Herc Holdings Q1 2026 Earnings Call - Integration Complete as Focus Shifts to Back-Half Growth

Rebecca, Conference Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Herc Holdings Inc. First Quarter 2026 earnings call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I will now turn the call over to Leslie Hunziker, Head of Investor Relations. Please go ahead.

Leslie Hunziker, Head of Investor Relations, Herc Holdings Inc.: Thank you, operator, and good morning, everyone. Today we’re reviewing our first 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 in 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 to these non-GAAP measures to the closest GAAP equivalent can be found in the conference call materials. Finally, please mark your calendars to join our second quarter management meeting at the Bank of America Global Industrials Conference in N.Y. on May 12th, the KeyBanc Industrials and Basic Materials Conference in Boston on May 27th, and the Wells Fargo Industrials and Materials Conference in Chicago on June 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.

Larry Silber, Chief Executive Officer, Herc Holdings Inc.: Thank you, Leslie, and good morning, everyone. I’m pleased to report that with the completion of our branch optimization program, the integration of H&E Equipment Services, the largest acquisition in our industry, is now complete. Integration was an enormous undertaking, and I could not be prouder of this team. The strength of our culture is what gives me confidence in what comes next. For the 3rd consecutive year, Herc Rentals has earned the Great Place to Work certification based on independent employee survey results. What makes this recognition especially meaningful this year is the context. Large acquisitions are disruptive by nature. We brought approximately 2,500 new employees into the Herc family, people facing new systems, new processes, and a new way of doing things.

Based on the survey feedback, our new colleagues recognized our strong culture through change management support, peer mentoring, and the extensive training and tools they received throughout the integration. Now they recognize the opportunity in front of them. With integration behind us, our focus shifts fully and decisively to leveraging our new scale to drive growth and efficiencies through execution. We have a larger platform, a stronger team, and a broader set of capabilities than at any point in our history. The work ahead is about unlocking the full potential of our platform, winning more business, serving customers better, and delivering stronger returns for our shareholders. Now, turning to slide 5. With a 30% larger branch network, we are optimizing fleet mix by market, driving network density, and capturing the operating efficiencies that come with scale. Fleet efficiency, employee productivity, and margin improvement are the goals.

Second, we are enhancing our fleet mix, and specialty solutions is a standout area of focus. Double-digit specialty revenue growth in the quarter reflects targeted fleet investments, 25% more specialty locations, and strong demand for mega projects, cross-selling, and the continued structural shift from equipment ownership to rental. Third, we are advancing our industry-leading digital capabilities through ProControl by Herc Rentals. Advanced technology features from fleet utilization insights and equipment location tracking to our patented mobile access controls and remote operation gives customers the tools to run safer, more efficient job sites. Our e-commerce platform continues to gain traction, delivering a seamless omni-channel experience with 24/7 self-service and personalized interactions. E-commerce revenue reached an all-time record high in the first quarter, a clear signal that our customers value the flexibility to do business with us however and whenever it works best for them.

As always, we lead through continuous improvement with our E3 Operating System built on a foundation of standardized processes, superior customer experiences, and a relentless focus on execution across our expanded network. Finally, as prudent stewards of capital, we invest responsibly. We took on incremental debt to acquire H&E, a deliberate decision to accelerate our scale and long-term earnings power. We expect to return to the top of our targeted 2 to 3 times leverage ratio by year-end 2027. Our path to deleveraging is clear. As we capture the full run rate of our synergy targets, EBITDA grows, free cash flow builds, and leverage comes down. Let me turn it over to Aaron to talk about our operational performance. Aaron?

Aaron Birnbaum, President, Herc Holdings Inc.: Thanks, Larry, and good morning, everyone. With the integration behind us and our foundation set, this is a moment our team has been working toward. Investments we’ve made in people, fleet, systems, and culture are now fully in place. What you’ll see from our operations team in 2026 is a relentless focus on putting all of it to work. We are executing with a larger network, a stronger bench, and a sharper sense of where the opportunities are. The work ahead is straightforward: win business, serve customers exceptionally well, and drive the performance this platform is built to deliver. In everything we do, every efficiency we drive, every customer we serve, every dollar of performance we deliver starts with one non-negotiable: the safety of our people and our customers.

From the job site training we provide to the safe, well-maintained equipment we put in their hands, safety is how we show up every day. Let me start there. On slide 7, our major internal safety program focuses on perfect days, and we strive for 100% perfect days throughout the organization. In the 1st quarter, on a branch-by-branch measurement, all of our operations achieved over 96% of days as perfect. Also notable, our total recordable incident rate remains better than the industry’s benchmark of 1.0, reflecting our high standards and commitment to the safety of our people and our customers. Our safety foundation is what makes everything else possible. On slide 8, you can see that what we’re building on that foundation starts with one of our most important assets, our fleet.

At $9.4 billion in original equipment cost, fleet is both our largest investment and our primary revenue growth engine. We entered 2026 with pro forma fleet down nearly 2% by design. The integration priority was alignment, the right equipment in the right markets with the right mix, and we achieved that. By the end of the first quarter, average OEC was down approximately 1% on a pro forma basis versus last year, consistent with our focus on utilization improvement. While fleet expenditures were up 78% on a pro forma basis, this reflects a return to normal seasonal buying levels after deliberately reduced purchases in early 2025 when we were preparing to bring in the acquired H&E fleet in the second quarter.

Our Q1 2026 investments of $183 million are directed toward growth opportunities and supporting our new specialty locations as they ramp up and begin contributing to revenue synergies. Fleet disposals at OEC were 20% higher year-over-year, reflecting lifecycle rotation and ongoing mix adjustments. Of the $281 million of disposals in the first quarter, realized proceeds were 49% of OEC, up from 45% in Q1 2025, reflecting a healthy used equipment market across almost every category, as well as our focused selling into the higher return wholesale and retail channels. As you know, the first quarter is our seasonally slowest demand period. Having strong fleet alignment right now before the seasonal ramp is critical.

Disciplined fleet management and our sales teams executing with increasing effectiveness across the combined network drove sequential monthly improvement in time and dollar utilization and employee productivity throughout the quarter. As utilization tightens into the peak season, we expect that discipline to translate directly into revenue growth and further improvement in fleet efficiency in the second half of the year. Turning to slide 9, we will gain better visibility into seasonal trends over the next month or so. Today, the bifurcated markets remain relatively consistent with what we have seen over the past year. In the local market, conditions remain stable overall. Government, infrastructure, MRO, and institutional construction demand are offsetting the still moderate commercial sector, consistent with what we expected coming into the year. On the national account side, large-scale project funding remains strong.

Megaproject activity is centered around manufacturing, LNG, renewables, and the continued surge in data center development. We are winning our targeted 10%-15% share of these opportunities with new projects coming online and current projects still in ramp-up phase. Megaproject activity was notably strong in the first quarter, with project ramp-ups accelerating earlier than is typical for our seasonally slowest period, activity that was built into the full year guidance we provided just two months ago. In the first quarter, local accounts represented 47% of rental revenue, compared with 53% for national accounts. As we have said, our long-term target is 60% local and 40% national. The mix provides for both growth and resiliency.

The national wing we are seeing today reflects the strength of our national accounts and megaproject activity. We expect the local mix to improve as the seasonal ramp builds and eventually as local demand recovers. Turning to slide 10, diversification is an important strategy for fostering sustainable growth and navigating economic cycles. As Herc has diversified into new end markets, geographies, and products and services over the last decade, we have reduced our reliance on any single industry or customer. We have become more resilient to downturns and more adaptable to emerging opportunities from megaproject development and the continued surge in data centers to technology advancements that support customer productivity and the secular shift from equipment ownership to rental.

With our expanded scale, we are better positioned than at any point in our history to capitalize on this breadth of opportunity and to find growth even as individual markets ebb and flow. The opportunity across end markets isn’t just broad, it’s deep. Turning to slide 11, let’s look at what the data tells us about the forward pipeline driving demand across our customer base. Here you can see that despite the uncertainty in the broader market, whether around interest rates, trade policy, or general economic sentiment, the fundamental drivers of our business remain intact. Industrial spending and non-residential construction starts continue to show meaningful opportunity for growth, built on a foundation of mega-project development and infrastructure investment.

Of course, there is some overlap across these 4 data sets, but no matter how you look at it, for companies with the safety record, scale, product breadth, technologies, and capabilities to serve customers at the local, regional, and national level, the opportunity for growth remains significant. We believe Herc is well-positioned to capture it. Turning to slide 12, this is where we are in our near-term journey. I want to be clear, against our 2026 plan, we are exactly where we expected to be. The integration work is behind us. What we have now is a 30% larger business, more fleet, more locations, more specialty capabilities, and a larger maturing sales force. That’s the foundation.

The 1st half of 2026 is about converting that foundation into performance, tightening utilization as we move into the seasonal peak, and sharpening sales effectiveness across the combined network. We have seen that start to play out. First, fleet efficiency. After working through the integration and fleet optimization process, we saw sequential improvement in Herc supply and demand alignment through the quarter, something we have been building towards since last summer’s acquisition. That’s not a small thing. While mega-project demand provided a tailwind, even in our seasonally slowest 1st quarter, we are still early in the ramp of our specialty locations and sales force maturation, which is why Q1 played out right in line with our plan. It tells us that we move into the seasonally stronger 2nd quarter, we have the right fleet and the right markets ready to work.

Continuing on that improvement plan in Q2 is what gives us confidence in the utilization trajectory in the back half. Second, our specialty locations. The Branch Optimization Program added 25% more specialty locations opening Q4 2025 and Q1 2026. These locations are now staffed, fleeted, and gaining momentum. New locations take time to mature, and that maturation curve is playing out as we modeled. By Q3 and Q4, those locations will more meaningfully contribute to revenue and margin growth. If we get the first half right, then the second half follows. Revenue growth accelerates, our fixed cost base works in our favor, and margin improvement becomes increasingly visible. That’s the progression we have mapped out. First half builds the foundation, second half delivers the growth. It’s also the flywheel into 2027.

Higher revenue, expanding margins, and increasingly apparent deleveraging as synergy capture compounds. That’s the path, and we’re on it. Mark will walk you through the details. Mark?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Thanks, Aaron, and good morning, everyone. I’m starting on slide 14 with a summary of our key financial metrics. For the first quarter on a GAAP basis, equipment rental revenue was up approximately 33% year-over-year, driven by the acquisition of H&E. On a pro forma basis, rental revenue declined 3%. 3% representing a meaningful sequential improvement from the fourth quarter. To put that into context, the acquired business was experiencing revenue pressure prior to close, a trend we’ve been actively working to reverse through fleet optimization, sales force training, and network alignment. While mega-project tailwinds and specialty execution benefited us in Q1, the inflection of the combined platform into revenue growth is a second half event consistent with our plan.

Adjusted EBITDA increased 33% compared with last year’s first quarter, benefiting from the higher equipment rental revenue as well as 31% more used equipment sales. Adjusted EBITDA on a pro forma basis was down approximately 5%. The increase in used equipment sales, which have a lower margin than the rental business, impacted the adjusted EBITDA margin. Also affecting margin was the static demand in the local market and the impact from the lower margin acquired business. EBITDA, which excludes used equipment sales, was up 30% during the first quarter. EBITDA margin was 40% impacted year-over-year by the lower margin acquired business. The path to margin improvement is clear. Rental revenue synergy contributions in the second half, a shift toward a higher margin product mix, full realization of cost synergies, and improved variable cost management at scale.

We expect margins to continue to improve from here, especially as those drivers take hold in Q3 and Q4. Our net loss in the first quarter included $5 million of transaction costs, primarily related to the H&E acquisition. On an adjusted basis, net income was $7 million. On slide 15, you can see we generated $94 million of free cash flow for the first quarter. Our current pro forma leverage ratio is 3.96 times, which is in line with our expectations as H&E’s stronger 2025 quarters roll out of the trailing 12-month calculation.

The ratio will remain relatively consistent through the year before improving meaningfully at year-end, when revenue synergies drive EBITDA growth in Q3 and Q4, and capital expenditures, which ramp in Q2 and Q3 to support the seasonal peak and new specialty locations, begin to provide greater EBITDA contribution.

Leverage improvement is a year-end story. We’re managing to it deliberately. We still expect to return to the top of our target range of 2-3x by year-end 2027 as revenue and cost synergies drive higher EBITDA flow-through. Turning to slide 16, we are affirming our full year 2026 guidance across all metrics. Q1 came in as expected. Rental revenue growth of 33% on an actual basis reflects the contribution of the combined platform. Adjusted EBITDA margin held at 39.3% consistent with last year despite the integration work that was still underway. The operational proof points Aaron walked you through, sequential monthly improvement in fleet efficiency and dollar utilization, specialty location maturation, sales force momentum, are the leading indicators that give us confidence in the back half acceleration embedded in our guide.

On synergies, cost synergies are running ahead of expectations, and we remain on track to secure an incremental $90 million this year to fully realize the $125 million target by year-end. Revenue synergies are back-half weighted and the $100 million-$120 million incremental target for 2026 is intact. The guide assumes the business performs as Aaron described. First half sets the foundation, second half delivers the growth. Q1 is consistent with that plan. Let’s open it up for questions. Operator?

Rebecca, Conference Operator: Your first question comes from the line of Rob Wertheimer with Melius Research.

Jerry Revich, Analyst, Wells Fargo Securities0: Hi. Thanks. Good morning, everybody.

Aaron Birnbaum, President, Herc Holdings Inc.: Good morning, Rob.

Jerry Revich, Analyst, Wells Fargo Securities0: I’d like your slide 11 puts together a bunch of the different kind of ways to look at the end market, and you mentioned, you know, and there’s others that are, you know, conflicting, let’s say. If you look at the top right, that mega projects chart is a lot of money kind of flowing down the pike. What I’d like to ask is whether, you know, that step up in 25, whether you saw that in, you know, customer conversations, et cetera, whether you see it today because, you know, an extra $300 billion in starts or whatever in a $900 billion market is a lot. I want to ground truth, you know, the data that are sometimes ambiguous.

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah, Rob, it’s Aaron. I’ll take that one. It’s really both. You know, when you build relationships with large general contractors or national accounts, they guide you to what’s coming down the pipeline. Often, you know, you bid on a project, and they let you know that you’ve been awarded, and it’s gonna start, or they’ve negotiated a contract, and they wanna bring you in as their trusted supplier. That’s one mechanism. There’s a lot of data around it. Dodge provides a lot of preview into what’s coming. Now, the pipeline of planned projects is pretty deep. I think we’ve mentioned, you know, it’s in the trillions of dollars.

It’s really when this starts, when they change from planning to starts is when that data starts hitting a slide that we showed you there. If you just look at 2026, April, May, June, July, August, September, you can see a lot more starts happening all across the board. Infrastructure, you know, wastewater or bridges, roads, but also these big mega projects that you see coming out, a lot of renewables. You see, obviously a lot of data center activity and other projects. You have to, you know, you get it from both ways. You can use both datasets to kinda guide your fleet planning and where your year is gonna go.

Jerry Revich, Analyst, Wells Fargo Securities0: To you, that feels like better times ahead in the back half as these things ramp.

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah

Jerry Revich, Analyst, Wells Fargo Securities0: ... feels right?

Aaron Birnbaum, President, Herc Holdings Inc.: As you can see, there’s more starts happening. These, they don’t always start when they say they’re gonna start, right? Sometimes you’ve heard us talk that sometimes they start 6 months late. It is building. Once these projects do start, these last for 2 or 3 years, as you know. They’re already in our plan for the, as we go through Q1 into Q2, and then the balance of the year. We like where it is right now, but it’s exactly the way we kinda planned out our year.

Jerry Revich, Analyst, Wells Fargo Securities0: Thank you.

Rebecca, Conference Operator: Your next question comes from the line of Mig Dobre with Baird. Your line is open.

Mig Dobre, Analyst, Baird: Thank you. Good morning. Thanks for taking my question. Good morning. Where I would like to start is with maybe a bit of a spotlight on your dollar utilization. At least to me, it’s looking like this metric came in a little bit better than what we normally see sequentially from a seasonal standpoint. So I’m wondering if you can comment on that. Is it an indication of sort of activity itself and, you know, better fleet utilization or just, you know, the fact that maybe in Q4 we had a relatively easy comparison? Related to all of this, how would you advise us to think about the remainder of the year? How do we think about the seasonal ramp into Q2 and Q3 from here on out?

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah. Great question. I think, quite honestly, Mig, I would take the revenue conversation, the dollar yield conversation, and the margin conversation.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: All in the same direction. You know, as Aaron mentioned, right, we saw fleet efficiency gains in the first quarter, which then sort of built through the dollar utilization. It improved sequentially as we walked our way through the quarter. You know, we spent the last 10 months, you know, optimizing our fleet and optimizing branches, putting new specialty locations in. You know, I would tell you that first quarter sort of played the way that we thought it was going to play. As you roll that forward, there’s an inflection point inside of Q2. 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.

Mig Dobre, Analyst, Baird: Maybe my follow-up on this, and I appreciate the sort of directional commentary, but if I’m thinking about normal seasonality here.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yep.

Mig Dobre, Analyst, Baird: Is there reason to think based on everything that you have, that you’re going on operationally that the improvement in dollar utilization can actually exceed that normal seasonality? You know, maybe you can put a finer point on how you think about, you know, the time utilization component of it, right? You know, the efficiency in your asset base relative to what’s happening with maybe pricing or rates more broadly in the market.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah. I think that, you know, sort of normal isn’t really this year. You know, the reality is that we had a hole to climb out of, you know, entering this year, sort of down 9 as we exited Q4. There’s a big efficiency play that we needed to see collectively as a business before investing growth CapEx into the business in the May, June, July timeframe. I would tell you it’s playing out the way that we thought it would. Now granted, it’s early. You know, May and June will be a much larger tell to sort of how the rest and the balance of the year plays out. I think we’re not, you know, we’re not necessarily looking at this as normal or abnormal.

We just know where we have to go, to get the fleet, back to a healthy, and efficient level.

Mig Dobre, Analyst, Baird: Great. Thank you.

Rebecca, Conference Operator: Your next question comes to the line of Jerry Revich with Wells Fargo Securities. Your line is open.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Morning, Jerry.

Jerry Revich, Analyst, Wells Fargo Securities: Yes. Hi. Good morning, everyone.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Morning, Jerry.

Jerry Revich, Analyst, Wells Fargo Securities: Hey, Larry. morning. I’m wondering if you could just talk about overall pricing that you’re seeing in the market.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Um-

Jerry Revich, Analyst, Wells Fargo Securities: Since we’ve had oversupply of aerials.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah

Jerry Revich, Analyst, Wells Fargo Securities: In particular, pricing is pretty tough. Can we just talk about are we optimistic that pricing can outpace inflation this year? As positively surprised by the realization and use values for you folks this quarter. It sounds like supply-demand is improving. Can we just unpack that, please?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah. I mean, unpack it to the level that I can. You know, we don’t comment specifically on price. I would say that we are encouraged by the fundamentals that we’re seeing in the industry. The fleet in and fleet on dynamics are good, you know, particularly as we sort of exit Q1, I think that the market is being both rational and constructive. We look forward to taking advantage of such marketplace.

Jerry Revich, Analyst, Wells Fargo Securities: Okay. Super. I appreciate it. Just to shift gears a little bit here. In terms of the performance of legacy H&E branches versus Herc, obviously the legacy Herc pricing and time based on historical stats has been significantly higher. Has that gap closed at all? Where are we in the process of driving the H&E branch performance towards legacy Herc performance?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Well-

Jerry Revich, Analyst, Wells Fargo Securities: today versus 12 months ago versus where we see it 12-18 months out?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah, I mean, I think thankfully, Jerry, I can’t really answer that question for you. That was part of, you know, this integration was to integrate this business in such that there is no longer an H&E or Herc, right? You know, I think if I could still answer that question, then I would say we probably haven’t done our job. You know, I think collectively, Q1 sort of played out the way that we planned Q1 to play out, and that’s probably about as deep as I can go in terms of insights between H&E and Herc.

Jerry Revich, Analyst, Wells Fargo Securities: Okay. Super. Lastly, I know you said in your prepared remarks that the quarter, dollar was in line with your expectations.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Mm-hmm

Jerry Revich, Analyst, Wells Fargo Securities: ... better than I think a lot of us had modeled. When we saw the industry data, it looked like pricing accelerated in March, and it looks like time inflected as well. I know you don’t want to provide a ton of color.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Mm-hmm

Jerry Revich, Analyst, Wells Fargo Securities: can you just comment on demand cadence over the course of the quarter and any other color you’re willing to share on that point?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah. I think, you know, from our vantage point, right, I mean, we are anticipating, Jerry, an inflection point, you know, sometime inside of Q2. I think from that point forward, you should see growth/improvement depending upon which line item you’re looking at, dollar utilization improvement, revenue growth and margin expansion as you sort of inflect out of Q2 and into the back half of the year.

Jerry Revich, Analyst, Wells Fargo Securities: Yep. Thank you.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: You’re welcome.

Rebecca, Conference Operator: Your next question comes from the line of Kyle Mikson with Citigroup. Your line is open.

Kyle Mikson, Analyst, Citigroup: great. Thank you.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: You’re welcome.

Kyle Mikson, Analyst, Citigroup: ... mentioned that pro forma fleet is down a little bit, and by design. Would love to hear you unpack that a little bit, and then just how you’re thinking about pro forma fleet growth for the full year and maybe bifurcating between gen rent and specialty.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah. I mean, we walked into, we walked into the year, as Aaron said, almost 2 points down, fleet on a pro forma basis. I think as you exit Q1, you’re still down 1 point, give or take. That again, was part of the plan. I think as you start then taking sort of the guided CapEx from a growth perspective and the guided sort of dispositions, you can sort of play that through. I would tell you that the expectation is we’ll probably load 65% of that gross CapEx number into the business in between the back half of Q2 and Q3. That should give you sort of the meaningful data points that you need to model.

Aaron Birnbaum, President, Herc Holdings Inc.: I would add too, Mark, that, as CapEx goes through the year, they’ll be over-indexed to our specialty fleet to feed our branch optimization, our shift to grow the specialty side, get it back closer to what it was pre-acquisition.

Kyle Mikson, Analyst, Citigroup: Helpful. Thank you. I know you’ve expanded the specialty locations quite a bit and working on cross-selling, which understandably, the cross-sell is expected to be a bit back half weighted. It’d just be helpful to hear about what the learning curve has been as you roll out specialty and more SKUs across the H&E network and just the visibility you feel like you have to actually hitting the revenue synergy targets as you get into the second half.

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah. I would say that our revenue synergy for 2026, we’re on the plan where we need to be as we exit Q1 and as we look towards the rest of the year where we’re expected to be for all of our revenue synergies. As it relates to, you know, cross-selling, it’s cross-selling with the specialty business is really a 2-front exercise. You got a bigger sales force, you gotta make them comfortable with asking those types of questions of their customers. They don’t have to be experts at the specialty products. We have experts on the sales side that support them, and that’s where the cross-selling goes hand in hand. When you have a large customer base, and we did a large acquisition and those customers weren’t used to specialty products to the extent that, you know, Herc Rentals had.

That’s where the cross-selling goes on, those tens of thousands of customers introducing specialty solutions to them with the sales force that we onboarded from the H&E acquisition. It’s really two parts, but a lot of relationship building internally. You know, we’ve been doing it for nine months and we like where we are right now, and we feel real comfortable about what we’re gonna get done in this arena Q2, three and four.

Kyle Mikson, Analyst, Citigroup: Great. Thank you.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Thank you.

Aaron Birnbaum, President, Herc Holdings Inc.: Thanks, Kyle.

Rebecca, Conference Operator: Your next question comes from the line of Ken Newman with KeyBanc Capital Markets. Your line is open.

Ken Newman, Analyst, KeyBanc Capital Markets: Hey, good morning, guys.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Morning.

Aaron Birnbaum, President, Herc Holdings Inc.: Morning.

Ken Newman, Analyst, KeyBanc Capital Markets: Morning. Mark, maybe, sorry if I missed this, but, you know, just going back to the cost synergies. I think you said that it was running ahead of schedule. Can you just maybe help us quantify how much were able to capture this quarter, and just help us think about the revenue synergy capture, progress for the rest of the year?

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah. The intent of that comment was is that the $125 million or the incremental $90 million will lay into 2026, which was ahead of the originally scheduled sort of synergy lay that was supposed to come in over a couple of years. That was the intent there, and I appreciate you asking that question. It’s relatively ratable. I would say it’s slightly back half loaded, but it’s coming in reasonably ratably over the 4 quarters, Ken.

Ken Newman, Analyst, KeyBanc Capital Markets: Understood.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah.

Ken Newman, Analyst, KeyBanc Capital Markets: Okay. That’s helpful. And then for the follow-up, you know, I think we’ve been hearing some rumblings on improving oil and gas markets here in the U.S. I know H&E used to play a much larger role in those end markets. Curious if you could just maybe help us understand what the exposure to oil and gas is today with the H&E fleet and how you think about that opportunity and whether you’re seeing that kind of pop up as potential starts opportunities in the next, you know, call it 12-24 months.

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah. A few points on that, Ken. First, our oil and gas mix of our business is less than 10%. All right? Before the acquisition and after. When you got $9 barrel oil, you’re gonna have some surge in the upstream and some surge in the downstream. The downstream guys actually produce and make more margin. H&E had relationships with, since they had a big footprint along the Gulf, they had a lot of relationships with contractors that were industrial contractors. They might have worked in all facets of the industrial complex, not just oil and gas, but might have been the chemical complex. They didn’t really have on-site downstream contracts, there weren’t long-term contracts that we picked up with the acquisition.

Our part of our business is still below 10%. However, we made relationships with a lot of healthy H&E contractors that work in that space, as I mentioned. With $90 oil, you know, there’s probably gonna be a, you know, increased activity in the Permian Basin and Texas and down the ship channel. You know, we’re well-positioned for that. Our position in oil and gas didn’t increase because of the acquisition. We like to keep everything diversified, so we like where we’re at.

Ken Newman, Analyst, KeyBanc Capital Markets: Got it. Thanks, guys.

Aaron Birnbaum, President, Herc Holdings Inc.: Thank you.

Rebecca, Conference Operator: Your next question comes to the line of Tami Zakaria with JPMorgan. Your line is open.

Jerry Revich, Analyst, Wells Fargo Securities2: Hi. Good morning. Thank you so much.

Aaron Birnbaum, President, Herc Holdings Inc.: Morning, Tami.

Jerry Revich, Analyst, Wells Fargo Securities2: ... and congrats on the wonderful results. First question on fuel costs that have been rising nationwide. Could you just remind us how you manage that risk in terms of your own costs and how you pass it on to customers and whether there’s any lag? Also, was the hedging different for legacy Herc versus H&E? Any color would be helpful.

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah. The price of oil, you know, rising nearly $100, that’s something that the business has to really focus on. We take the input of the price of fuel in three different ways. One, into our internal vehicles, service vehicles that we use to conduct our business. Second way is refueling of rental equipment. Third way is the logistics of our delivery apparatus to deliver equipment and pick up equipment all day long. You know, the first way is just our own assigned vehicles. There’s not a much we can do except buy better, right? Buy the gasoline at a favorable price point. The second piece is we do charge a fee to our customers if we have to refill the equipment when they rent it.

We give them the option, "Hey, you know, bring it back full, you know, no charge. Bring it back less than full, there is a charge." We have a fee for that. The logistics piece is the more complicated one because you have a lot of transactions happening every day across the entire network. We recover that by the delivery fee we charge for picking up and delivering. Also, there’s a surcharge that’s indexed that allows us to move with the price of oil per barrel as it moves through all cycles and all times and events, macro geopolitically.

Jerry Revich, Analyst, Wells Fargo Securities2: Understood. That’s very helpful. A similar question regarding freight rates, which have also been rising. Again, could you remind us if that is a risk you hedge, if you have long-term contracts with third-party haulers or more real-time rates that you pay?

Aaron Birnbaum, President, Herc Holdings Inc.: Yeah, we have a robust long-haul process when we have to broker third-party freight. We have a robust process there, and we built that over the last three years. We know that we get a favorable price point compared to the market any day of the week. Whether the price of oil is at 60 or 100 barrel, $100 per barrel, you know, we’re getting a favorable price point. As the price per barrel goes up, you just can’t avoid those costs. You try to, you know, pass on as much as you possibly can and try to anticipate how long it’ll last for.

Jerry Revich, Analyst, Wells Fargo Securities2: Understood. Thank you.

Aaron Birnbaum, President, Herc Holdings Inc.: Thank you.

Rebecca, Conference Operator: Your next question comes to the line of Steven Ramsey with Thompson Research Group. Your line is open.

Jerry Revich, Analyst, Wells Fargo Securities1: Morning, everyone.

Aaron Birnbaum, President, Herc Holdings Inc.: Morning.

Larry Silber, Chief Executive Officer, Herc Holdings Inc.: Morning, Steven.

Jerry Revich, Analyst, Wells Fargo Securities1: From a high level, I was wondering if you could parse the specialty performance a bit. Clearly, it was strong. Maybe if you could talk about specialty excluding mega projects and if it’s outpacing the local markets and maybe specialty on a same store basis when you exclude the new branches, just different ways of the strength of specialty in the quarter and as you look forward?

Larry Silber, Chief Executive Officer, Herc Holdings Inc.: Yeah, Steven. you know, we don’t break it out in that kind of detail, nor would we. We just, you know, you get into sort of segmentation, and we don’t do that. Generally, the specialty business has been performing well. We saw double-digit growth in the quarter. We expect to continue to see that as it services all facets of our business. The mega-project business, our national account and big industrial contracts, as well as the local market activity, where we’re penetrating on a greater basis as a result of our increased location count into that. Specialty will continue to grow. We’re excited about it, but we can’t and won’t break out individual areas.

Jerry Revich, Analyst, Wells Fargo Securities1: Okay. Understood. It’s been helpful. Then on disposals going through retail and wholesale, clearly a good story there. Can you talk about maybe on an innings basis or however it makes sense where you expect to be in 2026 versus the prior year? Do you hit maturity on that this year, or is that something beyond?

Larry Silber, Chief Executive Officer, Herc Holdings Inc.: Maturity related to what, Steven? Just in terms of where the fleet sits as we exit the year?

Jerry Revich, Analyst, Wells Fargo Securities1: More the fleet disposals that go through the higher margin channels.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Oh, I got you. I got you. Yeah, I mean, we, you know, This has been a couple of year journey, right? Like, we’ve been, you know, trying to flex, you know, these retail wholesale muscles. Q1 was a really good example of that. I mean, it was approaching sort of 70% into the retail wholesale channel. You know, that’s the sweet spot for us. That’s where we’d like to be. You know, I think, you know, Q1, Q4 will be your heavy disposal quarters. Q2 and Q3 will be a little more moderated. I would anticipate that, you know, that’s in our control, and we’ll probably sort of remain in or around there as we sort of walk through the year.

Jerry Revich, Analyst, Wells Fargo Securities1: All righty. Thank you.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Thank you.

Rebecca, Conference Operator: Your final question comes to the line of Neil Tyler with Rothschild & Co Redburn. Your line is open.

Neil Tyler, Analyst, Rothschild & Co Redburn: Yeah, good morning. Thank you. Just wanted to ask you guys about the sort of different sort of flow-through dynamics in the second half associated with things like, you know, the ramp-up in mega projects, which might potentially, I guess, hold margins back a bit and the specialty growth. Those two in combination seem to be contributing a larger proportion of your anticipated sort of demand upside in the back half. You know, can you sort of maybe help me think about how you’re thinking about those factors playing through on, you know, margin overall and flow-through, you know, and, you know, underlying that.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah

Neil Tyler, Analyst, Rothschild & Co Redburn: you know, what’s happening? Thank you.

Mark Humphrey, Senior Vice President and Chief Financial Officer, Herc Holdings Inc.: Yeah, sure. Sure, Neil. I think, you know, as I said earlier, right, we are anticipating margin expansion inside of Q3 and Q4. If you sort of look back to, you know, where margin was last year, Q3 and Q4, you know, it was in this 45, 46 sort of range from a rental EBITDA perspective. You know, therefore, if I’m anticipating margin expansion, then that incremental margin will certainly be greater than last year’s 45 or 46. Can’t get too terribly pointed there, but we are anticipating margin expansion as sort of all of these initiatives come together and fuel revenue growth in the back half.

Neil Tyler, Analyst, Rothschild & Co Redburn: That’s great. Thanks a lot.

Rebecca, Conference Operator: I will now turn the call back over to Leslie Hunziker for closing remarks.

Leslie Hunziker, Head of Investor Relations, Herc Holdings Inc.: Thank you for joining us on the call today. We look forward to updating you on our progress in the quarters to come. Of course, if you have any questions, please don’t hesitate to reach out to us. Have a great day.

Rebecca, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.