HERTZ REPORTS THIRD QUARTER 2022 RESULTS: REVENUE OF $2.5 BILLION, NET INCOME OF $577 MILLION, ADJUSTED CORPORATE EBITDA OF $618 MILLION, OPERATING CASH FLOW OF $932 MILLION AND ADJUSTED FREE CASH FLOW OF $505 MILLION

Oct 27, 2022

"Hertz posted another quarter of solid performance, reflecting overall strength in our business and continued demand for our services across all customer segments," said Stephen Scherr, Hertz chief executive officer. "I am enormously proud of the performance of our team, particularly our colleagues in Southwest Florida, who faced challenges from Hurricane Ian. Across geographies, we focused on operational excellence and fleet optimization to produce financial results that facilitated investment in our strategic priorities, like electrification, while enhancing returns to our shareholders and being in the service of our customers."  

ESTERO, Fla., Oct. 27, 2022 /PRNewswire/ -- Hertz Global Holdings, Inc. (NASDAQ: HTZ) ("Hertz", "Hertz Global" or the "Company") today reported results for its third quarter 2022.

HIGHLIGHTS 

  • Total revenues of $2.5 billion
  • GAAP net income of $577 million, or $1.33 per diluted share
  • Adjusted Net Income of $410 million, or $1.08 per adjusted diluted share (reflects adjustments for fair value remeasurements to outstanding public warrants and certain derivative contracts, among other items)
  • Adjusted Corporate EBITDA of $618 million, a 25% margin
  • Operating cash flow of $932 million, adjusted operating cash flow of $572 million
  • Adjusted free cash flow of $505 million
  • Corporate liquidity of $2.6 billion at September 30, including $1.0 billion in unrestricted cash
  • Company utilized $500 million to repurchase 27.2 million common shares during the quarter

Revenue was $2.5 billion, up 12% year over year, characterized by continued strength in demand and rate across all customer segments, with significantly increased contribution of value-added services revenue. Monthly revenue per unit was a quarterly record of $1,685 on utilization of 80%. Gross depreciation continued to normalize as the Company progressed its fleet rejuvenation, and car sales gains came in lower versus the previous quarter due to steeper than expected residual value declines. As a result, monthly net depreciation per unit was $187.

During the first two months of the quarter, the Company ran with intentionally elevated maintenance cost to address out of service levels. As a result of these efforts, by September, utilization had reached 81.4%, and maintenance cost receded such that the business experienced more typical operating cost leverage. Adjusted Corporate EBITDA was $618 million, representing a healthy margin of 25%. Adjusted free cash flow was $505 million, reflecting free cash flow conversion of 82%, which the Company utilized to repurchase 7% of its common stock, thereby increasing shareholder value.

SUMMARY RESULTS


Three Months Ended

September 30,


Percent
Inc/(Dec)

2022 vs 2021

($ in millions, except earnings per share or where noted)

2022


2021


Hertz Global - Consolidated






Total revenues

$          2,496


$          2,226


12 %

Adjusted net income (loss)(a)

$             410


$             587


(30) %

Adjusted diluted earnings (loss) per share(a)

$            1.08


$            1.20


(10) %

Adjusted Corporate EBITDA(a)

$             618


$             860


(28) %

Adjusted Corporate EBITDA Margin(a)

25 %


39 %









Average Vehicles (in whole units)

532,740


473,492


13 %

Average Rentable Vehicles (in whole units)

503,508


456,566


10 %

Vehicle Utilization

80 %


80 %



Transaction Days (in thousands)

37,123


33,489


11 %

Total RPD (in dollars)(b)

$          68.57


$          66.15


4 %

Total RPU Per Month (in whole dollars)(b)

$          1,685


$          1,617


4 %

Depreciation Per Unit Per Month (in whole dollars)(b)

$             187


$               42


NM







Americas RAC Segment






Total revenues

$          2,042


$          1,914


7 %

Adjusted EBITDA

$             564


$             830


(32) %

Adjusted EBITDA Margin

28 %


43 %









Average Vehicles (in whole units)

425,596


387,368


10 %

Average Rentable Vehicles (in whole units)

397,488


372,326


7 %

Vehicle Utilization

81 %


81 %



Transaction Days (in thousands)

29,653


27,627


7 %

Total RPD (in dollars)(b)

$          68.90


$          69.25


(1) %

Total RPU Per Month (in whole dollars)(b)

$          1,713


$          1,713


— %

Depreciation Per Unit Per Month (in whole dollars)(b)

$             198


$               21


NM







International RAC Segment






Total revenues

$             454


$             312


46 %

Adjusted EBITDA

$             150


$               78


93 %

Adjusted EBITDA Margin

33 %


25 %









Average Vehicles (in whole units)

107,144


86,124


24 %

Average Rentable Vehicles (in whole units)

106,020


84,241


26 %

Vehicle Utilization

77 %


76 %



Transaction Days (in thousands)

7,470


5,862


27 %

Total RPD (in dollars)(b)

$          67.28


$          51.52


31 %

Total RPU Per Month (in whole dollars)(b)

$          1,580


$          1,195


32 %

Depreciation Per Unit Per Month (in whole dollars)(b)

$             146


$             137


6 %


NM - Not meaningful

NOTE: Hertz Global - consolidated key metrics reflect global rental car operations only and exclude Donlen fleet management and leasing

(a)   Represents a non-GAAP measure. See the accompanying reconciliations included in Supplemental Schedule II.

(b)   Based on December 31, 2021 foreign exchange rates.

 

LIQUIDITY AND CAPITAL RESOURCES

During the third quarter 2022, the Company repurchased 27.2 million shares for $500 million. There is $1.4 billion remaining under the authorization as of October 20, 2022.

The Company's liquidity position was $2.6 billion at September 30, 2022, of which $1.0 billion was unrestricted cash.

EARNINGS WEBCAST INFORMATION

Hertz Global's live webcast and conference call to discuss its third quarter 2022 results will be held on October 27, 2022, at 8:30 a.m. Eastern Time. The conference call will be broadcast live in listen-only mode on the Company's investor relations website at IR.Hertz.com. If you would like to access the call by phone and ask a question, please go to https://register.vevent.com/register/BI328b89926fc24e6ead04d3c0ec8db8b3, and you will be provided with dial in details. Investors are encouraged to dial-in approximately 15 minutes prior to the call.  A web replay will remain available on the website for approximately one year. The earnings release and related supplemental schedules containing the reconciliations of non-GAAP measures will be available on the Hertz website, IR.Hertz.com.

UNAUDITED FINANCIAL DATA, SUPPLEMENTAL SCHEDULES, NON-GAAP MEASURES AND DEFINITIONS

Following is selected financial data of Hertz Global. Also included are Supplemental Schedules, which are provided to present segment results, and reconciliations of non-GAAP measures to their most comparable GAAP measure. Following the Supplemental Schedules, the Company provides definitions for terminology used throughout the earnings release and its view of the usefulness of non-GAAP measures to investors and management.

In the first quarter of 2022, the Company began using Average Rentable Vehicles when calculating Available Car Days, Total RPU and Utilization instead of Average Vehicles. Average Rentable Vehicles excludes vehicles for sale on the Company's retail lots or actively in the process of being sold through other disposition channels. Prior periods have been restated to conform with the revisions, as appropriate. The Company has also restated historical quarterly and annual periods beginning with first quarter 2019 to reflect this change and has posted this information to its investor relations website at IR.Hertz.com.

ABOUT HERTZ

The Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., operates the Hertz, Dollar and Thrifty vehicle rental brands throughout North America, Europe, the Caribbean, Latin America, Africa, the Middle East, Asia, Australia and New Zealand. The Hertz Corporation is one of the largest worldwide vehicle rental companies, and the Hertz brand is one of the most recognized globally. Additionally, The Hertz Corporation owns and operates the Firefly vehicle rental brand and Hertz 24/7 car sharing business in international markets and sells vehicles through Hertz Car Sales. For more information about The Hertz Corporation, visit www.hertz.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this release, and in related comments by the Company's management, include "forward-looking statements." Forward-looking statements include information concerning the Company's liquidity and its possible or assumed future results of operations, including descriptions of its business strategies. These statements often include words such as "believe," "expect," "project," "potential," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "would," "should," "could," "forecasts," "guidance" or similar expressions. These statements are based on certain assumptions that the Company has made in light of its experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate in these circumstances. The Company believes these judgments are reasonable, but you should understand that these statements are not guarantees of performance or results, and that the Company's actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent reports on Form 10-K, 10-Q and 8-K filed or furnished to the SEC.

Important factors that could affect the Company's actual results and cause them to differ materially from those expressed in forward-looking statements include, among other things:

  • the length and severity of COVID-19 and the impact on the Company's vehicle rental business as a result of travel restrictions and business closures or disruptions, as well as the impact on its employee retention and talent management strategies;
  • the impact of macroeconomic conditions resulting in inflationary cost pressures, labor and supply chain constraints, increased vehicle acquisition costs, and reductions in travel demand, among others;
  • the Company's ability to purchase adequate supplies of competitively priced vehicles at a reasonable cost as a result of the continuing global semiconductor microchip manufacturing shortage (the "Chip Shortage") and other raw material supply constraints;
  • the impact of the conflict between Russia and Ukraine on supply chains and raw materials for the automotive industry and uncertainty on overall consumer sentiment and travel demand, especially in Europe;
  • the impact on the value of the Company's non-program vehicles upon disposition when the Chip Shortage and other raw material supply constraints are alleviated;
  • the Company's ability to attract and retain key employees;
  • levels of travel demand, particularly business and leisure travel in the U.S. and in global markets;
  • significant changes in the competitive environment and the effect of competition in the Company's markets on rental volume and pricing;
  • occurrences that disrupt rental activity during the Company's peak periods;
  • the Company's ability to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in its rental operations accordingly;
  • the Company's ability to implement our business strategy, including its ability to implement plans to support a large scale electric vehicle fleet and to play a central role in the modern mobility ecosystem;
  • the Company's ability to adequately respond to changes in technology, customer demands and market competition;
  • the mix of program and non-program vehicles in the Company's fleet can lead to increased exposure to residual risk;
  • the Company's ability to dispose of vehicles in the used-vehicle market and use the proceeds of such sales to acquire replacement vehicles;
  • financial instability of the manufacturers of the Company's vehicles, which could impact its ability to fulfill obligations under repurchase or guaranteed depreciation programs;
  • an increase in the Company's vehicle costs or disruption to its rental activity due to safety recalls by the manufacturers of its vehicles;
  • the Company's access to third-party distribution channels and related prices, commission structures and transaction volumes;
  • the Company's ability to offer an excellent customer experience, and retain and increase customer loyalty and market share;
  • the Company's ability to maintain its network of leases and vehicle rental concessions at airports in the U.S. and internationally;
  • the Company's ability to maintain favorable brand recognition and a coordinated branding and portfolio strategy;
  • major disruption in the Company's communication or centralized information networks or a failure to maintain, upgrade and consolidate its information technology systems;
  • the Company's ability to prevent the misuse or theft of information it possesses, including as a result of cyber security breaches and other security threats, as well as its ability to comply with privacy regulations;
  • risks associated with operating in many different countries, including the risk of a violation or alleged violation of applicable anti-corruption or anti-bribery laws and the Company's ability to repatriate cash from non-U.S. affiliates without adverse tax consequences;
  • the Company's ability to utilize its net operating loss carryforwards;
  • risks relating to tax laws and regulations, or changes in such laws and regulations, that affect the Company's ability to deduct certain business interest expenses and offset previously-deferred tax gains, as well as any adverse determinations or rulings by tax authorities;
  • changes in laws, regulations, policies or other activities of governments, agencies and similar organizations, including those related to accounting principles, that affect the Company's operations, its costs or applicable tax rates;
  • the recoverability of the Company's goodwill and indefinite-lived intangible assets when performing impairment analysis;
  • costs and risks associated with potential litigation and investigations, compliance with and changes in laws and regulations and potential exposures under environmental laws and regulations; and
  • the availability of additional or continued sources of financing for the Company's revenue earning vehicles and to refinance its existing indebtedness.

Additional information concerning these and other factors can be found in the Company's filings with the SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date of this release, and, except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

UNAUDITED FINANCIAL INFORMATION


UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions, except per share data)

2022


2021


2022


2021

Revenues

$               2,496


$               2,226


$              6,650


$              5,387

Expenses:








Direct vehicle and operating

1,282


1,131


3,534


2,855

Depreciation of revenue earning vehicles and lease charges, net

294


61


341


420

Depreciation and amortization of non-vehicle assets

36


49


105


153

Selling, general and administrative

246


177


738


498

Interest expense, net:








Vehicle

27


41


77


243

Non-vehicle

43


22


123


157

Total interest expense, net

70


63


200


400

Other (income) expense, net

(6)


(7)


(6)


(20)

Reorganization items, net




677

(Gain) from the sale of a business




(400)

Change in fair value of Public Warrants

(73)


(16)


(584)


(16)

Total expenses

1,849


1,458


4,328


4,567

Income (loss) before income taxes

647


768


2,322


820

Income tax (provision) benefit

(70)


(160)


(379)


(193)

Net income (loss)

577


608


1,943


627

Net (income) loss attributable to noncontrolling interests


(3)



(1)

Net income (loss) attributable to Hertz Global

577


605


1,943


626

Dividends on Series A Preferred Stock


(34)



(34)

Net income (loss) available to Hertz Global common stockholders

$                  577


$                  571


$              1,943


$                 592









Weighted average number of shares outstanding:








Basic

355


471


395


264

Diluted

379


490


421


270

Earnings (loss) per share:








Basic

$                 1.62


$                 1.21


$                4.92


$                2.25

Diluted

$                 1.33


$                 1.13


$                3.22


$                2.14

 

UNAUDITED CONSOLIDATED BALANCE SHEETS



(In millions, except par value and share data)

September 30,
2022


December 31,
2021

ASSETS




Cash and cash equivalents

$               1,006


$               2,258

Restricted cash and cash equivalents:




Vehicle

203


77

Non-vehicle

299


316

Total restricted cash and cash equivalents

502


393

Total cash and cash equivalents and restricted cash and cash equivalents

1,508


2,651

Receivables:




Vehicle

222


62

Non-vehicle, net of allowance of $46 and $48, respectively

831


696

Total receivables, net

1,053


758

Prepaid expenses and other assets

934


1,017

Revenue earning vehicles:




Vehicles

13,757


10,836

Less: accumulated depreciation

(1,734)


(1,610)

Total revenue earning vehicles, net

12,023


9,226

Property and equipment, net

618


608

Operating lease right-of-use assets

1,632


1,566

Intangible assets, net

2,883


2,912

Goodwill

1,043


1,045

Total assets

$             21,694


$             19,783

LIABILITIES AND STOCKHOLDERS' EQUITY




Accounts payable:




Vehicle

$                  112


$                    56

Non-vehicle

502


516

Total accounts payable

614


572

Accrued liabilities

955


863

Accrued taxes, net

205


157

Debt:




Vehicle

10,097


7,921

Non-vehicle

2,979


2,986

Total debt

13,076


10,907

Public Warrants

737


1,324

Operating lease liabilities

1,556


1,510

Self-insured liabilities

484


463

Deferred income taxes, net

1,306


1,010

Total liabilities

18,933


16,806

Commitments and contingencies




Stockholders' equity:




Preferred stock, $0.01 par value, no shares issued and outstanding


Common stock, $0.01 par value, 477,792,170 and 477,233,278 shares issued, respectively, and
     341,223,449 and 449,782,424 shares outstanding, respectively

5


5

Treasury stock, at cost, 136,568,721 and 27,450,854 common shares, respectively

(2,821)


(708)

Additional paid-in capital

6,308


6,209

Retained earnings (Accumulated deficit)

(372)


(2,315)

Accumulated other comprehensive income (loss)

(359)


(214)

Total stockholders' equity

2,761


2,977

Total liabilities and stockholders' equity

$             21,694


$             19,783

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions)

2022


2021


2022


2021

Cash flows from operating activities:








Net income (loss)

$              577


$              608


$           1,943


$              627

Adjustments to reconcile net income (loss) to net cash provided by (used
     in) operating activities:








Depreciation and reserves for revenue earning vehicles

366


86


511


506

Depreciation and amortization, non-vehicle

36


49


105


153

Amortization of deferred financing costs and debt discount (premium)

13


11


38


109

Loss on extinguishment of debt




8

Stock-based compensation charges

32



96


2

Provision for receivables allowance

19


31


42


95

Deferred income taxes, net

52


141


301


125

Reorganization items, net




314

(Gain) loss from the sale of a business




(400)

Change in fair value of Public Warrants

(73)


(16)


(584)


(16)

(Gain) loss on financial instruments

(55)


(3)


(120)


(1)

Other

1


(5)


(2)


(15)

Changes in assets and liabilities:








Non-vehicle receivables

(34)


(9)


(234)


(223)

Prepaid expenses and other assets

7


14


(80)


(53)

Operating lease right-of-use assets

123


49


202


203

Non-vehicle accounts payable

25


(139)


(7)


(45)

Accrued liabilities

(50)


(32)


183


(43)

Accrued taxes, net


(2)


52


89

Operating lease liabilities

(130)


(54)


(223)


(214)

Self-insured liabilities

23


14


38


(13)

Net cash provided by (used in) operating activities

932


743


2,261


1,208

Cash flows from investing activities:








Revenue earning vehicles expenditures

(1,764)


(1,060)


(7,853)


(5,196)

Proceeds from disposal of revenue earning vehicles

1,583


746


4,470


1,945

Non-vehicle capital asset expenditures

(45)


(24)


(104)


(41)

Proceeds from non-vehicle capital assets disposed of or to be disposed of

4


7


10


17

Collateral payments




(303)

Collateral returned in exchange for letters of credit


154


19


268

Return of (investment in) equity investments



(15)


Proceeds from the sale of a business, net of cash sold


53



871

Other




(1)

Net cash provided by (used in) investing activities

(222)


(124)


(3,473)


(2,440)

Cash flows from financing activities:








Proceeds from issuance of vehicle debt

903


1,523


8,282


10,462

Repayments of vehicle debt

(1,130)


(1,343)


(5,954)


(9,463)

Proceeds from issuance of non-vehicle debt




3,139

Repayments of non-vehicle debt

(4)


(5)


(14)


(6,346)

Payment of financing costs

(4)


(3)


(42)


(154)

Proceeds from Plan Sponsors




2,781

Proceeds from Rights Offering, net


4



1,639

Proceeds from the issuance of preferred stock, net




1,433

Distributions to common stockholders




(239)

Proceeds from exercises of Public Warrants



3


Share repurchases

(505)



(2,152)


Early redemption payments




(85)

Contributions from (distributions to) noncontrolling interests


(10)



(25)

Other



(4)


Net cash provided by (used in) financing activities

(740)


166


119


3,142

Effect of foreign currency exchange rate changes on cash and cash
     equivalents and restricted cash and cash equivalents

(25)


(14)


(50)


(22)

Net increase (decrease) in cash and cash equivalents and restricted cash
     and cash equivalents during the period

(55)


771


(1,143)


1,888

Cash and cash equivalents and restricted cash and cash equivalents at
     beginning of period(a)

1,563


2,695


2,651


1,578

Cash and cash equivalents and restricted cash and cash equivalents at end
     of period

$           1,508


$          3,466


$           1,508


$          3,466


(a)   Amounts include cash and cash equivalents and restricted cash and cash equivalents of Donlen which were held for sale as of December 31, 2020.

 

 

Supplemental Schedule I 

HERTZ GLOBAL HOLDINGS, INC. 

CONDENSED STATEMENT OF OPERATIONS BY SEGMENT 

Unaudited



Three Months Ended September 30, 2022


Three Months Ended September 30, 2021

(In millions)

Americas
RAC


International
RAC


Corporate


Hertz
Global


Americas
RAC


International
RAC


All other
operations


Corporate


Hertz
Global

Revenues

$       2,042


$            454


$            —


$      2,496


$       1,914


$            312


$             —


$            —


$      2,226

Expenses:


















Direct vehicle and operating

1,077


206


(1)


1,282


960


173



(2)


1,131

Depreciation of revenue earning vehicles and lease charges, net

252


42



294


24


37




61

Depreciation and amortization of non-vehicle assets

29


3


4


36


42


3



4


49

Selling, general and administrative

85


53


108


246


72


27



78


177

Interest expense, net:


















Vehicle

31


(4)



27


33


8




41

Non-vehicle

(23)


1


65


43


(4)


2



24


22

Total interest expense, net

8


(3)


65


70


29


10



24


63

Other (income) expense, net

(1)


4


(9)


(6)


(2)


(1)



(4)


(7)

Reorganization items, net









(Gain) from the sale of a business









Change in fair value of Public Warrants



(73)


(73)





(16)


(16)

Total expenses

1,450


305


94


1,849


1,125


249



84


1,458

Income (loss) before income taxes

$          592


$            149


$          (94)


647


$          789


$              63


$             —


$          (84)


768

Income tax (provision) benefit







(70)










(160)

Net income (loss)







577










608

Net (income) loss attributable to noncontrolling interests
















(3)

Net income (loss) attributable to Hertz Global







577










605

Series A Preferred Stock deemed dividends
















(34)

Net income (loss) attributable to Hertz Global common
     stockholders







$         577










$         571


NOTE: Effective in the second quarter of 2021, as a result of the sale of the Company's Donlen fleet management and leasing business on March 30, 2021, the All Other Operations reportable segment, which consisted primarily of the former Donlen business, was no longer deemed a reportable segment.

 

 

Supplemental Schedule I (continued)

HERTZ GLOBAL HOLDINGS, INC.

CONDENSED STATEMENT OF OPERATIONS BY SEGMENT

Unaudited



Nine Months Ended September 30, 2022


Nine Months Ended September 30, 2021

(In millions)

Americas RAC


International
RAC


Corporate


Hertz Global


Americas RAC


International
RAC


All other operations


Corporate


Hertz Global

Revenues

$       5,573


$         1,077


$            —


$      6,650


$       4,524


$            727


$          136


$            —


$      5,387

Expenses:


















Direct vehicle and operating

2,982


554


(2)


3,534


2,394


452


5


4


2,855

Depreciation of revenue earning vehicles and lease charges

220


121



341


314


106




420

Depreciation and amortization of non-vehicle assets

85


10


10


105


130


12


2


9


153

Selling, general and administrative

270


142


326


738


191


97


10


200


498

Interest expense, net:


















Vehicle

68


9



77


182


49


12



243

Non-vehicle

(44)


1


166


123


(9)


3


1


162


157

Total interest expense, net

24


10


166


200


173


52


13


162


400

Other (income) expense, net

(3)


(3)



(6)


(8)


(2)



(10)


(20)

Reorganization items, net





80


12


(1)


586


677

(Gain) from the sale of a business








(400)


(400)

Change in fair value of Public Warrants



(584)


(584)





(16)


(16)

Total expenses

3,578


834


(84)


4,328


3,274


729


29


535


4,567

Income (loss) before income taxes

$       1,995


$            243


$           84


2,322


$       1,250


$               (2)


$          107


$        (535)


820

Income tax (provision) benefit







(379)










(193)

Net income (loss)







1,943










627

Net (income) loss attributable to noncontrolling interests
















(1)

Net income (loss) attributable to Hertz Global







1,943










626

Series A Preferred Stock deemed dividends
















(34)

Net income (loss) attributable to Hertz Global common      stockholders







$      1,943










$         592


NOTE: Effective in the second quarter of 2021, as a result of the sale of the Company's Donlen fleet management and leasing business on March 30, 2021, the All Other Operations reportable segment, which consisted primarily of the former Donlen business, was no longer deemed a reportable segment.

 

Supplemental Schedule II

HERTZ GLOBAL HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURE - ADJUSTED NET INCOME (LOSS), ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE AND ADJUSTED CORPORATE EBITDA

Unaudited



Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions, except per share data)

2022


2021


2022


2021

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share:








Net income (loss) attributable to Hertz Global

$                  577


$                  605


$               1,943


$                  626

Dividends on Series A Preferred Stock


(34)



(34)

Net income (loss) attributable and available to Hertz Global common stockholders, basic

577


571


1,943


592

Adjustments:








Income tax provision (benefit)

70


160


379


193

Vehicle and non-vehicle debt-related charges(a)(m)

13


12


39


116

Restructuring and restructuring related charges(b)

8


22


29


72

Acquisition accounting-related depreciation and amortization(c)

1


12


2


37

Reorganization items, net(d)




677

Pre-reorganization and non-debtor financing charges(e)


1



41

Gain from the Donlen Sale(f)




(400)

Unrealized (gains) losses on financial instruments(g)

(55)


(1)


(120)


(1)

Change in fair value of Public Warrants

(73)


(16)


(584)


(16)

Other items(h)(n)

6


11


89


(67)

Adjusted pre-tax income (loss)(i)

547


772


1,777


1,244

Income tax (provision) benefit on adjusted pre-tax income (loss)(j)

(137)


(185)


(444)


(299)

Adjusted Net Income (Loss)

$                  410


$                  587


$               1,333


$                  945

Weighted-average number of diluted shares outstanding

379


490


421


270

Adjusted Diluted Earnings (Loss) Per Share(k)

$                 1.08


$                 1.20


$                 3.16


$                 3.50

Adjusted Corporate EBITDA:








Net income (loss) attributable to Hertz Global

$                  577


$                  605


$               1,943


$                  626

Adjustments:








Income tax provision (benefit)

70


160


379


193

Non-vehicle depreciation and amortization(l)

36


49


105


153

Non-vehicle debt interest, net

43


22


123


157

Vehicle debt-related charges(a)(m)

9


8


25


62

Restructuring and restructuring related charges(b)

8


22


29


72

Reorganization items, net(d)




677

Pre-reorganization and non-debtor financing charges(e)


1



41

Gain from the Donlen Sale(f)




(400)

Unrealized (gains) losses on financial instruments(g)

(55)


(1)


(120)


(1)

Change in fair value of Public Warrants

(73)


(16)


(584)


(16)

Other items(h)(o)

3


10


96


(62)

Adjusted Corporate EBITDA

$                  618


$                  860


$               1,996


$               1,502



Supplemental Schedule II (continued)

(a) 

Represents debt-related charges relating to the amortization of deferred financing costs and debt discounts and premiums.

(b) 

Represents charges incurred under restructuring actions as defined in U.S. GAAP, excluding impairments and asset write-downs. Also includes restructuring related charges such as incremental costs incurred directly supporting business transformation initiatives. For the three and nine months ended September 30, 2022, charges incurred related primarily to International RAC. For the three months ended September 30, 2021, charges incurred were $15 million and $7 million for Corporate and International RAC, respectively. For the nine months ended September 30, 2021, charges incurred were $41 million, $23 million and $8 million for Corporate, International RAC and Americas RAC, respectively.

(c) 

Represents incremental expense associated with the amortization of other intangible assets and depreciation of property and equipment relating to acquisition accounting.

(d) 

Represents charges incurred associated with the Reorganization and emergence from Chapter 11. The charges relate primarily to Corporate.


(in millions)

Three Months Ended
September 30, 2021


Nine Months Ended
September 30, 2021

Professional fees and other bankruptcy related costs

$                              —


$                          257

Loss on extinguishment of debt


191

Backstop fee


164

Breakup fee


77

Contract settlements


25

Cancellation of share-based compensation grants


(10)

Net gain on settlement of liabilities subject to compromise


(22)

Other, net


(5)

Reorganization items, net

$                              —


$                          677



(e)   

Represents charges incurred prior to the filing of the Chapter 11 Cases comprised of preparation charges for the Reorganization, such as professional fees. Also includes, certain non-debtor financing and professional fee charges. The amounts incurred for Corporate were $1 million for the three months ended September 30, 2021, respectively. For Corporate, Americas RAC, International RAC, and All other operations were $17 million, $17 million, $5 million and $2 million for the nine months ended September 30, 2021, respectively.

(f) 

Represents the gain from the sale of the Company's Donlen business on March 30, 2021, primarily associated with Corporate.

(g) 

Represents unrealized gains (losses) on derivative financial instruments, primarily associated with Americas RAC.

(h)   

Represents miscellaneous items. For 2022, primarily includes bankruptcy claims, certain professional fees and charges related to the settlement of bankruptcy claims. For 2021, includes $100 million due to the suspension of depreciation in the first half of the year for the Donlen leasing and fleet management operations while classified as held for sale in all other operations, partially offset by letter of credit fees recorded in the first half of the year in Corporate and charges for a multiemployer pension plan withdrawal liability recorded in the first quarter in Corporate.

Supplemental Schedule II (continued)

(i)     Adjustments by caption on a pre-tax basis were as follows:


Increase (decrease) to expenses

Three Months Ended September
30,


Nine Months Ended September
30,

(In millions)

2022


2021


2022


2021

Direct vehicle and operating

$                      1


$                   (14)


$                   (49)


$                    45

Selling, general and administrative

(13)


(22)


(63)


(91)

Interest expense, net:








Vehicle

42


(8)


93


(81)

Non-vehicle

(5)


(4)


(21)


(54)

Total interest expense, net

37


(12)


72


(135)

Other income (expense), net

2


(9)


1


(17)

Reorganization items, net




(677)

Gain from the Donlen Sale




400

Change in fair value of Public Warrants

73


16


584


16

Total adjustments

$                  100


$                   (41)


$                  545


$                 (459)



(j)     

Derived utilizing a combined statutory rate of 25% and 24% for the three and nine months ended September 30, 2022 and 2021, respectively, applied to the respective Adjusted Pre-tax Income (Loss).

(k)   

Adjustments used to reconcile diluted earnings (loss) per share on a GAAP basis to Adjusted Diluted Earnings (Loss) Per Share are comprised of the same adjustments, inclusive of the tax impact, used to reconcile net income (loss) to Adjusted Net Income (Loss) divided by the weighted-average diluted shares outstanding during the period.

(l)     

Non-vehicle depreciation and amortization expense for Americas RAC, International RAC and Corporate for the three months ended September 30, 2022 was $29 million, $3 million and $4 million, respectively. For the three months ended September 30, 2021 was $42 million, $3 million, and $4 million for Americas RAC, International RAC and Corporate, respectively. Non-vehicle depreciation and amortization for Americas RAC, International RAC and Corporate for the nine months ended September 30, 2022 were $85 million, $10 million and $10 million, respectively.  For the nine months ended September 30, 2021 were $130 million, $12 million, $2 million and $9 million, respectively, for Americas RAC, International RAC, All other operations and Corporate.

(m) 

Vehicle debt-related charges for Americas RAC and International RAC for the three months ended September 30, 2022 were $8 million and $1 million, respectively, and were $6 million and $2 million, respectively, for the three months ended September 30, 2021. Vehicle debt-related charges for Americas RAC and International RAC for the nine months ended September 30, 2022 were $17 million and $8 million, respectively. For the nine months ended September 30, 2021, vehicle debt-related charges for Americas RAC, International RAC and All other operations were $48 million, $12 million and $2 million, respectively.

(n)

In 2022, includes letter of credit fees recorded in Corporate.

(o)   

In 2022, includes an adjustment for certain non-cash stock-based compensation charges recorded in Corporate.

 

 

Supplemental Schedule III

HERTZ GLOBAL HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURE - ADJUSTED OPERATING CASH FLOW

AND ADJUSTED FREE CASH FLOW

Unaudited



Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions)

2022


2021


2022


2021

ADJUSTED OPERATING CASH FLOW AND ADJUSTED FREE CASH FLOW:



Net cash provided by (used in) operating activities

$               932


$               743


$            2,261


$            1,208

Depreciation and reserves for revenue earning vehicles

(366)


(86)


(511)


(506)

Bankruptcy related payments - post emergence

6



84


Adjusted operating cash flow

572


657


1,834


702

Non-vehicle capital asset expenditures, net

(41)


(17)


(94)


(24)

Adjusted operating cash flow before vehicle investment

531


640


1,740


678

Net fleet growth after financing

(26)


(121)


(672)


(1,948)

Noncontrolling interests


(18)



(25)

Adjusted free cash flow

$               505


$               501


$            1,068


$          (1,295)









CALCULATION OF NET FLEET GROWTH AFTER FINANCING:



Revenue earning vehicles expenditures

$          (1,764)


$          (1,060)


$          (7,853)


$          (5,196)

Proceeds from disposal of revenue earning vehicles

1,583


746


4,470


1,945

Revenue earning vehicles capital expenditures, net

(181)


(314)


(3,383)


(3,251)

Depreciation and reserves for revenue earning vehicles

366


86


511


506

Financing activity related to vehicles:








Borrowings

903


1,523


8,282


$          10,462

Payments

(1,130)


(1,343)


(5,954)


$          (9,463)

Restricted cash changes, vehicle(a)

16


(73)


(128)


$             (202)

Net financing activity related to vehicles

(211)


107


2,200


797

Net fleet growth after financing

$               (26)


$             (121)


$             (672)


$          (1,948)



(a)   

Amount presented for the nine months ended September 30, 2021 excludes a $1 million non-cash impact of foreign currency exchange rates.

 

Supplemental Schedule IV

HERTZ GLOBAL HOLDINGS, INC.

NET DEBT CALCULATION

Unaudited



As of September 30, 2022


As of December 31, 2021

(In millions)

Vehicle


Non-Vehicle


Total


Vehicle


Non-Vehicle


Total

Term loans

$                    —


$               1,529


$               1,529


$                    —


$               1,539


$               1,539