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HERC HOLDINGS INC (HRI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered revenue and adjusted EPS beats versus Wall Street: total revenue $1.002B vs $981M consensus and adjusted EPS $1.87 vs $1.63 consensus, while GAAP net loss (-$35M; -$1.17) reflected $73M acquisition transaction costs and a $49M loss on Cinelease assets held for sale . Estimates marked with * come from S&P Global.
  • Integration of H&E closed June 2, and management updated FY25 guidance (ex-Cinelease) to equipment rental revenue $3.7–$3.9B and adjusted EBITDA $1.8–$1.9B; gross capex was lifted to $0.9–$1.1B to support specialty fleet cross-sell .
  • Dollar utilization moderated to 38.3% (from 41.0% YoY) given H&E mix and Cinelease decline; REBITDA margin ticked down 40 bps YoY to 43.1% as used equipment sales and one month of lower margin acquired business weighed on mix .
  • Financing completed: $4.4B new debt raised at 6.8% weighted average cost (WACD); total debt WAC now ~6.3%, net leverage at 3.8x with $1.6B liquidity, framing a deleveraging path back toward 2–3x by 2027 .
  • Near-term stock catalysts: clear delivery against synergy cadence (50% of $125M EBITDA cost run-rate by YE25), used equipment disposals ($700–$800M OEC in H2), and specialty fleet cross-sell traction; watch for H&E dis-synergies and interest-rate-sensitive local market pressure .

What Went Well and What Went Wrong

What Went Well

  • Successful close and rapid integration progress for H&E: “go-to-market collaboration, fleet sharing, and process alignment…off to a great start” with technology cutovers phasing through Q3; specialty cross-sell wins already observed .
  • Revenue and adjusted EPS beat consensus: total revenue up 18% YoY to $1.002B and adjusted EPS $1.87; adjusted EBITDA up 12.8% to $406M with core adjusted EBITDA +15.1% YoY .
  • Liquidity and capital discipline: $1.6B liquidity, adjusted FCF of $270M in 1H (net of transaction costs), increased gross capex to fund specialty fleet while holding net capex to $400–$600M .

What Went Wrong

  • GAAP profitability impacted by non-recurring charges: $73M transaction expenses and $49M loss on assets held for sale (Cinelease), driving GAAP net loss of $35M and diluted EPS of -$1.17 .
  • Dollar utilization compressed to 38.3% from 41.0% YoY due to H&E mix and Cinelease weakness; REBITDA margin dipped 30–40 bps YoY on lower margin sales and acquired business .
  • H&E legacy branches saw double-digit top-line pressure pre-close (≈-14% YoY rental revenue; legacy run-rate expected slightly worse in H2 on tough comps), weighing consolidated margins and necessitating fleet right-sizing and disposals .

Financial Results

Consolidated Metrics vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Billions)$0.951 $0.861 $1.002
Equipment Rental Revenue ($USD Billions)$0.839 $0.739 $0.870
Adjusted EBITDA ($USD Millions)$438 $339 $406
Adjusted EBITDA Margin (%)46.1% 39.4% 40.5%
REBITDA ($USD Millions)$406 $307 $379
REBITDA Margin (%)48.0% 41.2% 43.1%
GAAP Net Income (Loss) ($USD Millions)($46) ($18) ($35)
GAAP Diluted EPS ($)($1.62) ($0.63) ($1.17)
Adjusted EPS ($)$3.58 $1.30 $1.87

Revenue Composition

Revenue Line ($USD Millions)Q4 2024Q1 2025Q2 2025
Equipment Rental839 739 870
Sales of Rental Equipment96 105 106
Sales of New Equipment, Parts & Supplies9 11 17
Service & Other7 6 9
Total Revenues951 861 1,002

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Dollar Utilization (%)40.6% 37.6% 38.3%
Total Fleet at OEC ($USD Billions)$7.0 $6.9 $9.9
Average Fleet Age (months)46 47 46
Net Debt ($USD Billions)$4.0 $4.0 $8.3
Net Leverage (x)2.5x 2.5x 3.8x
Liquidity ($USD Billions)~1.9 ~1.9 ~1.6
Net Rental Equipment Capex ($USD Millions)760 FY 93 Q1 238 1H

Results vs Wall Street Consensus (S&P Global)

MetricConsensus*Actual
Revenue Q2 2025 ($USD Billions)$0.981*$1.002
Adjusted/Primary EPS Q2 2025 ($)$1.63*$1.87
# of EPS Estimates Q2 20254*—
# of Revenue Estimates Q2 20254*—
Note: Values marked with * retrieved from S&P Global. Company “adjusted EPS” compares to S&P “Primary EPS” for directional beat/miss.

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Equipment Rental RevenueFY 2025 (ex-Cinelease)+4% to +6% growth $3.7B to $3.9B (includes 6 months H&E; ex-Cinelease) Updated basis (inclusion of H&E); effectively higher absolute range
Adjusted EBITDAFY 2025 (ex-Cinelease)$1.575B to $1.650B $1.8B to $1.9B (ex-Cinelease) Raised (range higher; scope now includes 6 months H&E)
Net Rental Equipment CapexFY 2025$400M to $600M $400M to $600M Maintained
Gross CapexFY 2025$700M to $900M $900M to $1.1B Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prev-2)Q1 2025 (Prev-1)Q2 2025 (Current)Trend
Macro/local vs national demandLocal moderated; national mega projects strong; pricing +2.1% YoY Tale of two trends; national growth vs local pressure Local still pressured by rates; national demand/megaprojects robust; targeting 60/40 long-term mix Continued bifurcation; national strength offsets local
Cinelease dispositionLarge loss on assets held for sale; weakness in studio market Sale process ongoing in 2025 $49M loss on assets held for sale; ex-studio metrics disclosed Studio weakness persists; ex-studio focus
H&E acquisition & integrationAnnounced/ongoing process (multiple acquisitions in 2024) Preparing integration; closing targeted mid-year Closed June 2; integration progressing (people, fleet, processes, tech); early cross-sell wins Accretive scale; execution phase
Fleet strategy & disposals2024 rotation; OEC $7.0B; REBITDA margin 48% Net rental capex down YoY; OEC $6.9B OEC $9.9B; disposals target $700–$800M OEC in H2; proceeds ~44% of OEC, used market stable Fleet optimized; disposals accelerate
Leverage & financingNet leverage 2.5x; $1.9B liquidity Net leverage 2.5x; $1.9B liquidity $4.4B new debt; net leverage 3.8x; $1.6B liquidity; WACD ~6.3–6.8% Temporarily higher leverage; plan to 2–3x by 2027
Specialty solutions/technologySustained margin via pricing, technology, cost controls Tech platforms supporting resiliency Specialty over-indexed in capex; ProControl platform; cross-sell synergies Specialty mix expansion

Management Commentary

  • “This acquisition, the largest in the industry, will accelerate our strategy…providing geographic and customer diversification…economies of scale, and a larger fleet to strengthen our position as a premier rental company in North America.” — Larry Silber, CEO .
  • “With the merger now behind us, our focus is on integration, optimization and ensuring delivery of the revenue and cost synergy targets…go-to-market collaboration, fleet sharing, and process alignment.” — Larry Silber .
  • “Local markets continue to see pressure…while national account demand remains strong, and we continue to capture our targeted 10% to 15% share of the megaproject activity.” — Larry Silber .
  • “We expect to achieve 50% of our $125 million EBITDA run rate [cost synergies] by year end 2025.” — Mark Humphrey, CFO .
  • “Used equipment markets are healthy, steady…proceeds ~44% of OEC; residual values down YoY but stabilizing since late 2024.” — Aaron Birnbaum, COO .

Q&A Highlights

  • Dis-synergies and H&E trajectory: Legacy H&E branches down ≈15% in Q2 rental revenue; back half expected slightly worse on tough comps; revenue base stabilized post-close; margin impact near term .
  • Fleet disposals timing: ~$750M midpoint in H2, roughly ratable across Q3/Q4; used markets stable across retail/wholesale/auction channels .
  • Free cash flow algorithm: Normalized FCF ≈10–15% of revenue base; FY25 adjusted FCF guide $400–$500M includes ~$130M tax benefit from retroactive bonus depreciation/interest limits (“One Big Beautiful Bill”) .
  • Cost synergies composition and cadence: Headcount a “pretty good chunk”; identified actions mapped across 3/6/9/12-month waves; 50% run-rate by YE25 .
  • Pricing: Pricing contributed positively to revenue growth at legacy Herc; H&E facing pricing headwinds in local markets .

Estimates Context

  • Q2 2025 beat on revenue and adjusted/primary EPS: revenue $1.002B vs $0.981B consensus*; adjusted/primary EPS $1.87 vs $1.63 consensus* .
  • FY25 consensus* anchors: revenue ~$4.40B*, EPS ~$7.36*; management’s FY25 adjusted EBITDA guide $1.8–$1.9B (ex-Cinelease, with 6 months H&E), implying 42–43% margin path . Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term execution watch: prove synergy capture (revenue cross-sell in specialty; 50% of $125M EBITDA cost synergies by YE25) and deliver H2 fleet dispositions without margin slippage .
  • Narrative remains “national strength vs local moderation”: mega projects, industrial and infrastructure pipelines support top-line resilience despite rate-sensitive local softness; monitor utilization and mix .
  • Balance sheet: leverage temporarily elevated at 3.8x; liquidity ample at $1.6B; deleveraging hinges on EBITDA growth, capex discipline, and disposal proceeds .
  • Earnings quality: GAAP impacted by non-recurring transaction and Cinelease charges; adjusted metrics and ex-studio disclosures provide cleaner view of core trajectory .
  • Specialty expansion is a key margin lever: incremental gross capex shifted to specialty; expect mix shift to support margin recovery as integration matures .
  • Estimates likely to adjust upward for revenue/EPS given beats and updated guidance basis (including H&E), but monitor EBITDA definition alignment (company “adjusted” vs consensus) .
  • Trading setup: positive beat on revenue/EPS, raised EBITDA/gross capex guide with clear synergy milestones is supportive; risk skew from H&E dis-synergies, local market rate sensitivity, and near-term margin mix from used sales .

Guidance Changes (Detailed Table)

MetricPeriodPreviousCurrentCommentary
Equipment Rental RevenueFY 2025+4% to +6% growth (ex-Cinelease; legacy basis) $3.7–$3.9B (ex-Cinelease; includes 6 months H&E) Basis change to include H&E six months; absolute range higher
Adjusted EBITDAFY 2025$1.575–$1.650B $1.8–$1.9B Raised; margin guide 42–43%
Net Rental Equipment ExpendituresFY 2025$400–$600M $400–$600M Maintained
Gross CapexFY 2025$700–$900M $900–$1,100M Raised to support specialty cross-sell
DividendQ2 2025$0.665 (Q4 2024) $0.70 paid June 13, 2025 Increased and paid

Additional Notes from Q2 2025 Documents

  • H&E acquisition consideration: $78.75 cash plus 0.1287 HRI shares per H&E share; H&E shares ceased trading on NASDAQ post-close .
  • Pro forma reconciliations: Q2 pro forma equipment rental revenue down ~2% YoY; legacy Herc ex-studio +4% YoY; legacy H&E -14% YoY .
  • Safety KPIs: branches achieved >96% “Perfect Days” in Q2; TRIR 0.92 vs industry 1.0 .

All data points above cite company filings and press releases. Estimates marked * retrieved from S&P Global.