Herc Holdings Inc. Q4 FY2025 earnings call

2025 was a transformational year with the completion of the largest acquisition in the industry's history in June. Focus on thoughtful integration with priorities including branch network optimization, fleet integration, salesforce assimilation, and productivity/cost efficiencies. Safety is a core priority with all operations achieving over 97% of days as perfect in 2025. Expanded footprint through acquisition and greenfield openings, with digital revenue growing over 50% in 2025. 2026 priorities include completing integration by end of first quarter, scaling salesforce, executing go-to-market strategy, and tracking synergies. 2025 invested over $100M in capital to capture early revenue synergies, with specialty lines showing double-digit rental revenue growth in December.

For the fourth quarter, on a GAAP basis, equipment rental revenue was up 24% year over year. Adjusted EBITDA increased 19% compared with last year's fourth quarter. REBITDA, which excludes used equipment sales, was up 17% during the fourth quarter. The REBITDA margin was 45%. For the full year, in the fourth quarter, realized proceeds from disposals were 44% of OEC, up from 41% in Q3 2025. On a pro forma basis, employee productivity increased year over year in 2025.

2026 plan is to invest roughly $950M of gross capital, net CapEx at midpoint ~$650M, relatively flat with last year. Forecast rental revenue growth 13%-17%. Adjusted EBITDA between $2,000,000,000 and $2,100,000,000. Free cash flow in range of $400,000,000 to $600,000,000. Incremental revenue synergies ~$100,000,000 to $120,000,000 in 2026, cost synergies expected $125,000,000.

Forward-looking statements subject to risks and uncertainties including factors in press release and annual report on Form 10-Ks, etc., such as market demand changes, integration risks, price fluctuations.

Q: Clarification on guidance and how additional EBITDA is generated.

A: Cost synergies ~$125M, revenue synergies ~$100M to $120M with EBITDA flow-through in 60%-70% range, plus GAAP comp from five months of H&E contribution.

Q: Cadence of dollar utilization and fleet disposals.

A: Pro forma Q1 negative year over year in dollar utilization, decline improves as work through shoulder period, fleet disposals lower vs last year with intent to age fleet and improve utilization.

Q: Specialty business go-to-market strategy and customer examples.

A: Expanding footprint, new sales team trained to ask right questions and bring in subject matter experts, early success with general rental fleet, 50 new specialty locations to be up and running.

Q: Mega project profitability and market share.

A: Margin depends on project start with general or specialty equipment, typically becomes typical margin business, competitive position stable with expanded network.

Q: Sequential move from Q3 to Q4 and fleet growth vs revenue growth.

A: Improving fleet efficiency, intent for revenue growth to outpace fleet growth as work through 2026.

Q: EBITDA expansion and market lapping.

A: Pro forma Q1 down year over year, then begin to come out of shoulder period and ramp into growth in back half with synergy fleet and optimized branches.