Herc Q4 Earnings Call Highlights
Herc NYSE: HRI executives used the company’s fourth-quarter and full-year 2025 earnings call to detail progress integrating the H&E acquisition, highlight operational initiatives to drive revenue and cost synergies, and provide initial 2026 financial guidance. Management characterized 2025 as a “transformational year,” citing the June closing of what it called the largest acquisition in the equipment rental industry’s history and pointing to early execution on integration priorities.
Integration progress and operational focus
CEO Larry Silber said the company moved quickly on integration while trying to preserve the strengths of both organizations. He pointed to several actions taken over the past eight months, including an expanded field operating structure with 10 U.S. regions, a sales territory optimization effort, and transitioning acquired branches onto Herc’s technology stack.
Silber outlined four integration priorities during the seasonal “shoulder” period:
- Branch network optimization: The company is consolidating some general rental equipment in overlapping markets to create space for specialty operations, while adding specialty fleet to other general rental locations. Silber said these actions are expected to increase standalone or co-located specialty branches by about 25%. As of the fourth quarter, 80% of the planned branch optimization had been completed, with completion expected next month.
- Fleet integration and realignment: Management said it restructured combined assets by category, class, age, and location, and had the fleet “realigned with the right equipment in the right locations” by year-end. The goal is to improve flexibility and time utilization as the sales force scales and demand shifts seasonally.
- Sales force assimilation: Silber said the sales integration is progressing, with investment in training and adoption of CRM systems, sales models, and pricing systems. He cited early cross-selling success and improving consistency in execution.
- Productivity and cost efficiencies: The company said employee productivity increased year-over-year on a pro forma basis in 2025, supported by unified systems and standardized processes. Silber added that cost synergies are “tracking ahead of plan,” aided by procurement optimization, elimination of redundant costs, and streamlined corporate functions.
Safety was also emphasized as a key integration element. Silber said Herc onboarded 2,500 new team members into its health and safety program in the second half of 2025. He noted that, measured branch-by-branch, operations achieved over 97% “perfect days” in 2025, and said the total recordable incident rate remained better than the industry benchmark of 1.0.
Fourth-quarter results and acquisition effects
CFO Mark Humphrey reported that fourth-quarter equipment rental revenue increased about 24% year-over-year on a GAAP basis, driven by the H&E acquisition, “strong contributions from mega projects,” and specialty solutions sales. Adjusted EBITDA increased 19% compared with the prior-year quarter, helped by higher rental revenue and 53% more used equipment sales.
Humphrey said margins were affected by the higher used equipment sales mix, given used sales carry lower margins than rentals. He also cited lower fixed cost absorption due to moderating demand in certain local markets where H&E had been “overweighted,” along with redundant acquisition-related costs ahead of full cost synergy realization. REBITDA, which excludes used equipment sales, increased 17% in the quarter, with a REBITDA margin of 45% that Humphrey said reflected the lower-margin acquired business.
Net income in the quarter included $14 million of transaction costs, primarily related to the H&E acquisition. On an adjusted basis, the company reported net income of $69 million, or $2.07 per share.
Fleet actions, cash flow, and leverage
Humphrey said the company rebalanced the combined fleet within six months to improve capital efficiency and enable better fleet productivity, while making targeted investments in specialty equipment to support revenue synergies. He said second-half 2025 fleet expenditures were roughly 22% higher than the second half of 2024, while fleet disposals at original equipment cost (OEC) were 65% higher. For the full year, 2025 expenditures were flat year-over-year, and disposals rose 67%.
In the fourth quarter, the company recorded $342 million of disposals at OEC, with realized proceeds equal to 44% of OEC, up from 41% in the third quarter. Humphrey attributed the improvement to selling more equipment through higher-return retail and wholesale outlets.
For the year ended December 31, 2025, Herc generated $521 million of free cash flow net of transaction costs. Humphrey said the company’s pro forma leverage ratio was 3.9x to 3.95x, consistent with expectations as H&E’s 2024 quarters roll into the trailing twelve-month calculation. He reiterated a target of returning to the top of the company’s 2x to 3x leverage range by year-end 2027, driven by revenue and cost synergies and higher EBITDA flow-through.
2026 guidance: revenue growth, synergies, and capital plan
Management issued initial 2026 guidance that includes gross capital expenditures of roughly $950 million at the midpoint. Humphrey said lower expected dispositions would bring net CapEx to approximately $650 million at the midpoint, “relatively flat with last year.” The fleet plan is intended to support rental revenue growth of 13% to 17% for 2026.
Humphrey said the year’s GAAP growth rate would slow from the first quarter to the second quarter due to the H&E acquisition timing in the comparable base period. On a pro forma basis, he said quarterly revenue and fleet metrics are expected to improve sequentially from negative to positive growth from the first half to the second half, supported by higher utilization and fleet efficiency as the company exits the shoulder period and enters peak season.
On synergies, Humphrey said the company’s goal of generating roughly $390 million of gross revenue synergies through 2028 is unchanged, even after “front-loaded revenue dyssynergies” in 2025 versus the original plan. For 2026, management forecast incremental revenue synergies of about $100 million to $120 million. He also said cost synergies are running ahead of expectations, with the company expecting to recognize a total of $125 million of cost synergies in 2026.
The company guided to Adjusted EBITDA of $2.0 billion to $2.1 billion, which Humphrey described as profitable growth of 10% to 16%, driven by synergy delivery and improving fleet productivity. He noted this would be partially offset by lower used equipment sales year-over-year. Herc also guided to free cash flow of $400 million to $600 million.
Market backdrop: mega projects, local stability, and specialty expansion
President Aaron Birnbaum said the company expects to complete integration by the end of the first quarter of 2026. He said 50-plus additional specialty locations are expected to be staffed, fleeted, and open as the company heads into peak season, with management tracking revenue synergy initiatives and cost synergies tied to maintenance and transportation on a weekly basis.
Birnbaum described 2026 local markets as “relatively neutral” compared with 2025, with government, infrastructure, MRO, and institutional construction expected to offset a still-moderate commercial sector. He said mega-project activity remains robust, citing 2025 project concentration in manufacturing, LNG, renewables, and data centers. Management said it is winning its targeted 10% to 15% share of mega-project opportunities and aims to move toward the upper end of that range as the combined footprint improves competitiveness.
On customer mix, Birnbaum said that in 2025 local accounts represented 51% of rental revenue versus 49% from national accounts. Over the longer term, management said it continues to target a 60% local and 40% national split, describing diversification as important for resiliency.
In Q&A, executives also discussed the mechanics of synergy capture, including expanding fleet breadth into acquired branches, opening new specialty locations, and integrating Herc’s pricing tools. They noted that specialty growth is supported by training sales teams to identify customer needs and bring in specialty subject matter experts, rather than requiring every salesperson to be a specialty expert.
About Herc NYSE: HRI
Herc Holdings Inc NYSE: HRI operates as a leading equipment rental provider in North America, offering a wide range of machinery and support services to construction, industrial, government and event sectors. The company's fleet includes aerial work platforms, earthmoving equipment, material handling solutions, power generation units and specialty tools, enabling clients to scale their operations without the capital expense of ownership. In addition to basic machinery rentals, Herc provides value-added services such as equipment maintenance, on-site safety training and project consulting to help customers optimize productivity and maintain compliance with industry standards.
Founded as part of Hertz Global Holdings, the equipment rental business was spun off as an independent public company in early 2016.
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