HERTZ GLOBAL HOLDINGS, INC (HTZ) FY 2023 MD&A

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. 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 “Cautionary 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 2023 Annual Report.

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.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

•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.

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, 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.

Our strategy is focused on excellence in execution of our rental operations, presenting distinct product offerings through each of our brands, building on our leadership in ride share and selling vehicles from the fleet directly to consumers.

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 collision damage 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 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 damage, maintenance and fuel costs;

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

•Depreciation expense and lease charges, net relating to revenue earning vehicles, including gains and losses and related costs associated with the disposal of vehicles;

•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 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.

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 the second quarter of 2021, as a result of the Donlen Sale, as further disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2023 Annual Report, the All Other Operations reportable segment, which was primarily comprised of the Donlen business, was no longer deemed to be a reportable segment.

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. Holding periods typically range from six to sixty-six months. 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, 2023, 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). 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, channel disposition (e.g.,

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

auction, retail, dealer direct), historical sales experience for similar vehicles, third-party expectations of resale value 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 via auction, dealer direct wholesale channels, direct sales to third parties and retail channels. Non-program vehicles disposed of through our retail locations allow us the opportunity for ancillary revenue, such as warranty, financing and title fees. 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.

Chapter 11 and Emergence

On May 22, 2020, as a result of the impact from the COVID-19 global pandemic, the Debtors filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court. On June 10, 2021, the Plan of Reorganization was confirmed by the Bankruptcy Court and on June 30, 2021, the Plan of Reorganization became effective and the Debtors emerged from Chapter 11.

2023 Operating Overview

In December 2023, we identified a group of EVs (the "EV Disposal Group") that we desired to sell in response to management's determination that the supply of EVs exceeded customer demand, elevated EV damage and collision costs and a decline in EV residual values. As a result, the EV Disposal Group, included in our Americas RAC segment, has been classified as held for sale as of December 31, 2023. The carrying values of the vehicles included in the EV Disposal Group were written down to fair value less costs to sell and resulted in a write-down of $245 million for the year ended December 31, 2023. See Note 4, "Revenue Earning Vehicles" in Part II, Item 8 of this 2023 Annual Report for further details.

The following charts provide the period-over-period change for several key factors influencing our results for each of the years ended December 31, 2023, 2022 and 2021.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

(1)     Includes impact of foreign currency exchange at average rates ("fx").

(2)    Results shown are in constant currency as of December 31, 2022.

(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, 2023 compared to the year ended December 31, 2022 are included within this MD&A. Discussions of our results of operations, liquidity and capital resources for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found under Part II, Item 7 of our 2022 Form 10-K, which is available on the SEC's website (www.sec.gov) or indirectly through our website (www.hertz.com).

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ

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, 2023 Compared with Year Ended December 31, 2022

Total revenues increased $686 million in 2023 compared to 2022 driven primarily by higher volume. Americas RAC increased $443 million and International RAC increased $244 million, including a favorable $22 million fx impact in 2023.

DOE increased $646 million in 2023 compared to 2022, with increases of $502 million and $152 million in our Americas RAC and International RAC segments, respectively. DOE in our Americas RAC segment increased due primarily to higher volume-driven costs as well as higher collision and damage costs, particularly within the EV fleet, partially offset by cost saving initiatives in 2023. DOE in our International RAC segment, which included a favorable $11 million fx impact in 2023, increased primarily due to increased volume. The completion of the sale of the EV Disposal Group is expected to have a positive impact on DOE in our Americas RAC segment in 2024, particularly later in the year as sales are completed.

Depreciation of revenue earning vehicles and lease charges, net increased $1.3 billion in 2023 compared to 2022, of which $1.2 billion is attributed to our Americas RAC segment. The increase in our Americas RAC segment was due to several factors, primarily (i) reduced per unit gains on vehicle dispositions, (ii) an increase in Average Vehicles and (iii) a lower volume of vehicle dispositions. The increase in Americas RAC was partially offset by longer vehicle holding periods. Additionally, depreciation of revenue earning vehicles and lease charges, net increased

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

compared to 2022 due to the $245 million write-down of the carrying values of the EV Disposal Group resulting from its classification as held for sale in December 2023. Depreciation of revenue earning vehicles and lease charges, net in our International RAC segment increased $116 million in 2023 compared to 2022 due primarily to higher vehicle acquisition costs, an increase in Average Vehicles and reduced per unit gains on vehicle dispositions, partially offset by a higher volume of vehicle dispositions in 2023. Depreciation of revenue earning vehicles and lease charges, net in our Americas RAC segment is expected to be impacted in 2024 by several factors: (i) lower per unit depreciation that will be incurred on the EV Disposal Group, (ii) a larger average fleet compared to that held in 2023, (iii) the intended sale of older vehicles during 2024 and (iv) an uncertain residual environment.

Non-vehicle depreciation and amortization increased $6 million in 2023 compared to 2022, primarily in our Americas RAC segment, and primarily due to incremental depreciation on completed location refurbishment projects and accelerated amortization on certain software assets.

SG&A in 2023 was essentially flat compared to 2022 with a decrease of $194 million of cost associated with our corporate operations, offset by increases of $150 million and $47 million in our Americas RAC and International RAC segments, respectively. The decrease in cost associated with our corporate operations was due primarily to lower non-cash stock-based compensation costs, intercompany royalty assessment fees received from our International RAC segment, reduced bankruptcy claims and lower incentive compensation. SG&A in our Americas RAC segment increased as a result of increased IT and personnel costs and higher advertising spend. SG&A in our International RAC segment increased due primarily to intercompany royalty assessment fees paid to our corporate operations, partially offset by decreased incentive compensation and a reduction in litigation reserves.

Vehicle interest expense, net increased $396 million in 2023 compared to 2022 due primarily to higher average interest rates, which in part reflects reduced unrealized gains on interest caps in 2023, and higher debt levels resulting primarily by increased fleet levels. The impact of higher interest rates and debt levels primarily impacted our Americas RAC segment as a result of higher benchmark rates on the HVF III 2021-A Notes and the issuance of the HVF III Series 2023 Notes. Vehicle interest expense, net was also impacted by the unwind of certain of its interest rate caps in the first quarter of 2023 resulting in the realization of $88 million of previously unrealized gains, partially offset by a $98 million realized gain.

Non-vehicle interest expense, net increased $69 million in 2023 compared to 2022 due primarily to higher benchmark rates and higher debt levels resulting from the issuance of a new term loan in 2023, partially offset by interest income due to higher market rates.

Other expense increased $10 million in 2023 compared to 2022 due primarily to an increase in net periodic pension costs resulting from higher interest costs.

The effective tax rate in 2023 and 2022 was (268)% and 22%, respectively. We recorded a tax benefit of $329 million and a tax provision of $390 million for 2023 and 2022, respectively. The change in tax provision in 2023 compared to 2022 was primarily driven by lower pre-tax income in 2023, benefits from EV credits generated in 2023 and the release of valuation allowances in 2023 primarily related to the characterization of the loss on the restructuring of European operations.

CONSOLIDATED RESULTS OF OPERATIONS - HERTZ GLOBAL

The above discussion for Hertz also applies to Hertz Global.

Hertz Global had income of $163 million and $704 million from the change in fair value of Public Warrants that was incremental to Hertz for the years ended December 31, 2023 and 2022, respectively.

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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, 2023, our Americas RAC operations had a total of approximately 5,200 company-operated and franchisee locations, comprised of 1,900 airport and 3,300 off airport locations.

Results of operations and our discussion and analysis for our Americas RAC segment were as follows:

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, 2023 Compared with Year Ended December 31, 2022

Total revenues for Americas RAC increased $443 million in 2023 compared to 2022 due primarily to higher volume, with an increase in Transaction Days, partially offset by lower pricing. The increase in Transaction Days was driven primarily by volume increases in most leisure categories, in light of sustained travel demand, along with volume increases among our ride share customers. Volume at our airport locations increased 12% compared to 2022. Airport revenues comprised 68% of total revenues for the segment in 2023 consistent with 2022. Total RPD declined from previously elevated post-COVID levels. Revenues in Americas RAC were also impacted by an unfavorable $11 million fx impact in 2023.

Depreciation of revenue earning vehicles and lease charges, net for Americas RAC increased $1.2 billion in 2023 compared to 2022 due primarily to (i) reduced per unit gains on vehicle dispositions, (ii) an increase in Average

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Vehicles and (iii) a lower volume of vehicle dispositions, partially offset by longer vehicle holding periods. Additionally, depreciation of revenue earning vehicles and lease charges, net increased due to the $245 million write-down of the carrying value of EV Disposal Group resulting from its classification as held for sale in December 2023. The increase in Average Vehicles was driven in part by decisions, primarily during the fourth quarter of 2023, to delay planned fleet sales in light of an unfavorable used vehicle market. We expect depreciation of revenue earning vehicles and lease charges, net in our Americas RAC segment to be impacted in 2024 by several factors: (i) lower per unit depreciation that will be incurred on the EV Disposal Group, (ii) a larger average fleet compared to that held in 2023, (iii) the intended sale of older vehicles during 2024 and (iv) an uncertain residual environment.

DOE for Americas RAC increased $502 million in 2023 compared to 2022 due primarily to higher volume-related costs and higher collision and damage costs, particularly for the EV fleet, partially offset by cost saving initiatives in 2023. Americas RAC DOE was also impacted by an unfavorable $7 million fx impact in 2023. We expect the completion of the sale of the EV Disposal Group to have a positive impact on DOE in our Americas RAC segment in 2024, particularly later in the year as sales are completed.

Non-vehicle depreciation and amortization for Americas RAC increased $11 million in 2023 compared to 2022 resulting primarily from incremental depreciation on completed location refurbishment projects and accelerated amortization on certain software assets.

SG&A for Americas RAC increased $150 million in 2023 compared to 2022 due primarily to increased IT and personnel costs and higher advertising spend.

Vehicle interest expense for Americas RAC increased $316 million in 2023 compared to 2022 due primarily to higher average interest rates, which in part reflects reduced unrealized gains on interest caps in 2023, and higher debt levels resulting primarily by increased fleet levels. The impact of higher interest rates and higher debt levels were a result of higher benchmark rates on the HVF III 2021-A Notes and higher average interest rates and higher debt levels from the issuance of the HVF III Series 2023 Notes. Vehicle interest expense, net in our Americas RAC segment was also impacted by the unwind of certain of its interest rate caps in the first quarter of 2023 resulting in the realization of $88 million of previously unrealized gains, partially offset by a $98 million realized gain.

International RAC

As of December 31, 2023, our International RAC operations had approximately 6,200 company-operated and franchisee locations, comprised of 1,500 airport and 4,700 off airport locations in approximately 110 countries and jurisdictions, including Africa, Asia, Australia, Europe, the Middle East and New Zealand.

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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:

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, 2023 Compared with Year Ended December 31, 2022

Total revenues for International RAC increased $244 million in 2023 compared to 2022 due to higher volume. Transaction Days increased 15% driven primarily by higher volume in most leisure and business categories due to increased travel demand. Total RPD in 2023 was consistent with 2022. International RAC revenues were also impacted by a favorable $22 million fx impact in 2023.

Depreciation of revenue earning vehicles and lease charges, net for International RAC increased $116 million in 2023 compared to 2022 due primarily to higher vehicle acquisition costs, an increase in Average Vehicles and reduced per unit gains on vehicle dispositions, partially offset by a higher volume of vehicle dispositions in 2023. Depreciation of revenue earning vehicles and lease charges, net was also impacted by a favorable $10 million fx impact in 2023. Average Vehicles for International RAC increased in 2023 due in part to increased travel demand.

DOE for International RAC increased $152 million in 2023 compared to 2022 due primarily to higher volume, partially offset by a favorable $11 million fx impact in 2023.

SG&A for International RAC increased $47 million in 2023 compared to 2022 due primarily to increased intercompany royalty assessment fees paid to our corporate operations, partially offset by decreased incentive compensation and a reduction in litigation reserves.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Vehicle interest expense for International RAC increased $81 million in 2023 compared to 2022 due primarily to higher interest rates and higher debt levels.

Footnotes to the Results of Operations and Selected Operating Data by Segment Tables

(a)Adjusted Corporate EBITDA is calculated as net income (loss) attributable to Hertz or Hertz Global, 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; gain on sale of non-vehicle capital assets; 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

HERTZ GLOBAL

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

(1)In 2021, includes $8 million of loss on extinguishment of debt associated with the payoff and termination of the HIL Credit Agreement recorded in the second quarter.

(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, excluding impairments and asset write-downs. Also includes restructuring related charges such as incremental costs incurred directly supporting business transformation initiatives.

(4)Represents charges associated with the filing of and the emergence from the Chapter 11 Cases, as described in Note 19, "Reorganization Items, Net," in Part II, Item 8 of this 2023 Annual Report.

(5)Represents charges incurred prior to the filing of the Chapter 11 Cases comprised of preparation charges for the reorganization, such as professional fees. Also included certain non-debtor financing and professional fee charges.

(6)Represents the net gain from the sale of our Donlen business on March 30, 2021 recorded in Corporate as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2023 Annual Report.

(7)Represents unrealized (gains) losses on derivative financial instruments. See Note 11, "Financial Instruments," in Part II, Item 8 of this 2023 Annual Report.

(8)Represents the gain on sale of certain non-vehicle capital assets sold in March 2023. See Note 3, "Divestitures," in Part II, Item 8 of this 2023 Annual Report.

(9)Represents payments made for the settlement of certain claims related to alleged false arrests. See Note 14, "Contingencies and Off-Balance Sheet Commitments," in Part II, Item 8 of this 2023 Annual Report.

(10)Represents miscellaneous items. For 2023, primarily includes certain IT-related costs, charges for certain storm-related vehicle damages and certain professional fees and charges related to the settlement of bankruptcy claims, partially offset by a loss recovery settlement. For 2022, primarily includes certain bankruptcy claims, certain professional fees and charges related to the settlement of bankruptcy claims and certain non-cash stock-based compensation charges. For 2021, primarily includes $100 million associated with the suspension of depreciation during the first quarter for the Donlen business while classified as held for sale, partially offset by $17 million for certain professional fees, $14 million of charges related to the settlement of bankruptcy claims, charges for a multiemployer pension plan withdrawal liability and letter of credit fees.

(11)Represents the change in fair value during the reporting period for Hertz Global's outstanding Public Warrants, as disclosed in Note 12, "Fair Value Measurements," in Part II, Item 8 of this 2023 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.

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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:

(1)Based on December 31, 2022 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.

(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:

(1)Based on December 31, 2022 foreign currency exchange rates for all periods presented.

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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, 2023, we had $764 million of cash and cash equivalents and $442 million of restricted cash and cash equivalents. As of December 31, 2023, $328 million of cash and cash equivalents and $129 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, including disposal of the EV Disposal Group, 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, 2023 and 2022, Hertz had cash and cash equivalents of $764 million and $943 million, respectively, and restricted cash and cash equivalents of $442 million and $475 million, respectively. The following table summarizes the net change in cash and cash equivalents and restricted cash and cash equivalents for the periods shown:

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

In 2023, cash flows from operating activities decreased by $67 million year over year due primarily to a $169 million change in working capital accounts, partially offset by a $102 million change in net income, as adjusted for non-cash and non-operating items. Cash flows from working capital accounts decreased due primarily to a reduction in accrued liabilities due in part to incentive payments in 2023, the payment of bankruptcy claims in 2022 and a reduction in customer loyalty program accruals resulting in part from a change in program terms during 2023. Additionally, cash flows from working capital accounts decreased due to lower value added tax payables arising from intercompany fleet transfers in 2022.

Our primary investing activities relate to the acquisition and disposal of revenue earning vehicles. During 2023, there was a $209 million decrease in cash used in investing activities compared to 2022 driven by $162 million of net proceeds received in 2023 due to the sale of certain non-vehicle capital assets as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2023 Annual Report. Cash used in investing activities also decreased in 2023 due to an $82 million decrease in revenue earning vehicles expenditures, net, primarily associated with our Americas RAC segment, due in part from decreased vehicle acquisitions in 2023. We expect that in 2024, cash

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

used in investing activities in our Americas RAC segment will increase compared to 2023 as we increase acquisitions of new vehicles and dispose of vehicles with lower expected residual values.

Net financing cash inflows were $1.3 billion in 2023 compared to $488 million in 2022. The $828 million increase in cash inflows was due primarily to a $2.2 billion reduction in dividends paid by Hertz to Hertz Holdings due to reduced share repurchases in 2023, and an increase of $492 million in net proceeds from non-vehicle debt resulting primarily from the issuance of a new term loan in 2023. The increase in net financing cash inflows in 2023 was partially offset by a decrease of $1.8 billion in net proceeds from vehicle debt as a result of less issuances in 2023 compared to 2022.

Cash Flows - Hertz Global

As of December 31, 2023 and 2022, Hertz Global had cash and cash equivalents of $764 million and $943 million, respectively, and restricted cash and cash equivalents of $442 million and $475 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:

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 16, "Equity and Earnings (Loss) Per Common Share – Hertz Global," and Note 17, "Public Warrants - Hertz Global," in Part II, Item 8 of this 2023 Annual Report.

Share Repurchase Programs for Common Stock

In November 2021, Hertz Global's independent Audit Committee recommended, and its Board approved, the 2021 Share Repurchase Program, which was announced on November 29, 2021. In 2022, the Company completed the 2021 Share Repurchase Program by repurchasing 80,677,021 shares of Hertz Global's common stock during the first half of 2022 at an average share price of $19.74 for an aggregate purchase price of $1.6 billion. Under the completed 2021 Share Repurchase Program, a total of 97,783,047 shares of Hertz Global common stock were repurchased for an aggregate purchase price of $2.0 billion.

In June 2022, Hertz Global's independent Audit Committee recommended, and its Board approved, the 2022 Share Repurchase Program that authorized additional repurchases of up to an incremental $2.0 billion worth of shares of Hertz Global's outstanding common stock. The 2022 Share Repurchase Program, announced on June 15, 2022, has no initial time limit, does not obligate Hertz Global to acquire any particular amount of common stock and can be discontinued at any time. As of December 31, 2023, approximately $874 million remains available under the 2022 Share Repurchase Program.

Between inception and December 31, 2022, a total of 47,303,009 shares of Hertz Global's common stock were repurchased in open-market transactions under the 2022 Share Repurchase Program at an average share price of $17.64 for an aggregate purchase price of $835 million. During the year ended December 31, 2023, a total of 19,381,160 shares of Hertz Global's common stock were repurchased in open-market transactions at an average

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

share price of $15.01 for an aggregate purchase price of $291 million. Since inception of the 2022 Share Repurchase program a total of 66,684,169 shares of Hertz Global's common stock have been repurchased in open-market transactions at an average share price of $16.88 for an aggregate purchase price of $1.1 billion. There were no share repurchases after December 31, 2023 through the date of the filing of this 2023 Annual Report.

Common shares repurchased are included in treasury stock in the accompanying Hertz Global consolidated balance sheets as of December 31, 2023 and 2022 in Part II, Item 8 of this 2023 Annual Report.

Any future repurchases will be made at the discretion of management through a variety of methods, such as open-market transactions (including pre-set trading plans pursuant to Rule 10b5-1 of the Exchange Act), privately negotiated transactions, accelerated share repurchases, and other transactions in accordance with applicable securities laws. There can be no assurance as to the timing or number of shares of any repurchases.

Public Warrants

During the years ended December 31, 2023 and 2022, 48,965 and 245,959 Public Warrants were exercised, of which 31,034 and 60,661 were cashless exercises and 17,931 and 185,298 were exercised for $13.80 per share, respectively. As of December 31, 2023, a cumulative 6,335,204 Public Warrants have been exercised since their original issuance in June 2021. The outstanding warrants are exercisable through June 30, 2051. As of December 31, 2023, the exercise price remains $13.80.

Debt Financing

Refer to Note 6, "Debt," in Part II, Item 8 of this 2023 Annual Report for information on our outstanding debt obligations and our borrowing capacity and availability under our revolving credit facilities as of December 31, 2023.

Cash paid for interest on vehicle debt during 2023 and 2022 was $469 million and $204 million, respectively. The $265 million increase in cash paid for vehicle debt interest is due primarily to higher interest rates and higher debt levels resulting primarily from the issuances of the HVF III Series 2023 Notes. Cash paid for interest on non-vehicle debt during 2023 and 2022 was $252 million and $168 million, respectively. The $84 million increase in non-vehicle debt interest is primarily due to higher interest rates and outstanding borrowings on the First Lien RCF during 2023.

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 2024 as we expect to dispose of more aged vehicles and purchase newer vehicles. For a discussion of the risks associated with our high leverage, see Item 1A, "Risk Factors" in this 2023 Annual Report.

Our available corporate liquidity, which excludes unused commitments under our vehicle debt, was as follows:

Non-vehicle Debt

Approximately $20 million of our outstanding non-vehicle debt is scheduled to mature during the twelve months following the issuance of this 2023 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.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Significant financing activities during the year ended December 31, 2023 for our non-vehicle debt were as follows:

In March 2023, the aggregate committed amount under the First Lien RCF was increased from $1.9 billion to $2.0 billion.

In May 2023, the First Lien Credit Agreement was amended to change the benchmark interest rate on the Term Loans from the London Inter-Bank Benchmark Offered Rate ("USD LIBOR") to the term Secured Overnight Financing Rate ("SOFR") in connection with the cessation of USD LIBOR.

In November 2023, Hertz entered into an incremental term loan ("Incremental Term B Loan") in an aggregate principal amount of $500 million.

Letters of Credit

As of December 31, 2023, there were outstanding standby letters of credit totaling $995 million comprised primarily of $734 million issued under the First Lien RCF and $245 million issued under the Term C Loan. As of December 31, 2023, there is no remaining capacity to issue 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, 2023, none of the issued letters of credit have been drawn upon.

Vehicle Debt

Significant financing activities during the year ended December 31, 2023 for our vehicle debt were as follows:

Americas RAC

Approximately $2.3 billion of the outstanding vehicle debt in our Americas RAC segment is scheduled to mature during the twelve months following the issuance of this 2023 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.

HVF III U.S. ABS Program

The following HVF III Series 2023 Fixed Rate Rental Car Asset Backed Notes (collectively, the "HVF III Series 2023 Notes") were issued during the year ended December 31, 2023:

•HVF III Series 2023-1 Notes, issued in March 2023, in an aggregate principal amount of $500 million in four classes (Class A, Class B, Class C and Class D). At the time of issuance, Hertz, an affiliate of HVF III, purchased the Class D Notes in an aggregate principal amount of $40 million, which were subsequently sold to third parties in September 2023 as discussed below.

•HVF III Series 2023-2 Notes, issued in March 2023, in an aggregate principal amount of $300 million.

•HVF III Series 2023-3 Notes and Series 2023-4 Notes, issued in August 2023, in aggregate principal amounts of $500 million, respectively.

There is subordination within each of the preceding series based on class.

At the time of each respective issuance, proceeds from the issuance of the HVF III Series 2023 Notes were used primarily to repay amounts outstanding on the Series 2021-A Notes, with any remaining funds used for the purchase or refinancing of certain eligible vehicles.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

During initial issuance of the HVF III Series 2022-2, Series 2022-5 and Series 2023-1 Class D Notes (the "Class D Notes"), Hertz, an affiliate of HVF III, purchased the Class D Notes. In September 2023, Hertz sold the Class D Notes to third parties.

The HVF III Series 2021-A Notes were amended in June 2023 to increase the maximum principal amount that may be outstanding from $3.9 billion to $4.1 billion and to extend the maturity dates of the Series 2021-A Class A Notes and Class B Notes to June 2025 and August 2025, respectively.

Repurchase Facilities

As of December 31, 2023, there were no repurchase transactions outstanding under the Repurchase Facilities.

Hertz Canadian Securitization

The Hertz Canadian Securitization was amended in June 2023 to provide for aggregate maximum borrowings of CAD$475 million and to extend the maturity date to June 2025.

International RAC

Approximately $90 million of the outstanding vehicle debt in our International RAC segment is scheduled to mature during the twelve months following the issuance of this 2023 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

The European ABS was amended in September 2023 to (i) increase the aggregate maximum borrowings to €1.2 billion, (ii) extend the maturity date to March 2026 and (iii) amend certain other provisions to provide for further operating flexibility.

New Zealand RCF

The New Zealand RCF was amended in August 2023 to provide for aggregate maximum borrowings of NZD$120 million and to extend the maturity date to June 2025.

Australian Securitization

The Australian Securitization was amended in June 2023 to provide for aggregate maximum borrowings of AUD$340 million and to extend the maturity date to June 2025.

U.K. Financing Facility

The U.K. Financing Facility was amended in June 2023 to provide for aggregate maximum borrowings of £135 million and to extend the maturity date to November 2024.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Covenants

The First Lien Credit Agreement requires us to comply with the following financial covenant: a ratio of First Lien debt to Consolidated EBITDA, as defined in our First Lien Credit Agreement which may be materially different than Adjusted Corporate EBITDA presented in this 2023 Annual Report, (the "First Lien Ratio") of less than or equal to 3.00 to 1.00 in the first and last quarters of the calendar year and 3.50 to 1.00 in the second and third quarters of the calendar year. As of December 31, 2023, we were in compliance with the First Lien Ratio.

In addition to the financial covenant, the First Lien Credit Agreement contains customary affirmative covenants including, among other things, the delivery of quarterly and annual financial statements and compliance certificates, and covenants related to conduct of business, maintenance of property and insurance, compliance with environmental laws and the granting of security interests for the benefit of the secured parties under that agreement on after-acquired real property, fixtures and future subsidiaries. The First Lien Credit Agreement also contains customary negative covenants, including, among other things, the incurrence of liens, indebtedness, asset dispositions and restricted payments.

As of December 31, 2023, we were in compliance with all covenants in the First Lien Credit Agreement.

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 and asset-based 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 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 and various international subsidiaries that facilitate our international securitizations) will be available to satisfy the claims of unsecured creditors unless the secured creditors are paid in full.

We rely significantly on asset-backed and asset-based 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 6, "Debt," in Part II, Item 8 of this 2023 Annual Report. For a discussion of the risks associated with our reliance on asset-backed and asset-based financing and the significant amount of indebtedness, see Item 1A, "Risk Factors" in this 2023 Annual Report.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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:

The table below sets forth expenditures for revenue earning vehicles, net of disposal proceeds, by segment:

NM - Not meaningful

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

In 2023, revenue earning vehicle expenditures decreased approximately $1.1 billion, or 10%, compared to 2022, primarily in our Americas RAC segment, resulting from decreased vehicle acquisitions in 2023 as we held vehicles longer. Revenue earning vehicle disposal proceeds decreased approximately $1.0 billion, or 15%, in 2023 compared to 2022, primarily in our Americas RAC segment, driven by reduced per unit gains recognized on lower volume of vehicle dispositions. In 2024, we expect revenue earning vehicles expenditures, net to increase as we increase acquisitions of new vehicles and dispose of vehicles with lower expected residual values.

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:

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The table below sets forth non-vehicle capital asset expenditures, net of disposal proceeds, by segment:

NM - Not meaningful

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

In 2023, proceeds for non-vehicle capital assets increased by $169 million compared to 2022, driven by our Americas RAC segment, resulting primarily from the sale of certain non-vehicle capital assets as disclosed in Note 3, "Divestitures," in Part II, Item 8 of this 2023 Annual Report. In 2023, expenditures for non-vehicle capital assets increased $38 million compared to 2022, primarily in our corporate operations, driven in part by IT-related and EV charging infrastructure expenses.

CONTRACTUAL AND OTHER OBLIGATIONS

The following table details our material cash requirements for our contractual and other obligations as of December 31, 2023:

(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, 2023. See Note 6, "Debt," in Part II, Item 8 of this 2023 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.

(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 cancellation penalties 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 $29 million representing our tax liability for uncertain tax positions and related net accrued interest and penalties.

The table excludes pension and other postretirement benefit obligations as disclosed in Note 7, "Employee Retirement Benefits," in Part II, Item 8 of this 2023 Annual Report.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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 7, "Employee Retirement Benefits," in Part II, Item 8 of this 2023 Annual Report.

Our 2023 worldwide net periodic pension expense included in the accompanying consolidated statement of operations for the year ended December 31, 2023 was $11 million compared to $7 million in 2022 resulting primarily from increased interest costs, partially offset by reduced settlements.

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 7, "Employee Retirement Benefits," in Part II, Item 8 of this 2023 Annual Report, increased in December 31, 2023 compared with December 31, 2022 due primarily to an increase in the value of plan assets. We did not contribute to the Hertz Retirement Plan during 2023, and we do not anticipate contributing to the Hertz Retirement Plan during 2024. For the international plans, we anticipate contributing approximately $4 million during 2024. The level of 2024 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.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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 2023 Annual Report.

Revenue Earning Vehicles

Our principal assets are revenue earning vehicles, which represented approximately 60% of our total assets as of December 31, 2023. Revenue earning vehicles consist of vehicles utilized in our vehicle rental operations. For the year ended December 31, 2023, 12% 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 estimated 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 estimated residual values or holding periods could cause a material change in our estimates of non-program depreciation expense.

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 accident claims not yet paid, and claims incurred but not yet reported and are recorded on an undiscounted basis. Reserve requirements are based

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

on rental volume and actuarial evaluations of historical accident claim experience and trends, as well as future projections of ultimate losses, expenses and administrative costs. The adequacy of the liability is monitored quarterly based on evolving accident claim history and insurance related state legislation changes. 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 under the 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. We believe our valuation techniques and assumptions are 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 estimated 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.

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 United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense.

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THE HERTZ CORPORATION AND SUBSIDIARIES

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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 judgement occurs.

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 2023 Annual Report.

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HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

THE HERTZ CORPORATION AND SUBSIDIARIES