Hertz (HTZ) Q1 2026 earnings review
Top-Line Reversing to Growth, but Profitability Remains Elusive
Hertz is finally showing structural revenue momentum. Top-line revenue surged 11% YoY to $2.0 billion, Reversing the contraction trend seen throughout much of 2025. This was driven by a 5.5% increase in Revenue Per Day (RPD), marking the best pricing improvement since 2022. However, underneath the strong commercial execution, Hertz is still struggling to turn a profit. Adjusted Corporate EBITDA came in at $(161) million. While this is a 47% YoY improvement, the company is burning cash (-$466M Adjusted FCF) and battling elevated vehicle recalls that severely dragged down utilization. The 'Back-to-Basics' turnaround is working on the top line, but the timeline to free cash flow generation and deleveraging remains a distant horizon.
🐂 Bull Case
RPD grew 5.5% YoY, Reversing previous pricing weakness. Combined with a 3% growth in transaction days, this proves Hertz's new revenue management strategies and commercial optimizations are actually driving durable demand.
Depreciation Per Unit (DPU) dropped 13% YoY to $312. With the seasonal used car trough largely over and a younger fleet in place, Hertz is rapidly approaching its sub-$300 DPU North Star target.
🐻 Bear Case
Total debt swelled to over $18.1 billion in Q1. Adjusted Free Cash Flow was severely negative at $(466) million. Until the company can consistently generate operating cash, the balance sheet remains highly vulnerable.
A 300% YoY spike in vehicle recalls dragged utilization down to 79%, costing the company over $25M in EBITDA and ~930,000 transaction days. OEM supply chain quality is a macro risk outside Hertz's control.
⚖️ Verdict: ⚪
Neutral. The commercial turnaround is clearly Accelerating, with strong RPD and top-line growth. However, deeply negative free cash flow, elevated debt, and lingering operational headaches like vehicle recalls make the equity a high-risk proposition until EBITDA turns sustainably positive.
Key Themes
Strong RPD and Top-Line Acceleration
The single most positive data point in the quarter is the 5.5% YoY increase in Revenue Per Day (RPD) to $57.38. This shows Accelerating pricing power and validates management's shift toward direct channels and sophisticated revenue management. As a result, total RPU (Revenue Per Unit) per month improved 5% YoY to $1,353, steadily approaching the company's $1,500 target.
Depreciation Normalization
Fleet costs are moving in the right direction. DPU came in at $312, representing a 13% YoY improvement. Management noted the used car market hit a seasonal trough in February but has since recovered considerably. The 'Buy Right, Hold Right, Sell Right' strategy is Stable and working to de-risk the balance sheet from massive residual value shocks.
Hertz Car Sales Digitization via eBay
A new partnership with eBay brings thousands of Hertz Certified vehicles to a massive online automotive marketplace. By shifting dispositions from wholesale to retail channels, Hertz aims to capture thousands of dollars in incremental margin per vehicle. This is a critical driver for driving net DPU below the $300 target.
Elevated OEM Recalls
Macro quality issues from OEMs are severely impacting operations. Recall activity was 300% higher YoY, sidelining massive portions of the fleet. This dragged utilization down 70 basis points YoY to 79% (it would have been up 140 bps without the recalls). The financial impact was painful: nearly 1 million lost transaction days, ~$50 million in lost revenue, and >$25 million hit to Adjusted Corporate EBITDA.
Direct Operating Expenses Creeping Up
Despite management's narrative of 'rigorous cost control', Adjusted Direct Operating Expense (DOE) per Transaction Day actually increased 2% YoY to $38.43. This contradicts the positive cost narrative and moves the company further away from its North Star target of 'low $30s'. Normalizing for higher real estate costs and damages doesn't change the fact that structural base costs remain sticky.
Liquidity Drain and Extreme Leverage
Adjusted Free Cash Flow for the quarter was heavily negative at $(466) million. Hertz ended the quarter with $837 million in corporate liquidity (supplemented by $200 million in April), but Total Debt has swelled to $18.2 billion ($11.9B vehicle, $6.2B non-vehicle). The timeline for deleveraging the non-vehicle debt is highly uncertain given the ongoing operational cash burn.
Other KPIs
Accelerating. International revenue grew 16% YoY, vastly outperforming the Americas segment (9%). Transaction days grew 3%, but the real driver was strong pricing power, with Total RPD up 3% to $59.12. Additionally, International DPU is highly efficient at just $277/month, well below the corporate average.
Stable. While it is a significant 47% YoY improvement from the $(302) million disaster in 25Q1, it highlights the heavy seasonality and fixed cost burden of the business. Stripping out the >$25M hit from recalls, core operations are healing but still fall short of free-cash-flow breakeven levels.
Guidance
Accelerating toward the goal. Q1 DPU was $312, down from $358 a year ago. Management expects continued retail channel expansion (like the eBay partnership) and stabilized used car values to push this below the $300 threshold.
Stable. Q1 RPU was $1,353, representing a 5% YoY increase. Achieving $1,500 will require sustained pricing power (RPD) and resolving the OEM recall bottlenecks to push utilization back into the mid-80% range.
Decelerating. Q1 Adjusted DOE came in at $38.43, moving in the wrong direction (up 2% YoY). Reaching the low $30s will require massive operational leverage, which is difficult to achieve while fleet growth is artificially constrained by recalls.
Key Questions
Timeline for OEM Recalls
Recalls sidelined over 930,000 transaction days in Q1. Are OEMs compensating Hertz for the lost revenue, and what is the expected timeline to clear the backlog of out-of-service vehicles?
DOE Target Viability
Adjusted DOE per transaction day ticked up to $38.43 this quarter. Given sticky inflation and rising real estate costs, is the 'low $30s' target still realistic without massive fleet volume scale-up?
Free Cash Flow Inflection
With $466M in negative Adjusted Free Cash Flow this quarter, at what EBITDA margin run-rate does the business transition to consistently generating positive cash flow to service the $6.2 billion in non-vehicle debt?