Summary of Herc Holdings Inc. Q1 2026 Earnings Call

1Key Financial Results and Metrics

Equipment Rental Revenue: Up approximately 33% year-over-year, primarily due to the acquisition of H&E Equipment Services. On a pro forma basis, rental revenue declined 3%, indicating a sequential improvement from Q4 2025.

Adjusted EBITDA: Increased by 33% compared to Q1 2025, but down approximately 5% on a pro forma basis due to lower-margin used equipment sales and static local market demand.

Net Income: Adjusted net income was $7 million, with a reported net loss including $5 million in transaction costs related to the H&E acquisition.

Free Cash Flow: Generated $94 million in Q1.

Leverage Ratio: Current pro forma leverage ratio is 3.96x, with expectations to return to a target range of 2 to 3x by year-end 2027.

2Strategic Updates and Business Highlights

Integration of H&E: The integration process has been completed successfully, with a focus on leveraging a 30% larger branch network and optimizing fleet mix.

Specialty Solutions Growth: Achieved double-digit revenue growth in specialty solutions, with 25% more specialty locations contributing to this growth.

Digital Capabilities: Continued advancements in digital offerings, including e-commerce, which reached record revenue in Q1.

Safety Initiatives: Maintained a strong safety record with over 96% of operations achieving "perfect days" in Q1.

3Forward Guidance and Outlook

Full-Year 2026 Guidance: Reaffirmed across all metrics, anticipating a stronger second half of the year driven by revenue synergies and improved fleet efficiency.

Revenue Synergies: Targeting $100 million to $120 million in incremental revenue synergies for 2026, with expectations for realization to be back-half weighted.

Cost Synergies: On track to achieve an incremental $90 million in cost synergies this year, ahead of the original schedule.

4Bad News, Challenges, or Points of Concern

Pro Forma Revenue Decline: The decline in pro forma rental revenue indicates challenges in reversing revenue pressure from the acquired H&E business.

Market Conditions: Local market demand remains static, and there are concerns about pricing pressures in certain segments, particularly aerials.

Integration Challenges: While integration has been completed, the transition period can be disruptive, and the performance of legacy H&E branches is still being aligned with Herc’s standards.

5Notable Q&A Insights

Mega Project Activity: Strong demand for mega projects is expected to ramp up in the second half of the year, with a robust pipeline of planned projects.

Dollar Utilization: Improved dollar utilization metrics were noted, with expectations for continued improvement as seasonal demand increases.

Pricing Dynamics: While pricing pressures exist, there is optimism about the fundamentals of the market, and the company is positioned to take advantage of improving supply-demand dynamics.

Oil and Gas Exposure: The company has limited exposure to oil and gas (less than 10% of business), but sees potential opportunities in upstream and downstream markets due to rising oil prices. Overall, Herc Holdings is positioned for growth in 2026, with a focus on leveraging its expanded scale and optimizing operations post-acquisition, despite facing some challenges in revenue performance and market conditions.