Stock-Based Compensation
On May 17, 2018, the Herc Holdings Inc. 2018 Omnibus Incentive Plan (the "2018 Omnibus Plan") was approved and provides for grants of both equity and cash awards, including non-qualified stock options, incentive stock options, stock appreciation rights, performance awards (shares and units), restricted awards (shares and units) and deferred stock units to key executives, employees, non-management directors and non-employee consultants. The total number of common shares authorized for issuance under the 2018 Omnibus Plan is 2,200,000, of which approximately 979,000 remains available as of December 31, 2025 for future incentive awards.
Stock-based compensation awards are measured on their grant date using a fair value method and are recognized in the statement of operations over the requisite service period. The Company's stock-based compensation expense is included in “Selling, general and administrative” expense in the Company's consolidated statements of operations.
The following table summarizes the expenses and associated income tax benefits recognized (in millions):
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Compensation expense | $ | 34 | | | $ | 17 | | | $ | 18 | |
| Income tax benefit | (9) | | | (4) | | | (5) | |
| Total | $ | 25 | | | $ | 13 | | | $ | 13 | |
As of December 31, 2025, there was $26 million of total unrecognized compensation cost related to non-vested restricted stock units ("RSUs") and performance stock units ("PSUs"), no stock options were outstanding during 2025. The total unrecognized compensation cost is expected to be recognized over the remaining 1.3 years, on a weighted average basis, of the requisite service period that began on the grant dates.
Performance Stock Units
PSUs will vest based on the achievement of pre-determined performance goals over performance periods determined by the Company's Compensation Committee. Each of the units granted represent the right to receive one share of the Company's common stock on a specified future date. Compensation expense for PSUs is based on the grant date fair value and is recognized ratably over the approved vesting period. In addition to the service vesting condition, the PSUs have an additional vesting condition which stipulates the number of units to be awarded being based on the achievement of certain performance measures over the applicable measurement period and can range from 0% to 200% of the target.
A summary of the PSU activity is presented below.
| | | | | | | | | | | |
| Units | | Weighted
Average Grant Date
Fair Value |
Nonvested at December 31, 2024 | 174,073 | | | $ | 154.89 | |
| Granted | 71,408 | | | 191.71 | |
| Vested | (38,629) | | | 164.27 | |
| | | |
| Forfeited | (12,356) | | | 165.00 | |
Nonvested at December 31, 2025 | 194,496 | | | $ | 165.90 | |
The weighted average per share grant-date fair values of PSUs granted during 2025, 2024 and 2023 were $191.71, $148.01 and $155.80, respectively. The total fair value of PSUs that vested during 2025, 2024 and 2023 were $6 million, $12 million and $13 million, respectively.
Almost all PSUs granted in 2025, 2024 and 2023 include vesting conditions based on the achievement of the Company's return on invested capital ("ROIC") and average rental adjusted EBITDA performance measured over a three-year period starting from the year of grant.
Restricted Stock Units
RSUs granted under the 2018 Omnibus Plan will vest based on a minimum period of service or the occurrence of events (such as a change in control, as defined in the 2018 Omnibus Plan) specified by the Compensation Committee. Compensation expense for RSUs is based on the grant date fair value and is recognized ratably over the vesting period which generally ranges from one year to three years.
A summary of the RSU activity is presented below.
| | | | | | | | | | | |
| Units | | Weighted
Average Grant Date
Fair Value |
Nonvested at December 31, 2024 | 224,381 | | | $ | 137.10 | |
| Granted | 173,631 | | | 153.58 | |
| Vested | (115,087) | | | 144.49 | |
| Forfeited | (12,607) | | | 142.58 | |
Nonvested at December 31, 2025 | 270,318 | | | $ | 144.26 | |
The weighted average per share grant date fair values of RSUs granted during 2025, 2024 and 2023 were $153.58, $152.88 and $150.58, respectively. The total fair value of RSUs that vested during 2025, 2024 and 2023 was $17 million, $10 million and $9 million, respectively.