Herc Holdings Inc. 2026 Q3 Earnings Call

Leslie, please go ahead. Thank you, operator, and good morning, everyone.

Today, we're reviewing our third quarter 2026 results with comments on operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks will be followed by Q&A. Let me remind you that today's call will include forward-looking statements. These statements are based on the environment as we see it today and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the press release, our Form 10-Q, and our most recent annual report on Form 10-K, as well as other filings with the SEC. In addition, we'll be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance.

Reconciliations for these non-GAAP measures up to the closest GAAP equivalent can be found in the conference call materials. Finally, please mark your calendars to join our management meetings at BNP Paribas's virtual global group call on November 3rd, the Baird Global Industrial Conference in Chicago on November 10th, Rothschild & Co Redburn's Virtual CEO Conference on December 1st, and the Melius Research Conference in New York on December 9th. This morning, I'm joined by Larry Silber, Chief Executive Officer, Aaron Birnbaum, President, and Mark Humphrey, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Larry.

Thank you, Leslie, and good morning, everyone. Before we turn to the quarter, I want to take a moment to address the announcement we made yesterday. Leading this company has been an honor and a highlight of my career, and after more than a decade as CEO, I've decided the time is right to transition to Executive Chairman at the start of next year. I'm thrilled that Aaron Birnbaum will step in as Herc Rentals' next Chief Executive Officer on January 1st. This transition reflects the strength of our succession planning and my complete confidence in Aaron and the entire leadership team. Aaron has been with Herc for more than 35 years. Over that time, he has served in key roles across branch operations, sales, regional field management, and executive leadership, and he understands this business as well as anyone in the industry.

As our Chief Operating Officer, and most recently as President, Aaron Birnbaum has been instrumental in shaping our strategy and driving our operational excellence. There is no one better prepared to lead Herc into its next chapter. In my role as Executive Chairman, I will remain actively engaged, working closely with Aaron Birnbaum and the board on strategy, capital allocation, and continuing to build on the strong foundation we have established together. I could not be prouder of what this team has accomplished or more excited about where it is headed. This quarter is a great example of why. The third quarter was an outstanding period for Herc Rentals, and it reflects the strategic positioning we have built over the past year.

As a reminder, in 2025, we closed the largest acquisition in our industry's history, and just 9 months later, we completed the integration of H&E Equipment Services, which Aaron Birnbaum quarterbacked from start to finish. That work is now firmly behind us, and it has positioned us with a stronger and larger sales force, expanded scale, and increased fleet availability to capture a greater share of wallet across the robust mega-project pipeline. The third quarter is our first full quarter of comparable year-over-year combined results, and the underlying performance is clear. Equipment rental revenue increased nearly 12% on an average OEC fleet growth of less than 2%. That relationship, strong revenue growth on modest fleet growth, is the direct result of being good stewards of capital.

We have managed our fleet assets tightly, aligned the right equipment to the right markets, and driven meaningful improvement in fleet efficiency with dollar utilization up 360 basis points in the quarter. This is exactly the kind of disciplined execution that defines team Herc. Now turning to slide 5. We continue to follow our proven playbook, executing against our long-term growth strategies. First, we are growing the core. Our top-line growth continues to be led by national accounts, fueled by robust mega-project activity across data centers, infrastructure, manufacturing, and energy. Our increased scale and broader fleet capacity allow us to take on more of these large, complex projects and elevate our role with major contractors. Second, we are expanding specialty. Specialty revenues grew double digits year-over-year in the quarter, and specialty, once again, represents 20% of our total fleet at OEC, up from 17% a year ago.

Specialty is a higher margin, higher return category, and we continue to disproportionately invest here to support mega projects, our new specialty branches, and the cross-selling opportunities our larger customer base provides. Third, we are elevating technology. As an industry leader, our proprietary ProControl platform remains a true differentiator, giving customers the insights and controls they need to track, measure, and manage their fleet for a safer, more efficient job site. Finally, we continue to invest responsibly in our fleet to support highly visible customer demand while maintaining capital discipline and managing our balance sheet for the long term. Now, moving on to slide 6, our performance also reflects a culture built on accountability, collaboration, and shared commitment to our customers. As our organization has grown, that culture has kept our teams aligned and focused on consistent execution. Above all, safety remains our first priority.

Our responsibility is to ensure our people have the training, tools, and well-maintained equipment to work safely and help our customers do the same. That commitment underpins everything we accomplish. With that, let me turn it over to Aaron Birnbaum to walk you through our fleet performance and our operating initiatives.

Aaron? Thank you, Larry Silber, for your leadership and mentorship over the years.

I am honored to step into the CEO role in January, and I look forward to continuing the great work we started together. I am also excited to have the privilege of leading the best team in the industry. The expertise, resilience, and dedication Team Herc brings to our branches and our customers' job sites every day are truly what sets us apart. In the third quarter, that dedication showed up in our results. Our expanded network, maturing specialty branches, broader fleet access, and stronger sales force are working together to serve more customer needs. The investments and integration work of the past year are translating into more effective execution across the organization and contributing to the second-half momentum we anticipated.

Turning to slide 8, our fleet management approach is about more than deciding what to buy and what to sell. It is about understanding customer requirements, coordinating equipment across our network, and getting the most productive use from the capital we already have invested. Our larger footprint gives us more flexibility to meet those requirements. We can draw on our broader equipment base, coordinate fleet across nearby branches, and support large projects without treating every new opportunity as a separate fleet purchase. That expert fleet management is central to the efficiency Larry Silber highlighted. At the same time, we are making targeted investments where customer demand supports attractive returns. We added approximately $580 million of fleet at original equipment cost in the third quarter, or about $1.2 billion year to date, supporting lifecycle replacement, mega project demand, and our expanding specialty offering.

We also disposed of approximately $200 million of fleet at OEC versus $375 million in last year's third quarter. The lower level of dispositions reflects a different operating priority. In the third quarter of 2025, we were actively rightsizing and aligning the acquired fleet. Today, our focus is ongoing lifecycle management and refining the mix to match demand. A key part of refining that mix is our specialty offering. As Larry Silber noted, specialty equipment now represents 20% of our total fleet at OEC. That matches our pre-acquisition mix. When we acquired H&E, which was weighted toward general rental equipment, our specialty share initially declined to 17%. Returning to 20% this quickly reflects our targeted investment in specialty equipment to meet customer demand and intentional cross-selling activities to achieve our revenue synergy goals.