Herc Holdings Inc. Q2 FY2025 earnings call

• Successfully completed the acquisition of H&E Equipment Services and initiated integration activities, including setting up an integration management office and defining roles. - Fleet sharing and sales referrals are already occurring, with examples like a sales rep providing fleet for a mega project. - Technology integration planned with systems cutover in geographic phases throughout Q3, expecting completion by end of September. - Focus on specialty fleet and repurposing general rental branches into ProSolutions facilities. - Safety is a core focus, with all operations achieving at least 96% perfect days in Q2 and a total recordable incident rate better than the industry benchmark.

For Herc legacy branches excluding Cinelease, rental revenue increased 4% in the quarter, driven by strong mega project activity, moderated growth in the local market, and positive results in general rental and specialty product lines. H&E's rental revenue declined by approximately 15% due to workforce disruption and a narrow product offering in a moderating local market. In terms of revenue contribution, legacy Herc branches excluding Cinelease were a significant contributor, while H&E's revenue was a drag.

• 2025 Equipment Rental revenue expected to be $3.7 billion to $3.9 billion. - Adjusted EBITDA targeted between $1.8 billion and $1.9 billion, implying a margin of 42% to 43%. - Net CapEx remains on track at $400 million to $600 million despite increased gross CapEx for synergy fleet. - Adjusted free cash flow forecasted at $400 million to $500 million net of transaction costs. - Revenue synergy target of approximately $350 million over 3 years, with cost synergies expected to reach 50% of the $125 million EBITDA run rate target by year-end 2025.

• Workforce turnover and disruption during the H&E acquisition could impact operations. - Pricing pressure in H&E's local markets continues to be a concern. - Uncertainty in interest rates and tariffs may affect the overall market conditions. - Challenges in fully realizing revenue and cost synergies from the H&E integration in a timely manner.

Q: Congrats on getting the deal done and off to a new era. Wondering about fleet and future CapEx.

A: Broadly, early innings with adjustment to H&E revenue base, rev synergy component with $350M target over 3 years, majority of back half growth related to rev synergy fleet.

Q: Asked about timing of overseas sales and used market.

A: Dispositions back half of year likely ratable, used markets healthy and stable since late 2024.

Q: Unpacking free cash flow guidance.

A: Free cash flow generation in normalized environment expected to be 10%-15% of revs, missing 5 months of H&E free cash flow generation impacts current guide.

Q: Pricing pressure for H&E versus legacy Herc.

A: Pricing headwinds for H&E embedded in rev guide, Herc's pricing was a contributor to revenue growth in the quarter but not broken out separately.

Q: Clarity on cost synergies and headcount.

A: $125M cost synergies include significant headcount reductions, with workforce disposition time-lined and marching orders in place.

Q: Revenue synergy from cross-sell of specialty.

A: Early synergy wins with H&E, specialty sales team being developed to understand product breadth, with early wins and training planned for 2026.

Q: Legacy Herc component of guide.

A: Legacy Herc's guide includes no change in underlying markets served, but removal of anticipation of branch openings.