Summary of Herc Holdings, Inc. Q3 2025 Earnings Call

1Key Financial Results and Metrics

Revenue Growth: Equipment rental revenue increased approximately 30% year-over-year, driven by the acquisition of H&E and strong contributions from mega projects and specialty solutions.

Adjusted EBITDA: Increased by 24% compared to Q3 2024, benefiting from higher rental revenue and used equipment sales.

Adjusted EBITDA Margin: Margins were impacted by a higher proportion of used equipment sales through lower-margin auction channels and lower fixed cost absorption due to a slowdown in local markets.

Net Income: Reported net income included $38 million in transaction costs related to the H&E acquisition; adjusted net income was $74 million.

Free Cash Flow: Generated $342 million of free cash flow for the nine months ended September 30, 2025.

Leverage Ratio: Current leverage ratio stands at 3.8x, with a goal to return to a target range of 2 to 3x by year-end 2027.

2Strategic Updates and Business Highlights

Acquisition Integration: Successfully completed the integration of H&E within 90 days, a significant achievement compared to typical timelines of 6 to 18 months.

Operational Improvements: Expanded field operations, optimized sales territories, and integrated advanced technology platforms to enhance customer engagement and operational efficiency.

Fleet Management: Focused on rightsizing the fleet, with significant disposals of underutilized equipment. The aim is to optimize the fleet mix to align with demand patterns.

Specialty Solutions Growth: Plans to increase specialty equipment locations by 25% in 2026 and continue cross-selling specialty products to enhance revenue synergies.

3Forward Guidance and Outlook

2025 Guidance: Reiterated guidance for 2025, with expectations for continued growth in national accounts and specialty solutions. However, the company anticipates a tougher comparison in Q4 due to weather impacts from the previous year.

CapEx Plans: Gross fleet CapEx is expected to be between $900 million and $1.1 billion for 2025, with a focus on specialty equipment.

Long-term Strategy: Confident in achieving full revenue and cost synergies from the H&E acquisition over the next three years.

4Bad News, Challenges, or Points of Concern

Market Conditions: Local market growth remains limited due to high interest rates affecting commercial construction, leading to a bifurcated demand environment.

Margin Pressures: Adjusted EBITDA margins were impacted by lower-margin sales from auction channels and inefficiencies in the acquired business.

Integration Challenges: Ongoing integration efforts may continue to affect operational efficiency and performance metrics in the short term.

5Notable Q&A Insights

Fleet Rightsizing: The company is in the process of rightsizing the fleet, with expectations to complete this by the end of Q4 2025. Approximately $250 million to $300 million of activity was needed to optimize the fleet.

National Accounts and Margins: There are concerns about potential margin dilution from the increased focus on national accounts and mega projects, but management believes the volume and specialty product offerings will mitigate this.

Customer Retention: Employee and customer attrition rates have stabilized, with efforts underway to re-engage customers and enhance service levels.

Efficiency Reviews: Management is conducting efficiency reviews post-integration, aiming to identify further operational improvements and cost synergies. Overall, Herc Holdings is navigating a complex integration process while capitalizing on growth opportunities in mega projects and specialty solutions, despite facing challenges from market conditions and margin pressures.