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    HRI
    Earnings call· Mar 2026(Q1 FY26)

    HERC HOLDINGS Q1 FY26 earnings call HRI

    Apr 28, 2026 Source

    Executive summary

    Herc Holdings Q1 FY26 — H&E Integration Complete, Specialty Growth & Back-Half Acceleration

    Herc Holdings completed the integration of H&E Equipment Services, leveraging its expanded scale to drive growth and efficiencies. The company affirmed its full-year guidance, anticipating a back-half acceleration in revenue and margin improvement, driven by maturing specialty locations, sales force effectiveness, and improved fleet efficiency. Management expects to return to its target leverage ratio by year-end 2027.

    Highlights

    5

    • Equipment rental revenue increased 33% year-over-year on an actual basis.

    • Adjusted EBITDA grew 33% year-over-year on an actual basis.

    • Generated $94 million in free cash flow for the first quarter.

    • Used equipment sales were up 31% year-over-year, with realized proceeds at 49% of original equipment cost (OEC), up from 45% in Q1 2025.

    • Specialty revenue achieved double-digit growth in the quarter.

    Concerns

    4

    • Pro forma rental revenue declined 3% year-over-year.

    • Pro forma Adjusted EBITDA was down approximately 5% year-over-year.

    • Adjusted EBITDA margin was impacted by the lower-margin acquired business and static demand in the local market.

    • The current pro forma leverage ratio stands at 3.96x, above the target range of 2-3x.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full Year 2026 Guidance
    Affirmed across all metrics
    high materiality
    High
    Leverage Ratio
    2x to 3x
    high materiality
    High
    Incremental Cost Synergies
    $90 million
    medium materiality
    High
    Incremental Revenue Synergies
    $100 million to $120 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Local Accounts
    Local market conditions remained stable overall, with government, infrastructure, MRO, and institutional construction demand offsetting the moderate commercial sector. Long-term target is 60% local.
    Share of rental revenue: 47%
    		————
    National Accounts
    Large-scale project funding remains strong, with mega project activity centered around manufacturing, LNG, renewables, and data center development. Long-term target is 40% national.
    Share of rental revenue: 53%
    		————
    Oil and Gas
    The oil and gas mix of the business did not increase due to the H&E acquisition. Well-positioned for increased activity in the Permian Basin and ship channel with existing contractor relationships.
    Mix of business: Less than 10%
    		————

    Operational metrics

    18
    Equipment rental revenue
    33%YoY
    Q1 FY26

    Driven by the acquisition of H&E.

    Equipment rental revenue
    -3%YoY
    Q1 FY26

    Represents a meaningful sequential improvement from Q4. The acquired business was experiencing revenue pressure prior to close.

    Adjusted EBITDA
    33%YoY
    Q1 FY26

    Benefiting from higher equipment rental revenue and 31% more used equipment sales.

    Adjusted EBITDA
    -5%YoY
    Q1 FY26

    Impacted by lower-margin acquired business and static local market demand.

    Adjusted EBITDA margin
    39.3%consistent with last year
    FY26

    Full year guidance, consistent with last year despite integration work.

    Adjusted EBITDA margin
    40%
    Q1 FY26

    Impacted year-over-year by the lower-margin acquired business.

    Used equipment sales
    31%YoY increase
    Q1 FY26

    Contributed to Adjusted EBITDA growth.

    Leverage ratio
    3.96xin line with expectations
    Q1 FY26

    Expected to improve meaningfully at year-end 2026 and return to 2-3x target by year-end 2027.

    EBITDA (excluding used equipment sales)
    30%YoY
    Q1 FY26

    Increased during the first quarter.

    Net loss
    $5M
    Q1 FY26

    Primarily related to the H&E acquisition.

    Adjusted net income
    $7M
    Q1 FY26

    On an adjusted basis.

    Cost synergies
    $90Mahead of expectations
    FY26

    Incremental amount expected in 2026, on track to fully realize the $125M target by year-end.

    Revenue synergies
    $100M-$120Mintact
    FY26

    Incremental target for 2026 remains intact.

    Total reportable incident rate
    Better than 1.0vs industry benchmark
    Q1 FY26

    Reflecting high standards and commitment to safety.

    Perfect days (safety)
    Over 96%
    Q1 FY26

    All operations achieved over 96% of days as perfect.

    Specialty locations
    25%more
    Q1 FY26

    Added through the branch optimization program, opening in Q4 2025 and Q1 2026.

    Fleet disposals
    20%YoY higher
    Q1 FY26

    Reflecting life cycle rotation and ongoing mix adjustments.

    Disposal channel mix (retail/wholesale)
    Approaching 70%
    Q1 FY26

    This is a sweet spot for the company, with Q1 and Q4 typically being heavy disposal quarters.

    Industry KPIs

    10
    MetricValueDetails
    Daily sales rate-3%%
    Fleet productivityEfficiency gains
    Rental CAPEX fleet$183MUSD
    Used equipment sales49%% of OEC
    End market growth mixStrong
    Time dollar utilizationSequential improvement
    Ancillary specialty growthDouble-digit growth
    Market volume mro market benchmarkMeaningful opportunity for growth
    Contract vs spot large customer mix47% local / 53% national%
    Digital vending managed inventory penetrationRecord high

    Deals & partnerships

    1
    H&E Equipment ServicesLargest acquisition in the industry, significantly expanding branch network and capabilities.

    Integration of H&E Equipment Services is now complete, resulting in a 30% larger branch network and approximately 2,500 new employees joining the Herc family.

    Risks & headwinds

    6
    Pro forma rental revenue declineQ1 FY26

    3% YoY decline

    Mitigation: Actively working to reverse the trend through fleet optimization, sales force training, and network alignment; expecting inflection in Q2 and back-half acceleration.

    Pro forma Adjusted EBITDA declineQ1 FY26

    Approximately 5% YoY decline

    Mitigation: Expect margins to improve from Q2 onwards, driven by rental revenue synergy contributions, shift to higher-margin product mix, full realization of cost synergies, and improved variable cost management at scale.

    Impact of lower-margin acquired businessQ1 FY26

    Impacted Adjusted EBITDA margin

    Mitigation: Integration efforts focused on fleet optimization, sales force training, and network alignment to improve performance of the acquired business.

    Static demand in local marketQ1 FY26

    Impacted Adjusted EBITDA margin

    Mitigation: Offset by strong demand in government, infrastructure, MRO, and institutional construction sectors, as well as national account mega project activity. Expect local mix to improve as seasonal ramp builds and local demand recovers.

    Elevated leverage ratioQ1 FY26

    3.96x pro forma

    Mitigation: Expect to return to the target range of 2-3x by year-end 2027 through revenue and cost synergies driving higher EBITDA flow-through and free cash flow generation.

    Uncertainty in broader marketsOngoing

    Discussed not quantified

    Mitigation: Diversification into new end markets, geographies, and products/services to reduce reliance on any single industry or customer, making the company more resilient.

    What to watch in Q2 FY26

    5

    Dollar utilization improvement

    Q2 FY26
    CurrentSequential monthly improvement in Q1
    TargetInflection point in Q2, leading to back-half expansion

    Why it matters

    Indicates the effectiveness of fleet optimization and sales force efforts in driving revenue growth and margin expansion.

    As you roll that forward, there's an inflection point inside of Q2. And once we hit that inflection point inside of Q2, then I think you'll see dollar revenue and margin expansion as we work our way through the back half of the year.

    Q&A highlights

    8

    Asked for ground truth on the large mega project pipeline shown on Slide 11, specifically if the step-up in 2025 activity is being seen in customer conversations and if it implies better times ahead in the back half of the year.

    Management confirmed that they see the mega project activity through relationships with large general contractors and national accounts, as well as through data providers. They noted that the pipeline of planned projects is deep, and while not all projects start exactly when planned, the activity is building and projects typically last 2-3 years. This activity is already factored into their full-year plan, supporting the back-half ramp.

    “As you can see, there's more starts happening. Now these -- they don't all start when they say they're going to start, right? Sometimes you've heard us talk that sometimes they start 6 months away. But it is building. And once these projects do start to last for 2 or 3 years, as you know.”

    asked by Rob Wertheimer · answered by Aaron Birnbaum

    2 min read7 chapters

    Detailed Narrative

    01

    H&E Integration & Cultural Strength

    Herc Holdings announced the completion of the H&E Equipment Services integration, marking a significant milestone. The company now operates with a 30% larger branch network and has successfully onboarded approximately 2,500 new employees. This integration was recognized by a 'Great Place to Work' certification for the third consecutive year, reflecting strong culture and effective change management during the acquisition.

    02

    Strategic Focus Post-Integration

    With integration behind it, Herc's focus shifts to leveraging its new scale for growth and efficiency. Key areas include optimizing fleet mix by market, enhancing Specialty Solutions (which saw double-digit revenue growth), and advancing digital capabilities through 'Control by Herc Rentals' and a record-high e-commerce platform. The E3 operating system underpins continuous improvement and execution across the expanded network.

    03

    Operational Performance & Safety

    The operations team is focused on execution, aiming to win business and drive performance. Safety remains a top priority, with the company achieving over 96% 'perfect days' across its operations in Q1. The total reportable incident rate is better than the industry benchmark of 1.0, highlighting a strong commitment to safety standards.

    04

    Fleet Management & Capital Allocation

    Herc's fleet, valued at $9.4 billion in original equipment cost, is a primary revenue engine. The company entered 2026 with pro forma fleet down nearly 2% by design, ending Q1 down approximately 1% on an average OEC basis, consistent with utilization improvement goals. Q1 investments of $183 million were directed towards growth opportunities and supporting new specialty locations, with disposals up 20% YoY at OEC and realized proceeds at 49% of OEC.

    05

    Market Dynamics & Mega Projects

    Market conditions are bifurcated, with stable local markets (government, infrastructure, MRO, institutional construction) offsetting a moderate commercial sector. National account activity, particularly mega projects in manufacturing, LNG, renewables, and data centers, remains strong. Mega project ramp-ups accelerated earlier than typical in Q1, contributing to the full-year guidance.

    06

    Path to Back-Half Acceleration

    Q1 performance was in line with expectations, with sequential monthly improvement in time and dollar utilization and employee productivity. The company anticipates an inflection point in Q2, leading to accelerated revenue growth and margin expansion in the second half of the year. Maturing specialty locations, opened in Q4 2025 and Q1 2026, are expected to contribute more meaningfully to revenue and margin growth by Q3 and Q4.

    07

    Deleveraging Strategy

    The pro forma leverage ratio is currently 3.96x, which is in line with expectations given the H&E acquisition. Management expects this ratio to remain relatively consistent through the year before improving meaningfully at year-end 2026. The company is targeting a return to its 2x to 3x leverage range by year-end 2027, driven by revenue and cost synergies and higher EBITDA flow-through.

    AI-generated summary of the company’s earnings call. Not investment advice.