HERC HOLDINGS INC

Herc Holdings Inc. is one of the leading equipment rental suppliers with 602 ¹ locations in North America. The equipment rental industry serves a diverse group of customers from individuals and small local contractors to large national accounts providing a wide variety of rental equipment including mid-size and heavy equipment, specialty equipment and contractor tools. The industry is highly fragmented with few national competitors and many regional and local operators. The growth and financial health of the North American equipment rental industry is driven by a number of factors including economic trends, non-residential construction activity, capital investment in the industrial sector, repair, maintenance and overhaul spending, government spending and demand for construction and other rental equipment generally, including for remediation and re-building efforts related to natural disasters. Companies have increasingly turned to the equipment rental market to manage their capital needs, and the trend from equipment ownership to rental in the North American construction industry is expected to continue in the near term.

Herc Holdings believes it is one of the largest equipment rental companies in the North American equipment rental industry, with an estimated 4% ² market share by revenue and 602 ³ locations in 46 ⁴ states in the United States and five ⁵ provinces in Canada. The company's scale compared to most of its competitors provides a number of significant competitive advantages including the ability to provide premium brands and a comprehensive line of equipment and services, the ability to track utilization and facilitate the seamless transfer of its fleet across multiple locations, a geographic footprint that allows proximity and local expertise, favorable purchasing power, operational cost efficiencies, a national sales force, and industry-specific expertise. The company's competitors in the equipment rental industry range from other large national companies to regional and local businesses and include equipment vendors and dealers who both sell and rent equipment directly to customers. The company also competes with global companies in certain specialty categories.

Herc Holdings generates revenue principally from the business of renting equipment on a daily, weekly or monthly basis. Ancillary to its principal business of equipment rental, the company also sells used rental equipment, sells new equipment and consumables, and offers certain services and support to its customers. The company provides equipment rental services to customers in a wide variety of large markets, including contractors in commercial and residential construction, specialty and remediation and environmental sectors; industrial, including energy, chemical processing and manufacturing; infrastructure, such as highway and bridges, railroads and sewer and waste disposal; and other industries such as facilities management and entertainment production and services. National accounts represented 49% ⁶ of equipment rental revenue for the year ended December 31, 2025.

The company's principal products and services include equipment rental, sales of used rental equipment, and sales of new equipment, parts and supplies. Equipment rental includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges. As of December 31, 2025, the average age of the equipment rental fleet was 45 ⁷ months. As of December 31, 2025, the rental fleet consisted of equipment with a total original equipment cost, based on the guidelines of the American Rental Association, of $9.5 ⁸ billion. The composition of the equipment rental fleet based on original equipment cost as of December 31, 2025 was 26% ⁹ Aerial, 18% ¹⁰ Specialty, 22% ¹¹ Material Handling, 13% ¹² Earthmoving, and 21% ¹³ Other. The company also sells new equipment, and the types of new equipment sold vary by location and include a variety of ProContractor tools and supplies, small equipment, safety supplies and expendables. Service and other revenue primarily relates to training and labor provided to customers.

The company's equipment rental business is supported by Herc Rentals ProSolutions, its industry-specific solutions-based services which includes power generation, climate control, remediation and restoration, pump, trench shoring, and its Herc Rentals ProContractor professional grade tools. The company offers a suite of customer-focused services including equipment transport, fleet management and telematics, power solutions, on-site services and customized advice, re-rental options, and parts and supplies sales. The company's classic fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting equipment. Contractor business represented approximately 38% ¹⁴ of equipment rental revenue for the year ended December 31, 2025. Industrial customers represented approximately 25% ¹⁵ of equipment rental revenue for the year ended December 31, 2025. Infrastructure and government represented approximately 18% ¹⁶ of equipment rental revenue for the year ended December 31, 2025. Commercial facilities customers represented approximately 14% ¹⁷ of equipment rental revenue for the year ended December 31, 2025. Other customers collectively represented approximately 5% ¹⁸ of equipment rental revenue for the year ended December 31, 2025.

On June 2, 2025, the company completed the acquisition of H&E Equipment Services, Inc. by acquiring all of the outstanding common stock of H&E in exchange for $78.75 ¹⁹ in cash and 0.1287 ²⁰ shares of its common stock on a per-H&E share basis. The total purchase price was $4.8 ²¹ billion including cash payment of $2.9 ²² billion and the issuance of approximately 4.7 ²³ million shares of its common stock to H&E's shareholders, valued at $584 ²⁴ million. H&E added approximately 160 ²⁵ locations, over 2,500 ²⁶ team members and rental equipment primarily consisting of high-quality general rental categories including aerial, earthmoving, and material handling equipment. On July 31, 2025, the company completed the divestiture of the Cinelease studio entertainment business for initial cash consideration of $100 ²⁷ million, subject to customary post-closing adjustments, and agreed upon earnouts. The company recognized a pre-tax gain on the divestiture of $1 ²⁸ million and used the net proceeds from the sale of Cinelease to repay indebtedness. On December 5, 2025, the company declared a quarterly dividend of $0.70 ²⁹ per share. There were no share repurchases during the year ended December 31, 2025. As of December 31, 2025, the approximate dollar value that remains available for share purchases under the Share Repurchase Program is $161 ³⁰ million.

Total revenues for the year ended December 31, 2025 were $4,376 ³¹ million, compared to $3,568 ³² million for the year ended December 31, 2024, an increase of $808 ³³ million, or 23% ³⁴. Equipment rental revenue increased $581 ³⁵ million, or 18% ³⁶, during 2025 primarily due to an increase in average OEC on rent, which includes the impact of the June 2025 acquisition of H&E. Net income for the year ended December 31, 2025 was $1 ³⁷ million, compared to $211 ³⁸ million for the year ended December 31, 2024, a decrease of $210 ³⁹ million, or 100% ⁴⁰. Income before income taxes was $1 ⁴¹ million for 2025, compared to $291 ⁴² million for 2024.

The company's long-term strategy is focused on growing the core and expanding specialty. The company is focusing on growing its core equipment, which includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting, by investing in more equipment on existing locations to leverage its network. The company is expanding its footprint in North America, with a focus on increasing the number of branches in major urban markets through opening new greenfields and targeting strategic acquisitions. In 2025, the company accelerated the growth of its footprint with the acquisition of H&E, adding approximately 160 ⁴³ locations, over 2,500 ⁴⁴ team members and rental equipment primarily consisting of high-quality general rental categories including aerial, earthmoving, and material handling equipment. The company also seeks to achieve ongoing growth via its strategy to expand and diversify its revenues through a broader mix of equipment that increases the range of customers and markets served, growing its ProSolutions business which offers specialized equipment and services, as well as its ProContractor business, which focuses on professional grade tools and equipment.

The company is elevating the use of technology across the rental consumption chain by making significant investments in its digital platforms and is leveraging the knowledge that it has in serving customers for over sixty years to ensure that those investments create value throughout the rental experience. The company is committed to delivering technology that enables it to drive improvements in customers' efficiency and productivity. The redesigned customer platform is based on data-driven business intelligence, offering a self-service model in which customers have a real-time view into equipment availability through both a mobile and desktop view. Customers are presented with spot market pricing models and logistics options and can create their own equipment orders based on the information provided. Customers are able to manage their equipment, rental contracts, and accounts through the technology platform and are also able to use self-service tools to act upon rental decisions such as extending a contract, adding equipment, or indicating that a job is complete.

The company continues to take meaningful actions to advance its 2030 sustainability goals including reducing its Scope 1 and 2 greenhouse gas emission intensity by 25% ⁴⁵; reducing its non-toxic waste intensity to landfill by 25% ⁴⁶; and reducing Total Reportable Incident Rate of 0.49 ⁴⁷ or lower. These goals were set based on the company's 2019 performance and assessment of relevant sustainability topics. Since the acquisition of H&E, the company plans to re-establish a new baseline and develop revised goals in line with its larger footprint and sustainability priorities. Until such time, the company continues to track progress against the current goals and currently it has exceeded its GHG intensity target, nearly met its non-toxic waste intensity target and it continues to strongly focus on safety to further its TRIR goal.

The company is committed to delivering long-term sustainable value for shareholders with a balanced, disciplined, and opportunistic approach to capital deployment. Over the past five years, the company has laid the foundation for growth and as it continues to invest in the business, surplus capital will be allocated through further investment in rental equipment, distributions to shareholders with a quarterly dividend and debt repayment. The company has continued to pay quarterly dividends at $0.70 ⁴⁸ per share throughout 2025. As of December 31, 2025, the approximate dollar value that remains available for share purchases under the Share Repurchase Program is $161 ⁴⁹ million.

Local markets continue to be impacted by the elevated interest rate environment and continued economic uncertainty. Although inflation appears to have stabilized, the company has experienced and expects to continue to experience inflationary pressures, potentially as a result of tariffs imposed, a portion of which may be passed on to customers. Currently, the company does not expect material direct impact of tariffs on its procurement costs in 2026. There are also costs for which the pass through to customers is less direct, such as repairs and maintenance, and labor. The company cannot predict the extent to which its financial condition, results of operations or cash flows will ultimately be impacted by these ongoing economic conditions.

The company's business is seasonal, with demand for its rental equipment tending to be lower in the winter months, particularly in the northern United States and Canada. The equipment rental business, especially in the construction industry, has historically experienced decreased levels of business from December until late spring and heightened activity during the third and fourth quarters until December. To reduce the impact of seasonality, the company is focused on expanding its customer base through specialty products that serve different industries with less seasonality and different business cycles.

The company's business is cyclical and depends on the levels of capital investment and maintenance expenditures by its customers, and a slowdown in economic conditions or adverse changes in the level of economic activity could have a material adverse effect. The industry is highly competitive, and competitive pressures could lead to a decrease in market share or in the prices that can be charged. The company may fail to realize all of the anticipated benefits of the acquisition of H&E, or those benefits may take longer to realize than expected, and integration may be difficult, costly and time-consuming. The company's significant level of indebtedness, with total outstanding debt of approximately $8.1 ⁵⁰ billion as of December 31, 2025, exposes it to a number of risks, including making it more vulnerable to general adverse economic and industry conditions and requiring a significant portion of cash flows to make payments on debt. The company's rental fleet is subject to residual value risk upon disposition, and a sale of equipment below its net book value could adversely affect results of operations, liquidity and cash flows.

Management's message emphasizes the company's long-term strategy focused on growing the core and expanding specialty, elevating technology, integrating sustainability, and allocating capital. The company accelerated its growth strategy in 2025 with the acquisition of H&E, adding approximately 160 ⁵¹ branches, while also opening 26 ⁵² new greenfield locations, achieving greater density and scale in select urban markets to better serve both local and national customers. The company invested in its rental equipment as part of its long-term capital expenditure plans, adding rental equipment strategically throughout its network in response to customer demand and to position itself for growth into 2026. The company has returned to a more normalized cadence of rental equipment expenditures and disposals, remaining mindful of the possibility it may experience supply chain disruptions in the future. Management believes the company is well-positioned to operate effectively through the present environment.