates — that support the development and adoption of EVs may be reduced, eliminated, amended or exhausted from time to time. For example, previously available incentives favoring EVs in certain areas have expired, were cancelled or have temporarily become unavailable; in some cases, these incentives have not been replaced or reinstituted. The U.S., in particular, eliminated EV credits with the enactment of the One Big Beautiful Bill Act ("OBBBA") on July 4, 2025. Expiration of federal tax credits and related incentives favoring EVs may impact vehicle acquisition costs, residual values, fleet composition strategies and overall customer demand for EVs.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
Since our decision to significantly reduce the size of our global EV fleet and corresponding EV dispositions, the EV fleet represents less than 10% of our U.S. operating fleet. Our decision to reduce our EV fleet resulted in the recognition, during the year ended December 31, 2024, of $223 million of incremental net depreciation expense related to the sale of EVs. While we expect that this action will better balance supply against expected demand of EVs, position us to eliminate a disproportionate number of lower margin rentals, and reduce collision and damage expense associated with EVs, as well as ultimately improve our financial results, we cannot guarantee that we will be able to execute EV dispositions so that the expected benefits of this action will materialize.
If we do not adequately address potential risks related to EVs, our results of operations, financial condition, liquidity and cash flows may be adversely impacted, and our ability to pursue our EV initiatives could be compromised.
We may fail to adequately respond to changes in technology that are impacting the mobility industry.
The mobility industry has recently been characterized by rapid changes in technology innovation and deployment to address evolving customer demands, improve operational efficiency and disrupt competitive dynamics. Examples include technology solutions designed to: address increasing customer expectations, improve vehicle maintenance and utilization and enable traditional and non-traditional competitors to introduce transportation offerings, consumption models and vehicle platforms, including EVs and autonomous vehicles and other potentially disruptive technologies. Our ability to continually improve our technology platforms, processes and products in this environment is essential to maintain a competitive position in customer satisfaction, market share and cost structure.
Due to natural complexity in technology innovation, potentially high costs of certain initiatives and the competition for talent in the technology space, we may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products or enhanced product offerings. These challenges related to emerging technology may result in loss of competitive differentiation, margin erosion, decline in market share, inability to achieve our strategic initiatives, inefficient or outdated service delivery platforms, inability to attract or retain key talent and other unfavorable consequences that may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
We face intense competition that may lead to downward pricing or an inability to increase prices.
We believe that price is one of the primary competitive factors in the vehicle rental market and various factors beyond our control may prevent us from pricing our offerings at a level that we believe is appropriate for the quality and service we offer, or that is necessary to fund reinvestments in innovative offerings for customers. Technology has enabled cost-conscious customers, including business travelers, to compare rates available from rental companies more easily and for competitors to monitor our pricing decisions in real time. Our competitors, some of whom may have greater resources and better access to capital than us, may seek to reduce prices in order to, among other things, attempt to gain a competitive advantage, capture share in a particular geography or class of rental or compensate for declines in rental activity.
Additionally, pricing in the vehicle rental industry is impacted by the supply of vehicles available for rent. Any significant fluctuations in the supply of rental vehicles available in the market due to unexpected changes in demand, supply chain disruptions, residual value declines or actions taken by our competitors could require us to make changes to our pricing. Our ability to compete effectively depends, in part, on our ability to maintain a competitive and agile cost structure. If we cannot maintain our costs at a competitive level and with the ability to adapt to changing circumstances, then our business could be materially adversely affected.
We also compete with non-traditional companies for vehicle rental market share, including auto manufacturers, ride-hailing and car sharing companies and other competitors in the mobility industry. To the extent we do not react appropriately to our competition or optimize our revenue and pricing strategies to react to the actions of these competitors, we may experience sub-optimal pricing, sub-optimal asset utilization, poor customer satisfaction, lost revenue and other unfavorable consequences which may materially adversely affect our revenues and results of operations, financial condition, liquidity and cash flows.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
We rely on third-party distribution channels for a significant amount of our revenues, and adverse changes in our access to, prominence within, cost to participate in, or volume delivered pursuant to these distribution channels could have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows.
Third-party distribution channels account for a significant amount of our vehicle rental reservations. These third-party distribution channels include traditional and online travel agencies, third-party internet sites, airlines and hotel companies, marketing partners, such as credit card companies and membership organizations, and global distribution systems that allow travel agents, travel service providers and customers to connect directly to our reservations systems. Loss of access to or prominence within any of these channels, changes in pricing or commission structures or other terms within these channels, or a reduction in transaction volume through these channels could have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows, particularly if our customers are unable to access our reservation systems through alternate channels. These third-party channels may be influenced by changes in technology including developments in artificial intelligence.
If our customers develop loyalty to internet travel intermediaries rather than our brands, our business and revenues could be adversely affected.
Certain internet travel intermediaries, such as online travel agencies and third-party internet sites, use generic indicators of the type of vehicle (such as “standard” or “compact”) at the expense of brand identification. In addition, some intermediaries have launched their own loyalty programs to develop loyalties to their reservation system rather than to our brands. If the volume of sales made through internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries than to our brands, or if our market share suffers due to lower levels of customer loyalty, our business and our results of operations, financial condition, liquidity and cash flows could be adversely affected.
Our commercial off airport leases and airport concession agreements expose us to numerous risks that could cause our financial results to suffer.
We maintain a substantial network of vehicle rental locations at off airport and airport locations in the U.S. and internationally. If we are unable to continue operating these facilities at their current locations due to the termination of leases or the termination of vehicle rental concessions at airports, which comprise a majority of our revenues, our operating results could be adversely affected. These leases and concession agreements typically include minimum payment obligations that are required even if our volume significantly declines, which could increase our costs as a percentage of revenues. In addition, if the costs of these leases and/or concession agreements increase and we are unable to increase our pricing structure to offset the increased costs, our results of operations, financial condition, liquidity and cash flows could be adversely affected. Additionally, increased competition from peer-to-peer vehicle rental operators may impact market share and revenue. At many airports locations, peer-to-peer operators have operational and financial advantages over incumbent vehicle rental operators due to lower financial obligations and more convenient access to vehicles. Airports are having difficulty executing agreements with peer-to-peer operators that achieve parity with existing vehicle rental operators, and enforcement of these agreements remains a challenge with the airports. By peer-to-peer vehicle rental operators not being held to the same financial and operational standards at the airports as well as offering customers operational advantages, peer-to-peer operators may have an impact on financial results and overall market share.
Maintaining favorable brand recognition is essential to our success and failure to do so could materially adversely affect our business.
Our business is heavily dependent upon the favorable brand recognition that our “Hertz”, “Dollar” and “Thrifty” brand names have in the markets in which they participate. Factors affecting brand recognition are often outside our control, and our efforts to maintain or enhancefavorable brand recognition, such as marketing and advertising campaigns, may not have their desired effects. Negativeclaims or publicity regarding, among other things, our
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ITEM 1A. RISK FACTORS (Continued)
Company or our operations, offerings, practices or customer service may damage our brands or reputation, even if such claims are untrue. In addition, although our licensing partners are subject to contractual requirements to protect our brands, it may be difficult to monitor or enforce such requirements, particularly in foreign jurisdictions, and various laws may limit our ability to enforce the terms of these agreements or to terminate the agreements. Any decline in perceived favorable recognition of our brands or damage to our reputation could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
RISK RELATED TO OUR EMPLOYEES
The ability to attract and retain front-line employees, senior leadership and other key personnel is critical to the success of our business.
The success of our business depends on our ability to hire and retain front-line employees, senior leadership and other key personnel in sufficient numbers and with the necessary skills to meet demand. We develop and maintain a talent management strategy that defines current and future talent requirements (e.g., experience, skills, location requirements, timing, etc.) based on our strategic direction, actively conduct talent reviews and succession planning to be prepared if executives, managers or other key personnel resign, retire or their service is otherwise interrupted. In addition, we conduct annual benchmarking for the executive pay for our key senior positions. We strive to maintain competitive compensation and benefits, employee development and retention programs and build an inclusive culture. Competition for qualified employees is intense, particularly with respect to technology roles that are critical to our strategic and information technology initiatives. Changing employee expectations about remote work and workplace flexibility complicate our employee recruiting, retention and talent management strategies. In addition, recent inflationary trends overall have driven market pressure for increased wages, and declines in our share price have impacted the retention value of existing equity awards. If we do not succeed in building and maintaining our talent pipeline through attracting and retaining qualified personnel, particularly at the leadership level, our ability to execute our business plan may be adversely affected, which could harm our operating results or financial condition. In addition, we may find it difficult to hire and retain a sufficient number of qualified front-line employees to meet demand at certain locations. Overall, the failure of our talent management strategies could result in inadequate staffing levels, declines in customer satisfaction, an inability to execute our business plan, eroding employee morale and productivity, an increase in operating expenses or an inability to achieve internal control, regulatory or other compliance-related requirements.
We may face issues with our union-represented employees.
Active labor contracts covering the terms of employment for the Company's union-represented employees in the U.S. are presently in effect, many of which cover employees at our larger airport locations, primarily with the International Brotherhood of Teamsters and the International Association of Machinists. These contracts are renegotiated periodically, and we anticipate renegotiating labor contracts with approximately 2% of these employees in 2026. Failure to negotiate a new labor agreement when required could result in a work stoppage. Although we believe that our labor relations have generally been good, it is possible that we could become subject to additional work rules imposed by agreements with labor unions, or that contract extensions, work stoppages or other labor disturbances could occur in the future. In addition, our non-union-represented workforce has been subject to unionization efforts in the past, and we could be subject to future unionization, which could lead to increases in our operating costs and/or constraints on our operating flexibility.
RISKS RELATED TO INFORMATION TECHNOLOGY, CYBERSECURITY AND PRIVACY
Cybersecurity threats continue to increase in frequency and sophistication, and a successful cybersecurity incident could interrupt or disrupt our information technology systems, or those of our third-party business partners, which could, among other things, disrupt our business, force us to incur costs or cause us reputational harm.
We encounter continuous risk of exposure to cybersecurity attacks, cybersecurity incidents, and other cybersecurity threats to our information networks and systems, as well as those of our third-party service providers, and the
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ITEM 1A. RISK FACTORS (Continued)
information stored on those networks and systems. Cybersecurity attacks are increasing in their frequency, sophistication and intensity, have become increasingly difficult to detect and may be exacerbated by geopolitical tensions. Cybersecurity incidents vary in their form and can include the deployment of harmful malware or ransomware, denial-of-services attacks and other attacks, which may affect business continuity and threaten the availability, confidentiality and integrity of our systems and information. Cybersecurity incidents can also include fraud, phishing or other social engineering attempts or other methods to cause confidential information, payments, account access or access credentials, or other data to be transmitted to an unintended recipient. Cybersecurity threat actors also may attempt to exploitvulnerabilities in software including software commonly used by companies in cloud-based services and bundled software. Like many other companies, we detect attempts by threat actors to gain access to our systems and networks on a frequent basis, and the frequency of such attempts could increase in the future. At this time, we do not have any indication that any risks from cybersecurity threats have had, or are reasonably likely to have, a material effect on our business strategy, results of operations or financial condition. We have invested in the protection of data and information technology, and actively work to enhance our business continuity and disaster recovery capabilities; however, there can be no assurance that our efforts will be successful.
We monitor our obligations under and compliance with global laws requiring information security safeguards and potential notification requirements in the event of a cybersecurity incident. We maintain procedures for detecting, communicating and addressing cybersecurity incidents. We have also taken steps to assess cybersecurity of third- party business partners, including service providers, licensees and franchisees, that handle, possess, process and store our material information. We require these third parties to maintain certain security controls. However, because of the rapidly changing nature and sophistication of cybersecurity threats, which can be difficult to detect, there can be no guarantee that our controls, policies and procedures have detected or prevented or will detect or prevent all of these cybersecurity threats, and we cannot predict the full impact of any past or future cybersecurity incident.
A cybersecurity incident relating to our information or systems or that of our third-party business partners, or any failure by us or our third-party business partners to effectively address, enforce and maintain our information technology infrastructure and cybersecurity requirements may result in substantial harm to our business strategy, results of operations and financial condition, including major disruptions to business operations, loss of intellectual property, release of confidential information, alteration or corruption of data or systems, costs related to remediation or the payment of ransom and litigation, including individual claims or consumer class actions, commercial litigation, administrative, and civil or criminalinvestigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs, and possible prolongednegative publicity.
We have experienced in the past, and may experience in the future, cybersecurity incidents that have resulted in threat actors obtaining personal information of our customers. Our customers’ information, including their loyalty account login information, can be a target for cyber criminals. Given that customers may share common credentials across multiple sites, a compromise of one site can provide cyber criminals the means to compromise customer accounts of other merchants and any customer information contained therein.
Although we maintain a cyber insurance policy, there is no guarantee that such coverage will be sufficient to address costs, liabilities and damages we may incur in connection with a cybersecurity incident or that such coverage will continue to be available on commercially reasonable terms or at all.
Our business is heavily reliant upon information technology systems, some of which are managed, hosted, provided or used by third parties and any significant failures or disruptions to these systems could adversely impact our business.
Our ability to, among other things, accept reservations, process rental and sales transactions, manage our pricing, manage our revenue earning vehicles, manage our financing arrangements, account for our activities and otherwise conduct our business depends on the performance and availability of our networks and systems, as well as those of third-party providers and other business partners. We have experienced, and from time to time in the future may experience, a failure or interruption that results in the unavailability of certain information systems. Additionally, our major information technology systems, reservations and accounting functions are centralized in a few locations
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worldwide. Any disruption, termination or substandard provision of services, including by third-party providers or other business partners, whether as the result of outages, localized conditions (e.g., fire or explosion), failure of systems to function as designed, as the result of a cybersecurity incident, technology vulnerability or malfunction, or as the result of events or circumstances of broader geographic impact (e.g., earthquake, storm, flood, epidemic, strike, act of war, civil unrest or terrorist act), could materially adversely affect our business by disrupting normal reservations, customer service, accounting and technology functions; interfering with our ability to manage our vehicles; delaying or disrupting rental and sales processes; adversely affecting our ability to comply with our financing arrangements; and otherwise impacting our ability to manage our business. These events could, individually or in the aggregate, lead to lower revenues, increased costs or other adverse effects on our results of operations, financial condition, liquidity and cash flows, and could cause reputational harm, any of which may be material.
If we fail to evaluate, maintain, upgrade and consolidate our information technology systems, our business could be adversely affected.
In the ordinary course of our business, we take steps to evaluate, maintain, upgrade, update, and consolidate our information technology systems, including by making changes to legacy systems, replacing legacy systems with successor systems with new functionality, outsourcing certain systems and acquiring new systems with new functionality. We deploy significant capital expenditures in connection with these activities. If we fail to maintain effective technology enablement and processes, we may be unable to support business growth expectations, and such failure could result in excessive overhead costs, high rates of transaction failures and rework, detrimental impact to customers, cybersecurity threats or incidents, excessive write-offs, service quality issues, declining employee morale, loss of key talent and other unfavorable consequences. If we fail to effectively implement system upgrades, system changes or our outsourcing plans, we may experience negative impacts, including our ability to manage our business, disrupt our internal control structure, incur additional administration and operating expenses, place undue demands on management time and experience other negative impacts associated with delays or difficulties in transitioning to new systems. Although we have made progress to reduce the number of aged systems, such risks are elevated when legacy systems and infrastructure updates are delayed or otherwise not made on a timely basis, which can result in a heightened security and/or business continuity risk. In addition, the implementation of our technology initiatives and systems, including updates to legacy systems, may cause disruptions in our business operations by severelydegrading performance or a complete loss of service and have an adverse effect on our business and operations if not anticipated and appropriately mitigated.
The misuse or theft of information we possess, including as a result of cybersecurity incidents, could harm our brand, reputation or competitive position and give rise to liabilities which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
In the normal course of business, we regularly collect, process and store information about millions of individuals and businesses, including payment card information and other sensitive and confidential personal information. In addition, our customers regularly transmit personal information and other sensitive and confidential information to us via the internet and through other electronic means. Despite the security measures and compliance programs we currently maintain and monitor, our facilities, vehicles and systems and those of our third-party business partners may contain defects in design or manufacture or other problems that could compromise information security. Unauthorized parties have in the past, and may in the future, also attempt to gain access to our facilities or systems, or those of third parties with whom we do business, through fraud, misrepresentation, or other forms of deception or attack. We and our third-party business partners may not anticipate or prevent all types of attempts to obtain unauthorized access, and techniques used to obtain unauthorized access to systems change frequently. For example, i n recent years, many companies have been subject to high-profile cybersecurity incidents that involved attacks on the company’s infrastructure and the compromise of non-public sensitive and confidential information. These attacks were often not recognized or detected until after the disclosure of sensitive information notwithstanding the security measures the companies had maintained. Although we evaluate our security throughout our business and make enhancements designed to safeguard our systems and data, our efforts may not be sufficient to maintain the confidentiality, security or availability of the data we collect, store and use to operate our business. Additionally, any failure to manage information privacy in compliance with applicable laws, whether as a
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result of our own error or the error or malfeasance of others, could result in significant regulatory fines and sanctions, litigation, prolongednegative publicity, data breaches, declining customer confidence, loss of key customers, employee liability and other unfavorable consequences.
We may face particular data protection and privacy risks in connection with the European Union's Global Data Protection Regulation, the California Consumer Privacy Act and other privacy laws and regulations.
Our business requires the processing and storage of personal information relating to our customers, employees, business partners and others. Strict data privacy laws regulating the collection, transmission, storage and use of employee data and consumers’ personal information are continuously evolving in the European Union, U.S., Australia, New Zealand, Canada and other jurisdictions in which we operate. In particular, the European Union’s General Data Protection Regulation (the “GDPR”) imposes compliance obligations for the collection, use, retention, security, processing, transfer and deletion of personally identifiable information of individuals. In addition, countries, such as the United Kingdom, have implemented the GDPR through their own legislation, for example, the UK Data Protection Act of 2018. Privacy laws in the U.S. include the California Consumer Privacy Act, as amended, as well as other similar privacy laws currently imposed throughout 20 states, which expand the definition of personal information and may grant, among other things, individual rights to access and delete personal information, the right to opt out of the sale and sharing of personal information, and the right to restrict automated decision making or additional processing of sensitive personal information. These laws and regulations can also impose significant forfeitures and penalties for noncompliance and afford private rights of action to individuals under certain circumstances.
We actively monitor compliance with data protection and privacy-related laws and other regulations, including pending legislation, in the jurisdictions we operate; however, these laws are developing rapidly and may create inconsistent or conflicting requirements. Changes in the legal and regulatory environments in the areas of customer and employee privacy, data security and cross-border data flows, among other things, could have a material adverse effect on our business, primarily through the regulation of our marketing and transaction processing activities, the limitation on the types of information that we may collect, process and retain, the resulting costs of complying with such legal and regulatory requirements and potential monetary forfeitures and penalties for noncompliance, which could be significant. Such regulations also may increase our compliance and administrative burden significantly and require us to invest resources and management attention in order to update our information technology systems to meet new requirements. Any failure to manage data privacy in compliance with applicable laws and regulations could result in significant regulatory investigations, fines, sanctions, consumer and class action litigation, commercial litigation, prolongednegative publicity, data breaches, declining customer confidence, loss of key customers, employee liability and other unfavorable consequences.
RISKS RELATED TO LEGAL, REGULATORY AND TAX MATTERS
Our U.S. and foreign operations expose us to risks that may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Operating in the U.S. and in many different countries exposes us to varying risks, which include: (i) multiple, and sometimes conflicting, U.S. and foreign regulatory requirements and laws that are subject to change, including but not limited to, laws relating to income and other direct or indirect taxes, including corporate alternative minimum taxes, automobile-related liability, insurance rates, insurance products, consumer privacy, data security, employment matters, cost and fee recovery, and the protection of our trademarks and other intellectual property; (ii) the effect of foreign currency translation risk, as well as limitations on our ability to repatriate income; (iii) varying tax regimes, including consequences from changes in applicable tax laws and our ability to repatriate cash from non-U.S. affiliates without adverse tax consequences; (iv) foreign country ownership or investment requirements, as well as difficulties in obtaining financing in foreign countries for local operations; (v) changes in the proportion of revenue between the U.S. and foreign countries with varying tax rates or imposition of global minimum tax rates; and (vi) political and economic instability, natural calamities, civil unrest, war, terrorism and other hostilities.
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The effects of these risks may, individually or in the aggregate, materially adversely affect our results of operations, financial condition, liquidity and cash flows.
The disposition of revenue earning vehicles may result in taxable income, which might not be fully offset by the taxable expense associated with newly purchased revenue earning vehicles.
Under the OBBBA, we are permitted 100% bonus depreciation on vehicle purchases. However, vehicles purchased using certain financing arrangements are not eligible for accelerated depreciation election. If we choose to purchase vehicles using such financing arrangements, or if our existing financing arrangements are deemed not to qualify under the Code, our ability to claim accelerated expensing would be limited.
Further, a material and extended reduction in vehicle purchases by our U.S. vehicle rental business, for any reason, would similarly limit the amount of tax expense available to offset the tax cost associated with the disposition of vehicles.
Any of the foregoing developments could result in the requirement for us to make future material cash tax payments on the disposition of revenue earning vehicles, which could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Our ability to utilize our net operating loss carryforwards (“NOLs”) may be limited as a result of ownership change under Section 382 of the Code.
In general, Section 382 of the Code provides an annual limitation with respect to the ability of a corporation to utilize its NOLs and other tax attributes, as well as certain built-in-losses ("BILs"), against future taxable income in the event of a change in ownership. Limitations imposed on our ability to use NOLs, other tax attributes and BILs to offset future taxable income may cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitations were not in effect and could cause such NOLs and other tax attributes to expire unused. Similar rules and limitations may apply for state and foreign income tax purposes. If we experience an ownership change, it is possible that a significant portion of our tax attributes could be limited for use to offset future taxable income.
We face risks related to liabilities and insurance.
Our businesses expose us to claims for personal injury, death and property damage resulting from the use of the vehicles rented or sold by us, and for employment-related injuryclaims by our employees. We are currently a defendant in numerous actions and have received numerous claims for which actions have not yet been commenced for public liability and property damage arising from the operation of motor vehicles rented from us. There can be no assurance that we will not be exposed to uninsured liability at levels in excess of our historical levels, that liabilities relating to existing or future claims will not exceed the level of our insurance or reserves, that we will have sufficient capital available to pay any uninsuredclaims or that insurance with unaffiliated carriers will continue to be available to us on economically reasonable terms or at all. See Item 1, “Business—Insurance and Risk Management” and Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
We are subject to evolving laws and regulations, and the compliance costs, or any imposed liabilities or obligations (including for failing to satisfy these laws and regulations) could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
We are subject to an increasing number of federal, state, local and foreign laws and regulations relating to corporate and social responsibility matters, including environmental and climate change laws.
The rapidly evolving sustainability regulatory landscape is significant to us in relation to our operations, including with respect to the ownership and operation of tanks for the storage of petroleum products, such as gasoline, diesel fuel, and motor and used oils. We cannot guarantee that the tanks will remain free from leaks or that the use of these tanks will not result in significant spills or leakage. If a leak or a spill occurs, it is possible that the costs to
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investigate and remediate resulting impacts, as well as any associated fines, litigation or reputational harm could be significant. Historically, we have indemnified property owners for the costs associated with remediating certain hazardous substance storage, recycling or disposal sites and, in some instances, for natural resource damages. Compliance with existing or future environmental laws and regulations may require material expenditures by us or otherwise have a material adverse effect on our consolidated financial condition, results of operations, liquidity or cash flows. See Item 1, ‘‘Business—Government Regulation and Environmental Matters’’ in this 2025 Annual Report.
Legislative and regulatory authorities in the U.S. and abroad have considered, and will likely continue to consider (and some have passed) measures related to climate change, and other corporate and social responsibility topics, such as the EU's Corporate Sustainability Reporting Directive ("CSRD") and the EU's Corporate Sustainability Due Diligence Directive ("CSDDD"), as well as the California Climate Corporate Data and Accountability Act, and the California Climate-Related Financial Risk Act (collectively, the "California's Climate Laws"); Australia has also recently passed new legislation related to climate-related reporting. As these regulations become effective for establishing greater due diligence within the supply chain with respect to human rights and/or environmental risks, the mitigation efforts needed extend beyond our own operations. Additionally, the aforementioned regulatory requirements may place limitations on greenhouse gas emissions and imposing fees on entities deemed to be responsible for greenhouse gas emissions, demand for our services could be affected, our vehicle and compliance, and/or other costs could increase and our business could be adversely affected. Moreover, governments may continue to pursue measures, such as vehicle travel restrictions, related to climate change and greenhouse gas emissions. Should rules establishing bans on diesel or fuel vehicles from entering certain locations become effective in the countries in which we operate, demand for our services could be affected, our fleet and/or other costs could increase and our business could be adversely impacted. Furthermore, if our greenhouse gas emissions-related (or other relevant) data, processes or reporting are incomplete or inaccurate, or if we fail to comply with relevant reporting frameworks from newly emerging regulations, we may incur monetary penalties and reputational harm, investor demand for our securities may decrease, and we could become subject to litigation or government investigations, which may adversely affect our reputation and business.
Moreover, we cannot predict the nature, scope or effect of the implementation of the above-mentioned, or the passing or amending of future, sustainability regulatory requirements, nor can we predict the manner in which existing or future laws, rules or regulations may be administered or interpreted. Any alleged or actual violations of any such law, rule or regulation, as well as changes in such laws, rules and regulations, and their interpretation, may require us to incur additional expenses, subject us to governmental or third-party scrutiny, investigation and civil and criminalpenalties, limit our ability to provide services in any of the countries in which we operate, and could result in a material adverse impact on our reputation, business, financial position or results of operations.
Changes in the legal and regulatory environment that affect our operations could disrupt our business, increase our expenses or otherwise have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
We are subject to a wide variety of U.S. and international laws and regulations and changes in the level of government regulation of our business that have the potential to materially alter our business practices and materially adversely affect our results of operations, financial condition, liquidity and cash flows. Those changes may occur through new laws and regulations or changes in the interpretation of existing laws and regulations.
For example, any new, or change in existing, U.S. law and regulation with respect to optional insurance products or policies could increase our costs of compliance or make it uneconomical to offer such products. For further discussion regarding how changes in the regulation of insurance intermediaries may affect us, see Item 1, ‘‘Business—Insurance and Risk Management’’ in this 2025 Annual Report. If customers decline to purchase supplemental liability insurance products from us as a result of any changes in these laws or otherwise, our results of operations, financial condition, liquidity and cash flows could be materially adversely affected.
Also, we derive revenue through rental activities of our brands under franchise and license arrangements. These arrangements are subject to various international, federal and state laws and regulations that impose limitations on
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our interactions with our counterparties. In addition, the used-vehicle sale industry, including our network of company-operated retail vehicle sales locations, is subject to a wide range of federal, state and local laws and regulations, such as those relating to motor vehicle sales, retail installment sales and related finance and insurance matters, advertising, licensing, consumer protection and consumer privacy. Changes in the laws and regulations that impact our franchising and licensing agreements, or our used-vehicle sales operation could adversely affect our results.
In most jurisdictions where we operate, we pass-through various expenses, costs and fees to our rental customers as separate charges. We believe that our pass-throughs, where imposed, are properly disclosed and are lawful. However, in the event of incorrect calculations or disclosures with respect to pass-throughs, or a successfulchallenge to the methodology we have used for determining our pass-through treatment, we could be subject to fines or other liabilities. In addition, we may in the future be subject to potential legislative, regulatory or administrative changes or actions which could limit, restrict or prohibit our ability to separately state, charge and recover various expenses, costs and fees.
Certain proposed or enacted laws and regulations with respect to the banking and finance industries, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (including risk retention requirements) and amendments to the SEC's rules relating to asset-backed securities, could restrict our access to certain financing arrangements and increase our financing costs, which could have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
We are subject to many different forms of taxation in various jurisdictions throughout the world, which could lead to disagreements with tax authorities regarding the application of tax laws.
We are subject to many forms of taxation in the jurisdictions throughout the world in which we operate, including, but not limited to, income tax, withholding tax, indirect tax, value-added tax, registration tax, road tax, premium tax and payroll-related taxes. Tax law and administration are extremely complex and often require us to make subjective determinations. For example, in accordance with Section 482 of the Code and the OECD guidelines, we have established transfer pricing policies to govern our intercompany operations. Implementing transfer pricing policies can be extremely complex. Tax authorities could disagree with our policies, which disagreements could result in lengthy legal disputes and, ultimately, the payment of substantial funds to government authorities, which could have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
An impairment of our long-lived assets could have a material impact on our results of operations.
Our long-lived assets consist primarily of revenue earning vehicles, right of use ("ROU") assets and property and equipment. We make estimates about the expected economic lives, projected residual values and the potential for impairment. We amortize long-lived assets using the straight-line method over the estimated economic lives. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Factors which could be indicators of impairment include, but are not limited to, (i) significant decrease in market prices of the assets, (ii) current period operating or cash flow losses or a projection or forecast that demonstrates continuing losses and (iii) significant changes in the estimated useful lives. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairmentloss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying value or estimated fair value less costs to sell.
For example, during the third quarter of 2024, at the conclusion of our historical peak rental season, there was a reduction in the cash flow projections in our Americas RAC and International RAC segments, indicating that the carrying values of our long-lived assets may not be recoverable. The reduction was largely attributed to the acceleration of the rental fleet rotation in our segments, where shortening the useful life reduced the potential future cash flows expected to be earned from the fleet. Operating cash flow projections also deteriorated from delayed timing of operating cost improvements and longer timeframes associated with revenue maximization initiatives. As a result, we tested the recoverability of our long-lived assets in our Americas RAC and International RAC segments by
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comparing the carrying values against undiscounted future cash flow projections, and we determined that an impairment existed. This determination resulted in the recognition of a total impairment charge of $1.0 billion.
To the extent that there are further changes in market conditions or in the performance of our long-lived assets, there is a possibility that we could incur additional impairments in the future, which could have a material impact on our results of operations.
An impairment of our goodwill and other indefinite-lived intangible assets could have a material impact to our results of operations.
On an annual basis as of October 1, and at interim periods when circumstances require as a result of a triggering event, we test the recoverability of our goodwill and indefinite-lived intangible assets by performing an impairment analysis. The reviews of fair value involve judgment and estimates, including projected revenues, projected cash flows, long-term growth rates, royalty rates and discount rates. A significant decline in any of the items used to determine fair value, as well as other triggering events, could result in a material impairment charge. For details of our annual impairment testing, see Note 6, "Goodwill and Intangible Assets, Net," in Part II, Item 8 of this 2025 Annual Report.
Changes in management’s estimates and assumptions could have a material impact to our results of operations, financial condition, liquidity and cash flows.
In preparing our periodic reports under the Exchange Act, including our consolidated financial statements, our management is required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include depreciation for revenue earning vehicles; accruals for estimated liabilities, including public liability, property damage and litigation reserves; the recoverability of our goodwill and indefinite-lived intangible assets; and income taxes. Changes in estimates or assumptions or the information underlying the assumptions, such as changes in our business or fleet plans or the market for used vehicles, or general market conditions, could affect reported amounts of assets, liabilities or expenses.
Our global business requires a compliance program to promote organizational adherence to applicable laws and regulations, and if the compliance program does not operate as designed, it can increase numerous risks to the Company.
We have a compliance program that promotes a culture of ethical behavior and adherence to applicable laws and regulations. In addition to other key compliance topics, the program is designed to: (i) identify applicable anti-bribery requirements (e.g., laws limiting commercial bribery and corruption); (ii) identify applicable antitrust requirements (e.g., laws to prevent price fixing, contract rigging, market or customer allocations, etc.); (iii) interpret the application of such requirements; (iv) educate target audiences; (v) enable whistleblower and investigations process; and (vi) provide independent, ongoing compliance monitoring.
Operating in many different countries increases the risk of a violation, or allegedviolation, of the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act, other applicable anti-corruption laws and regulations, the economic sanctions programs administered by the U.S. Treasury Department’s Office of Foreign Assets Control and the anti-boycott regulations administered by the U.S. Department of Commerce's Office of Anti-Boycott Compliance. The failure of our compliance program to operate as designed can result in a failure to comply with the laws outlined above or with other applicable laws, which could result in significant penalties or otherwise harm the Company’s reputation and business. There can be no guarantee that all of our employees, contractors and agents will comply with the Company’s policies that mandate compliance with these laws. Violations of these laws could result in legal and regulatory sanctions, increased litigation and fines, prolongednegative publicity, diminished investor confidence, declining employee morale and other unfavorable consequences, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and cash flows.
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Hertz Holdings is a publicly traded holding company with no operations of its own and depends on its subsidiaries for cash.
The operations of Hertz Holdings are conducted nearly entirely through its subsidiaries, and its ability to generate cash is dependent on the earnings and the receipt of funds from its subsidiaries via return of paid-in capital, dividends or intercompany loans to meet any of its operating expenses or debt obligations, or to pay dividends, if any, on its common stock. None of the subsidiaries of Hertz Holdings, however, are obligated to make funds available to Hertz Holdings for the payment of operating expenses, debt obligations or dividends. In addition, certain states' laws and the terms of certain of our debt agreements significantly restrict, or prohibit, the ability of Hertz and its subsidiaries to pay dividends or to make other distributions, make loans or otherwise transfer assets to Hertz Holdings, including state laws that require dividends to be paid only from surplus. If Hertz Holdings does not receive cash from its subsidiaries, then Hertz Holdings' financial condition could be materially adversely affected.
Failure to meet corporate and social responsibility expectations or standards or to advance our corporate responsibility priorities could adversely affect our business, results of operations and financial condition.
There has been an increased focus from stakeholders and activists on the corporate and social responsibility performance of companies, including environmental stewardship (e.g., climate, sustainability and water use); diversity, equity and inclusion initiatives; sourcing and supply chain activities; human capital and human rights records; and overall corporate governance profile. This has resulted in expanding and increasingly complex expectations related to reporting, diligence and disclosure on corporate and social responsibility topics, as well as pressure to modify product offerings and business practices to drive change on these issues. These developments and other rapidly changing laws, regulations, policies and related interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, may alter the environment in which we do business.
As the nature, scope and complexity of corporate and social responsibility reporting, diligence and disclosure requirements expand, including compliance with, among other new regulations, CSRD, CSDDD, and California's Climate Laws regarding, among other matters, greenhouse gas emissions, we may need to undertake additional costs to control, assess and report on corporate and social responsibility metrics. Identifying, monitoring, quantifying, aggregating and disclosing the associated data and information relating to such issues can require significant investments of time and resources, both initially and as the requirements evolve over time, and may increase the ongoing costs of compliance, which could adversely impact our business, results of operations and financial condition. In addition, such data and information may be unreliable particularly when obtained from third parties.
Given our commitment to being a responsible corporate citizen, we actively monitor and manage corporate and social responsibility trends through various initiatives, which we may refine or expand further in the future, and we could be criticized for any commitments we may establish. Our failure or perceived failure to achieve any goals, maintain practices that align with stakeholder expectations for “best practices,” or comply with new corporate and social responsibility expectations and regulatory requirements could harm our reputation, adversely impact our ability to attract and retain customers and talent, and expose us to increased scrutiny from a range of stakeholders. Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on issues related to corporate and social responsibility matters. Damage to our reputation may reduce demand for our products and services and thus have an adverse effect on our future financial results.
RISKS RELATED TO OUR INDEBTEDNESS
Our indebtedness exposes us to various risks, which could impair our financial condition.
As of December 31, 2025, we had total indebtedness of approximately $17.1 billion, including $11.6 billion of vehicle related debt and $5.4 billion of non-vehicle related debt, as disclosed in Note 7, "Debt," in Part II, Item 8 of this 2025 Annual Report. As of December 31, 2025, we had available borrowing capacity of $924 million under the First Lien RCF. Furthermore, we are also able to incur certain additional indebtedness subject to compliance with our existing
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covenants. A portion of our indebtedness bears interest at variable rates, which exposes us to risks inherent in interest rate fluctuations and higher interest expenses in the event of continued increases in interest rates. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this 2025 Annual Report for additional information related to interest rate risk.
Our ability to satisfy and manage our debt obligations depends on our ability to generate cash flow and on overall financial market conditions. Factors driving the overall condition of the financial markets are beyond our control. Furthermore, if we are unable to generate sufficient cash flow from operations to service our debt obligations and meet our other cash needs, we may experience limited access or be unable to access financial markets for additional capital and may be forced to reduce or delay capital expenditures, sell or curtail assets or operations, or seek to restructure or refinance our indebtedness. If we must reduce or delay investment or sell or curtail our assets or operations, it may negatively affect our ability to generate sufficient cash flow to service our debt obligations and to meet our cash needs. Additionally, there can be no assurance that we would be able to borrow additional amounts or refinance our current indebtedness to fund working capital, capital expenditures, debt service requirements, execution of our business strategy or acquisitions and other purposes on favorable terms. Certain of our debt agreements limit our capacity to incur incremental debt and may limit the type of debt we incur for refinancing our existing debt, which may in turn limit our flexibility to strategically refinance our existing debt – on terms favorable to us or at all.
Our reliance on asset-backed financing arrangements to purchase vehicles subjects us to a number of risks, many of which are beyond our control.
We rely significantly on asset-backed financing to purchase vehicles. If we are unable to refinance or replace our existing asset-backed financing or continue to finance new vehicle acquisitions through asset-backed financing on favorable terms, on a timely basis, or at all, then our costs of financing could increase significantly and have a material adverse effect on our liquidity, interest costs, financial condition, cash flows and results of operations, including, more broadly, the financial performance of the Company.
Our asset-backed financing capacity could be decreased, our financing costs and interest rates could be increased, or our future access to the financial markets could be limited, as a result of risks and contingencies, many of which are beyond our control, including: (i) the acceptance by and/or demand from credit markets of the structures and structural risks associated with our asset-backed financing arrangements; (ii) the credit ratings provided by credit rating agencies for our asset-backed indebtedness; (iii) third parties requiring changes in the terms and structure of our asset-backed financing arrangements, including increased credit enhancement or required cash collateral and/or other liquid reserves; (iv) the insolvency or deterioration of the financial condition of one or more of our principal vehicle manufacturers; (v) changes in laws or regulations that negatively affect any of our asset-backed financing arrangements; or (vi) the overall credit condition of Hertz.
Our asset-backed vehicle financing facilities include credit enhancement provisions that require us to provide cash or additional vehicle collateral in the event the estimated market values for the vehicles used as collateral decreases below net book values. Net book values under our asset-backed financings may differ from those under U.S. GAAP book values due to differences in depreciation rates primarily under our asset-backed financings. As a result, reductions in the estimated market value of vehicles used as collateral could adversely affect our liquidity, cash flow, and ultimately, the profitability of our Company, or otherwise require us to use cash intended for other purposes as collateral, and potentially lead to decreased borrowing base availability. Similarly, if the demand for used vehicles were to decline, resulting in sales of vehicles below the net book value required by our asset-backed financings, we may have difficulty meeting the minimum required collateral levels resulting in a contractual obligation to add additional collateral in the form of cash or additional vehicles to the under collateralized asset-backed financing. In the event that we cannot post additional collateral, the principal under our asset-backed financing arrangements may be required to be repaid sooner than anticipated with vehicle disposition proceeds and lease payments we make to our special-purpose financing subsidiaries. If that event were to occur (or any other liquidation events), the holders of our asset-backed debt may have the ability to exercise their right to, directly or indirectly, foreclose on and sell vehicles to generate proceeds sufficient to repay such debt.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
Failure by us to have proper financing and debt management processes in place may result in cash shortfalls and liquidity problems, the need to seek emergency financing at high interest rates, violations of debt covenants and an inability to execute strategic initiatives. These outcomes could negatively affect our liquidity and our ability to maintain sufficient levels of revenue earning vehicles to meet customer demands and could trigger cross-defaults under certain of our other financing arrangements.
Substantially all of our consolidated assets secure certain of our outstanding indebtedness, which could materially adversely affect our debt and equity holders and our business.
Substantially all of our consolidated assets are subject to security interests or are otherwise encumbered for the benefit of our creditors. The bulk of our consolidated assets consists of our revenue earning vehicles and certain related vehicle assets and are subject to security interests or are otherwise encumbered for the benefit of our asset-backed financing arrangements. Substantially all of our remaining consolidated assets are encumbered by and pledged to our senior creditors as collateral for certain of our senior debt obligations. As a result of substantially all of our assets being encumbered for the benefit of certain creditors, our various secured creditors have liquidation priorities ahead of other stakeholders of our business.
As a result of substantially all of our assets being encumbered under various financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired or contractually limited under our existing financings. If our ability to secure additional indebtedness or dispose of assets were to occur, it could have a material adverse effect on our financial flexibility and force us to attempt to incur additional unsecured indebtedness, which may not be available to us or may not be available to us at favorable rates and terms.
We may not be able to deduct certain business interest expenses, which could have a material adverse effect on our results of operations and liquidity.
While, the OBBBA eased the interest expense limitation rules under IRC Section 163(j), these rules could still limit our deductibility of interest expense and could result in additional material cash tax payments that could have a material adverse effect on our results of operations and liquidity. Furthermore, in the event our debt instruments were to be recharacterized as equity for tax purposes, the Company would not be entitled to deduct the payments as interest and could be assessed withholding taxes on payments to certain lenders, which could have a material adverse effect on our results of operations and liquidity.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of our stock and could diminish our liquidity.
Our Board has authorized a share repurchase program that does not have an expiration date. The program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock, and we have not repurchased any of our common stock since December 2023. Certain of our debt agreements contain restrictions that may limit our ability to make restricted payments to Hertz Holdings for the purpose of conducting share repurchases through the share repurchase program. We cannot guarantee that the share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Furthermore, share repurchases could affect the market price of our common stock or increase its volatility and decrease our cash balances and/or our liquidity. Beginning in 2023, the Inflation Reduction Act of 2022 imposed a non-deductible 1% excise tax on the fair market value of share repurchases that exceed $1 million in a taxable year. If share repurchases are conducted, the excise tax will increase the cost of such share repurchases.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
The share price of our common stock may be volatile.
Numerous factors, including many that are outside of our control, may have a significant impact on the market price of our common stock. These risks include those described or referred to in this “Risk Factors” section and in the other documents incorporated herein by reference as well as, among other things:
• our operating and financial performance and prospects;
• our successful execution of our business strategy, including with respect to our ongoing fleet rotation;
• sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares of common stock intend to sell;
• our ability to repay our debt;
• adverse market reactions to any additional debt we incur in the future;
• our credit ratings;
• our access to financial and capital markets to refinance our debt or replace the existing credit facilities;
• investor perceptions of us and the industry and markets in which we operate;
• our dividend policy;
• future sales of equity or equity-related securities;
• the capped call transactions that we entered into, and the swap transactions that a third party entered into in connection with the issuance of our Exchangeable Notes Due 2030 in September 2025;
• announcements and actions filed by third parties of significant claims or proceedings against us;
• issuances of new or updated research reports by security or industry analysts, or those analysts not publishing or ceasing to publish reports about us, our industry or our market;
• speculative trading activities by third parties, driven by, among other things, social media coverage;
• changes in, or results that vary from, earnings estimates or buy/sell recommendations by analysts;
• additions or departures of key management personnel; and
• general financial, domestic, economic and other market conditions.
In addition, stock markets experience significant price and volume fluctuations from time to time that are not related to the operating performance of particular companies. These market fluctuations may have a material adverse effect on the share price of our common stock.
Anti-takeover provisions in our charter documents and under Delaware law, as well as ownership of a significant percentage of our common stock by the Plan Sponsors, could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our common stock.
Provisions in the Hertz Holdings Certificate of Incorporation and Bylaws may have the effect of delaying or preventing a change of control or changes in our management, including, generally, provisions that:
• do not provide cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
• provide for a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board;
• allow for removal of directors only for cause;
• allow only the Board to fill a vacancy created by the expansion of the Board or the resignation, death, retirement, disqualification or removal of a director;
• require advance notice for stockholder proposals to be brought before a meeting of stockholders, including proposed nominations of persons for election to the Board;
• only allow stockholder action to be taken at an annual or special meeting;
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
• limit the ability of stockholders to call a special meeting; and
• authorize blank check preferred stock.
These provisions may make it more difficult for stockholders to replace members of our Board, which is responsible for appointing the members of our management. In addition, we have elected not to be governed by DGCL Section 203, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a stockholder owning 15% or more of our outstanding voting stock, unless the stockholder has held the stock for a period of at least three years.
The significant ownership interests held by our Plan Sponsors, which, as of December 31, 2025, exceeded 50% of our outstanding common stock (without taking into account the dilutive impact of outstanding Public Warrants or the Exchangeable Notes) means that the Plan Sponsors have the ability to control matters requiring stockholder approval, such as director elections, amendments to the Hertz Holdings Certificate of Incorporation and significant corporate transactions. With respect to such matters, the Plan Sponsors’ interests may not align with those of other stockholders, or they may take actions that other stockholders do not view as beneficial. This could delay or prevent a change of control transaction or discourage a potential acquirer from pursuing such a transaction, which transaction might have otherwise been of benefit to the other stockholders. The Plan Sponsors’ ownership may also adversely affect the trading price for our common stock if potential investors perceive disadvantages in investing in a company with controlling stockholders.
The choice of forum provision in the Certificate of Incorporation of Hertz Holdings could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or agents.
Our Certificate of Incorporation provides that, unless we consent in writing to an alternative forum, to the fullest extent permitted by law, the Delaware Chancery Court is the sole and exclusive forum for any stockholder to bring any state law claim for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of a breach of fiduciary duty owed by any director, officer, employee or agent of the Company to us or to our stockholders; (iii) any action asserting a claim against us arising pursuant to the DGCL, our Certificate of Incorporation or Bylaws; (iv) any action or proceeding as to which the DGCL confers jurisdiction on the Delaware Chancery Court; and (v) any action asserting a claim against us that is governed by the internal affairs doctrine. In addition, the choice of forum provision provides that, unless the Company consents in writing to the selection of an alternative forum, claims brought under the Securities Act of 1933, as amended, must be brought exclusively in the federal district courts of the U.S. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or agents, which provision may discourage such lawsuits against us and our directors, officers and agents. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
GENERAL RISK FACTORS
A business continuity plan is necessary for our global business, and the failure of such plan may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
We have a business continuity management plan designed to: (i) identify key assets, operations and underlying threats; (ii) define and assess relevant threats (e.g., natural disasters, pandemics, civil unrest, terrorism, etc.) on business operations; (iii) develop and maintain disaster recovery strategies and business resumption plans to minimize the impact of both known and unknown threats; and (iv) test the adequacy of our action plans. If our business continuity management plan fails to operate as intended, we may experience significant business disruptions, release of confidential information, maliciouscorruption of data, regulatory intervention and sanctions, prolongednegative publicity, litigation and liabilities, product and service quality failures, irreparableharm to customer relationships and other unfavorable consequences which may materially adversely affect our results of operations, financial condition, liquidity and cash flows.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 1A. RISK FACTORS (Continued)
Our results of operations and share price could be materially adversely affected if we are unable to maintain effective internal control over financial reporting.
The accuracy of our financial reporting is dependent on the effectiveness of our internal controls. We are required to provide a report from management to our shareholders on our internal control over financial reporting that includes an assessment of the effectiveness of these controls. Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. Because of these inherent limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud. If we cannot maintain and execute adequate internal control over financial reporting or implement required new or improved controls that provide reasonable assurance of the reliability of the financial reporting and preparation of our financial statements for external use, we could sufferharm to our reputation, incur incremental compliance costs, fail to meet our public reporting requirements on a timely basis, be unable to properly report on our business and our results of operations, or be required to restate our financial statements, and our results of operations, our share price and our ability to obtain new business could be materially adversely affected.
We may use AI in our business, and challenges with properly managing its use could result in reputational harm, competitive harm and legal liability, and could have adverse effects on our results of operations, financial condition, liquidity and cash flows .
We may incorporate AI solutions into our business, and we may leverage AI, including generative AI, into our business operations. Our competitors or other third parties, like third-party distribution channels, may incorporate AI into their products more quickly or more successfully than we do, which could impair our ability to compete effectively and could adversely affect our results of operations. In addition, there are significant risks in using AI, and there can be no assurance that the use of AI will enhance our business or be beneficial to our business operations, including our efficiency or our profitability.
Additionally, if our AI applications, or the AI applications of third parties, are based on data, algorithms or other inputs that are flawed, or if our AI applications, or the AI applications of third parties, assist us in producing content, analyses or recommendations that are, or are alleged to be, deficient, inaccurate or biased, our business, results of operations and financial conditions may be adversely affected. The increased use of AI applications generally has resulted in, and may in the future result in, cybersecurity incidents that implicate the personal data of end users of such applications. Any such cybersecurity incidents related to our own use of AI applications may increase our cybersecurity risks, as well as the cybersecurity risks of third parties, which could adversely affect our reputation and results of operations. AI also presents emerging ethical issues, and if our use of AI becomes controversial, we may experience brand, reputational or competitive harm, or legal liability. The rapid evolution of AI, including the potential regulation of AI by governmental or other regulatory agencies, will require significant resources to develop, test and implement AI ethically and to minimize any unintended, harmful impacts.
We may pursue strategic transactions, including acquisitions and divestitures, which could be difficult to implement, disrupt our business or change our business profile significantly.
Any future strategic acquisition or disposition of assets or a business could involve numerous risks, including: (i) potential disruption of our ongoing business and distraction of management; (ii) difficulty integrating the acquired business or segregating assets and operations to be disposed of; (iii) exposure to unknown, contingent or other liabilities, including litigation arising in connection with the acquisition or disposition or against any business we may acquire; (iv) changes to our business profile in ways that could have unintendednegative consequences; and (v) the failure to achieve anticipated synergies. If we enter into significant strategic transactions, the related accounting charges may affect our financial condition and results of operations, particularly in the case of an acquisition. The financing of any significant acquisition may result in changes in our capital structure, including the incurrence of additional indebtedness. A material disposition could require the amendment or refinancing of our outstanding indebtedness or a portion thereof.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
Cautionary
In this MD&A, we refer to the following non-GAAP measure and key metrics:
• Adjusted Corporate EBITDA – important non-GAAP measure to management because it allows management to assess the operational performance of our business, exclusive of certain items, and allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes that it is important to investors for the same reasons it is important to management and because it allows investors to assess our operational performance on the same basis that management uses internally. Adjusted EBITDA, the segment measure of profitability and accordingly a GAAP measure, is calculated exclusive of certain items which are largely consistent with those used in the calculation of Adjusted Corporate EBITDA.
• Vehicle Utilization – important key metric to management and investors as it is the measurement of the proportion of our vehicles that are being used to generate revenues relative to rentable fleet capacity. Higher Vehicle Utilization means more vehicles are being utilized to generate revenues.
• Depreciation Per Unit Per Month – important key metric to management and investors as depreciation of revenue earning vehicles and lease charges is one of our largest expenses for the vehicle rental business and is driven by the number of vehicles, expected residual values at the expected time of disposal and expected hold period of the vehicles. Depreciation Per Unit Per Month is reflective of how we are managing the costs of our vehicles and facilitates a comparison with other participants in the vehicle rental industry.
• Total Revenue Per Transaction Day ("Total RPD," also referred to as "pricing") – important key metric to management and investors as it represents a measurement of the changes in underlying pricing in the vehicle rental business and encompasses the elements in vehicle rental pricing that management has the ability to control.
• Total Revenue Per Unit Per Month ("Total RPU") – important key metric to management and investors as it provides a measure of revenue productivity relative to the number of vehicles in our rental fleet whether owned or leased ("Average Rentable Vehicles"). Average Rentable Vehicles excludes vehicles for sale on our retail lots or actively in the process of being sold through other disposition channels.
• Transaction Days – important key metric to management and investors as it represents the number of revenue generating days ("volume"). It is used as a component to measure Total RPD and Vehicle Utilization. Transaction Days represent the total number of 24-hour periods, with any partial period counted as one Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one Transaction Day in a 24-hour period.
Our non-GAAP measure and key metrics should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. The above non-GAAP measure and key metrics are defined, and the non-GAAP measure is reconciled to its most comparable U.S. GAAP measure, in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT
Our Business
We are engaged principally in the business of renting vehicles primarily through our Hertz, Dollar and Thrifty brands. Our profitability is primarily a function of the volume, mix and pricing of rental transactions and the utilization of vehicles based on its availability to rent, the related ownership cost of vehicles and other operating costs. Significant changes in the purchase price or residual values of vehicles or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We continue to balance our mix of EVs, non-program vehicles and program vehicles based on market conditions, including residual values. Our business requires significant expenditures for vehicles, and, as such, we require substantial liquidity to finance such expenditures.
Through our "Back-to-Basics" roadmap, we are committed to executing a comprehensive strategy to transform our business, anchored by three financial pillars: disciplined fleet management, revenue optimization and rigorous cost control. Building on our brand strength, global network and fleet management expertise, we remain committed to operational excellence and keeping customers central to everything we do. We have strengthened our fleet by refining our capabilities by sourcing vehicles strategically, deploying them efficiently and monetizing them effectively. Our approach balances disciplined execution today with systematic innovation for tomorrow, leveraging industry experience to adapt to evolving market dynamics and position us for sustainable growth in the future of mobility.
Our revenues are primarily derived from rental and related charges and consist of worldwide vehicle rental revenues from all company-operated vehicle rental operations and charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling and electric charging of vehicles and revenues associated with value-added services, including the sale of loss or collisiondamage waivers, theft protection, liability and personal accident/effects insurance coverage, premium emergency roadside service and other products and fees. Also included are collections from customers for vehicle damages, ancillary revenues associated with, but not limited to, retail vehicle sales and certain royalty fees from our franchisees (such fees are approximately 2% of total revenues each period).
Our expenses primarily consist of:
• direct vehicle and operating expense ("DOE"), primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservation costs; and other costs relating to the operation and rental of revenue earning vehicles, such as collision and damage, maintenance, fuel and electric charging costs;
• depreciation expense and lease charges, net relating to revenue earning vehicles, including gains and losses and related costs associated with the disposal of vehicles, including vehicle sales;
• depreciation and amortization expense relating to non-vehicle assets;
• selling, general and administrative expense ("SG&A"), which includes advertising costs and administrative personnel costs, along with costs for information technology and business transformation programs; and
• interest expense, net.
To accommodate increased demand, we seek to increase our available fleet and staff. As demand declines, we seek to reduce our fleet and staff accordingly. As a result, we strive to maintain a flexible workforce, with a significant number of part-time and seasonal workers. A number of our other major operating costs, including airport concession fees, commissions and vehicle liability expenses, are directly related to revenues or transaction volumes. Certain operating expenses, including real estate taxes, rent, insurance, utilities, maintenance and other facility-related expenses, and minimum staffing costs, remain fixed and cannot be adjusted for demand.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Our Reportable Segments
We have identified two reportable segments, which are consistent with our operating segments and organized based on the products and services provided and the geographic areas in which business is conducted, as follows:
• Americas RAC - Rental of vehicles, as well as sales of value-added services, in the U.S., Canada, Latin America and the Caribbean; and
• International RAC - Rental of vehicles, as well as sales of value-added services, in locations other than the U.S., Canada, Latin America and the Caribbean.
In addition to the above reportable segments, we have corporate operations. We assess performance and allocate resources based upon the financial information for our operating segments.
Revenue Earning Vehicles
Revenue earning vehicles used in our rental and leasing operations are recorded at cost, net of related discounts and incentives from manufacturers. Also included in revenue earning vehicles are vehicles placed on our retail lots for sale or actively in the process of being sold through other disposition channels.
Program vehicles are purchased under repurchase or guaranteed depreciation programs with vehicle manufacturers wherein the manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Guaranteed depreciation programs guarantee the residual value of the program vehicle upon sale, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Program vehicles generally provide us with flexibility to increase or reduce the size of our fleet based on market demand. Historically, when we have increased the percentage of program vehicles, the average age of our fleet has decreased, since the average holding period for program vehicles has historically been shorter than that for non-program vehicles.
When a revenue earning vehicle is acquired outside of a vehicle repurchase program, which is the case for the majority of our fleet at December 31, 2025, we estimate the period that we will hold the asset, primarily based on historical measures of the amount of rental activity (e.g., automobile mileage). The planned holding period of our revenue earning vehicles as of December 31, 2025, typically averaged 27 months; however, certain vehicles in our fleet may have fallen above or below our average planned holding period. We also estimate the residual value of the applicable revenue earning vehicles at the expected time of disposal, considering factors such as make, model and options, age, physical condition, mileage, sale location, time of the year and market conditions. The vehicle is depreciated using a rate based on these estimates. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and estimated future market conditions, their effect on residual values at the expected time of disposal and any changes to the estimated holding period of the vehicle. Differences between actual residual values (i.e., the ultimate sales price) and those estimated in our financial statements result in an adjustment to depreciation upon disposition of the vehicle. Our depreciation of revenue earning vehicles and lease charges also includes costs associated with the disposal of vehicles and rents paid for vehicles leased.
We dispose of our non-program vehicles through a variety of channels, including dealer direct wholesale channels, retail and auction. Non-program vehicles disposed of through our retail locations allow us the opportunity for ancillary vehicle sales revenue, such as warranty, financing and title fees, with vehicle sale proceeds offsetting our depreciation of revenue earning vehicles and lease charges. We periodically review and adjust the mix between program and non-program vehicles in our fleet based on contract negotiations and the economic environment pertaining to our industry in an effort to optimize the mix of vehicles. The use of program vehicles reduces the volatility associated with residual value estimation.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
2025 Operating Overview
The following charts provide the period-over-period change for several key factors influencing our results for each of the years ended December 31, 2025 and 2024:
(1) Includes impact of foreign currency exchange at average rates.
(2) Results shown are in constant currency as of December 31, 2024.
(3) The percentages shown in this chart reflect Vehicle Utilization versus period-over-period change.
For more information on the above, see the discussion of our results on a consolidated basis and by segment that follows herein. In this MD&A, certain amounts in the following tables are denoted in millions. Amounts, such as percentages, are calculated from the underlying numbers in thousands, and as a result, may not agree to the amount when calculated from the tables in millions. Discussions regarding our results of operations, liquidity and capital resources for the year ended December 31, 2025 compared to the year ended December 31, 2024 are included within this MD&A. Discussions of our results of operations, liquidity and capital resources for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found under Part II, Item 7 of
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
our 2024 Form 10-K, which is available on the SEC's website (www.sec.gov) or indirectly through our website (www.hertz.com).
CONSOLIDATED RESULTS OF OPERATIONS - HERTZ
Years Ended December 31,
Percent
Increase/(Decrease)
($ In millions)
Total revenues
Depreciation of revenue earning vehicles and lease charges, net
Direct vehicle and operating expenses
Non-vehicle depreciation and amortization
Selling, general and administrative expenses
Interest expense, net:
Vehicle
Non-vehicle
Interest expense, net
Other (income) expense, net
(Gain) from the sale of non-vehicle capital assets
Legal settlement
Bankruptcy-related litigation reserve
Long-Lived Assets impairment
Income (loss) before income taxes
Income tax (provision) benefit
Net income (loss)
Adjusted Corporate EBITDA (a)
The footnote in the table above is shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Total revenues decreased $544 million in 2025 compared to 2024, resulting primarily from a decrease of $639 million in our Americas RAC segment, partially offset by an increase of $94 million in our International RAC segment. The decrease in total revenues resulted primarily from lower pricing and lower volume.
Depreciation of revenue earning vehicles and lease charges, net decreased $1.7 billion in 2025 compared to 2024, which is primarily attributable to our Americas RAC segment. Depreciation of revenue earning vehicles and lease charges, net decreased due primarily to (i) impacts from our fleet refresh reducing the capital cost of newly acquired vehicles and strengthening of residual values at the expected time of disposal resulting from market improvements, (ii) per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in the same period in 2024 resulting in part from the disposition of vehicles through a more optimized channel mix, (iii) lower Average Vehicles and (iv) write-downs on the carrying values of the EVs classified as held for sale in the first half of 2024.
DOE decreased $200 million in 2025 compared to 2024 with a decrease of $265 million in our Americas RAC segment, partially offset by an increase of $60 million in our International RAC segment. The decrease in DOE was due primarily to lower volume.
Non-vehicle depreciation and amortization decreased $23 million in 2025 compared to 2024, resulting from decreases of $13 million and $10 million associated with our Americas RAC segment and corporate operations,
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
respectively. The decrease in non-vehicle depreciation and amortization is due primarily to certain asset retirements in 2024 and first quarter of 2025 resulting in an increase in assets that were fully depreciated in 2025.
SG&A increased $138 million in 2025 compared to 2024 driven primarily by an increase of $132 million associated with our corporate operations. The increase in SG&A associated with our corporate operations was due primarily to a non-cash stock-based compensation gain related to forfeitures of former CEO awards in March 2024, higher personnel costs and increased professional fees.
Vehicle interest expense, net increased $18 million in 2025 compared to 2024 due primarily to higher average rates, partially offset by decreased debt levels and lower market rates.
Non-vehicle interest expense, net increased $100 million in 2025 compared to 2024 due primarily to higher debt levels and higher average interest rates.
In 2025, we recognized a gain of $144 million on the sales of certain non-vehicle capital assets, primarily during the second and third quarters of 2025, in our Americas RAC segment, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
In 2025, we recognized a gain of $154 million related to the receipt of a legal settlement distribution in connection with our participation in a class action settlement, as disclosed in Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
In 2025, we recognized additional expense of $24 million in our corporate operations related to an existing bankruptcy-related litigation reserve for interest that continues to accrue during each subsequent reporting period until resolved. Refer also to Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
In 2024, we recognized an impairment charge of $1.0 billion associated with the Long-Lived Assets in our Americas RAC and International RAC segments, as disclosed in Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report.
For the year ended December 31, 2025, we recorded a tax benefit of $83 million, which resulted in an effective tax rate of 11%. For the year ended December 31, 2024, we recorded a tax benefit of $375 million, which resulted in an effective tax rate of 11%. The change in tax in 2025 compared to 2024 was driven primarily by lower pretax losses in 2025, non-taxable year-over-year fluctuations in fair value adjustments of the Exchangeable Note and lower tax credits in 2025, partially offset by lower valuation allowances in 2025.
CONSOLIDATED RESULTS OF OPERATIONS - HERTZ GLOBAL
The above discussion for Hertz also applies to Hertz Global.
Hertz Global had a loss of $44 million and income of $275 million from the change in fair value of Public Warrants that was incremental to Hertz for the years ended December 31, 2025 and 2024, respectively.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS AND SELECTED OPERATING DATA BY SEGMENT
Americas RAC
As of December 31, 2025, our Americas RAC operations had a total of approximately 4,600 company-operated and franchisee locations, comprised of 2,000 airport and 2,600 off airport locations.
Results of operations and our discussion and analysis for our Americas RAC segment were as follows:
Years Ended December 31,
Percent Increase/(Decrease)
($ In millions, except as noted)
Total revenues
Depreciation of revenue earning vehicles and lease charges, net
Direct vehicle and operating expenses
Direct vehicle and operating expenses as a percentage of total revenues
Non-vehicle depreciation and amortization
Selling, general and administrative expenses
Selling, general and administrative expenses as a percentage of total revenues
Vehicle interest expense
(Gain) from the sale of non-vehicle capital assets
Legal settlement
Long-Lived Assets impairment
Adjusted EBITDA
Transaction Days (in thousands) (b)
Average Vehicles (in whole units) (c)
Average Rentable Vehicles (in whole units) (c)
Vehicle Utilization (c)
Total RPD (in dollars) (d)
Total RPU Per Month (in whole dollars) (e)
Depreciation Per Unit Per Month (in whole dollars) (f)
Percentage of program vehicles as of period end
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Total Americas RAC revenues decreased $639 million in 2025 compared to 2024 due primarily to lower pricing and lower volume. Total RPD and Transaction Days declined across most customer channels in 2025 compared to 2024. Airport revenues comprised 68% and 69% of total revenues for the segment in 2025 and 2024, respectively.
Depreciation of revenue earning vehicles and lease charges, net for Americas RAC decreased $1.6 billion in 2025 compared to 2024 due primarily to (i) impacts from our fleet refresh reducing the capital cost of newly acquired vehicles and strengthening of residual values at the expected time of disposal resulting from market improvements, (ii) per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in the same period in 2024 resulting in part from the disposition of vehicles through a more optimized channel mix, (iii) lower Average Vehicles and (iv) write-downs on the carrying values of the EVs classified as held for sale in 2024.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
DOE for Americas RAC decreased $265 million in 2025 compared to 2024 due primarily to lower volume, reduced self-insurance liabilities as a result of adverse experience and case development and decreased collision and damage charges, partially offset by increased facility rent expense resulting in part from sale leaseback transactions in 2025.
Non-vehicle depreciation and amortization decreased $13 million in 2025 compared to the same period in 2024 due primarily to certain asset retirements in 2024 resulting in an increase in assets that were fully depreciated in 2025.
SG&A for Americas RAC increased $22 million in 2025 compared to 2024 due primarily to increased professional fees, higher personnel costs and increased advertising spend, partially offset by lower restructuring related charges.
Vehicle interest expense for Americas RAC increased $31 million in 2025 compared to 2024 due primarily to higher average rates due in part to the issuance of the HVF III 2025 Notes, partially offset by lower market rates and lower debt levels.
Americas RAC recognized a gain of $144 million on the sale of certain non-vehicle capital assets, primarily during the second and third quarters of 2025, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
Americas RAC recognized a gain of $154 million in 2025 related to the receipt of a legal settlement distribution in connection with our participation in a class action settlement, as disclosed in Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
Americas RAC recognized an impairment charge of $865 million in 2024 associated with certain long-lived assets, of which $740 million and $125 million related to its revenue earning vehicles and ROU assets, respectively. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report for further details.
International RAC
As of December 31, 2025, our International RAC operations had approximately 6,300 company-operated and franchisee locations, comprised of 1,500 airport and 4,800 off airport locations in over 110 countries and jurisdictions, including Africa, Asia, Australia, Europe, the Middle East and New Zealand.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of operations and our discussion and analysis for our International RAC segment were as follows:
Years Ended December 31,
Percent Increase/(Decrease)
($ In millions, except as noted)
Total revenues
Depreciation of revenue earning vehicles and lease charges, net
Direct vehicle and operating expenses
Direct vehicle and operating expenses as a percentage of total revenues
Non-vehicle depreciation and amortization
Selling, general and administrative expenses
Selling, general and administrative expenses as a percentage of total revenues
Vehicle interest expense
Long-Lived Assets impairment
Adjusted EBITDA
Transaction Days (in thousands) (b)
Average Vehicles (in whole units) (c)
Average Rentable Vehicles (in whole units) (c)
Vehicle Utilization (c)
Total RPD (in dollars) (d)
Total RPU Per Month (in whole dollars) (e)
Depreciation Per Unit Per Month (in whole dollars) (f)
Percentage of program vehicles as of period end
Footnotes to the table above are shown in the "Footnotes to the Results of Operations and Selected Operating Data by Segment Tables" section of this MD&A.
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Total revenues for International RAC increased $94 million in 2025 compared to 2024, due primarily to higher volume resulting from increases primarily in our leisure channel in 2025 compared to 2024. Total revenues for International RAC were also impacted by a favorable $47 million foreign currency impact in 2025.
Depreciation of revenue earning vehicles and lease charges, net for International RAC decreased $60 million in 2025 compared to 2024 due primarily to (i) per unit gains recognized on vehicle dispositions in 2025 compared to per unit losses recognized in the same period in 2024 and (ii) changes in fleet mix.
DOE for International RAC increased $60 million in 2025 compared to 2024 due primarily to higher facility rent costs, increased maintenance costs and increased volume.
SG&A for International RAC decreased $16 million in 2025 compared to 2024 due primarily to decreased restructuring related charges, partially offset by expenses incurred related to an unfavorablelitigation ruling in the third quarter of 2025.
Vehicle interest expense for International RAC decreased $13 million in 2025 compared to 2024 due primarily to lower debt levels and lower market rates.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
International RAC recognized an impairment charge of $183 million in 2024 associated with its revenue earning vehicles. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report for further details.
Footnotes to the Results of Operations and Selected Operating Data by Segment Tables
(a) Adjusted Corporate EBITDA is calculated as net income (loss), adjusted for income taxes; non-vehicle depreciation and amortization; non-vehicle debt interest, net; vehicle debt-related charges; restructuring and restructuring related charges; unrealized (gains) losses from financial instruments; change in fair value of Public Warrants and certain other miscellaneous items. When evaluating our operating performance, investors should not consider Adjusted Corporate EBITDA in isolation of, or as a substitute for, measures of our financial performance determined in accordance with U.S. GAAP. The reconciliations to the most comparable consolidated U.S. GAAP measure are presented below.
HERTZ
Years Ended December 31,
(In millions)
Net income (loss)
Adjustments:
Income tax provision (benefit)
Non-vehicle depreciation and amortization
Non-vehicle debt interest, net (1)
Vehicle debt-related charges (2)
Restructuring and restructuring related charges (3)
Unrealized (gains) losses on financial instruments (4)
Gain on sale of non-vehicle capital assets (5)
Legal settlement (6)
Bankruptcy-related litigation reserve (7)
Long-Lived Assets impairment (8)
Non-cash stock-based compensation forfeitures (9)
Other items (10)
Adjusted Corporate EBITDA
HERTZ GLOBAL
Years Ended December 31,
(In millions)
Net income (loss)
Adjustments:
Income tax provision (benefit)
Non-vehicle depreciation and amortization
Non-vehicle debt interest, net (1)
Vehicle debt-related charges (2)
Restructuring and restructuring related charges (3)
Unrealized (gains) losses on financial instruments (4)
Gain on sale of non-vehicle capital assets (5)
Legal settlement (6)
Bankruptcy-related litigation reserve (7)
Long-Lived Assets impairment (8)
Non-cash stock-based compensation forfeitures (9)
Change in fair value of Public Warrants (11)
Other items (10)
Adjusted Corporate EBITDA
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(1) In 2025, excludes gains (losses) related to the fair value of the Exchange Features 2029 and the Exchange Feature 2030, which are included in footnote 4 below.
(2) Represents vehicle debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.
(3) Represents charges incurred under restructuring actions as defined in U.S. GAAP. Also includes restructuring related charges such as incremental costs incurred related to personnel reductions, litigation and closure of underperforming locations.
(4) Represents unrealized (gains) losses on derivative financial instruments. In 2025, also includes gains (losses) related to the fair value of the Exchange Features 2029 and the Exchange Feature 2030. See Note 12, "Financial Instruments," in Part II, Item 8 of this 2025 Annual Report.
(5) Represents the gains on sales of certain non-vehicle capital assets sold in 2025 and 2023. See Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
(6) Represents the gain related to the receipt of a legal settlement distribution in September 2025 in connection with the Company’s participation in a class action settlement. See Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
(7) Represents an increase to an existing bankruptcy-related litigation reserve initially recorded in September 2024, including interest that continues to accrue during each subsequent reporting period. See Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report.
(8) Represents Long-Lived Assets impairment charges recognized in the third quarter of 2024. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report.
(9) Represents former CEO awards forfeited in March 2024. See Note 9, "Stock-Based Compensation," in Part II, Item 8 of this 2025 Annual Report.
(10) Represents miscellaneous items. For 2025, primarily includes a pension plan settlement reserve adjustment, a one-time settlement agreement to restructure an IT contract, certain IT-related charges, cloud computing costs, an unfavorablelitigation ruling and certain concession-related adjustments. For 2024, primarily includes certain IT-related charges, cloud computing costs and certain storm-related vehicle damages, partially offset by a loss recovery settlement and certain litigation settlements.
(11) Represents the change in fair value during the reporting period for Hertz Global's outstanding Public Warrants, as disclosed in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
(b) Transaction Days represents the total number of 24-hour periods, with any partial period counted as one Transaction Day, that vehicles were on rent (the period between when a rental contract is opened and closed) in a given period. Thus, it is possible for a vehicle to attain more than one Transaction Day in a 24-hour period.
(c) Vehicle Utilization is calculated by dividing total Transaction Days by Available Car Days. Available Car Days represents Average Rentable Vehicles multiplied by the number of days in a given period. Average Rentable Vehicles excludes vehicles for sale on our retail lots or actively in the process of being sold through other disposition channels and is determined using a simple average of such vehicles at the beginning and end of a given period.
Americas RAC
International RAC
Years Ended December 31,
Transaction Days (in thousands)
Average Rentable Vehicles (in whole units)
Number of days in period (in whole units)
Available Car Days (in thousands)
Vehicle Utilization
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(d) Total RPD is calculated as revenues, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates ("Total Revenues - adjusted for foreign currency"), divided by the total number of Transaction Days. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Total RPD is shown below:
Americas RAC
International RAC
Years Ended December 31,
($ in millions, except as noted)
Revenues
Foreign currency adjustment (1)
Total Revenues-adjusted for foreign currency
Transaction Days (in thousands)
Total RPD (in dollars)
(1) Based on December 31, 2024 foreign currency exchange rates for all periods presented.
(e) Total RPU Per Month is calculated as Total Revenues - adjusted for foreign currency divided by the Average Rentable Vehicles in each period and then divided by the number of months in the period reported.
Americas RAC
International RAC
Years Ended December 31,
($ in millions, except as noted)
Total Revenues-adjusted for foreign currency
Average Rentable Vehicles (in whole units)
Total revenue per unit (in whole dollars)
Number of months in period (in whole units)
Total RPU Per Month (in whole dollars)
(f) Depreciation Per Unit Per Month represents the amount of average depreciation expense and lease charges, per vehicle per month and is calculated as depreciation of revenue earning vehicles and lease charges, net, with all periods adjusted to eliminate the effect of fluctuations in foreign currency exchange rates, divided by the Average Vehicles in each period, which is determined using a simple average of the number of vehicles at the beginning and end of a period, and then dividing by the number of months in the period reported. Our management believes eliminating the effect of fluctuations in foreign currency exchange rates is useful in analyzing underlying trends. The calculation of Depreciation Per Unit Per Month is shown below:
Americas RAC
International RAC
Years Ended December 31,
($ in millions, except as noted)
Depreciation of revenue earning vehicles and lease charges, net (1)
Foreign currency adjustment (2)
Adjusted depreciation of revenue earning vehicles and lease charges
Average Vehicles (in whole units)
Adjusted depreciation of revenue earning vehicles and lease charges divided by Average Vehicles (in whole dollars)
Number of months in period (in whole units)
Depreciation Per Unit Per Month (in whole dollars)
(1) Reflects four months of depreciation at post-impairment rates for the year ended December 31, 2024. See Note 4, "Long-Lived Assets Impairment," in Part II, Item 8 of this 2025 Annual Report.
(2) Based on December 31, 2024 foreign currency exchange rates for all periods presented.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Our U.S. and international operations are funded by cash provided by operating activities and by extensive financing arrangements in the U.S. and internationally.
Cash and Cash Equivalents
As of December 31, 2025, we had $565 million of cash and cash equivalents and $602 million of restricted cash and cash equivalents. As of December 31, 2025, $231 million of cash and cash equivalents and $89 million of restricted cash and cash equivalents were held by our subsidiaries outside of the U.S. We continue to assert non-permanent reinvestment of foreign earnings that give rise to excess cash, provided such cash can be remitted in a tax efficient manner.
We believe that cash and cash equivalents generated by our operations and cash received on the disposal of vehicles, together with amounts available under various liquidity facilities and refinancing options available to us in the capital markets, will be sufficient to fund our operating activities and obligations for the next twelve months and for the foreseeable future thereafter.
Cash Flows - Hertz
As of December 31, 2025 and 2024, Hertz had cash and cash equivalents of $565 million and $591 million, respectively, and restricted cash and cash equivalents of $602 million and $541 million, respectively. The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for the periods shown:
Years Ended December 31,
(In millions)
$ Change
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net change in cash and cash equivalents and restricted cash and cash equivalents
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
During 2025, cash flows from operating activities decreased $598 million period over period due primarily to a $190 million change in net income, as adjusted for non-cash and non-operating items and a $408 million change in working capital accounts. Cash flows from working capital accounts decreased due primarily to an increase to an existing bankruptcy-related litigation reserve recorded in the third quarter of 2024 and an increase in self-insurance liabilities as a result of adverse experience and case development in 2024, partially offset by a reduction in value added tax ("VAT") receivables due primarily to VAT refunds received in 2025.
Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles. During 2025, there was a $934 million decrease in the cash used in investing activities period over period due primarily to a $749 million decrease in revenue earning vehicle expenditures, net. The decrease in cash used by revenue earning vehicle expenditures, net, resulted primarily from per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in 2024, higher fleet prepayments in 2024 due in part to our fleet rotation initiatives and changes to fleet working capital due to timing, partially offset by increased vehicle acquisitions. Cash used in investing activities also decreased period over period due to $177 million of increased proceeds primarily
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
from the disposition of certain non-vehicle capital assets in 2025 compared to 2024, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
Net financing cash inflows were $370 million in the 2025 compared to $655 million in 2024. The $285 million decrease in cash inflows is due primarily to a $1.3 billion decrease in net proceeds from non-vehicle debt resulting from fewer issuances of non-vehicle debt in 2025 compared to 2024. Cash flows from financing activities were also impacted by an increase of $1.1 billion in net proceeds from vehicle debt largely resulting from more issuances of HVF III medium term notes in 2025 compared to 2024.
Cash Flows - Hertz Global
As of December 31, 2025 and 2024, Hertz Global had cash and cash equivalents of $565 million and $592 million, respectively, and restricted cash and cash equivalents of $602 million and $541 million, respectively. The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for Hertz Global for the periods shown:
Years Ended December 31,
(In millions)
$ Change
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net change in cash and cash equivalents and restricted cash and cash equivalents
Fluctuations in operating, investing and financing cash flows from period to period were due to the same factors as those disclosed for Hertz above, with the exception of any cash inflows or outflows related to the issuance or repurchase of our common stock and the exercise of Public Warrants. See Note 17, "Equity and Earnings (Loss) Per Common Share – Hertz Global," and Note 18, "Public Warrants – Hertz Global," in Part II, Item 8 of this 2025 Annual Report.
Public Warrants
As of December 31, 2025, approximately 82,700,000 Public Warrants remain outstanding with an exercise price of $13.61. As of December 31, 2025, there has been approximately 6,300,000 Public Warrants exercised since their original issuance in June 2021. The outstanding warrants are exercisable through June 30, 2051. As of December 31, 2025, the exercise price is $13.61.
At-the-Market ("ATM") Equity Offering Program
In May 2025, Hertz Global filed a Form S-3 Registration Statement as well as a prospectus supplement covering the offering, issuance and sale of up to a maximum aggregate offering price of $250 million shares of Hertz Global common stock par value $0.01 per share that may be issued and sold from time to time under an equity distribution agreement with various banking institutions, acting as the Company's agents, through an ATM offering program (the "ATM Program"). As of December 31, 2025, no shares of Hertz Global common stock had been sold under the ATM Program.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Debt Financing
See Note 7, "Debt," in Part II, Item 8 of this 2025 Annual Report for information on our outstanding debt obligations and our borrowing capacity and availability under our revolving credit facilities as of December 31, 2025.
Cash paid for interest on non-vehicle debt during 2025 compared to 2024 was $463 million and $287 million, respectively. The $176 million increase in cash paid for non-vehicle debt interest is due primarily to higher debt levels in 2025 resulting from the issuance of the First Lien Senior Notes in 2024. Cash paid for interest on vehicle debt during 2025 compared to 2024 was $541 million and $511 million, respectively. The $30 million increase in cash paid for vehicle debt interest is due primarily to higher debt levels resulting from the issuances of HVF III medium term notes in 2025 and the second half of 2024, partially offset by lower debt levels and interest rates associated with the European ABS.
A substantial portion of our liquidity requirements arise from servicing our indebtedness, funding our operations, including purchases of revenue earning vehicles, and funding non-vehicle capital expenditures. We expect to maintain heightened levels of indebtedness into 2026. For a discussion of the risks associated with our high leverage, see Item 1A, "Risk Factors" in this 2025 Annual Report.
Our available corporate liquidity, which excludes unused commitments under our vehicle debt, was as follows:
(In millions)
As of December 31, 2025
As of December 31, 2024
Cash and cash equivalents
Availability under the First Lien RCF
Corporate liquidity (1)
(1) In January 2026, we made a payment for the stipulated amount of $346 million in connection with the case captioned Wells Fargo Bank, National Association v. The Hertz Corporation, et. al., as further disclosed in Note 15, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2025 Annual Report. The payment was funded through borrowings under the First Lien RCF.
Non-vehicle Debt
Approximately $284 million of our outstanding non-vehicle debt is scheduled to mature during the twelve months following the issuance of this 2025 Annual Report. We have reviewed our debt facilities for non-vehicle debt and determined that it is probable that we will be able, and have the intent, to refinance these facilities at such times as we determine appropriate prior to maturity.
Significant financing activities during the year ended December 31, 2025 for our non-vehicle debt are below.
First Lien Credit Agreement / First Lien RCF
On April 1, 2025, an amendment to the First Lien Credit Agreement, which was entered into in April 2024 ("Amendment No. 8"), expired. Amendment No. 8 contained a minimum liquidity covenant of $400 million for each month ending in the second and third quarters of 2024 and $500 million for each month ending in the fourth quarter of 2024 and the first quarter of 2025. Amendment No. 8 also temporarily amended Hertz's compliance with a financial covenant consisting of a ratio of first lien debt to Consolidated EBITDA ("the First Lien Ratio"), as defined within the First Lien Credit Agreement and may be materially different than Adjusted Corporate EBITDA presented in Part II, Item 7 of this 2025 Annual Report, to require a ratio of less than or equal to 5.0x in the second and third quarters of 2024 and 4.75x in the fourth quarter of 2024 and first quarter of 2025. Upon expiration of Amendment No. 8, the First Lien Ratio reverted to a requirement of less than or equal to 3.0x in the first and last quarters of the calendar year and 3.5x in the second and third quarters of the calendar year.
In May 2025, the First Lien Credit Agreement was amended ("Amendment No. 10"), which provided for the extension of the maturity date of $1.7 billion of commitments under our existing $2.0 billion First Lien RCF from
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
June 2026 to March 2028, subject to a springing maturity date (as defined in the First Lien Credit Agreement) and makes certain other amendments to the First Lien Credit Agreement. We will have access to up to $2.0 billion under the First Lien RCF until June 2026, and thereafter the aggregate amount of commitments under the First Lien RCF will be $1.7 billion until March 2028, after giving effect to the terms of Amendment No. 10.
Amendment No. 10 also contains a minimum liquidity covenant, consistent with that of Amendment No. 8, which requires $400 million for each month ending in the second and third quarters of the calendar year and $500 million for each month ending in the first and fourth quarter of the calendar year. Amendment No. 10 also adds certain limitations on Restricted Payments and Permitted Investments (each as defined in the First Lien Credit Agreement). Under the terms of Amendment No. 10, the minimum liquidity covenant and certain restrictions will sunset upon the end of the Relief Period (as defined in the First Lien Credit Agreement).
Exchangeable Notes Due 2029
In June 2024, Hertz issued $250 million in aggregate principal amount of the Exchangeable Notes Due 2029. The Exchangeable Notes Due 2029 bear PIK interest payable semi-annually in arrears on January 15 and July 15 (the "Semi-annual PIK Event"), which began in January 2025, whereby PIK interest increases the principal amount of the Exchangeable Notes Due 2029 upon each Semi-annual PIK Event. In connection with Semi-annual PIK Events in the first and third quarter of 2025, we increased the principal amount of the Exchangeable Notes Due 2029 by $11 million and $10 million, respectively.
Upon issuance, the Company bifurcated the Exchange Feature 2029, as defined in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report, from the Exchangeable Notes Due 2029 for accounting purposes utilizing applicable guidance. As a result, the Company recognized a debt discount of $68 million within non-vehicle debt, representing the initial fair value of the Exchange Feature 2029. Additionally, for each Semi-annual PIK Event, we bifurcate an associated embedded derivative (the "Exchange Feature 2029 PIK") from the Exchangeable Notes Due 2029 for accounting purposes utilizing applicable guidance. As a result, we recognized a debt discount of $11 million within non-vehicle debt representing the initial fair value. See Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report for further details.
The net carrying amount of the Exchangeable Notes consists of the following:
(In millions)
December 31, 2025
December 31, 2024
Principal
Non-cash PIK interest
Unamortized debt discounts and issuance costs (1)
Unamortized discounts associated with the Exchange Features 2029 (2)
Fair value of the Exchange Features 2029 (3)
Net carrying amount
(1) Debt issuance costs are amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2029 using the effective interest method.
(2) Reflects the unamortized discount associated with the Exchange Features 2029, as defined in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report, net of accretive interest which is amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2029 using the effective interest method.
(3) Refer also to Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Interest expense recognized for the Exchangeable Notes Due 2029 consists of the following:
Year Ended December 31,
(In millions)
Non-cash PIK interest
Amortization of debt discount and debt issuance costs
Accretive interest
(Gain) loss on fair value of the Exchange Features 2029 (1)
Total
(1) Refer also to Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
Exchangeable Notes Due 2030
In September 2025, Hertz issued $425 million in aggregate principal amount of the Exchangeable Notes Due 2030, which are guaranteed by Hertz Holdings, Rental Car Intermediate Holdings, LLC and each of Hertz's existing and future, direct and indirect, U.S. subsidiaries that are guarantors under the First Lien Credit Agreement. The Exchangeable Notes Due 2030 bear interest at a rate of 5.500% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2026. The Exchangeable Notes Due 2030 mature on October 1, 2030 (the "Maturity Date 2030"), unless earlier repurchased, redeemed or exchanged (the "Exchange Feature 2030"), in accordance with their terms prior to the Maturity Date 2030.
Prior to July 1, 2030, the Exchangeable Notes Due 2030 will be exchangeable only upon satisfaction of certain conditions and during certain periods. Thereafter, the Exchangeable Notes Due 2030 will be exchangeable at any time until the close of business on the second scheduled trading day immediately preceding the Maturity Date 2030. The Exchangeable Notes Due 2030 will be exchangeable by holders into shares of Hertz Global common stock, cash or a combination of common stock and cash, at Hertz's election, at an initial exchange rate of 108.2808 shares per $1,000 principal amount of Exchangeable Notes Due 2030, corresponding to an initial exchange price of $9.24 per share of Hertz Global common stock, subject to adjustment upon the occurrence of certain events.
Hertz may not redeem the Exchangeable Notes Due 2030 prior to October 6, 2028. On or after October 6, 2028 and on or prior to the 26th scheduled trading day immediately preceding the Maturity Date 2030, if the last reported sale price per share of Hertz Global common stock has been at least 130% of the exchange price for the Exchangeable Notes Due 2030 for certain specified periods and certain other conditions are satisfied, Hertz may redeem all or a portion (subject to certain limitations) of the Exchangeable Notes Due 2030. The redemption will be at a cash redemption price equal to the principal amount of the Exchangeable Notes Due 2030 to be redeemed plus accrued and unpaid interest on such Exchangeable Notes Due 2030 to, but not including, the redemption date.
Upon issuance, we bifurcated the Exchange Feature 2030 from the Exchangeable Notes Due 2030 for accounting purposes utilizing applicable guidance. As a result, we recognized a debt discount within non-vehicle debt representing the initial fair value of the Exchange Feature 2030. As of December 31, 2025, the fair value of the Exchange Feature 2030 was $54 million. See Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report for further details.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The net carrying amount of the Exchangeable Notes Due 2030 consists of the following:
(In millions)
December 31, 2025
December 31, 2024
Principal
Unamortized debt issuance costs (1)
Unamortized discounts associated with the Exchange Feature 2030 (2)
Fair value of the Exchange Feature 2030 (3)
Net carrying amount
(1) Debt issuance costs are amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2030 using the effective interest method.
(2) Reflects the unamortized discount associated with the Exchange Feature 2030, net of accretive interest which is amortized to non-vehicle interest expense over the term of the Exchangeable Notes Due 2030 using the effective interest method.
(3) As further disclosed in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
Interest expense recognized for the Exchangeable Notes Due 2030 consists of the following:
Year ended December 31,
(In millions)
Contractual interest expense
Amortization of debt issuance costs
Accretive interest
(Gain) loss on fair value of Exchange Feature 2030 (1)
Total
(1) As further disclosed in Note 13, "Fair Value Measurements," in Part II, Item 8 of this 2025 Annual Report.
Letters of Credit
As of December 31, 2025, there were outstanding standby letters of credit totaling $995 million comprised primarily of $681 million issued under the First Lien RCF and $245 million issued under the Term C Loan. As of December 31, 2025, no capacity remained to issue additional letters of credit under the Term C Loan. Such letters of credit have been issued primarily to provide credit enhancement for our asset-backed securitization facilities and to support our insurance programs, as well as to support our vehicle rental concessions and leaseholds. As of December 31, 2025, none of the issued letters of credit have been drawn upon.
Hertz also has access to various unsecured letter of credit facilities ("Standby LCs"), in which, at Hertz's option and under the terms of the facilities, Hertz may request letters of credit be issued for itself and on behalf of certain of its subsidiaries up to the committed amounts of the facilities. In February 2026, Hertz increased the committed amounts under its Standby LCs by approximately $200 million.
Vehicle Debt
Significant financing activities during the year ended December 31, 2025 for our vehicle debt were as follows:
Americas RAC
Approximately $3.1 billion of the outstanding vehicle debt in our Americas RAC segment is scheduled to mature during the twelve months following the issuance of this 2025 Annual Report. We have reviewed our debt facilities and determined that it is probable that we will be able, and have the intent, to refinance these facilities at such times as we determine appropriate prior to maturity.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
HVF III U.S. Vehicle Variable Funding Notes
In May 2025, HVF III amended the HVF III Series 2021-A Notes, which provided for the extension of the maturity date of $2.9 billion of aggregate commitments of Class A Notes from April 2026 to May 2027. In August 2025, $780 million in non-extending commitments were voluntarily terminated.
In June 2025, HVF III amended the HVF III Series 2021-A Notes to issue new Class B Notes in which aggregate commitments were increased from $188 million to $300 million and the maturity date was extended to June 2027. The Class B Notes are subordinate to the Class A Notes.
In August 2025, HVF III amended the HVF III Series 2021-A Notes to permit borrowings and repayments of principal under the Class B Notes and to allow for future issuance of a Class C tranche of notes.
HVF III U.S. Vehicle Medium Term Notes
HVF III Series 2025-1 Notes and Series 2025-2 Notes: In March 2025, HVF III issued the Series 2025-1 (Class A, Class B, Class C and Class D) and Series 2025-2 Notes (Class A, Class B, Class C and Class D) each in aggregate principal amount of $500 million with maturity dates of September 2028 and September 2030, respectively.
In June 2025, HVF III issued the Series 2025-3 (Class A, Class B, Class C and Class D) and Series 2025-4 Notes (Class A, Class B, Class C and Class D) in aggregate principal amounts of $375 million and $310 million with maturity dates of December 2028 and December 2030, respectively.
In December 2025, HVF III issued the Series 2025-5 (Class A, Class B, Class C and Class D) and Series 2025-6 Notes (Class A, Class B, Class C and Class D) in aggregate principal amounts of $450 million and $550 million with maturity dates of May 2029 and May 2031, respectively.
There is subordination within each of the preceding series based on class.
Hertz Canadian Securitization
In May 2025, the Hertz Canadian Securitization was amended to extend the maturity date to April 2027.
International RAC
Approximately $67 million of the outstanding vehicle debt in our International RAC segment is scheduled to mature during the twelve months following the issuance of this 2025 Annual Report. We have reviewed our debt facilities and determined that it is probable that we will be able, and have the intent, to refinance these facilities at such times as we determine appropriate prior to maturity.
European ABS
In May 2025, the European ABS was amended to provide for the extension of the maturity date of total aggregate maximum borrowings of €1.2 billion, inclusive of the addition of Class B Notes, to April 2027. In August 2025, €129 million in non-extending commitments were voluntarily terminated.
In July 2025, the European ABS was amended for the issuance of Class C Notes in an aggregate principal amount of €100 million. The Class C Notes can be drawn and repaid on a revolving basis and have a maturity date of April 2027. After giving effect to the issuance of the Class C Notes, total aggregate maximum borrowings available under the European ABS are €1.3 billion until April 2027. The Class C Notes are subordinate to the Class A Notes and Class B Notes.
Australian Securitization
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In June 2025, the Australian Securitization was amended to extend the maturity date to June 2027.
New Zealand RCF
In August 2025, the New Zealand RCF was amended to extend the maturity date to August 2027.
U.K. ABS
In December 2024, HFF entered into the U.K. ABS. Upon issuance, the U.K. ABS was not funded. During the first quarter of 2025, the U.K. ABS aggregate maximum borrowings were increased to £215 million.
In December 2025, the U.K. ABS was amended to extend the maturity date to March 2028.
Covenants
The First Lien Credit Agreement requires us to comply with the following financial covenant: the First Lien Ratio, which requires a ratio of less than or equal to 3.0x in the first and last quarters of the calendar year and 3.5x in the second and third quarters of the calendar year. Amendment No. 8 temporarily increased the First Lien Ratio and contained a minimum liquidity covenant, which expired, as expected, on the first day of the second quarter of 2025, as discussed above. Additionally, Amendment No. 10 requires a minimum liquidity covenant, consistent with Amendment No. 8, and will sunset upon the end of the Relief Period, as discussed above. As of December 31, 2025, we were in compliance with the First Lien Ratio. As of December 31, 2025, we were in compliance with the minimum liquidity covenant, as discussed above.
Additionally, the First Lien Credit Agreement, the First Lien Senior Notes, the Exchangeable Notes Due 2029, the Exchangeable Notes Due 2030, the Senior Notes Due 2026 and the Senior Notes Due 2029 (collectively, the "Corporate Indebtedness") contain customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and/or compliance certificates, and covenants related to conduct of business, maintenance of property and insurance, compliance with environmental laws and, where applicable, the granting of security interests for the benefit of the secured parties under the applicable agreements on after-acquired real property, fixtures and future subsidiaries.
The terms of our Corporate Indebtedness contain covenants limiting the ability of Hertz and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, Hertz Global capital stock; make certain investments or other restricted payments; sell certain assets; transfer intellectual property to unrestricted subsidiaries; merge, consolidate or sell all or substantially all of its assets; and create restrictions on the ability of Hertz’s restricted subsidiaries to pay dividends or other amounts to Hertz. As per the terms of the Corporate Indebtedness, these covenants are subject to a number of important and significant limitations, qualifications and exceptions.
As of December 31, 2025, we were in compliance with all covenants under the terms of agreements governing the respective Corporate Indebtedness.
Vehicle Financing Risks
Our program vehicles are subject to repurchase by vehicle manufacturers under contractual repurchase or guaranteed depreciation programs. Under these programs, vehicle manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during a specified time period, typically subject to certain vehicle condition and mileage requirements. We use values derived from this specified price or guaranteed depreciation rate to calculate financing capacity under certain asset-backed financing arrangements.
In the event of a bankruptcy of a vehicle manufacturer, our liquidity could be impacted by several factors including reductions in fleet residual values and the risk that we would be unable to collect outstanding receivables due to us from such bankrupt manufacturer. In addition, the program vehicles manufactured by any such company would
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
need to be removed from our financing facilities or re-designated as non-program vehicles, which would require us to furnish additional credit enhancement associated with these program vehicles.
Substantially all of our revenue earning vehicles and certain related assets are owned by special purpose entities or are encumbered in favor of the lenders under the various credit facilities, other secured financings and asset-backed securities programs. None of the value of such assets (including the assets owned by Hertz Vehicle Financing III LLC, TCL Funding LP and each of the domestic and international subsidiaries that pledge vehicle and vehicle related assets as part of our securitization programs) will be available to satisfy the claims of non-vehicle secured or unsecured creditors unless the vehicle related secured creditors under the securitization programs are paid in full.
We rely significantly on asset-backed financing arrangements to purchase vehicles for our U.S. and international vehicle rental fleets. For further information concerning our asset-backed financing programs and our indebtedness, see Note 7, "Debt," in Part II, Item 8 of this 2025 Annual Report. For a discussion of the risks associated with our reliance on asset-backed financing and the significant amount of indebtedness, see Item 1A, "Risk Factors" in this 2025 Annual Report.
Capital Expenditures
Revenue Earning Vehicles Expenditures and Disposals
The table below sets forth our revenue earning vehicles expenditures and related disposal proceeds for the annual periods shown.
Cash inflow (cash outflow)
Revenue Earning Vehicles
(In millions)
Capital
Expenditures
Disposal
Proceeds
Net Capital Proceeds (Expenditures)
The table below sets forth expenditures for revenue earning vehicles, net of disposal proceeds, by segment.
Cash inflow (cash outflow)
Years Ended December 31,
($ in millions)
$ Change
% Change
Americas RAC
International RAC
Total
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
Proceeds from the disposal of revenue earning vehicles increased $408 million, or 5%, in 2025 compared to the same period in 2024, primarily in our Americas RAC segment resulting in part from per unit gains on vehicle dispositions recognized in 2025 compared to per unit losses recognized in 2024. Revenue earning vehicle expenditures decreased $341 million, or 3%, in 2025 compared to 2024, primarily in our Americas RAC segment, resulting from higher fleet prepayments in 2024 due in part to fleet rotation initiatives and changes to fleet working capital due to timing, partially offset by increased vehicle acquisitions.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Non-Vehicle Capital Asset Expenditures and Disposals
The table below sets forth our non-vehicle capital asset expenditures, and related disposal proceeds from non-vehicle capital assets disposed of or to be disposed of for the annual periods shown.
Cash inflow (cash outflow)
Non-Vehicle Capital Assets
(In millions)
Capital
Expenditures
Disposal
Proceeds
Net Capital
Expenditures
The table below sets forth non-vehicle capital asset expenditures, net of disposal proceeds, by segment.
Cash inflow (cash outflow)
Years Ended December 31,
($ in millions)
$ Change
% Change
Americas RAC
International RAC
Corporate
Total
NM - Not meaningful
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
The change in non-vehicle capital asset expenditures, net in 2025 compared to 2024 is primarily due to a $177 million increase in proceeds resulting largely from the disposition of certain non-vehicle capital assets in our Americas RAC segment, as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2025 Annual Report.
CONTRACTUAL AND OTHER OBLIGATIONS
The following table details our material cash requirements for our contractual and other obligations as of December 31, 2025:
Payments Due by Period
(In millions)
Total
After 2030
Vehicles:
Debt obligation
Interest on debt (1)
Non-Vehicle:
Debt obligation
Interest on debt (1)
Minimum fixed obligations for operating leases
Commitments to purchase vehicles (2)
Purchase obligations and other (3)
Total
(1) Amounts represent the estimated commitment fees and interest payments based on the principal amounts, minimum non-cancelable maturity dates and interest rates on the debt as of December 31, 2025. See Note 7, "Debt," in Part II, Item 8 of this 2025 Annual Report for further details.
(2) Represents fleet purchases where contracts have been signed or are pending with committed orders under the terms of such agreements. We expect purchases under these agreements will be financed primarily through the issuance of vehicle debt. These purchases are subject to vehicle manufacturers satisfying their performance commitments under such agreements.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(3) Represents agreements to purchase goods or services that are legally binding on us and that specify all significant terms, including fixed or minimum quantities; fixed, minimum or variable price provisions; and the approximate timing of the transaction, as well as liabilities for uncertain tax positions and other liabilities, and excludes any obligations to employees. Only the minimum non-cancelable portion of purchase agreements and related cancellationpenalties are included as obligations. In the case of contracts that state minimum quantities of goods or services, amounts reflect only the stipulated minimums; all other contracts reflect estimated amounts. Purchase obligations include $31 million representing our tax liability for uncertain tax positions and related net accrued interest and penalties.
The table excludes pension benefit obligations as disclosed in Note 8, "Employee Retirement Benefits," in Part II, Item 8 of this 2025 Annual Report.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
Indemnification Obligations
In the ordinary course of business, we execute contracts involving indemnification obligations customary in the relevant industry and indemnifications specific to a transaction such as the sale of a business. These indemnification obligations might include claims relating to the following: environmental matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier and other commercial contractual relationships and financial matters. Performance under these indemnification obligations would generally be triggered by a breach of terms of the contract or by a third-party claim. We regularly evaluate the probability of having to incur costs associated with these indemnification obligations and have accrued for expected losses that are probable and estimable.
Environmental
We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable expenses that we expect to incur for such matters have been accrued, and those expenses are reflected in our consolidated financial statements within accrued liabilities. Amounts accrued represent the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as required. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).
EMPLOYEE RETIREMENT BENEFITS
Pension
We sponsor defined benefit pension plans worldwide. Pension obligations give rise to expenses that are dependent on assumptions discussed in Note 8, "Employee Retirement Benefits," in Part II, Item 8 of this 2025 Annual Report.
Our 2025 worldwide net periodic pension expense included in the accompanying consolidated statement of operations for the year ended December 31, 2025 was $6 million compared to $9 million in 2024 resulting in part from curtailmentgains associated with our international plans.
The funded status (i.e., the dollar amount by which the projected benefit obligations exceeded the market value of pension plan assets) of the Hertz Retirement Plan, as defined in Note 8, "Employee Retirement Benefits," in Part II, Item 8 of this 2025 Annual Report, increased in December 31, 2025 compared with December 31, 2024 due primarily to increased returns on plan assets. We contributed $9 million to the Hertz Retirement Plan during 2025,
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
and we do not anticipate contributing to the Hertz Retirement Plan during 2026. For the international plans, we anticipate contributing approximately $4 million during 2026. The level of 2026 and future contributions will vary and is dependent on a number of factors including investment returns, interest rate fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes.
The following accounting policies involve a higher degree of judgment and complexity in their application, unless otherwise noted below, and therefore, represent the critical accounting policies used in the preparation of our consolidated financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. For additional discussion of our critical accounting policies, as well as our significant accounting policies, see Note 2, "Significant Accounting Policies," in Part II, Item 8 of this 2025 Annual Report.
Revenue Earning Vehicles
Our principal assets are revenue earning vehicles, which represented approximately 56% of our total assets as of December 31, 2025. Revenue earning vehicles consist of vehicles utilized in our vehicle rental operations. For the year ended December 31, 2025, 26% of the vehicles purchased for our combined U.S. and International vehicle rental fleets were vehicles purchased under repurchase or guaranteed depreciation programs with vehicle manufacturers, or program vehicles.
For program vehicles, the manufacturers agree to repurchase vehicles at a specified price or guarantee the depreciation rate on the vehicles during established repurchase periods, subject to, among other things, certain vehicle condition, mileage and holding period requirements. Vehicle repurchase programs guarantee on an aggregate basis the residual value of the program vehicle upon sale according to certain parameters which include the holding period, mileage and condition of the vehicles. Since the contractual arrangement reduces or eliminates estimation uncertainty, we do not consider the depreciation of program vehicles to be part of our critical accounting policies or estimates.
For all other vehicles, depreciation is recorded over the estimated holding period based on projected residual values at the time of disposal. Generally, when revenue earning vehicles are acquired outside of a vehicle repurchase program (i.e., non-program vehicles), we estimate the period that we will hold the asset, primarily based on historical measures of the amount of rental activity (e.g., automobile mileage) and the targeted age of vehicles at the time of disposal. We also estimate the residual value of the applicable revenue earning vehicles at the expected time of disposal, which is affected by many factors including make, model and options, age, physical condition, mileage, sale location and time of the year. Market conditions for used vehicle sales can also be affected by external factors such as the economy, natural disasters, fuel prices, new and used vehicle supply levels, and incentives offered by manufacturers of new vehicles. Depreciation rates are reviewed on a quarterly basis based on management's ongoing assessment of present and projected future market conditions, their effect on residual values at the expected time of disposal and the estimated holding periods, which may result in periodic adjustments to the depreciation rates recognized in the period of change and future periods. Upon disposal of revenue earning vehicles, any difference between the net proceeds received and the net book value results in a gain or loss and is recorded as an adjustment to depreciation of revenue earning vehicles and lease charges in the accompanying statements of operations.
Changes in projected residual values or holding periods could cause a material change in our estimates of non-program depreciation expense.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Self-insured Liabilities
Self-insured liabilities on our consolidated balance sheets primarily include public liability, property damage and liability insurance supplement. These represent an estimate for both reported accidentclaims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis. Reserve requirements are based on actuarially determined estimates using historical claims experience. The adequacy of the liability is monitored quarterly based on evolving accident claim history. If our estimates change or if actual results differ from these assumptions, the amount of the recorded liability is adjusted to reflect these results.
Recoverability of Goodwill and Indefinite-lived Intangible Assets
On an annual basis as of October 1, and at interim periods when circumstances require as a result of a triggering event, as defined by Accounting Standards Codification ("ASC") 350 – Intangibles, Goodwill and Other ("ASC 350"), we test the recoverability of our goodwill and indefinite-lived intangible assets by performing an impairment analysis. An impairment is deemed to exist if the carrying value of goodwill or indefinite-lived intangible assets exceed their fair value as determined using Level 3 inputs, as described in Part II, Item 8 of this 2025 Annual Report, under the U.S. GAAP fair value hierarchy. The reviews of fair value involve judgment and estimates, including projected revenues, projected cash flows, long-term growth rates, royalty rates and discount rates, which we deem reasonable for this purpose.
For goodwill, we determine the fair value using an income approach based on the discounted cash flows of each reporting unit. A reporting unit is an operating segment or a business one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. Components are aggregated into a single reporting unit when they have similar economic characteristics. We have two reporting units (operating segments): Americas Rental Car and International Rental Car. Key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections, tax rates and terminal value rates. Discount rates are determined based on the reporting unit's weighted average cost of capital (“WACC”). The WACC used in the discounted cash flow model methodology is calculated based upon the fair value of our debt and share price with a debt-to-equity ratio comparable to the vehicle rental car industry as well specific risk factors for each reporting unit. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Our cash flow projections represent management's most recent planning assumptions, which are based on a combination of industry outlooks, views on general economic conditions, our expected pricing plans and expected future savings. Terminal value rates are determined using a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and long-term growth rates.
Our indefinite-lived intangible assets primarily consist of the Hertz and Dollar Thrifty tradenames. For tradenames, we determine the fair value using a relief-from-royalty income approach, which utilizes our revenue projections for each asset along with assumptions for royalty rates, tax rates and the WACC.
A significant decline in either projected revenues, projected cash flows or an increase in discount rates, such as the WACC, used to determine fair value could result in an impairment charge. Deterioration in the global economic conditions in the travel industry and the supply chain constraints affecting new vehicle production, our cash flows and our ability to obtain future financing to maintain our fleet or the weighted average cost of capital assumptions may result in an impairment charge to earnings in future periods. We will continue to closely monitor actual results versus our expectations as well as any significant changes in market events or conditions and the resulting impact to our assumptions about future projected cash flows, projected revenues and the weighted average cost of capital. If our expectations of the operating results, both in magnitude or timing, do not materialize, or if our weighted average cost of capital increases, we may be required to record goodwill and indefinite-lived intangible asset impairment charges, which could be material.
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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
THE HERTZ CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income Taxes
Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities in the period in which the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new information becomes available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment or a loss of a tax attribute or deduction that is materially different from our current estimate of the unrecognized tax benefits. These differences will be reflected as increases or decreases to income tax expense in the period in which the change in judgment occurs.
On July 4, 2025, the OBBBA was enacted, reinstating full bonus depreciation, allowing interest deductions based on EBITDA, expensing R&D costs and modifying certain international provisions of the Code. As a result, we expect federal cash taxes to decrease in the near term, assuming fleet investments are maintained or increased from current levels. These provisions are also expected to increase deferred tax assets, such as net operating losses, and may necessitate additional valuation allowances depending on future taxable income and loss trends.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 2, "Significant Accounting Policies—Recently Issued Accounting Pronouncements," in Part II, Item 8 of this 2025 Annual Report.
