HRI - NYSE

Hello, and thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to Herc Holdings, Inc. Third Quarter 2025 Earnings Call and Webcast. [Operator Instructions] Now I would like to turn the call over to Leslie Hunziker, Senior Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Today, we're reviewing our third quarter 2025 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 an open 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 Form 10-K, as well as other filings with the SEC. Today, we're reporting our financial results on a GAAP basis, which include H&E results for June through September in the 9-month period for 2025. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for 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 management meetings at the Baird Industrial Conference in Chicago on November 11, Redburn Atlantic Virtual CEO Conference on December 2, and the Melius Research Conference in New York on December 10. This morning, I'm joined by Larry Silber, President and Chief Executive Officer; Aaron Birnbaum, Senior Vice President and Chief Operating Officer; and Mark Humphrey, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Larry.

Thank you, Leslie, and good morning, everyone. I want to start by thanking all of Team Herc for their incredible energy, focus and commitment throughout the third quarter. Integrating the largest acquisition in our industry is no small feat, but our team has truly risen to the challenge, driving alignment, accelerating progress, supporting one another, and accomplishing a large systems migration, all while remaining focused on scaling operations in a mixed demand environment. We continue to see robust activity across mega projects and specialty solutions, underscoring the strength of our strategic positioning. In the local markets, growth is limited as new projects in the commercial sector remain on hold due to the high interest rate environment. In this bifurcated landscape, our scale, advanced technology platform and diversification across geographies, end markets and product lines continue to be competitive advantages is enabling us to operate with agility and resilience. At the same time, we're executing against our integration road map with discipline, speed and a clear focus on unlocking both cost and revenue synergies within our 3-year time frame. Let's now turn to Slide #5 for an update on our progress. Since closing the transaction, we expanded our field operating structure from 9 to 10 U.S. regions, reorganized districts and added key leadership roles to ensure operational continuity and scalability. Our regional vice presidents and field support staff continue to relentlessly manage change and support our teams for growth. Early on, we completed a comprehensive sales territory optimization exercise to restructure coverage and deepen customer relationships given our much larger scale. And we equipped our new sales team members with a broader product offering and expert product support. They are now undergoing training on enhanced market and customer analytics and customer engagement tools. Together, these initiatives will further improve retention and strengthen the capabilities and execution of our sales force. Equally important in the quarter, we completed the full systems integration. We got this done in just 90 days, compared to a typical time line of 6 to 18 months for companies of a similar size and complexity. This accelerated execution reflects the strength of our internal capabilities, disciplined planning and deep experience with enterprise technology deployments. This integration included an enterprise platform consolidation, where we transitioned the H&E branch operations from SAP to our customized rental and front end system, and Oracle ERP framework. Our proprietary pricing engine also is now fully integrated with centralized controls in place to ensure consistency, protect margins and align pricing decisions with our broader business goals. Our logistics system called [indiscernible] is also now operational across the expanded network to improve delivery accuracy and optimize route planning at the lowest possible cost. As we deployed our business intelligence suite across the acquired locations, giving us real-time visibility beginning this month into combined performance metrics, customer behavior and operational KPIs. Finally, our industry-leading customer-facing technology, ProControl by Herc Rentals is now available to our entire customer portfolio, enabling equipment renting, tracking and asset management and control from any device anywhere. We view these systems integrations not just as a technical milestone, but as strategic enablers. They're going to allow us to scale faster, operate smarter and deliver more value to our customers and shareholders. The systems alignment marks a turning point. For the first time beginning in the fourth quarter, we have full visibility into our combined business and are now positioned to analyze the operations at a more granular district and branch level. Specifically this quarter, we're drilling down into three key areas. First, productivity. We're using the data to benchmark performance, lagging underperforming locations for deeper review and identifying top-tier branches where we can replicate best practices to drive operational improvement across the organization. Second, expense management. We want to pinpoint additional variable cost saving opportunities, discontinue activities that do not align with our strategic priorities, and eliminate inefficiencies at the local level. And third, fleet management. After having conducted a full audit of our combined equipment assets in the third quarter, we made good progress of disposing underutilized, off-brand and aged acquisition fleet. Aaron will share some of those details. But our focus on fleet management is ongoing as we rebalance our portfolio to match demand patterns, optimize mix and support scalable growth. Another way we're scaling the business for 2026 and beyond is by optimizing our network footprint. We've undertaken a market-by-market analysis of our combined branch locations with a goal of reducing redundancies and enabling better product allocation to further strengthen our market presence. Over the next 6 months, we expect to consolidate some general rental branches for cost and operational efficiencies. We'll repurpose certain of those branches into stand-alone specialty equipment locations. In other instances, we'll further expand access to our specialty solutions by co-locating specialty equipment within existing general rental facilities. These initiatives are expected to result in about 50 additional specialty locations, increasing our specialty network by 25% next year and supporting accelerated growth in these high-margin product categories. Overall, we're making excellent progress on the integration. Our teams are getting acclimated. Our systems are unified. Our customers are already seeing early benefits. We remain confident in our ability to deliver the full value of the acquisition both in terms of cost efficiencies and accelerated growth while continuing to deliver on our long-term growth strategies, which are outlined on Slide #6. As we said, integrating this acquisition is our primary focus, and therefore, we have paused other M&A initiatives for the time being, and are completing the remaining in-flight greenfields. Year-to-date, we added 17 greenfield facilities, of which 6 were opened in the third quarter, and we have roughly 10 more new location openings planned for the fourth quarter. Capitalizing on the secular shift from ownership to rental, particularly in the specialty market, and yielding greater value from mega projects through specialty solutions is a key focus for us. Further cross-selling specialty gear is an important component of the revenue synergies with H&E. In line with this strategy, we've continued to over-index our gross CapEx plans towards specialty, with the goal of increasing this category as a percent of our overall fleet composition long-term. And of course, re-purposing general rental branches into ProSolutions facilities, as I just mentioned, will support specialty equipment capacity for the 160-plus acquired locations. Finally, we continue to elevate our industry-leading ProControl by Herc Rentals technology offering with new efficiency features and controls, seamless navigation and tailored experiences all in a single app, addressing our customers' more complex and expanding needs. While we work through the integration of H&E, we'll continue to follow our playbook. Leveraging branch network scale, our broad fleet mix, technology leadership, and capital and operating discipline to position us to manage across the cycle and generate substantial growth over the long-term. We are committed to our goal of becoming the supplier, employer and investment of choice for the equipment rental industry. Now I'll turn the call over to Aaron, who will talk a little bit more about operating trends, and then Mark will take you through the third quarter financial performance and outlook. Aaron?

Thanks, Larry, and good morning, everyone. As we continue executing on this important integration, I also want to personally thank our teams for their incredible commitment and perseverance. Whether navigating change, supporting integration efforts, or pushing forward on growth initiatives, their resilience and focus have been exceptional. They have continued to show up for our customers, for each other and for the future we're building together. That dedication is what drives our momentum and it's what sets team Herc apart. Equally important to our success is our unwavering commitment to safety. Safety is at the core of everything we do and is an immediate integration priority. We onboarded 2,500 new Herc team members into our Health and Safety program in the third quarter. As you can see on Slide 8, our major internal safety program focus on perfect days. We strive for 100% perfect days throughout the organization. In the third quarter, on our branch-by-branch measurement, all of our operations achieved at least 97% 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. Turning to Slide 9. We're operating in a disproportionate demand environment, where the local market remains affected by interest rate, sensitive commercial construction, while mega project activity continues to be robust. In the third quarter, local accounts represented 52% of rental revenue compared with 53% a year ago on a pro forma basis. On the national account side, private funding for new large-scale projects is still quite robust. We kicked off several new mega projects in the third quarter as the push for restoring manufacturing, along with increases in LNG export capacity and the expansion of artificial intelligence are continuing to drive new construction demand. We are winning our targeted 10% to 15% share of these project opportunities with even more new mega projects on deck and current projects still ramping up. As a combined company, we'll continue to target a 60% local and 40% national revenue split long-term, knowing that this diversification provides for growth and resiliency. Sticking with the topic of resiliency, let's turn to Slide 10, where you can see that despite the uncertain sentiment in the general market around interest rate -- interest rates and tariffs, industrial spending and non-residential construction starts still show plenty of opportunity for growth, built on a foundation of mega project development and infrastructure investments. Taking a look at the updated industrial spending for forecast at the top left, industrial info resources is projecting strong capital and maintenance spending through the end of the decade. Dodge's forecast for non-residential construction starts in 2025, is estimated at $467 billion, a 4% increase year-over-year, with 3% to 6% growth continuing in each successive year. Additionally, the mega project chart in the upper right quadrant gives you a snapshot of the total dollar value and U.S. construction project starts over the last 2 years, and a growth projection that exceeds $650 billion for 2025. We estimate we are only in the early to middle innings of this multi-year opportunity. We don't take the chart out beyond this year because visibility is less clear for actual start dates of those projects still in the planning phases. But there are trillions of dollars in the mega project pipeline that aren't accounted for here. Finally, there's another $346 billion in infrastructure projects estimated for 2025. That's a roughly 6% increase over 2024, and infrastructure construction activity is expected to further strengthen in the out years. Of course, there are some overlapping projects among these 4 data sets, but no matter how you look at it, for companies with a safety record, product breadth, technology and capabilities to service customers at the national account level, the opportunities for growth remain significant. Moving to Slide 11. Let me take a minute to walk you through how we're managing fleet levels and equipment mix in response to this dynamic and evolving landscape. First, we are rightsizing our acquired fleet and aligning brand consistency to drive operational efficiency and long-term value. At the same time, we're making targeted investments in specialty equipment to unlock revenue synergies, ensuring we're not just leaner, but also more capable and better aligned with high-value opportunities. Our fleet strategy is also calibrated to support the divergent operating environment scaling a repositioning fleet to meet national demand while maintaining flexibility in local markets. In the third quarter, we executed against the strategy, increasing gross CapEx seasonally and expanding our specialty equipment offering in line with our much larger branch network and our revenue synergy goals. We're still expecting gross fleet CapEx of $900 million to $1.1 billion for 2025. Also in the latest quarter, we nearly doubled disposals on an OEC basis versus last year, as we work to optimize our larger general rental fleet post acquisition. Realized proceeds were 41% of OEC on those equipment dispositions. Given the significant amount of fleet we were selling and the variance in brand quality, more sales went through the auction channel this quarter than in the recent past. Once we have the fleet in a more optimal position we'll resume our channel shift strategy to the higher-return wholesale and retail outlook. For the full year, we're still expecting disposals at OEC of $1.1 billion to $1.2 billion. We're tracking at about 75% of that target with the remainder coming in the fourth quarter. I know there's strong interest in our 2026 CapEx plan, but it's still early in the process. So we're not yet in a position to share specifics. But from a high level, I could tell you that we have an especially young fleet today as a result of the H&E acquisition. We'd like to get it back to Herc's historical average fleet age, so that's something that will be considered in our fleet plan. Also, we fully expect continued growth in national accounts and specialty solutions next year, we're planning our fleet by mix and geography to support that momentum. At the same time, demand visibility for local projects remains highly compressed, which reinforces the need for agility in both how we manage our existing fleet and the pace of planning for 2026. The scale we've gained bolsters our ability to respond to near-term trends in local markets while also leveraging efficiencies to prepare for the start of a cyclical recovery. But it's important to remember that a pickup in local demand typically lags interest rate reductions. Developers still need time to secure financing and contractors have to obtain permits and mobilize labor for planned projects. So we're being thoughtful and disciplined in our planning, balancing short-term responsiveness with long-term readiness. Turning to Slide 12. I'll continue to state the obvious. Diversification is an important strategy for fostering sustainable growth and navigating economic cycles. As Herc is diversified into new end markets, geographies and products and services over the last 9 years, we have reduced our reliance on a single industry or customer. We become more resilient to downturns and more adaptable to emerging opportunities like the mega project developments, technology advancements that support customer productivity, and the secular shift from ownership to rental, especially in the specialty category classes. We believe we are well positioned to manage dynamic markets and the acquired scale further bolsters our capacity and therefore, our opportunities. With that, I'll pass the call on to Mark.

Thanks, Aaron, and good morning, everyone. I'm starting on Slide 14 with a summary of our key metrics for the third quarter, which includes Cinelease results for July. As you may have seen, we completed the sale of Cinelease on July 31 with proceeds used to pay down our ABL. For the third quarter, on a GAAP basis, equipment rental revenue was up approximately 30% year-over-year, driven by the acquisition of H&E, and strong contributions from mega projects and specialty solutions. Adjusted EBITDA increased 24% compared with last year's third quarter, benefiting from the higher equipment rental revenue, as well as used equipment sales. Adjusted EBITDA margin was primarily impacted by a higher proportion of our used equipment sold through the lower-margin auction channel as we work to align the acquired fleet. Also affecting margin with lower fixed cost absorption as a result of the ongoing moderation in certain local markets where H&E was overweighted, as well as acquisition-related redundant costs preceding the full impact of cost synergies. REBITDA, which excludes used equipment sales, was up 22% during the third quarter. REBITDA margin was 46%, impacted by the lower-margin acquired business. Margin improvement will come from equipment rental, revenue growth and a shift over time to a higher margin product mix, as well as delivery of the full cost synergies and improved variable cost management from the increased scale. Our net income in the third quarter included $38 million of transaction costs primarily related to the H&E acquisition. On an adjusted basis, net income was $74 million. Shifting to capital management on Slide 15, you can see that we generated $342 million of free cash flow, net of transaction costs in the 9 months ended September 30, 2025, which was in line with our expectations. Our current leverage ratio is 3.8x. Our goal is to return to the top of our target range of 2 to 3x by year-end 2027, as revenue and cost synergies drive higher EBITDA flow-through. And less capital will be required to achieve the revenue synergies due to scale benefits on the utilization of existing fleet. The combined entity will be capitalized to maintain financial strength and flexibility. On Slide 16, we're reiterating our 2025 guidance. When we set the guide a month into the integration, we modeled the back half of the year using the second quarter trends we were seeing for each of the legacy companies. Of course, in any large-scale acquisition, integrating the acquired operations and acclimating new team members as a phase an ongoing effort. We're starting to get a better read on the pacing of training, upskilling and re-engaging the acquired team. And we're making good progress on backfilling for the H&E sales force attrition that occurred, with strong patterns in place for recruiting candidates and onboarding and training new hires. Despite a lot of moving pieces with the integration overall, the guidance still feels about right based on current visibility. Two points I'd like to call out for the fourth quarter. First, unless something big happens in the next 2 weeks, we'll likely have a tougher comp from a U.S. weather standpoint, with last year benefiting from about 2 to 3 points of hurricane-related pro forma revenue upside for the combined company. Second, when it comes to fourth quarter adjusted EBITDA, you should expect that we'll continue to utilize the auction channel more than Herc typically would as we're still rightsizing the acquired fleet with a focus on dispositions of off-brand and aged general rental equipment. This shift in channel mix will continue to pressure proceeds and therefore, the used sales margin. With a completed systems integration now providing a uniform granular view of the entire company, we're putting action plans in place to address any underperforming areas or foundational inefficiencies. All of that will better position us as we planned for 2026. Longer term, based on all the opportunity we see, we remain confident in the strategic value of this combination, and our ability to achieve both the full revenue and cost synergies over the next 3 years. With that, operator, we'll take our first question.

[Operator Instructions] And your first question comes from the line of Mig Dobre with Baird.

I guess my first question goes to this comment on the rightsizing of the fleet. And I'm kind of curious where you are in this process? Do you expect to be largely done with this in the fourth quarter? Or is this kind of stretching into 2026? And is there any way to maybe get us to better understand the magnitude of the work that needs to be done here, either in terms of amount of OEC that needs to be disposed, or any other way that you want to frame it?

Yes, Mig, this is Aaron. I'll take that question. A lot of the heavy lifting was done in Q3. We still have more work to do as we go through Q4. As long as the 2026 kind of landscape economic -- demand landscape is good, we'll be essentially kind of closing that part of it out. The Q3 -- higher disposals in Q3 was really related to just some rebalancing of the fleet. On the H&E side, they didn't do their normal cadence of disposals that they historically would have done in Q1 and Q2. So we had to catch up on that. And then just some of the brand mix, the operations are more efficient when you've got a standardized kind of manufacturer-type fleet. So that's what some of the shaping was done. And we feel good what we got done, but as we mentioned, a little more auction activity than we typically would do. And as we get into '26, we'll get back to our normal cadence of getting the higher retail wholesale channel.

Mig, this is Mark. Maybe just a couple of other points there. I think when you think about what Aaron said. Going back to Q2 and the comments we made then, we thought that there was probably, call it, $250 million, $300 million of activity that needed to happen in the back half of the year to sort of rightsize or better rightsize that fleet for the territories it was going in. And I would say, as we sit here through Q3, probably half of that was completed, maybe a little bit more than that in the third quarter. And so the expectation would be better rightsizing the fleet as we get through fourth quarter, such that next year, we can lean on aging the fleet and disposing of less gear.

All right. That's helpful. Then maybe a question on your overall mix. The national accounts account for, if I'm not mistaken, pretty much a record as far as my -- back as my model goes. So a lot more business done with national accounts. I guess that would be consistent with your comment on mega projects being an area of growth. As you sort of think about 2026, I do wonder if this business, megaproject national accounts is to some extent, dilutive to margins. If this is something that we need to think about as we think about the margin framework for next year? And I'm not asking for guidance. I'm just asking for some color as to how this portion of the business is really impacting you?

Yes. Mig, Larry, I'll take that. Look, we're expecting, obviously, for the same type of activity to continue into '26 because as you know, until interest rates have a substantial reduction, which maybe we'll see tomorrow another 25 basis points, who knows. It usually takes 6 to 9 to as long as 12 months for that to trickle down into the local market to make that a more attractive business opportunity and certainly spur the activity for us in the local market, which remains somewhat muted. Overall, though, we don't find that there's any significant margin dilution. Because remember when we put equipment out at a national account or a mega project, you have minimal movement of that project. You're not having excessive delivery there. And we also have a larger volume of equipment out there, and we tend to also get a lot more specialty product out on those projects that are opportunistic for us as we go along. So we don't see much dilution at all relative to continuing in this trend.

And your next question comes from the line of Tami

My first question is on the comment you made about combining some of the [ gen rent ] locations. I think you said you're going to have 50 additional specialty. Is it the right way to think about it that about 100 of the general rental locations would close and those would sort of merge and become 50 specialty? How should I think about the interchange between the two?

No, not at all, actually. Our branch count increased dramatically as a result of the acquisition. The way we want you to think about it is there were, hopefully, in two buckets. One, we have a strategy where we typically do a branch and branch, right? So that's how we kind of scale the business. We'll open a specialty business inside of a general rental branch and let it mature. And when it gets enough scale, then we'll pop it off and have its own stand-alone location. That's really what's the fuel with the 50 new locations as we go through next year's period. There were just a handful of locations that H&E where they're like 1 mile away from our brand, so we could consolidate those. And in those cases, we're turning those into another specialty branch right away sooner than we typically would. But we're not closing branches from H&E, that would be dilutive to what our strategy is. So we like the scale and it gives us a bigger footprint, which allows us to solve the market needs better.

Understood. That's super helpful. And my second question is now that your -- the two businesses are on the same platform, it gives you more visibility into the combined business. Would you consider revisiting some of the cost synergies and any -- the revenue synergy targets you had at the start of the journey?

Yes. I mean, I think, Tami, I mean that's an ongoing process, right? I mean I think that from a cost synergy perspective, we originally laid out $125 million into buckets. So those buckets look the same today as they did yesterday? No. Will they continue to change and evolve? Yes. And then I think -- and probably good news here, as I mentioned in my prepared remarks, there's also efficiency reviews taking place now that we're on the same platform. And so whether you want to call that synergy or efficiency, I don't care. Ultimately, it's incremental margin and efficiency that we're going to gain. So that's how we're looking at it, and I think it will continue to evolve as we move forward.

Your next question comes from the line of Kyle Menges with Citi Group.

Yes, maybe following up on that. I guess, is there anything noteworthy or unexpected incremental coming from these efficiency reviews that are taking place now, now that you're on the same platform?

Again, I mean, it's early innings, right? I mean it's just sort of completed at the end of Q3. I guess the way I would respond to that, Kyle, is that Herc has a fair number of operational KPIs. And so as we sort of rolled ourselves out of Q3 and had clear visibility really for the first time, right? Now it's about aligning our KPIs and our expectations to these newly formed, or re-devised territories on the consolidated platform. So I don't think there's anything of a surprise nature in that. I think it's just us running our playbook and our game plan and looking for efficiency along the way, and that's exactly what we'll do.

Yes. And keep in mind that we still -- while we have the IT integration completed, we still have a fair amount of training and education and development of people and aligning resources that needs to happen here in Q4 to prepare the organization as it goes into Q1. And we have a fair amount of work ahead of us still in addition to the movement of these branches that Aaron talked about a moment ago. So a lot of work ahead, and we'll continue to look for opportunities for improvement.

Makes sense. And then it would be helpful just to hear an update on dissynergies and synergies. I guess, just what's giving you guys confidence that dissynergies are behind you? Are you continuing to see that stabilization in the sales force, any success bringing people back? And then just it would be helpful to hear an update on some of the earlier -- early revenue synergies that you're seeing as well?

Yes, I'll take the first part of that and saying, yes, look, we've been able to stabilize the sales organization. Now attrition is happening at or below normalized Herc levels that we've seen in the past. And a lot of that is behind us. There have been a couple of folks that we brought back into the organization. But we fill the vast majority of those holes with our team, with our Black and Gold team that have been in training in preparation for sales territories and we're looking to continue to keep with the training, with the education, with the introduction to our technology platform, that's an enabler for these salespeople to earn more money, and it's also a retention device. So we're excited about that being behind us for the most part. Aaron, do you want to?

Yes, we're seeing on the revenue synergy side, we're seeing -- it's early innings. We're just getting started with it. We're introducing some of the specialty products to customers that were on the H&E side, regional type customers, and we're getting some good traction, right? So it's -- some of the products we offer weren't offered at H&E and the customers were able to kind of move their share of wallet, our direction. So it's -- we're happy where the progress is, but we've got a lot more work to do.

Your next question comes from the line of Kenneth Newman with KeyBanc Capital Markets.

Maybe for my first question, Mark, it seems like gross margins in the quarter came in a bit lower than I would have expected, but you did leverage SG&A a little bit stronger than my model. Is there any way you could help us just dimensionalize how to think about gross margin sequentially, third quarter to fourth quarter, just given all the moving pieces? Maybe also a little bit of help on how we think about SG&A dollars going forward.

I guess, look, there was a little bit of noise, quite honestly, in the original view, at least the way that I was looking at this and we couldn't know the answers until we finished all of the mapping of their expenses into our general ledger structure. And so I think what -- and the way that I would sort of guide you here is that in totality, you probably had somewhere in the order of magnitude of 55% between DOE and SG&A in the quarter. And I think that, that's a reasonable proximity into the fourth quarter, recognizing that there's probably a little less coming through the funnel in the fourth quarter shoulder period. So I don't think that there'll be a ton of movement. But I think, generally speaking, you're probably a little less efficient in the fourth quarter just from an overall revenue sort of downtick as you get into the November and December time frame.

Okay. No, that's very helpful. I'm sorry if I missed it, but did you disclose how much H&E's contributed to rental revenue and EBITDA in the quarter? I'm just trying to get a sense of what core dollar you would like in the quarter?

You didn't hear that because I can't give it. We wouldn't be doing our job, Ken, if I could still sort of pull apart and tell you the performance of H&E and Herc. I can't, and therefore, I won't. But I would tell you that sort of overall, the business on hold performed about the way that we thought it would inside of Q3.

Your next question comes from the line of Rob Wertheimer with Melius Research.

A couple of questions. Larry, you touched on it, if I didn't mishear, you touched on employee retention and you're kind of going in the positive direction now with hiring, rehiring, and then attrition has stopped. Customer attrition, can you talk about that on H&E kind of former accounts if we come through all the dissynergies as you kind of thought in recent quarters? And then I'll just bolt on my second one. When you've had a chance to look at the business more closely now, how does rental rates stack up and what do you need to do if it's below? What do you need to do and what time frame to kind of improve service levels or broaden out service levels and improve that?

Yes. Look, what I said and what I hope came through is that we've stabilized the attrition that had happened prior to close. And we feel that, that is now at a normalized level with no further significant attrition that we're expecting that would be any different from what we would experience with Herc on a normalized basis. So I think we're okay there. But remember, we have backfilled a lot of those positions with folks that have been in our Black and Gold, what we call our PSA program, Professional Sales Associate program. So they're going into new territories, they're on a learning curve, picking up new responsibilities and -- and we'll have some training and education to do over the course of the balance of the year and into early next year. But it will have to ramp up probably into Q2 when we see them become fully effective. And as you know, that usually takes over a 2- to 3-year period for a sales person to sort of really understand their territories and really perform at the levels we'd like them to perform at. I'll pass the other side over to Aaron relative to your comment on pricing and where it was, and what we're doing to get back to the overall Herc average.

Yes, Rob, so I'd say to Larry's point, the attrition and all that stabilized. As Q3 went through, we focused a lot on integration. We got the reorganization all done. And now we're back to kind of like performance management and developing our sales team with the go-to-market strategies we already have. When H&E came into the business, their pricing was lower than the Herc. So we're working on moving that to the needle upward with our tools and systems that we have. We talk about some of our pricing tools that are proprietary to Herc. So they're learning the tools. Our sales management is working with them. That's not going to happen overnight, right? That's a bridge that's going to happen over time to get them back to the Herc historical, kind of, rental rate performance. But we've done a good job with the customers. We've negotiated all the contracts H&E had into the Herc system. And the regional type H&E customers, as I mentioned earlier, have really embraced some of the extra fleet breadth that we have. And then the local customers where the market is not as strong and there were some disruptions with some leading up to the closing of the acquisition. Maybe that was because they weren't as busy or maybe because their sales rep moved on. So we've got all the data. We're moving forward with our CRM and our sales efforts to engage with those customers. And some of those engagements take 3 or 4 different -- 5 different cycles of connection. But we know that we've got a great rental operation, and we're confident those customers will come back over time. But we're happy where we are in the process right now.

That concludes our question-and-answer session. I will now turn the call back over to Leslie Hunziker for closing remarks. Leslie?

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 further questions, please don't hesitate to reach out to us. Have a great day.