Earnings call transcript: Herc Holdings sees 13.7% revenue rise in Q2 2025

Herc Holdings Inc. (HRI) reported a 13.7% increase in rental revenue for the second quarter of 2025, reaching between $3.7 billion and $3.9 billion. Despite a net loss of $73 million due to transaction costs, the company noted an adjusted net income of $56 million. The stock rose by 7.12% to $121, reflecting investor confidence in the company’s strategic acquisitions and market position.

Key Takeaways

• Herc Holdings completed the acquisition of H&E Equipment Services Inc., enhancing its specialty equipment offerings.
• The company integrated over 160 H&E locations, aiming for $125 million in cost synergies.
• Industrial and infrastructure spending is expected to boost market opportunities, with forecasts exceeding $2 trillion in megaprojects.

Company Performance

Herc Holdings showcased robust performance in Q2 2025, driven by strategic acquisitions and expansion into specialty equipment markets. The integration of H&E Equipment Services has been a key factor, allowing the company to optimize its sales territories and enhance its national account capabilities. This diversification helps mitigate cyclical risks and positions Herc Holdings favorably against industry competitors.

Financial Highlights

• Rental Revenue: $3.7-$3.9 billion, up 13.7% YoY
• Adjusted EBITDA: $406 million, a 12.8% increase
• Net Loss: $73 million due to transaction costs
• Adjusted Net Income: $56 million
• Projected 2025 Adjusted EBITDA: $1.8-$1.9 billion

Outlook & Guidance

Herc Holdings projects equipment rental revenue for 2025 to be between $3.7 billion and $3.9 billion. The company plans to focus on the integration of H&E Equipment Services and aims to achieve $125 million in cost synergies, with 50% expected by year-end. Additionally, Herc Holdings targets a leverage reduction to 2-3x by 2027, pausing further M&A activity to concentrate on current operations.

Executive Commentary

Aaron Birnbaum, an executive at Herc Holdings, stated, "We are well positioned to manage dynamic markets," highlighting the company’s strategic adaptability. Larry Silber added, "The whole being greater than the sum of its parts," emphasizing the value of the H&E acquisition. Birnbaum also noted, "Our teams are energized by the unique opportunity that H&E presents," reflecting on the positive internal response to the acquisition.

Risks and Challenges

• Integration Risks: The ongoing integration of H&E Equipment Services could pose operational challenges.
• Market Volatility: Fluctuations in industrial spending and construction starts may impact revenue.
• Competitive Pressure: Increased competition in the rental market could affect pricing and margins.

Herc Holdings Inc. remains focused on leveraging its recent acquisition to expand its market presence and improve operational efficiencies, setting the stage for continued growth in a dynamic market environment.

Full transcript - Herc Holdings Inc (HRI) Q2 2025:

Kate, Conference Operator: Thank you for standing by. My name is Kate and I will be your conference operator today. At this time I would like to welcome everyone to the Herc Holdings Inc. second quarter 2025 earnings call and webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. Thank you. I would now like to turn the call over to Leslie Hunziker, Vice President of Investor Relations. Please go ahead.

Leslie Hunziker, Vice President of Investor Relations, Herc Holdings Inc.: Thank you, operator. Good morning everyone. Today we’re reviewing our second quarter 2025 results with comments on operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks will be followed by an open Q&A. Let me remind you that today’s call will include forward-looking statements. These statements are based on the environment as we see it today and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the press release, our Form 10-Q, and our most recent Annual Report on Form 10-K, as well as other filings with the SEC. Today we are reporting financial results on a GAAP basis, which include H&E Equipment Services Inc.

results for June in each of the three and six month periods for 2025. In addition, we’ll be discussing non-GAAP information that we believe is useful in evaluating the company’s operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the conference call materials. This morning I’m joined by Larry Silber, President and Chief Executive Officer, Aaron Birnbaum, Senior Vice President and Chief Operating Officer, and Mark Humphrey, Senior Vice President and Chief Financial Officer. I’ll now turn the call over to Larry.

Larry Silber, President and Chief Executive Officer, Herc Holdings Inc.: Thank you, Leslie, and good morning everyone. It’s been a busy time since our last earnings call. During the second quarter, we successfully completed the acquisition of H&E Equipment Services Inc. Since then, integration activities have been underway to validate financial, operational, and cultural assumptions, identify key talent, mitigate risks, and ensure a smooth transition for all stakeholders. One of our early priorities was to set up an integration management office and clearly define roles and responsibilities within the integration process. This successfully ensured minimal disruption to the rest of our employees’ value responsibilities and allowed Herc sales and operations staff to remain focused on and productive through the transaction process in a dynamic environment like the one we operate in today, where underlying local and national demand trends are bifurcated. This was critical.

The local markets continue to see pressure as more commercial projects come to completion, while new projects in that sector remain on pause due to prolonged higher interest rates. The good news is that our local sales professionals are experienced, determined hunters using the full suite of Herc’s product offering, reputation for service excellence, and industry-leading technology platforms to create opportunities and win new accounts. On the other side of the coin, national account demand remains strong, and we continue to capture our targeted 10% to 15% share of the megaproject activity there. We’re supporting customer success with differentiated specialty solutions, large and varied general rental offering, and a full-service fleet management including maintenance, logistics, safety, training, and utilization insights. In the quarter, excluding synergies, Herc legacy branches continued to outpace overall market expansion driven by growth in both national and local account revenues.

I want to thank all of Team Herc colleagues for bringing their best efforts every day, for the collaboration and support you’ve shown your colleagues old and new, and for keeping your eye on the ball and embracing the changes that bring opportunity and growth. As you can imagine, Herc’s biggest growth opportunity today and over the next three years stems from the scale and synergies we gained through the H&E acquisition. Let’s move to slide 5 for some perspective on how the integration has progressed. Since we closed the transaction, our teams have been working tirelessly to successfully bring the two companies together. As reported in the first quarter, H&E Equipment Services Inc.’s financial performance was impacted in part by disruptions to their employee base during the bidding process, and we saw those distractions continue through the close of the deal in early June.

Since then, meeting the team and immediately putting in place comprehensive communications that address their most critical questions has gone a long way in stabilizing our acquired workforce in the field. Herc Holdings Inc., RVPs and district managers have visited all of the acquired branches multiple times, getting to know the new organization. I personally visited over 40 H&E Equipment Services Inc. and Herc Holdings Inc. locations throughout the West, South, Midwest and Northeast over the last couple of months and Aaron’s covered even more of our network. Additionally, we’ve remapped the operating regions and optimized the salesforce territories to address our now larger footprint. In doing so, we added two RVP positions which were filled by H&E Equipment Services Inc. field leaders. We’re also adding key management positions to our sales organization to drive revenue synergies and develop our mid market capabilities where we know H&E Equipment Services Inc.

excel. Our new field structure has been cascaded to employees throughout the organization. At the same time, we’re managing staffing priorities. Our fleet team completed its assessment of H&E Equipment Services Inc.’s assets by market category, class, brand, utilization rates and equipment age. Based on the outcome, updated plans for incremental dispositions as well as the addition of specialty fleet or synergies is considered in our Net Fleet CapEx guidance, which Mark will take you through in a minute. Most exciting is that the fleet sharing and sales referrals are already taking place. Let me give you just a couple of examples. One of our new sales reps recently was contacted by a customer of his who currently is running a megaproject. The customer asked his rep if he could provide the fleet needed for this large job now that H&E Equipment Services Inc. was part of Herc Holdings Inc.

This wasn’t a project that H&E Equipment Services Inc. could have previously supported with its more limited product offering and Herc Holdings Inc. didn’t have a relationship with this contractor. It’s a clear example of the whole being greater than the sum of its parts and our national account project pipeline just got a bit bigger. In another example, we hosted Joint Branch Manager Sales Leader town halls in Dallas and Houston about a week after we closed. In each meeting, we asked the room if anyone had a story of renting equipment that they wouldn’t have been able to rent just a few days earlier. Almost every hand went up. One person said they were able to fill a request for a special aerial attachment. Another said they were working on a generator deal where H&E Equipment Services Inc. previously didn’t carry the size of generator the customer needed.

It seemed that everyone had a story and there was lots of excitement in the room. That’s really what this is about and it’s one of the reasons we’re confident in our revenue synergy target. Behind the scenes, we’re checking all the boxes. Training for standardizing processes for things like logistics, maintenance, and safety is also underway, and governance policies, including things like the customer and supplier contract approvals, have been communicated and controls are in place across the joint organization. Our next major initiative is the technology integration. We’ve got systems cutover planned in geographic phases throughout the third quarter and expect to be done by the end of September. We’ve invested significant time and attention in adding capacity to the Herc Holdings Inc.

system, beta testing capabilities, data migration, and of course security, and putting together training processes, mentoring structures on site, extra support, and a dedicated hypercare team. We feel good about the plan. Our initial cutover took place two weeks ago and it went very well. Our second phase is next week and we feel very confident that it will be equally successful. At that time, nearly 45% of the acquired locations will be fully integrated onto Herc Holdings Inc.’s industry-leading technology platform. The takeaway here is that our new organization is working well and we’re off to a great start as a combined company, and we’re well positioned to capture the synergies of the acquisition while continuing to deliver on our long-term growth strategies, which are outlined on slide 6.

As we’ve said, integrating this acquisition will be our primary focus and therefore we are pausing other M&A initiatives for the time being and completing the remaining in-flight Greenfields. In the first half of the year, we added 11 new facilities, of which eight were opened in the second quarter. Capitalizing on the secular shift from ownership to rental, particularly in a specialty market, and yielding greater value from megaprojects through specialty solutions is a key focus for us. Further, cross-selling specialty gear is an important component of the revenue synergies with H&E Equipment Services Inc. In line with this strategy, we’ve continued to over-index our gross CapEx plans towards specialty as a % of our fleet composition long term. We’re also planning to repurpose general rental branches into ProSolutions facilities beginning this year to support specialty equipment capacity for the 160+ acquired locations.

While we work through the integration of H&E Equipment Services Inc., we will continue to follow our playbook, leveraging branch network scale, our broad fleet mix, technology, leadership, and capital and operating discipline to position us to manage across the cycle and generate sustainable growth over the long term. Now I’ll turn the call over to Aaron Birnbaum who will talk a little bit more about operating trends, and then Mark Humphrey will take you through the second quarter business performance drivers and transaction adjustments.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Aaron, thanks Larry and good morning everyone. I also want to thank our team for remaining agile in a very dynamic environment by leveraging our diverse end market capabilities, comprehensive fleet offering, broad geographic coverage, and the deep customer relationships we’ve cultivated, all of which support a resilient business model. As an added bonus, our teams are energized by the unique opportunity that H&E Equipment Services Inc. presents, and that energy and excitement already is beginning to translate into an expanded project pipeline. Our combined team is committed to converting opportunities into revenue while prioritizing customer success and a safety-first focus. Safety is at the core of everything we do, and you can see on slide 8. Our major internal safety program focuses on perfect days, and we strive for 100% perfect days throughout the organization.

In the second quarter, on a branch-by-branch measurement, all of our operations achieved at least 96% of days as perfect. Equally notable, our total recordable incident rate remains better than the industry benchmark of 1.0, reflecting our high standards and commitment to the safety of our people and our customers. Turning to slide 9, as Larry said, we are operating in a disproportionate demand environment where the local market remains affected by interest rate sensitive commercial construction while megaproject activity continues to be robust. In the second quarter, with one month of H&E Equipment Services Inc. result included, local accounts represented 53% of rental revenue compared with 56% a year ago. On a pro forma basis, as if we owned H&E Equipment Services Inc. on April 1, our second quarter rental revenue mix would have been 55% local and 45% national.

In the local markets, we are expanding in select regions where infrastructure, education, government, recreation, and facility maintenance and repair projects are active. On the national account side, government and private funding for new large and megaprojects is still quite robust. The push for reshoring manufacturing, along with increases in LNG export capacity and the expansion of artificial intelligence, are driving new construction demand. We are continuing to win more of our targeted share of these project opportunities. With several new megaprojects on deck this year and the 2024 project still ramping up, we always get questions about cancellations and delays, so I’ll address that now. We haven’t experienced any cancellations on our megaprojects, and when it comes to project delays, as we said before, delays are fairly typical on national accounts as large, complex projects deal with design revisions, labor issues, and lengthy permitting and regulatory reviews.

Case in point, in June we finally put initial equipment on rent for a substantial megaproject that was awarded back in January. This project was delayed due to a rigorous permitting process. In instances like this, our fleet team and operations and sales leaders rely on experience and collaboration to strategically adjust plans to address these timing issues. It’s the nature of the business. As a combined company, we’ll continue to target a 60% local and 40% national revenue split, knowing that this diversification provides for growth and resiliency. Moving to slide 10, if you jump ahead in the deck, then you know that we’re increasing our gross CapEx forecast to account for incrementally more specialty fleet this year to capture the cross-selling synergies in our plan. Despite this, our net fleet CapEx forecast is unchanged at roughly 30% lower year over year.

At the midpoint of our guide, the offset to the expenditures is incremental disposals as we make adjustments for mix and utilization. In the second quarter, we spent roughly 9% less on new fleet than in the prior year quarter, with a mix of fleet expenditures more heavily weighted towards specialty gear even pre-acquisition. Also, in the latest quarter, we disposed of 82% more fleet on an OEC basis versus a year earlier in preparation for onboarding the H&E Equipment Services Inc. fleet. Realized proceeds were 44% of OEC on those equipment dispositions while residual values were down year over year. Sequentially, we’ve seen the used equipment market stabilize since the back half of 2024. On the right side of the slide, you can see our fleet composition at OEC. Total fleet was $9.9 billion as of June 30, 2025, with specialty fleet representing about 18% of the total.

Excluding the Centerlease assets, our base fleet is approximately $9.6 billion and higher margin. Specialty fleet would make up about 16% of that. With the acquisition synergies, we expect specialty fleet to return to about 20% of OEC as we continue to prioritize this high margin equipment category. Having a diversified offering that includes specialty fleet is an advantage for us in addressing the comprehensive needs of both local and national account customers, and delivering value-added expert solutions to meet these customers’ critical or emergency requirements provides another degree of operating resilience of our business. Sticking with the topic of resiliency, let’s turn to Slide 11 where you can see that despite the uncertain sentiment in the general market around interest rates and tariffs, industrial spending and non-residential construction starts still show plenty of opportunity for growth built on the foundation of megaproject development and infrastructure investments.

Taking a look at the updated industrial spending forecast at the top left, Industrial Info Resources is projecting 2025 to be another strong year of capital and maintenance spending at $527 billion. Dodge’s forecast for non-residential construction starts in 2025 is estimated to increase 7% to $478 billion. Additionally, there’s another $360 billion in infrastructure projects forecasted for 2025. That’s a 10% increase over 2024. The dotted line on these charts reflects growth over pre-pandemic peak levels. You can see that this year and the next three years are currently projected to be among the strongest periods of activity that this industry has seen. The megaproject chart in the upper right quadrant gives you a snapshot of the growth and projected starts over the last two years and for 2025 for U.S. construction projects with a total dollar value exceeding $250 million.

We estimate we are only in the early to middle innings of this multi-year opportunity. We don’t take the chart out beyond this year because visibility is less clear for actual start dates of those projects still in the planning phases, but there is an additional $2 trillion in the megaproject pipeline that isn’t accounted for here. Of course, there’s some overlap in projects among these four data sets, but no matter how you look at it, for companies with the safety record, product breadth, technologies, and capabilities to service customers at the national account level, the opportunities for growth remain significant. Turning to Slide 12, I’ll continue to state the obvious. Diversification is an important strategy for fostering sustainable growth and navigating economic cycles.

As Herc has diversified into new end markets, geographies, and products and services over the last nine years, we have reduced our reliance on a single industry or customer. We’ve become more resilient to downturns and more adaptable to emerging opportunities with like the megaproject developments, technology advancements that support customer productivity, and the secular shift from ownership to rental, especially in the specialty category classes. We believe we are well positioned to manage dynamic markets, and the acquisition of H&E Equipment Services Inc. further bolsters our capacity and therefore our opportunities. With that, I’ll pass the call on to Mark.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Thanks, Aaron, and good morning, everyone. I’m starting on Slide 14 with a summary of our key metrics for the second quarter. I’ll start with our GAAP results, which include both H&E Equipment Services Inc.’s June results and the Centerlease results. Centerlease, as has been discussed, is classified as assets held for sale. I’ll just make a couple of quick points here before turning the focus to the core results. In the second quarter, rental revenue increased 13.7% and adjusted EBITDA was up 12.8% to $406 million. We recorded a net loss in the second quarter, which included $73 million of transaction costs primarily related to H&E Equipment Services Inc., and a $49 million loss on assets held for sale. However, on an adjusted basis, net income was $56 million. Let’s move to Slide 15, where we can walk through the revenue breakdown by contributing business in the second quarter.

GAAP equipment rental revenue was up about 14%, but on a pro forma basis, which includes H&E Equipment Services Inc. for the full second quarter, rental revenue would have been down 2% year over year, primarily as a result of continued weakness in the film and TV vertical and a double-digit decline in the H&E Equipment Services Inc. business. Centerlease rental revenue was down nearly 40% from a year ago as the studio entertainment industry recovery that started to get traction in the first half of 2024 continues to be pushed out as entertainment companies delay reshoring production. Excluding Centerlease, rental revenue from Herc Holdings Inc. legacy branches increased 4% in the quarter, reflecting strong megaproject activity, moderated growth in the local market, as well as positive results in both general rental and specialty product lines year over year.

Shifting to H&E Equipment Services Inc., as you saw in their last several earnings reports, the business has struggled to capitalize on opportunities outside of their local market. Legacy H&E Equipment Services Inc. branches exited the quarter with rental revenue declining at roughly 15%. A portion of the decline is attributable to the workforce disruption, including turnover caused by two announced transactions. The balance reflects the volume and pricing pressure that results from being limited by a narrow product offering in a moderating local market. As Larry Silber and Aaron Birnbaum mentioned, we feel that the actions we’ve taken to stabilize and engage the workforce have been effective now, right?

Sizing the fleet and providing the acquired branches with a broader portfolio of equipment and more sophisticated tools with which to manage the business should get things back on track as we move into 2026 and hopefully a better interest rate environment. This is the last time we’ll provide a revenue breakdown by business. The fleet is fungible and is already being commingled, and customer account sharing and redesigned sales territories are in play. We are now one company. Moving on to slide 16, here we outline our core financial results, which excludes Centerlease from both periods in order to give you a better sense of how the base business performed in the quarter. A full reconciliation of quarterly performance metrics can be found beginning on slide 24 in the appendix of our presentation. For the second quarter, equipment rental revenue was up 15.6% year over year.

Adjusted EBITDA increased approximately 15.1% compared with last year’s second quarter, benefiting from higher equipment rental revenue as well as used equipment sales. Adjusted EBITDA margin primarily was impacted by higher revenue from sales of used equipment, which generate a lower margin than rental revenue. REBITDA, which excludes used equipment sales, was up 14.5% during the second quarter. REBITDA margin dipped 30 basis points compared with the prior year due to the one month impact of the lower margin acquired business. Margin improvement will come from cost synergies and a shift over time to a higher margin product mix as we deliver on the revenue synergies from the acquisition. ROIC for the core business is targeted to exceed our cost of capital within three years of closing the acquisition, supported by capital efficiencies, economies of scale, and a higher margin revenue mix.

Shifting to capital management on slide 17, you can see that we generated $270 million of free cash flow net of transaction costs in the first half on higher operating cash flow and disciplined net capital expenditures. In June, we finalized the debt funding for the acquisition, raising $4.4 billion at a weighted average cost of 6.8%. This was done through a combination of unsecured notes, a term loan vehicle, and incremental drawdown on our upsized ABL. Our current leverage ratio is 3.8 times as we anticipated. We believe we can bring that back into the top of our target range of 2 to 3 times within calendar year 2027.

As revenue and cost synergies drive higher EBITDA flow through and less capital will be required to achieve the revenue synergies due to scale benefits on the utilization of existing fleet, the combined entity will be capitalized to maintain financial strength and flexibility. If you flip to Slide 18, you’ll see that we are introducing combined 2025 guidance. As noted, our guidance excludes the performance of Centerlease. We are now expecting to generate equipment rental revenue of $3.7 to $3.9 billion in 2025, which includes six months of forecasted H&E Equipment Services Inc. result. You’ll recall that we projected a 10% dis-synergy target over two years in our initial modeling of the acquisition. We believe that all of that came to fruition pre-close as a result of the disruptions to the H&E Equipment Services Inc. business.

The revenue outlook at a high level reflects the previously guided performance expectations for legacy Herc Holdings Inc., the anticipated run rate revenue trajectory of legacy H&E Equipment Services Inc., a reduction in greenfield openings and M&A branches year over year for both companies, and the phasing in of initial revenue synergies. Notwithstanding the dis-synergies which created a new lower base of acquired revenue at closing, our gross revenue synergy target remains the same at approximately $350 million over three years. When it comes to cost synergies, savings from redundant positions, contracts, and public company expenses are already being realized. We expect to achieve 50% of our $125 million EBITDA run rate target by year end 2025.

We’re confident in our ability to achieve both the full revenue and cost synergies and should be able to update you on the cadence of how those synergies come in when we give our guidance for 2026. For 2025, we estimate adjusted EBITDA will be between $1.8 and $1.9 billion, which implies an adjusted EBITDA margin of 42% to 43%. For net capex, as Aaron Birnbaum mentioned, we’re tracking to our original guide of $400 million to $600 million. Despite increasing gross capex for synergy fleet as we’ve stated, we believe we’ll be able to generate the revenue synergies with roughly half the typical amount of fleet needed as we optimize utilization of the combined general rental fleets and only add incremental gross capex for specialty type fleet.

To support the acquired customer base in the second half of the year, we are targeting equipment disposals of $700 million to $800 million at OEC as part of the H&E Equipment Services Inc. fleet integration. To better align our fleet level to the new base of acquired revenue, we forecast adjusted free cash flow for the year to be $400 million to $500 million net of transaction costs, reflecting an approximate $130 million cash tax benefit from the new legislation around retroactive bonus depreciation and interest deduction limitations, partially offset by higher interest expense. As with any major acquisition, we’ve got some work to do as we integrate H&E Equipment Services Inc. operations, but as we gain more insight and intelligence into the acquired business, it’s reinforced our view of the significant opportunities ahead and our belief that the combination with H&E Equipment Services Inc.

will create long term benefits for customers, employees, and shareholders. With that, operator, we’ll take our first question.

Kate, Conference Operator: At this time I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We encourage everyone to limit yourselves to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Rob Wertheimer with Melius Research. Line is open.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Hi, good morning everybody, and congrats on getting the deal done and off to a new era.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: This first one is going to be a little bit tricky to answer because it touches on 2026 guide and I don’t want to go explicit, but I wonder.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: If you could give general comments on.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: How you feel set up for fleet in light of the $UTE, in light.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Of having acquired a bunch and what that means for future CapEx.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Did you consider tightening it further for this year?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: There’s always different categories, I know you.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Maybe just talk about your use of capital over the next couple of years.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Thank you. Yeah, I think broadly speaking, Rob, obviously you know this is very early innings here, right? We have sort of an adjustment based adjustment to make on the new revenue base, which will be sort of right sizing that H&E Equipment Services Inc. fleet into the broader organization. Hopefully the majority of that activity will occur in the back half of 2025. I think when you then think about that going forward, right, there’s a revenue synergy component to this as I stated and prepared. There’s a $350 million go get over a three year period. There will take some invested capital, capital light as we’ve modeled it, but the majority of the increase here in the back half of the year on the gross side is related to revenue synergy fleet. That’ll layer in over the back six months, probably ratably throughout.

I think it’s too early for me to sort of give you guide into 2026. I think we need to see the uptake of both the plan to right size, how the revenue synergy fleet is laying in, and be able to then provide you more clarity as we provide you 2026 guidance in 4Q with 4Q results. That’s totally fair. Thank you. And then if I can.

Larry Silber, President and Chief Executive Officer, Herc Holdings Inc.: I wonder if you could just describe.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Obviously this is a big transaction, but you expected revenue synergies. There was a little bit of a.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: How confident are you that?

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: You’ve gotten past that? How does that normally play out? People come after some key employees or some key accounts, and maybe that’s what you figured.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Maybe just any expansion there, and I’ll stop.

Thank you.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah, Rob, this is Aaron. I’ll take the back half of that question for sure. As we communicated in the prepared remarks and as you’re aware, there was a lot of, I guess, anxiety and change going on during the due diligence HSR period. There was some loss of employees from H&E. Some of them were sales reps. Once we closed the transaction, we were able to get in front of the employees. That really settled everybody down and we haven’t had the same issues since June 2. It’s a different business. As we said, it’s one company now and we’re seeing synergies occur and we’ve really stabilized the force and I think we’re all working together right now.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: I think, Rob, maybe coming at it a little bit differently and to Aaron’s point, we’ve absolutely stabilized the revenue base. That doesn’t completely take into account the tough comp that that H&E Equipment Services Inc. business would have had on the back half of the year. It was an acquisition for them that was sizable in 2024. Obviously, didn’t recur in 2025. While the revenue base has stabilized, it’s not going to necessarily come through from a growth perspective in that same manner. There will be additional pressures to the revenue growth, if you will, in the back half of the year assumed in that H&E Equipment Services Inc. business. Does that make sense?

Kate, Conference Operator: Your next question comes from the line of Tammy Zakaria with JP Morgan. Your line is open.

Hi, this is Alec Alfred. Tammy, thanks for taking my question. My first one is are you able to comment on the timing of the I think it was $1.1 to $1.2 billion OEC sales for the full year in Q3 versus Q4, and what’s the expected recovery rate on that OEC, and any incremental color on the used market since the prior quarter would be great.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Thank you.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: I’ll take the front half of that and I’ll let Aaron sort of comment on the used market as we see it today. I think just from a dispositions perspective, we’re probably looking, if you take that guide into its midpoint, you’re sort of talking about $750 million of dispositions back half of the year. My, our sort of best view of that is probably ratable Q3 and Q4 as we think about it today. I’ll let Aaron comment on the market.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah, our view on the used markets is that they’re healthy, they’re steady, they’ve really stabilized since late last year. Whether you’re talking retail, wholesale, or the auction channel, they’re stable, kind of looking back to like a 2019 level. It’s a healthy market. We think the used equipment markets are a good place for us to rebalance as we get through the balance of this back half of the year with the H&E Equipment Services Inc. fleet. We’re encouraged about this stabilization there. Just for clarification, I think the.

Slide mentioned, you know, accelerated impact of acquisition decision synergies create a lower revenue base. How should we think about, you know, how much synergies versus dissynergies are embedded in the full year revenue and the EBITDA guide as well?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah, good question. I think if you think about sort of the entry rate of H&E into us, prepared remarks had about a minus 15. My comments back to Rob is you’re probably looking at something a little bit greater than minus 15 in the back half just due to the tough comp. That’s how I would think about it.

Kate, Conference Operator: Your next question comes from the line of Kyle Menges with Citigroup. Your line is open.

Thank you. I had a question on the free cash flow guidance. Just maybe unpacking that a little bit. I mean, I think the back of that envelope math with I think you said $130 million from the big beautiful bill bonus depreciation and then seems like around $300 million maybe benefit from sales of OEC. I guess that doesn’t leave much for the implied for the core business from a free cash flow standpoint for the year. I guess how should we be thinking about maybe the baseline for free cash flow into next year for the business?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah, good questions one and all. I think I’ve said that in my mind the way I would think about the free cash flow capabilities of this business in a normalized environment, sort of thinking mid single digit growth is somewhere between 10% to 15% free cash flow generation off of the revenue base. I think what makes the look through here a little bit more difficult, Kyle, is that we’re missing five months of free cash flow generation from H&E Equipment Services Inc. And so, you know, when you think about that, I think my sort of guide here of 10% to 15% of revs on a free cash flow basis begins to make some sense. You know, that aligns to whether you wanted to look at it on a GAAP basis for the year.

If you wanted to look at it on a pro forma basis and, you know, evaluate H&E Equipment Services Inc. in there, you kind of come to this, you know, $500 million to $600 million on a pro forma basis for the year, which aligns with where I would have anticipated the business to be.

That’s helpful. It sounds like still some price in your comments, some pricing pressure for H&E in the quarter. It would be helpful to hear just pricing for H&E versus legacy Herc. Is H&E pricing still negative and then Herc still positive, and then just how to think about price at a high level for the remainder of the year and into next year.

Yeah, I mean, I think the pricing headwinds that H&E Equipment Services Inc. are taking on is sort of already embedded inside of that overall rev guide that I gave you for them. I think on the Herc Holdings Inc. side of the equation, we don’t break apart pricing components. I would tell you that pricing was a contributor to revenue growth in the quarter and leave it at that.

Kate, Conference Operator: Your next question comes from the line of Ken Newman with KeyBanc Capital Markets. Your line is open.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Hey, good morning, guys.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Morning. Morning. Mark and Aaron, I think you guys talked about workforce stabilization at the beginning of the call. Can you just remind us how much of the $125 million of cost synergies is headcount related and maybe just help us clarify, does that assume that the headcount reductions have already kind of taken place here into the back half or is there still work to do there as well? Yeah, great question, Ken. I don’t think we ever necessarily publicly disclosed how much of it was workforce related, but I would tell you it’s a pretty good chunk. There are other components in there, contracts and locations and yada, yada, yada.

Yes, I would tell you we absolutely have identified the people and that sort of gives me the confidence to lay out that number as we sort of get to the end of the year, being able to clip off at a run rate basis, 50% of that $125 million and we have sort of laid them out in buckets. There’s a 3, 6, 9 and a 12 sort of disposition of employees as we work our way through the transition of the business. Yes, all of that is timelined and bright lined and we have those marching orders.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah, okay.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: For the follow up, you.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Obviously, with the synergies on the.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Workforce disruptions last quarter, I’m just curious how you think about share gains or share loss in the quarter, and your opportunity to kind of recapture that back as we progress through the rest of the year.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah, you know, the H&E Equipment Services Inc. business, Ken, as you’re aware, was really tied to the local markets more heavily than the Herc Holdings Inc. business. Some of those share issues will get manifested over the course of the marketplace improving, maybe sometime when the cycle shifts again. As far as, specifically about the revenue that was assigned to some of the salespeople that left earlier in the year, we know all those customers, we have all the data, we’re putting in place plans and activities to reach back out to those customers right now. Over the rest of the year, some of those customers we didn’t have a relationship with, some of them we did. There’s going to be a lot of activity going on with our sales force. Now we got a very large sales force.

With our CMS and our activities to get them all engaged there, our teams are all aligned now and ready to go. We plan on clawing that back.

Kate, Conference Operator: Your next question comes from the line of Neil Tyler with Rothschild and Co. Redburn. Your line is open.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah, thanks. Good morning guys. A couple of questions, a couple of questions still, please. Firstly, on the revenue synergy from cross-sell of specialty, you’d mentioned previously that that might take a little longer to accrue as the training measures and sort of education of the salesforce would take a little bit of time. Are you anticipating, because obviously you’re talking about bringing the fleet on board this year, it sounds like you’re reasonably optimistic that you can get through those processes quite quickly and start to accrue those revenue synergies in the early part of the year. Is that the right way to think about that? Secondly, just wanted a bit of clarification on the legacy Herc component of the guide and if you could just sort of walk me back through the different pieces.

You said that there’s been no change in the underlying market, I believe, in terms of or markets that Herc serves, but you’ve removed the anticipation of branch openings. Is that the difference there? Thank you. I’ll take the first one, Neil. When you think about specialty customers, really you can put them in two different buckets. Some customers know what they need for a product especially and some of them need help to technically set up the project to solve a problem. We already are getting early synergy wins with the H&E Equipment Services Inc. team. It started immediately and we’re tracking that. Those are probably the ones that fit in the first bucket, customers that knew what they wanted but H&E Equipment Services Inc. didn’t have the product. We’ve already started the campaign of softly developing the H&E Equipment Services Inc.

sales team to understand all the specialty product breadth that we have. We have to do it in a kind of a measured approach. First thing right now is to get them on our systems, but we’re getting early wins there. When you look at getting into 2026, the beginning of the year, they’ll all be trained up on it. The neat thing about specialty is that if you’re a general rental sales professional and you got a customer that needs a technical solution, you don’t have to have the technical expertise. You can lean on the sales force that we have and the technical experts we have in the specialty field to help solve that issue with the customer, and that’s really how the machine works.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Great, thank you. On the legacy Herc side of this, I think I said it in the prepared remarks, but effectively what we did at a high level was flowed the Herc first half run rate into the new guide as the starting point and then layered on to that sort of our anticipated.

Growth.

Provided by H&E Equipment Services Inc. and then layered on top of that some revenue synergies which Aaron just kind of covered off with you.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Okay, great. Understood. Thank you.

Kate, Conference Operator: Your next question comes from the line of Stephen Ramsay with Thompson Research Group. Your line is open.

Hi, good morning. I wanted to dissect fleet movement impact to the second quarter and the second half maybe from a couple of different ways. Number one, just shifting fleet from lower utilization branches to markets with higher demand. Secondly, fleet disposition with H&E Equipment Services Inc. and how that impacts fleet movement maybe within megaprojects. Was fleet movement an incremental headwind to adjusted EBITDA margin in the second quarter or is it embedded in the second half?

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah, Susan, a couple things about fleet movement I’d mention is that the western United States has a more moderated local market than other parts of the U.S. We’ve moved fleet kind of that direction. When the H&E Equipment Services Inc. business came in in June, we found that we were able to say yes a lot more frequently and quicker to big projects, megaprojects, a lot of examples in that arena. The last piece is that when you think about the logistics, right, one of the things we noticed right away is that with our greater scale and larger footprint of fleet and locations, we’re able to use third party freight to move fleet less frequently than we had previously. There has been a tremendous amount of inflation in third party freight over the last year or so. That’s really helped us be more efficient. Steven and I’ll.

Did I answer your questions there?

The only last part of it would be if there’s extra expense headwind embedded in the second quarter result for EBITDA or in the second half.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: No, I think, Stephen, Aaron kind of summed that up. I think, you know, as we sort of get used to our new normal increased scale, you’ll even see less of that. I would tell you that repositioning of fleet is what we do. I think as we go forward, the scale benefits of this to our markets allow us to hopefully do less of that over time. Fleet is closer to where we need it to be just because of increased scale.

Excellent.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Okay.

My follow up would be dissecting core Herc Holdings Inc. rental revenue trends. The 4% growth seems solidly in line with where large peers were, just on an order of magnitude. Were locals a negative and megas a positive when you look at that? Thinking about rate and volume, just order of magnitude, how that contributed to the 4%?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: I would tell you that sort of across the board genre specialty, and then if you wanted to roll that up and look a level higher, your national accounts were all sort of contributors to rev growth inside of Q2. As I stated earlier, we’re not pulling apart pricing, but it was a contributor to rev growth in the second quarter as well.

Kate, Conference Operator: Your next question comes from the line of Sheriff El Savad with Bank of America. Your line is open.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Hi, good morning. I just wanted to touch on guidance again. I know we’ve discussed it quite a bit, but just looking at the EBITDA raise of about $237 million in the back half of last year, H&E.

H&E did about $350 million EBITDA in.

Q1 for them was down 19%. This seems to imply EBITDA weakening about down 30% year over year in the back half. Given that you’ve stabilized the revenue base, why is it that you seem to be implying that EBITDA declines increase?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: I think what you would if you ultimately pulled that apart effectively, at least through the first six months of the year and what we’ve trended out is effectively 100% flow through of that revenue dollar to the negative. From a percentage perspective, yes it’s going to look like a 30% but it’s effectively dollar for dollar, almost dollar for dollar for the revenue that’s coming out of the top. I think that there is a component of this of transition. We’ve got to right size that fleet, right size the business for the new revenue base and that’s all part and parcel to the back half transition that we’re going through.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Understood. Turning to a different segment of the business, looking at the breakdown, it seems like expenses at Centerlease have tripled year over year. What’s the driver behind that pickup in costs there, and is that something that you expect to recur going forward?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: I think that, obviously, we’ve stated Centerlease has struggled. It started to get some footing at the beginning of 2024, and then it took a pause again. That’s sort of what we’re up against until productions reshore into the U.S. I think the biggest cost difference year over year, Sharif, is just an impairment that we took to fair value the assets. The operational piece of that really is relatively unchanged year over year, but we did take an impairment charge in the second quarter.

Kate, Conference Operator: Your next question comes from the line of Mig Dubre with Bayer. Your line is open.

Thank you. Just to follow up on that last set of questions. If I understand this correctly, H&E revenue to be down about 15% in the back half and pressure on EBITDA about 30%.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: How would you sort of.

Frame what’s cyclical here relative to some of the issues with, you know, employee turnover and like that you talked about earlier? To that second point, how do you think about what’s kind of structural here in nature and what do you need to do to address this? I understand that you said things have stabilized, but is it that now you need to go and try to replace these people, maybe go on a bit of a hiring spree or recruiting? Is it that you just need to accelerate some of your cost synergies to sort of reflect that, you know, the business is just operating on a lower base?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah, there’s a lot there. Let me see if I can unpack that. I think, you know, as we work our way through the integration, both systemically as well as right sizing the fleet, we’ll run that business and make those decisions. I don’t necessarily foresee us. We’ve got a process that we need to run from an integration perspective. There won’t be necessarily pull forward of cost synergies. We’ve got to run that plan out. I think that that’s sort of aligned into probably the early part of Q1 in terms of the run out of cost synergies. I think we’ll be able to provide additional clarity as we walk into 2026. We just have this transitionary period that we’re going to have to adjust the business to, both from a fleet perspective, a people perspective and all of the above.

Understood. I’m curious, for my follow up, how you think about leverage and the path towards delevering. Maybe you can comment on that. If I understood your comments on free cash flow on a more normalized basis, we should be looking somewhere north of $600 million, maybe closer to $700 million. You’ve got over $8 billion in debt. What’s the path here going forward? Given your leverage goals, how long do you think you’re going to be maybe on a sideline from an incremental M&A perspective? Thank you.

All very good questions. Meg, I’ll take the last piece of that first. I think that we have stated that we will be inside of our target of two to three times sometime inside calendar 2027. That really hasn’t changed. Obviously, the base of the business here needs adjusting and we’ll do that. That doesn’t change the outlook of getting inside of that target range of two to three times inside of calendar 2027.

Yeah.

Larry Silber, President and Chief Executive Officer, Herc Holdings Inc.: As far as M&A goes, Nick, as I said in my prepared remarks, we’re going to pause any additional M&A activity for the near term until we complete this integration and start on the path of achieving our synergy targets both on a cost and a revenue side. As we get this leverage moving in the right direction, we’ll see what’s available out there and at that time we’ll determine whether or not there are any appropriate targets for future M&A.

Kate, Conference Operator: Your next question comes from the line of Stephen Fisher with UBS. Your line is open.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Thanks for taking the question, and good morning.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: I’m just wondering if you see any.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Differences in the profile of large projects over the next, say, 12 to 18.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Months relative to what you’ve seen over the last couple of years in terms.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Of either end markets or geography, is there going to be more public sector infrastructure, big projects versus what’s been private sector over the past couple of years? Just curious about that large project mix.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: Yeah. Stephen, this is Aaron. I’ll take that one on over the next 12 to 18 months. What you see is a robust pipeline. There sure is a lot more data center type activity. There’s more infrastructure work that was planned and coming online. There’s definitely a lot more industrial manufacturing projects that are coming into that large project profile. Whether you’re talking about reshoring or pharma or industrial chemicals, there’s a lot of projects that you’re seeing. Another thing you see a lot of as well coming online is things in the line of water treatment, water services. I guess that would fall into the infrastructure, but really robust pipeline. Of course, it seems like every city wants a new stadium. Those news releases are pretty frequent, so it’s really encouraging. I would say it’s accelerated more than anything else.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: That’s really helpful. Just as a follow up.

Aaron Birnbaum, Senior Vice President and Chief Operating Officer, Herc Holdings Inc.: I think you gave the 6.8% as.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: The rate on the new debt. Did you give a total interest expense guide for the year?

Larry Silber, President and Chief Executive Officer, Herc Holdings Inc.: I didn’t.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: If you think about sort of weighted average cost of debt running somewhere between 6.3% and 6.4% on your debt projection, you’re going to land right in line with where you need to be.

Kate, Conference Operator: I will now turn the call back over to Leslie Hunziker for closing remarks.

Leslie Hunziker, Vice President of Investor Relations, Herc Holdings Inc.: Okay. Thank you for joining us on the call today. We look forward to updating you on our progress in the quarters to come. Of course, if you have any questions, please don’t hesitate to reach out. Have a great day.

Kate, Conference Operator: Ladies and gentlemen, that concludes today’s call. You can now disconnect. Thank you and have a great day.

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