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    HRI
    Earnings call· Jun 2026(Q2 FY26)

    HERC HOLDINGS Q2 FY26 earnings call HRI

    Jul 28, 2026 Source

    Executive summary

    Herc Holdings Q2 FY26 — Strong Mega Project Demand Drives Raised Full-Year Guidance

    Herc Holdings delivered a strong second quarter, with pro forma equipment rental revenue returning to growth ahead of schedule, driven by robust mega project activity and specialty segment expansion. The company raised its full-year guidance, reflecting increased demand and strategic fleet investments, despite facing headwinds from fuel inflation. Management is focused on optimizing its expanded platform, enhancing fleet efficiency, and advancing a multi-year logistics transformation to scale its cost structure.

    Highlights

    5

    • Pro forma equipment rental revenue returned to growth, increasing 2% overall, earlier than expected.

    • Specialty revenues grew double digits in the quarter.

    • ProControl active external users grew nearly 20% quarter-to-quarter.

    • Q2 was the highest revenue-generating e-commerce quarter-to-date.

    • Full-year equipment rental revenue guidance raised to $4.425 billion at midpoint, reflecting nearly 5% pro forma growth.

    Concerns

    3

    • Fuel inflation pressured margins, impacting adjusted EBITDA margin by 150 bps and adjusted REBITDA margin by 170 bps year-over-year.

    • Local market activity remains stable but varies, with some markets feeling weakness in the interest rate sensitive commercial sector.

    • Free cash flow guidance lowered to $250 million to $350 million for the year due to increased fleet investment.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year equipment rental revenue
    $4.425 billion
    high materiality
    High
    Full-year net fleet CapEx
    roughly $900 million
    high materiality
    High
    Full-year Adjusted EBITDA
    approximately $2.09 billion
    high materiality
    High
    Full-year Free Cash Flow
    $250 million to $350 million
    high materiality
    Medium
    Incremental revenue synergy target
    $100 million to $120 million
    medium materiality
    High
    Incremental cost synergies
    $90 million
    medium materiality
    High
    Fuel and transportation inflation impact on adjusted EBITDA margin
    about 1 point of pressure
    medium materiality
    Medium
    Total fleet spend (gross CapEx)
    $1.325 billion
    high materiality
    High
    Fleet growth
    2.5% to 3%
    medium materiality
    Medium

    Operational metrics

    28
    Equipment rental revenue growth (GAAP)
    23YoY
    Q2 FY26

    GAAP equipment rental revenue growth.

    Total revenues growth (GAAP)
    20YoY
    Q2 FY26

    GAAP total revenues growth, primarily driven by H&E acquisition.

    Adjusted EBITDA growth (GAAP)
    19
    Q2 FY26

    GAAP adjusted EBITDA growth.

    Adjusted EBITDA margin (GAAP)
    40.4
    Q2 FY26

    GAAP adjusted EBITDA margin.

    REBITDA growth (GAAP)
    18
    Q2 FY26

    REBITDA growth, excluding equipment and parts sales.

    REBITDA margin (GAAP)
    41.4
    Q2 FY26

    REBITDA margin, excluding equipment and parts sales.

    Adjusted net income
    48
    Q2 FY26

    Includes add-back adjustments of $4 million for restructuring and transformation costs.

    Adjusted EPS
    1.43
    Q2 FY26

    Per diluted share, includes add-back adjustments of $4 million for restructuring and transformation costs.

    Restructuring and transformation costs (add-back)
    4
    Q2 FY26

    Included in adjusted net income add-backs, covers initial costs of logistics transformation.

    Pro forma equipment rental revenue growth
    2
    Q2 FY26

    Pro forma with H&E combined in both periods, returned to growth.

    Average fleet at OEC reduction (pro forma)
    3YoY
    Q2 FY26

    Pro forma reduction in average fleet at Original Equipment Cost.

    Pro forma adjusted EBITDA margin change
    down 60YoY
    Q2 FY26

    Pro forma with H&E combined in both periods.

    Pro forma REBITDA margin change
    down 120YoY
    Q2 FY26

    Pro forma with H&E combined in both periods.

    Fuel and transportation inflation increase
    35since Q1
    Q2 FY26

    Increase in fuel and transportation costs since the first quarter.

    Fuel and transportation inflation impact on adjusted EBITDA margin
    150
    Q2 FY26

    Year-over-year impact on adjusted EBITDA margin.

    Fuel and transportation inflation impact on adjusted REBITDA margin
    170
    Q2 FY26

    Year-over-year impact on adjusted REBITDA margin.

    Adjusted EBITDA margin (excluding fuel inflation)
    up 90YoY
    Q2 FY26

    Adjusted EBITDA margin improvement when excluding the impact of fuel inflation.

    Adjusted REBITDA margin (excluding fuel inflation)
    up 50YoY
    Q2 FY26

    Adjusted REBITDA margin improvement when excluding the impact of fuel inflation.

    Liquidity
    2.1
    Q2 FY26

    Ample liquidity at the end of the quarter.

    Net leverage
    3.95
    Q2 FY26

    Net leverage ratio at the end of the quarter.

    Quarterly dividend
    0.70
    Q2 FY26

    Regular quarterly dividend paid.

    Fleet at OEC added
    634
    H1 FY26

    Fleet added at original equipment cost through the first half of the year.

    Fleet at OEC disposed
    247
    Q2 FY26

    Fleet disposed of at original equipment cost.

    Proceeds from fleet disposal recovery rate
    46
    Q2 FY26

    Healthy recovery rate from fleet disposals.

    ProControl active external users growth
    nearly 20QoQ
    Q2 FY26

    Growth in active external users on the proprietary ProControl platform.

    Incremental cost synergies realized (H2 portion)
    55
    H2 FY26

    Approximately 55% of the incremental $90 million cost synergies are expected to be realized in the second half of the year.

    Total fleet spend allocation (Q2-Q3)
    70%-75%
    Q2-Q3 FY26

    Proportion of the $1.325 billion total fleet spend for FY26 expected to be acquired in Q2 and Q3.

    Oil and gas business share
    mid-single digits, high single digits
    Q2 FY26

    Company's position in the oil and gas business, no material change.

    Industry KPIs

    10
    MetricValueDetails
    Daily sales rate2%
    Fleet productivity2% higher revenue on 3% less fleet
    Rental CAPEX fleetroughly $900MUSD
    Used equipment sales247$M
    End market growth mix—
    Time dollar utilizationincreased >200bps
    Ancillary specialty growthdouble digits%
    Market volume mro market benchmarkover $800BUSD
    Contract vs spot large customer mix20%
    Digital vending managed inventory penetrationnearly 20%

    Deals & partnerships

    1
    H&EIntegration of H&E acquisition

    Integration successfully completed in Q1 FY26, allowing full focus on execution in Q2. Significantly increased bandwidth to serve the national market and mega projects.

    Risks & headwinds

    3
    Fuel inflationQ2 FY26, expected to continue in H2 FY26

    Pressured margins, 150 bps impact on adjusted EBITDA margin and 170 bps on adjusted REBITDA margin year-over-year. Up approximately 35% since Q1.

    Mitigation: Working on pricing actions, better pass-through discipline, and contract renewal negotiations. Multi-year logistics transformation initiative underway.

    Macro volatilityH2 FY26

    Oil prices have moved higher again since June, creating uncertainty.

    Mitigation: Modeling a quarterly expense impact broadly consistent with Q2 for H2 FY26.

    Local market weaknessOngoing

    Some markets feeling the brunt of weakness in the interest rate sensitive commercial sector.

    Mitigation: Diversification across geographies, project types, and customer accounts (especially national accounts and mega projects) drives resiliency. Fleet is fungible to move from local to mega projects.

    What to watch in Q3 FY26

    5

    Fuel and transportation cost impact

    next quarter
    Current150 bps impact on adjusted EBITDA margin in Q2 FY26
    TargetStabilization or reduction of pressure on adjusted EBITDA margin

    Why it matters

    Fuel costs are a significant headwind, and management's ability to recover or mitigate these costs will impact profitability.

    All in, we expect fuel and transportation inflation to create about a point of pressure year-over-year on adjusted EBITDA margin for full year 2026.

    Q&A highlights

    7

    Can you comment on the pricing environment, especially with reports of price increases, and the progress on dollar utilization?

    Larry Silber stated that the pricing environment is rational and constructive, driven by healthy supply and demand. The acceleration in dollar utilization was largely due to self-help and the fleet getting healthier ahead of expectations, with continued focus on pushing price.

    “I mean I think at the end of the day, we have a rational and constructive pricing environment the supply and demand dynamics are extremely healthy. It's a huge focus for us, and we're going to continue to sort of push price like we always do.”

    asked by Jerry Revich · answered by Lawrence Silber

    2 min read6 chapters

    Detailed Narrative

    01

    H&E Integration and Operational Pivot

    Following the successful H&E integration in Q1, Herc Holdings pivoted to execution in Q2, achieving pro forma equipment rental revenue growth of 2% earlier than anticipated. This was supported by disciplined fleet management, leading to positive fleet efficiency and progressive capture of cross-selling and cost synergies. The team's dedication and collaboration were key to efficiently integrating the acquisition and standardizing the operating model across the network.

    02

    Strategic Growth Pillars

    The company continues to execute its long-term growth strategies by growing the core through national accounts and mega projects, expanding its double-digit growing specialty segment, and elevating technology via its ProControl platform and e-commerce channels. ProControl active external users grew nearly 20% quarter-to-quarter, and Q2 marked the highest revenue-generating e-commerce quarter-to-date, highlighting the success of digital capabilities as a key differentiator.

    03

    Fleet Optimization and Capital Discipline

    Fleet optimization efforts resulted in 2% higher pro forma equipment rental revenue on approximately 3% less average fleet at OEC compared to last year, demonstrating improved efficiency. Herc added $634 million of fleet at OEC in H1 and plans to step up fleet investment, particularly in higher-margin specialty equipment, to meet accelerating mega project demand. Concurrently, $247 million of fleet at OEC was disposed of, generating healthy 46% recovery, allowing for capital recycling into higher-demand fleet.

    04

    Mega Project Opportunity

    Herc Holdings has increased its target share of the total U.S. mega project opportunity from 15% to 20%, leveraging its expanded geographic footprint, fleet capacity, and operating platform. External data projects over $800 billion in U.S. mega project starts in 2026, providing a large and durable market opportunity spread over multi-year jobs. The company's enhanced capabilities position it to take on more primary or strong secondary roles in these projects.

    05

    Logistics Transformation Initiative

    To address fuel and logistics inflation and improve transportation economics, Herc initiated a multi-year logistics transformation in late 2025. This effort aims to enhance routing, process discipline, cost recovery, and execution, building a more efficient and scalable delivery engine beyond acquisition cost synergies. The initiative is expected to improve service for customers and support ongoing margin improvement over the long term⏳.

    06

    Capital Allocation and Deleveraging

    The company is making a deliberate choice to increase fleet investment to capture demand, particularly in specialty equipment, which is expected to drive EBITDA growth. This EBITDA generation is seen as the most powerful lever for deleveraging, with a 'flywheel setup' anticipated to improve the trajectory into 2027, targeting the 3x leverage range. This strategy is pursued despite a near-term impact on free cash flow due to higher CapEx.

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