Herc Revenue Jumps 18% in Fiscal Q2

Key Points

• - Revenue (GAAP) surged to $1,002 million in Q2 2025, outpacing analyst estimates by 14.7 %, driven largely by the H&E Equipment Services acquisition.

• - Adjusted earnings per share missed forecasts, falling to $1.87 versus the $1.96 estimate, amid margin compression and integration costs.

• - Net loss reached $35 million, due mainly to transaction expenses and a $49 million GAAP charge tied to Cinelease asset sales.

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Herc (NYSE:HRI), a leading North American equipment rental company, reported its second quarter 2025 results on July 29, 2025. The headline result was an 18.1% year-over-year increase in revenue for the second quarter, propelling total sales (GAAP) to $1,002 million and exceeding expectations by over $128 million. However, profit metrics showed pressure: non-GAAP earnings per share came in at $1.87, missing the $1.96 consensus, while the company moved to a net loss of $35 million (GAAP). These results reflect both the impact and integration costs of Herc’s recent acquisition of H&E Equipment Services. Overall, the quarter marked a turning point as Herc began its largest integration effort yet, combining major revenue growth with visible transitional cost burdens.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Herc and Its Strategic Focus

Herc operates as one of the largest equipment rental firms across North America. Its business revolves around renting construction, industrial, and specialty equipment to customers including contractors, infrastructure developers, and facility managers. With a vast fleet and over 600 locations following the H&E deal, Herc serves both national accounts and local markets.

The company’s recent direction centers on building market leadership and diversification. This includes growing specialty rentals, advancing digital fleet management tools, and expanding national account relationships. Key success factors are efficient capital allocation, discipline in integrating acquisitions, optimizing fleet utilization, and maintaining a broad customer reach.

Quarter Highlights: Growth, Integration, and Challenges

The period was defined by the completed acquisition of H&E Equipment Services, the largest deal in the sector to date. This significantly expanded Herc’s network to 622 locations and delivered a major step-change in scale. Management presented the H&E merger as critical to broadening geographic footprint and customer diversification. Early synergy effects have begun, particularly through reduced corporate overhead and initial improvements in selling, general and administrative expenses (SG&A).

Revenue (GAAP) rose sharply, up 18.0% from the prior-year period. The primary driver was a 14% year-over-year climb in equipment rental revenue, which included a June contribution from H&E. While the top-line (GAAP revenue) exceeded analyst targets by a wide margin, profit measures trended lower. Adjusted EBITDA grew 13%, translating to a 40.5% adjusted EBITDA margin for the second quarter. However, that adjusted EBITDA margin slipped two percentage points from last year, attributed to a “volume of lower margin sales of used equipment and the impact of the H&E acquisition.” Management also cited integration costs and changes in business mix as contributors to margin compression.

Operational efficiency, measured by dollar utilization (the percentage of fleet earning rental income), weakened. At 38.3%, the latest dollar utilization level dropped notably from 41.0% in Q2 2024. Management linked this decline to dilution from the H&E acquisition and weaker performance at Cinelease, Herc’s studio and lighting business that is being divested. Direct operating expenses as a percent of rental revenue climbed to 43.6%, up from 42.6% in the prior-year period. This reflects “lower fixed cost absorption” in certain regional markets, as activity in interest rate-sensitive commercial construction continued to soften.

Several material one-offs drove the company’s net loss. Transaction expenses tied to the H&E deal spiked to $73 million. Separately, Herc recognized a $49 million GAAP charge related to Cinelease assets held for sale, further weighing down profitability. Excluding these items, adjusted net income dropped 24% year over year. Free cash flow generation was also lower in the first half of 2025 compared to the prior year, reflecting higher integration spending and lower margins.

On the capital side, Herc’s net debt was $8.3 billion as of June 30, 2025 with net leverage climbed to 3.8 times trailing adjusted EBITDA. The company confirmed a quarterly dividend of $0.70 per share, in line with the rise declared earlier this year. Management stated it expects leverage to return to its 2–3 times target range within twenty-four months, citing future synergy realization and disciplined free cash flow conversion. Net fleet investment slowed, with net rental equipment capital expenditures falling from $343 million in the first half of 2024 to $238 million in the first half of 2025.

Business Model and Product Family Overview

At its core, Herc provides a broad suite of equipment rentals, including earthmoving machines, aerial work platforms (such as boom lifts and scissor lifts), and portable power solutions. The specialty equipment segment covers products used in more technical or urgent project needs, like climate control, energy solutions, and trench safety equipment. Management again highlighted the specialty solutions business this quarter as a key area of growth, as it tends to deliver higher margins and offers stronger cross-selling potential following the H&E integration.

The company’s portfolio also extends to new equipment, parts, and resale of previously rented machinery. These categories supplement core rental activities, but are generally lower margin compared to equipment rental. Herc continues to shift its fleet mix in favor of higher-value specialty categories, while also leveraging technology investment for digital fleet tracking, customer self-service, and logistic optimization. No new products or digital launches were specifically noted this quarter, but the company indicated ongoing investment in these initiatives.

Outlook and What to Watch Next

Looking forward, management updated its fiscal 2025 guidance in line with the expanded company. It now forecasts full year equipment rental revenue of $3.7–$3.9 billion, excluding Cinelease, and adjusted EBITDA of $1.8–$1.9 billion for the full year. Net rental equipment capital expenditures are projected in the $400–$600 million range. Guidance does not assume a major recession, and management said an economic downturn or further slowdown could trigger a revision. Management will maintain continued attention on integration and process alignment.

Investors and observers should monitor Herc’s execution on synergy targets, margin stabilization, and utilization rates as integration efforts continue. Key areas for tracking are progress in the specialty solutions business, completion of the Cinelease sale, debt and leverage reduction, and performance in interest rate-sensitive markets. The quarterly dividend was maintained at $0.70 per share, reflecting the company’s ongoing capital return policy.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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