HERC HOLDINGS INC (HRI)

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Report, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements and the accompanying notes including receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our condensed consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

We are engaged principally in the business of renting equipment. Ancillary to our principal business of equipment rental, we also sell used rental equipment, sell new equipment and consumables and offer certain services and support to our customers. Our profitability is dependent upon a number of factors including the volume, mix and pricing of rental transactions and the utilization of equipment. Significant changes in the purchase price or residual values of equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. Our business requires significant expenditures for equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

Our revenues primarily are derived from rental and related charges and consist of:

•Equipment rental (includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges);

•Sales of rental equipment and sales of new equipment, parts and supplies; and

•Service and other revenue (primarily relating to training and labor provided to customers).

Our operating expenses primarily consist of:

•Direct operating expenses (primarily wages and related benefits, facility costs and other costs relating to the operation and rental of rental equipment, such as delivery, maintenance and fuel costs);

•Cost of sales of rental equipment, new equipment, parts and supplies;

•Depreciation expense relating to rental equipment;

•Selling, general and administrative expenses;

•Transaction expenses;

•Non-rental depreciation and amortization; and

•Interest expense.

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HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Recent Developments and Economic Conditions

Local markets continue to be impacted by the elevated interest rate environment and continued economic uncertainty. Our diversification across industries and project types has contributed to the resiliency of our business and we believe the operating environment continues to favor equipment rental companies of scale. We have completed the integration of H&E and continue to focus on realizing the anticipated operational synergies from the acquisition.

We actively monitor the impact of the dynamic macroeconomic environment and manage our business to adjust to such conditions, including the impact of inflation, fuel prices due to the conflict in Iran, potential tariffs, interest rate fluctuations or supply chain disruptions, including:

•Monitoring our exposure to inflationary pressures and passing on cost increases to customers where appropriate, although, some costs have less direct pass-through to customers, such as repairs and maintenance, and labor;

•Reevaluating our capital allocation strategy as necessary to address exposure to floating rate debt;

•Planning our equipment purchases and having various suppliers from which to source equipment.

Currently, we do not expect any direct impact of current macroeconomic conditions on our fleet procurement costs in 2026, though we do anticipate higher fuel costs in the short term which could have a negative impact on our results of operations. However, we believe we are well-positioned to operate effectively through the present environment.

Seasonality

Our business is seasonal, with demand for our rental equipment tending to be lower in the winter months, particularly in the northern United States and Canada. Our equipment rental business, especially in the construction industry, has historically experienced decreased levels of business from December until late spring and heightened activity during our third and fourth quarters until December. We have the ability to manage certain costs to meet market demand, such as fleet capacity, the most significant portion of our cost structure. For instance, to accommodate increased demand, we increase our available fleet and staff during the second and third quarters of the year. A number of our other major operating costs vary directly with revenues or transaction volumes; however, certain operating expenses, including rent, insurance and administrative overhead, remain fixed and cannot be adjusted for seasonal demand, typically resulting in higher profitability in periods when our revenues are higher, and lower profitability in periods when our revenues are lower. To reduce the impact of seasonality, we are focused on expanding our customer base through products that serve different industries with less seasonality and different business cycles. Accordingly, results for interim periods are not necessarily indicative of a full year operating performance.

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HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

Equipment rental revenue increased $202 million, or 23%, during the second quarter of 2026, primarily reflecting the additional contribution from the H&E acquisition completed on June 2, 2025 and growth in average OEC on rent particularly on mega projects. On a pro forma basis including the standalone, pre-acquisition results of H&E, equipment rental revenue increased 2% year-over-year primarily reflecting growth in average OEC on rent, partially offset by ongoing moderation in certain local markets where H&E's customer base had historically been more concentrated.

Sales of rental equipment increased $4 million, or 4%, during the second quarter of 2026 when compared to the second quarter of 2025 as we continue to improve the equipment mix and utilization. The margin on sales of rental equipment was 22% in 2026 compared to 19% in 2025. The increase in margin on sale of rental equipment in 2026 primarily reflected a favorable sales channel mix, as well as reduced volume of sales of H&E fleet and the associated impact from the fair value markup following acquisition.

Direct operating expenses in the second quarter of 2026 increased $112 million, or 30%, when compared to the second quarter of 2025. Direct operating expenses were 45.8% of equipment rental revenue in 2026, compared to 43.6% in the prior-year period. The increase as a percent of rental revenue is primarily related to the impact of the H&E acquisition and related greenfields that take more time to mature. In addition, certain operating expenses were elevated during the quarter, including increases in delivery and fuel expenses of $19 million and $18 million, respectively, due to increased volume of rentals and higher fuel prices throughout the quarter. Maintenance expense increased $13 million with an increased average fleet size and facilities expense increased $12 million as we have added more locations through acquisitions and opening greenfield locations.

Depreciation of rental equipment increased $47 million, or 24%, during the second quarter of 2026 when compared to the second quarter of 2025 due to an increase in average fleet size primarily as a result of the H&E acquisition. Non-rental depreciation and amortization increased $30 million, or 67%, primarily due to amortization of intangible assets related to the H&E acquisition and non-rental asset depreciation resulting from the growth of the business.

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HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 2.    MANAGEMENT'S DISCUS

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Report, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including receivables allowances, depreciation of rental equipment, the recoverability of long-lived assets, useful lives and impairment of long-lived tangible and intangible assets including goodwill and trade name, pension and postretirement benefits, valuation of stock-based compensation, reserves for litigation and other contingencies, accounting for income taxes and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and our knowledge of actions that we may undertake in the future in determining the estimates that will affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

OVERVIEW OF OUR BUSINESS AND OPERATING ENVIRONMENT

We are engaged principally in the business of renting equipment. Ancillary to our principal business of equipment rental, we also sell used rental equipment, sell new equipment and consumables and offer certain services and support to our customers. Our profitability is dependent upon a number of factors including the volume, mix and pricing of rental transactions and the utilization of equipment. Significant changes in the purchase price or residual values of equipment or interest rates can have a significant effect on our profitability depending on our ability to adjust pricing for these changes. Our business requires significant expenditures for equipment, and consequently we require substantial liquidity to finance such expenditures. See "Liquidity and Capital Resources" below.

Our revenues are primarily derived from rental and related charges and consist of:

•Equipment rental (includes all revenue associated with the rental of equipment including ancillary revenue from delivery, rental protection programs and fueling charges);

•Sales of rental equipment and sales of new equipment, parts and supplies; and

•Service and other revenue (primarily relating to training and labor provided to customers).

Our expenses primarily consist of:

•Direct operating expenses (primarily wages and related benefits, facility costs and other costs relating to the operation and rental of rental equipment, such as delivery, maintenance and fuel costs);

•Cost of sales of rental equipment, new equipment, parts and supplies;

•Depreciation expense relating to rental equipment;

•Selling, general and administrative expenses;

•Transaction expenses;

•Non-rental depreciation and amortization; and

•Interest expense.

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HERC HOLDINGS INC. AND SUBSIDIARIES

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Recent Developments and Economic Conditions

Local markets continue to be impacted by the elevated interest rate environment and continued economic uncertainty. Our diversification across industries and project types have contributed to the resiliency of our business and we believe the operating environment continues to favor equipment rental companies of scale. We actively monitor the impact of the dynamic macroeconomic environment and manage our business to adjust to such conditions. We accelerated our growth strategy in 2025 with the acquisition of H&E, adding approximately 160 branches, while also opening 26 new greenfield locations, achieving greater density and scale in select urban markets to better serve both our local and national customers.

We invested in our rental equipment as part of our long-term capital expenditure plans, adding rental equipment strategically throughout our network in response to customer demand and to position ourselves for growth into 2026. We have returned to a more normalized cadence of rental equipment expenditures and disposals, remaining mindful of the possibility we may experience supply chain disruptions in the future. Although inflation appears to have stabilized, we have experienced and expect to continue to experience inflationary pressures, potentially as a result of tariffs imposed, a portion of which may be passed on to customers. Currently, we do not expect material direct impact of tariffs on our procurement costs in 2026. There are also costs for which the pass through to customers is less direct, such as repairs and maintenance, and labor. We cannot predict the extent to which our financial condition, results of operations or cash flows will ultimately be impacted by these ongoing economic conditions, however, we believe we are well-positioned to operate effectively through the present environment.

Capital Structure

We took a number of actions related to our capital structure on June 2, 2025 to finance the acquisition of H&E including:

•Issued $1.65 billion aggregate principal amount of 7.00% Senior Notes due 2030 and $1.1 billion aggregate principal amount of 7.25% Senior Notes due 2033

•Entered into a credit agreement with respect to a new senior secured asset-based revolving credit facility that provides for aggregate maximum borrowings of up to $4.0 billion (subject to availability under a borrowing base) and replaced the prior senior secured asset-based revolving credit facility entered into in 2019

•Entered into a credit agreement with respect to a senior secured term loan facility of $750 million

Supporting our financial flexibility, liquidity and continued investment in our business, we also took the following actions during 2025:

•Amended and extended our account receivable securitization facility on August 29, 2025, extending maturity to August 31, 2026. On December 1, 2025 aggregate commitments were increased from $400 million to $475 million

•Redeemed $1.2 billion outstanding principal of the 2027 Notes on December 16, 2025 at a redemption price of 100.00% using the combined net proceeds from offering of $600 million aggregate principal amount of 5.75% Senior Notes due 2031 and $600 million aggregate principal amount of 6.00% Senior Notes due 2034

Finally, as part of our capital allocation strategy, we have continued to pay quarterly dividends at $0.70 per share throughout 2025.

Acquisition of H&E Equipment Services, Inc.

On June 2, 2025, we completed the acquisition of H&E by acquiring all of the outstanding common stock of H&E in exchange for $78.75 in cash and 0.1287 shares of our common stock on a per-H&E share basis. The total purchase price was $4.8 billion including cash payment of $2.9 billion and the issuance of approximately 4.7 million shares of our common stock to H&E's shareholders, valued at $584 million.

H&E was a full-service equipment rental company that provided its customers with a mix of high-quality general rental fleet including aerial, earthmoving, material handling, and other lines of equipment. H&E served a diverse mix of customers across both construction and industrial markets through its network of approximately 160 branches in over 30 U.S. states.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Divestiture of Cinelease

On July 31, 2025, we completed the divestiture of the Cinelease studio entertainment business for initial cash consideration of $100 million, subject to customary post-closing adjustments, and agreed upon earnouts pursuant to the purchase and sale agreement. We recognized a pre-tax gain on the divestiture of $1 million and used the net proceeds from the sale of Cinelease to repay indebtedness.

RESULTS OF OPERATIONS

NM - Not meaningful

Year Ended December 31, 2025 Compared with Year Ended December 31, 2024

Equipment rental revenue increased $581 million, or 18%, during 2025 primarily due to an increase in average OEC on rent, which includes the impact of the June 2025 acquisition of H&E. On a pro forma basis including the standalone, pre-acquisition results of H&E and Otay, equipment rental revenue decreased 6% year-over-year partially resulting from ongoing moderation in certain local markets where H&E's customer base was heavily concentrated. In addition, acquisition disruption at H&E, particularly within the salesforce, prior to the close of the acquisition contributed to the year-over-year decline, however, through initiatives post-close, this stabilized during the third quarter. The divestiture of Cinelease on July 31, 2025 also contributed to the year-over-year decline.

Sales of rental equipment increased $198 million, or 64%, during 2025 when compared with 2024 as we increased the volume of sales to improve the equipment mix and utilization focusing on acquisition fleet. The margin on sales of rental equipment was 18% in 2025 compared to 28% in 2024. The decrease in margin sale of rental equipment in 2025 resulted from the fair value markup of the acquisition fleet sold, a larger volume of sales through the lower margin auction channel and continued normalization of used equipment pricing in the market.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Direct operating expenses increased $311 million, or 24%. Direct operating expenses were 42.5% of equipment rental revenue in 2025, compared to 40.5% in the prior-year period. The increase as a percent of rental revenue related to lower fixed cost absorption due to the impact

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