TRG | The Bottom Line – 12/19

As calendar year 2025 comes to a close, TRG is wrapping up NDR travels with companies and gearing up for 2026. Our last NDR of the year was with heavy equipment rental company Herc (HRI), a company we firmly believe is very well-positioned the third largest player in the industry, maintaining 5% market share. TRG expects the next few years to be defined by winning outsized share on megaprojects, specialty growth, and debt reduction. Big rental guys continue to win the big projects, and Herc’s market share on megas is 10-15%, with newly acquired H&E pushing this mix to the high end of that range. Opportunities continue to shine through with the integration of H&E into the Herc network. In a business where scale and cross-selling matters greatly, Herc has a larger Gen Rent portfolio than H&E. This presents potential revenue upside for the H&E network. For perspective, looking at all fleet (Gen Rent + Specialty), H&E’s re-rent rate was 4% vs. Herc at 1.5%. A lower re-rent rate brings margin upside. In addition, on a core basis, Specialty is ~20% of Herc’s fleet. H&E had a low-single-digit % of their fleet in Specialty. This puts Herc at ~17% on a pro forma basis. As such, this essentially creates a significant opportunity for Herc to grow the Specialty fleet across the H&E branches. As Herc gravitates back to 20%+ Specialty fleet, this would likely elevate KPIs like dollar utilization and EBITDA margin. Looking forward to 2026, TRG is kicking off January with a Worthington Enterprises (WOR) NDR in NYC. WOR earnings this week was highlighted by continued M&A activity with the announced acquisition of LSI Group, expanding into the commercial metal roofing market. The acquisition adds to WOR’s building product line up after the recent acquisition of Elgen expanded WOR into HVAC supplies. The deal is expected to close in Q1’26 for a purchase price of $205MM.  TRG views this acquisition as a natural extension of building out Worthington’s expertise in Building Products segment, checking the boxes for key WOR criteria for M&A. Stay tuned for additional great TRG corporate access, field trip, and monthly Fireside Chat opportunities in 2026!