Financial Data and Key Metrics Changes - For Q3 2025, equipment rental revenue increased approximately 30% year-over-year, driven by the acquisition of H&E and strong contributions from mega projects and specialty solutions [23] - Adjusted EBITDA rose 24% compared to the previous year's third quarter, benefiting from higher equipment rental revenue and used equipment sales [23] - Adjusted net income for the quarter was $74 million, with $38 million in transaction costs related to the H&E acquisition included in the net income [25] Business Line Data and Key Metrics Changes - The company completed a full systems integration in just 90 days, which is significantly faster than the typical timeline of six to 18 months for similar-sized companies [6] - The focus on fleet management included disposing of underutilized and aged equipment, with gross CapEx expected to be between $900 million and $1.1 billion for 2025 [19] - The company plans to consolidate some general rental branches to improve operational efficiencies, expecting to add about 50 specialty locations, increasing the specialty network by 25% next year [9] Market Data and Key Metrics Changes - Local accounts represented 52% of rental revenue, down from 53% a year ago, indicating a slight shift in market dynamics [14] - The company is targeting a long-term revenue split of 60% local and 40% national accounts, which provides growth and resiliency [15] - The industrial spending forecast indicates strong capital and maintenance spending through the end of the decade, with non-residential construction starts estimated at $467 billion for 2025, a 4% increase year-over-year [16] Company Strategy and Development Direction - The integration of H&E is the primary focus, with other M&A initiatives paused to ensure successful integration and realization of synergies [10] - The company aims to capitalize on the shift from ownership to rental, particularly in the specialty market, and is increasing its gross CapEx plans towards specialty equipment [11] - Diversification into new end markets and products has reduced reliance on a single industry, enhancing resilience to downturns [22] Management Comments on Operating Environment and Future Outlook - Management noted that while local market demand is affected by high interest rates, mega project activity remains robust, indicating a bifurcated demand environment [4] - The company expects continued growth in national accounts and specialty solutions, with plans to optimize fleet mix and geography to support this momentum [21] - Management remains confident in achieving both revenue and cost synergies over the next three years, despite the challenges posed by the integration process [28] Other Important Information - The company generated $342 million of free cash flow in the nine months ended September 30, 2025, aligning with expectations [26] - The current leverage ratio stands at 3.8x, with a goal to return to a target range of two to three times by the end of 2027 [26] - The company has onboarded 2,500 new team members into its health and safety program, emphasizing a strong commitment to safety [13] Q&A Session Summary Question: What is the status of the fleet right-sizing process? - Management indicated that significant progress was made in Q3, with more work expected in Q4, aiming to close this process by the end of 2026 [31][33] Question: How does the mix of national accounts impact margins? - Management stated that they do not expect significant margin dilution from national accounts or mega projects, as these projects typically involve minimal movement and higher volumes of specialty products [36] Question: Can you clarify the consolidation of general rental locations? - Management clarified that the strategy involves opening specialty businesses within general rental branches rather than closing them, aiming for a net increase in specialty locations [39] Question: Are there updates on cost and revenue synergies? - Management noted that cost synergy targets are evolving, and efficiency reviews are ongoing now that the integration is complete, which will contribute to incremental margins [41] Question: How is customer attrition being managed post-acquisition? - Management reported stabilization in the sales organization and is focusing on re-engaging customers, with positive early signs of revenue synergies from introducing specialty products to former H&E customers [62]

Financial Data and Key Metrics Changes - For the third quarter of 2025, equipment rental revenue increased approximately 30% year over year, driven by the acquisition of H&E Equipment Services Inc. and strong contributions from mega projects and specialty solutions [25] - Adjusted EBITDA rose 24% compared to the previous year's third quarter, benefiting from higher equipment rental revenue and used equipment sales [25] - Net income for the third quarter included $38 million of transaction costs related to the H&E Equipment Services Inc. acquisition, with adjusted net income at $74 million [26] Business Line Data and Key Metrics Changes - The company completed a full systems integration within 90 days, significantly faster than the typical timeline of six to 18 months for similar-sized companies [6][8] - The focus on fleet management included disposing of underutilized and aged equipment, with a goal of optimizing the fleet to match demand patterns [10][20] - The company expects to consolidate some general rental branches for cost and operational efficiencies, resulting in about 50 additional specialty locations, increasing the specialty network by 25% next year [10][12] Market Data and Key Metrics Changes - Local accounts represented 52% of rental revenue compared to 53% a year ago, indicating a slight shift in revenue sources [16] - The company is targeting a long-term revenue split of 60% local and 40% national, which provides growth and resiliency [17] - Industrial spending is projected to remain strong, with non-residential construction starts estimated at $467 billion for 2025, a 4% increase year over year [18] Company Strategy and Development Direction - The integration of H&E Equipment Services Inc. is the primary focus, with other M&A initiatives paused to ensure successful integration [11] - The company aims to capitalize on the shift from ownership to rental, particularly in the specialty market, and is increasing gross CapEx plans towards specialty equipment [12][13] - The strategy includes optimizing the branch network and enhancing customer-facing technology to improve service levels and operational efficiency [10][12] Management's Comments on Operating Environment and Future Outlook - Management noted that while local market growth is limited due to high interest rates, robust activity continues in mega projects and specialty solutions [4][16] - The company remains confident in achieving full revenue and cost synergies over the next three years, despite the ongoing integration challenges [30] - Management highlighted the importance of safety and operational efficiency, with a commitment to maintaining high standards across the organization [15][16] Other Important Information - The company generated $342 million of free cash flow in the nine months ended September 30, 2025, aligning with expectations [27] - The current leverage ratio stands at 3.8 times, with a goal to return to a target range of two to three times by year-end 2027 [27] Q&A Session Summary Question: What is the status of the fleet right-sizing process? - Management indicated that significant progress was made in Q3, with expectations to complete the right-sizing in Q4, depending on the economic landscape for 2026 [32][35] Question: How does the mix of national accounts impact margins? - Management stated that they do not expect significant margin dilution from national accounts or mega projects, as these projects typically involve minimal movement of equipment and higher volumes [36][39] Question: Can you clarify the consolidation of general rental locations? - Management explained that the strategy involves opening specialty businesses within general rental branches rather than closing them, aiming for a net increase in specialty locations [41] Question: Are there updates on cost and revenue synergies? - Management confirmed that while initial synergy targets may evolve, they are focused on efficiency reviews and believe there will be incremental margin improvements [43][45] Question: How is customer retention and pricing being managed post-acquisition? - Management reported stabilization in attrition rates and is working on improving pricing for H&E Equipment Services Inc. customers to align with Herc's historical performance [57][61]