United Rentals (URI) Q1 2026 Earnings Transcript

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DATE

Thursday, April 23, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Matthew Flannery
• Chief Financial Officer — Ted Grace

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TAKEAWAYS

• Total Revenue -- nearly $4 billion, up 7% year over year, setting a first-quarter record and driven by broad-based demand across General and Specialty segments.
• Rental Revenue -- $3.4 billion, up 8.7%, with growth supported primarily by large projects and verticals including nonresidential construction and infrastructure.
• Specialty Segment -- Revenue grew 14%, with all lines showing progress and 17 cold starts completed in the quarter.
• Fleet Productivity -- 2.3%, exceeding the company's internal 1.5% inflation "bogey" and supporting OER growth of 6.5%.
• Adjusted EBITDA -- $1.76 billion, up $140 million, yielding a margin of 44.1%, which represents a 60 basis point improvement excluding last year’s H and E benefit.
• Adjusted EPS -- $9.71, a 10% increase, establishing a new Q1 record.
• Used Equipment Sales -- $680 million OEC sold at a 51.5% recovery rate, with $350 million in proceeds and an adjusted margin of 47.4%.
• Gross Rental CapEx -- $874 million, about 19% of full-year guidance midpoint, distributed across both replacement and growth, with emphasis on Specialty and selected General Rental equipment.
• Free Cash Flow -- Over $1.05 billion generated, described as critical for ongoing shareholder returns and reinvestment.
• Capital Returned to Shareholders -- $500 million via $375 million in share repurchases and $125 million in dividends during the quarter.
• Net Leverage -- 1.9x, "well within" the targeted range, with total liquidity of nearly $3.4 billion as of March.
• Restructuring Charges -- $45 million recorded, primarily from consolidating overlapping facilities and reducing headcount, with a total $55-$65 million expected for the year.
• Updated Full-Year Revenue Guidance -- Now $16.9 billion to $17.4 billion, a $100 million increase from original outlook.
• Full-Year Adjusted EBITDA Guidance -- Raised by $50 million to $7.625 billion to $7.875 billion.
• Full-Year CapEx Guidance -- Increased by $100 million to a $4.4 billion to $4.8 billion range, reflecting higher anticipated demand.
• Full-Year Free Cash Flow Guidance -- $2.15 billion to $2.45 billion, with higher CapEx offset by operational cash flow.
• Full-Year Share Repurchase Plan -- Maintained at $1.5 billion, combining with the dividend for an anticipated ~$2 billion capital return (~$32 per share, ~4% capital return yield).
• Return on Invested Capital -- Stood at 11.8%, described as "comfortably above" the company’s cost of capital.
• Major Project Activity -- Large projects, especially in data centers, nonresidential construction, infrastructure, and power, are supporting growth momentum.
• Facility Consolidation -- Approximately two dozen locations closed, specifically targeting excess or duplicate facilities, with no stated negative revenue impact.

SUMMARY

Management raised full-year revenue and EBITDA outlooks, attributing the upward revision to robust customer demand and significant project activity in key sectors. Executive commentary emphasized stable local market trends and highlighted ongoing strong performance in ancillary and re-rent categories, which contributed a combined $111 million in incremental rental revenue. The Specialty business continued to outpace company average growth, though leadership indicated a moderated number of new cold starts compared with prior years. Restructuring actions focused on facility consolidation and operational efficiency yielded estimated cost benefits, while the newly increased capital expenditure program was designed to address elevated demand in both General and Specialty rental categories.

• Plans call for the sale of approximately $2.8 billion of fleet over the year, leveraging persistent demand for used equipment.
• The majority of incremental CapEx is weighted toward Specialty, while select General Rental investments aim to meet major project needs.
• Leadership described ongoing cost management as targeting labor, delivery, and repair and maintenance, with cost reductions expected to total $45-$50 million for the year.
• Company maintained flexibility to adjust rental fleet growth as needed, with vendor agreements allowing for upward fleet adjustments if market demand continues to exceed expectations.
• Recent M&A activity amounted to roughly $400 million in Q1, and deals over the course of all of last year and this year collectively contribute only about 1% to overall revenue growth.
• No single project or event—including the World Cup—will materially impact 2026 financial results due to the company's scale; relevant revenues were already incorporated in forecasts.

INDUSTRY GLOSSARY

• OER (Operating Equipment Rental): Core rental revenue from company-owned fleets, excluding ancillary and re-rent sources.
• Cold Start: Opening of a new rental branch that was not acquired, but established organically by the company.
• Recovery Rate: Percentage of original equipment cost recovered through sale of used assets.
• Dollar Utilization: Total rental revenue divided by the original equipment cost of rental assets, reflecting efficiency of asset deployment and pricing power.

Full Conference Call Transcript

Matthew Flannery: Thank you, operator, and good morning, everyone. Thanks for joining our call. Yesterday afternoon, we reported a strong start to 2026, including first quarter records across revenue, EBITDA, and EPS. I was very pleased by the growth, margins, and fleet productivity we reported as the team continues to execute against our North Star of putting the customer first. The momentum we are carrying into our busy season, along with our customers' feedback for their business, supports our expectations this will be another record year, as further evidenced by our updated guidance.

This is all attributed to our 28 thousand team members who are laser-focused every day on safely serving the customer and delivering against our goal to be their partner of choice. What exactly does this mean? Well, it means we have a broad and unmatched offering of both general and specialty products. We invest in industry-leading technology to make both the customer and our own operations more productive and efficient. And most importantly, we have a track record of providing superior service our customers can depend on. This did not happen by accident. We have developed sustainable competitive advantages through our differentiated value proposition and operational excellence, allowing us to deliver consistent performance and shareholder value.

Now, having said all this, today I will give a quick recap of our first quarter results, followed by what is driving our optimism for the year, and then Ted will go into more details around the numbers before we open up the call for Q&A. So let us start with the quarter's results. Our total revenue grew by 7% year-over-year to nearly $4 billion. Within this, rental revenue grew by almost 9% to $3.4 billion, both first-quarter records. Fleet productivity of 2.3% contributed to OER growth of 6.5%. Adjusted EBITDA came in at $1.8 billion, resulting in a margin of 44.1%, a 60 basis point improvement year-over-year when you exclude the H and E benefit.

And finally, adjusted EPS came in at $9.71, up 10% year-over-year and another first-quarter record. Now let us turn to customer activity. We continue to see healthy growth across both our General and Specialty. Within Specialty, which grew 14% year-over-year, we saw growth across all lines of business and opened 17 cold starts. By vertical, our construction end market saw strong growth led by nonresidential construction and infrastructure. On the industrial side, power and mining and minerals were notable standouts, with power continuing to post double-digit growth. We saw a wide variety of new projects kick off in the quarter, spanning health care, infrastructure, power, industrial manufacturing, and, of course, data centers.

And for you soccer fans out there, we expect to be a key partner for the World Cup starting here in the second quarter. Now turning to the used market, we sold $680 million of OEC at a 51% recovery rate. We are on track to sell approximately $2.8 billion of fleet this year, supported by strong demand for used equipment. In conjunction with these sales, we spent $874 million on rental CapEx. This was spread across replacement and growth CapEx, with a focus on Specialty and bringing in additional General equipment where we see strong demand. Subsequently, we generated free cash flow of $1.1 billion.

We are set up for another strong year of cash generation, which is a critical feature of the company. As a reminder, the combination of our industry-leading profitability, capital efficiency, and the flexibility of our business model enables us to generate meaningful free cash flow throughout the cycle which can be redeployed in ways that allow us to create long-term shareholder value. Finally, we allocated capital in the quarter consistent with our framework, which starts with a healthy balance sheet. After supporting both organic and inorganic growth, we returned $500 million to shareholders during the quarter through a combination of share buybacks and our dividend.

Our leverage of 1.9x remains well within our targeted range, leaving plenty of dry powder to support growth and return excess capital to shareholders. Now let us turn to the rest of 2026. As evidenced by our updated guidance, the year is playing out better than we expected just a few months ago. Feedback from the field continues to be optimistic, particularly for large projects. We are carrying strong momentum into our busy season and we feel confident we are positioned to win in the marketplace. So to sum it all up, our unwavering focus on our strategy, which includes our differentiated value proposition, positions us well to compete effectively in the marketplace.

Our customers know they can depend on us, and our team is executing with strong capabilities. We see multiyear tailwinds for large projects and believe we are well positioned for these opportunities. And we will continue to monitor and manage our cost structure and operate with capital discipline. I am confident the combination of our resilient business model, prudent capital allocation, and balance sheet strength will allow us to continue to drive profitable growth, generate strong free cash flow, and deliver compelling returns to our investors. And with that, I will hand the call over to Ted to review our financial results, and then we will take your questions. Over to you, Ted.

Ted Grace: Thanks, Matt, and good morning, everyone. As Matt just shared, we are off to a strong start to the year with first quarter records across total revenue, rental revenue, EBITDA, and EPS. More importantly, we are pleased to be raising our full-year guidance based on the momentum we are carrying into our busy season and strong customer sentiment. Before we get into the details of the outlook, let us dive into the first-quarter numbers. As you saw in our press release, rental revenue increased $274 million year-over-year, or 8.7%, to a first-quarter record of over $3.4 billion, supported primarily by growth from large projects and key verticals.

Within this, OER increased by $163 million, or 6.5%, driven by 5.7% growth in our average fleet size and fleet productivity of 2.3%, partially offset by assumed fleet inflation of 1.5%. Also within rental revenue, ancillary and re-rent grew by nearly 8%, adding a combined $111 million, as ancillary growth continues to outpace OER. Pivoting to used, we sold $680 million of OEC in the quarter, generating $350 million of proceeds, adjusted margin of 47.4%, and a 51.5% recovery rate. So, solid used results overall. Next, let us turn to EBITDA.

Excluding the $52 million net benefit we realized with the termination of the H and E acquisition in the year-ago period, EBITDA increased $140 million to a first-quarter record of almost $1.76 billion. This was primarily driven by a $160 million increase in rental gross profit, partially offset by a $12 million decline in used gross profits. Excluding the impact of H and E, SG&A increased $16 million year-over-year but declined as a percent of revenue, while gross profits from other lines of businesses increased $8 million. Looking at profitability, our first-quarter adjusted EBITDA margin was 44.1%, reflecting a 60 basis point improvement year-over-year excluding the impact of H and E.

As expected, we continue to see geographically dispersed large projects driving much of our growth, while customer demand for ancillary services also remains strong. Nonetheless, as you saw this quarter, the benefit of strong cost management expanded our underlying margins year-over-year. And while we will always have normal quarter-to-quarter variability in costs, it remains our goal to achieve flat margins for the full year. To give you a little more color on the cost controls, I will note that we recorded $45 million of restructuring charges in the first quarter, which were primarily related to the consolidation of overlapping facilities and headcount reductions.

Additionally, we took steps across the organization to control variable costs with a significant focus on labor and outside hauling. And while it is still early in the year, we are pleased with the results of these initiatives. Shifting to CapEx, gross rental CapEx was $874 million, translating to around 19% of our full-year spend at midpoint and in line with historical first-quarter levels. Moving to returns and free cash flow, our return on invested capital of 11.8% remained comfortably above our weighted average cost of capital. Free cash flow for the quarter exceeded $1.05 billion. Turning to our balance sheet, net leverage remained very comfortable at 1.9x at March, with total liquidity of almost $3.4 billion.

On the capital allocation front, we returned $500 million to shareholders in the quarter, including $125 million via dividends and $375 million through repurchases. Now let us shift to the guidance we shared last night, which reflects our confidence in delivering another year of strong results. Total revenue is now expected in the range of $16.9 to $17.4 billion, an increase of $100 million versus our initial guidance. While used sales are still expected at around $1.45 billion at midpoint, this implies full-year growth ex-used of roughly 7%. In turn, we have also raised our adjusted EBITDA guidance by $50 million to a range of $7.625 to $7.875 billion.

On the fleet side, we have increased our gross CapEx guidance by $100 million to a range of $4.4 to $4.8 billion, reflecting the stronger demand we see. This now implies net CapEx of $2.95 to $3.35 billion. And finally, we are guiding to another year of strong free cash flow in the range of $2.15 to $2.45 billion, with the increase in CapEx offset by higher cash flow from operations. Shifting to capital allocation, it remains our plan to repurchase $1.5 billion of shares in 2026.

Combined with our dividend, this will return roughly $2 billion to our shareholders this year, equating to approximately $32 per share for a return of capital yield of about 4% based on our current share price. So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.

Operator: Certainly. Thank you, Mr. Grace. We will now open the call for questions. Ladies and gentlemen, if you do have any questions, please press 1 at this time. You can remove yourself from the queue by pressing 2. Additionally, to get to as many questions as possible, we ask that you please limit yourself to one question and one follow-up. We will go first this morning to David Raso with Evercore ISI. David, please go ahead.

David Raso: Hi. Thank you for the time. I want to focus on margins and the cost saving initiatives versus, you know, maybe some fuel cost concerns. As you mentioned, the margins were up 60 bps year-over-year. Incrementals were 53. The amount of savings in the first quarter, be it labor and some of the real estate you spoke of, I am coming up with something like $10 million. So even without that, margins are up 40 bps. Incrementals are 49. And the reason I go through those numbers is the rest of the year—and I am just using midpoints—I appreciate that. But the rest of the year, you are now implying margins down 20 bps year-over-year. Incrementals only 42.5.

I just want to make sure how much we should be looking at the first quarter as a little bit of an anomaly on savings and the margin, and why would we then, if it is not an anomaly, see the margins down the rest of the year-over-year? Thank you.

Matthew Flannery: That will—I will start there, and then we can go from there.

Ted Grace: Thanks for the question, David. I would say, as always, we caution people against anchoring to the midpoint. Goes without saying, we are very pleased with the start to the year we have had. And certainly, the underlying improvement excluding whatever the benefit was from restructuring—and you are probably in a reasonable zip code assuming around $10 million of benefit in the first quarter. There is still a lot of game to be played. We feel very good about the trajectory we are on. Excellent execution in the first quarter. We have to sustain that through the busy season, which is to say the second and third quarter.

So if you look at the results, it was really kind of all three big areas of cost that provided leverage—labor, delivery, and R&M. So we feel like there is broad-based contribution to the improvement. But again, we have to sustain that through the busy season, and the area that is probably going to be the most important to focus on will be delivery through the busy season. And so we feel really good about the start to the year. The team is incredibly focused—after taking care of customers, focusing on cost is job number two. So Matt, I do not know if you would add anything.

Matthew Flannery: No. I think you covered it. Do not anchor on the midpoint and, more importantly, the efforts we put in place we talked about to help mitigate some of the cost challenges that came with the repositioning and some of the other challenges. The team is doing a good job, and we will continue to run that play.

David Raso: And to follow up on that, then I will hop off. Can you give us any sense of how you are thinking about fleet productivity after the 2.3% in the first quarter? Cadence, full year—whatever you want to provide us would be great. Thank you.

Matthew Flannery: Sure, David. We feel like the supply-demand dynamics in the market are conducive to driving positive fleet productivity. As you know, our goal is always to overcome that 1.5% inflation bogey that we put out there, and I am glad to see the team did that in Q1. And frankly, that is our expectation in our guidance when we start every year. So on track—feel good about it. When I think about it qualitatively, we continue to get positive rate. We feel good—rate is still a good guy.

The time utilization, which we have been talking about running at a high level for a few years now—and maybe even thought that would be a headwind this year—I am pleased to say the team is continuing to achieve high levels of time utilization. And then the biggest change when we think about Q4, which got a lot of explaining and a lot of focus, was really an anomaly, and that is why we talked so much about some of the challenges in mix. We did not face those mix headwinds like we did in Q4. So we do not expect to have those headwinds again. But once again, we will continue to update you as we go along.

Operator: Thank you. We will go next now to Robert Wertheimer at Melius Research. Rob, please go ahead.

Robert Wertheimer: Thank you. I am most curious about some of your customer commentary. I am curious about what the timeline is, especially on some of those larger projects. When you go from having conversations about how they feel to preorders or planning for specific projects, has some of that started to happen—has that caused some of your turn? And then I will just ask my follow-up at the same time. Dirt movement—dirt equipment started moving upwards a quarter or two ago. There are a lot of mixed signals in the industry, but some saw that as a leading indicator.

Do you think that is a tangible sign that we started at the bottom and are working our way up—is that some of the strengthening demand you are seeing?

Matthew Flannery: Yeah, Rob. As far as the planning aspects, as you could imagine, the larger the project, the more time in advance the customers need to communicate with their suppliers, and certainly equipment suppliers, about what they are going to need. So we will continue to do that. It is a continuous pipeline of projects, and, as you can imagine, a continuous pipeline of those conversations. So we have more visibility on those large projects, and we feel good about not only our positioning, but the overall demand in the large project area. So we feel really good about that. As far as dirt, certainly, it makes logical sense about dirt being a leading indicator.

We are seeing strength across our portfolio. Quite frankly, you saw the percent Gen Rent number, and that could not happen if it was just driven by dirt. Whether that is a leading indicator for even more acceleration, I would agree that the pipeline is strong. I would not really extrapolate those numbers to us because we are not seeing a separation. But maybe the dealership network is impacting that number as well, which is good. But overall, we feel good about the demand cycle, and we feel good about where we are with major projects.

Robert Wertheimer: Thank you.

Operator: Thank you. We will go next now to Michael J. Feniger with Bank of America. Mike, please go ahead.

Michael J. Feniger: Hi, everyone. Thanks for taking my questions. I was just hoping, Ted, if we could talk about ancillary costs, repositioning cost—if we think about the bridge, I know this gets a lot of attention. Is that pressure intensifying in 2026 versus 2025? How are we mark-to-market with what we are seeing potentially on the fuel side? And clearly, we are seeing the cost savings come through, and that should build. Does that offset any increases that you are seeing there if we look at a bridge on the margins for 2026 versus 2025?

Ted Grace: There is a lot to unpack there, Mike, but thanks for the question. So ancillary growth—the relative growth to OER—kind of held constant with what we saw last year. And so, obviously, a big part of what we focus on strategically is taking care of our customers, and the team is doing a great job there. I would say from the standpoint of thinking about the contribution margin from ancillary, probably very much in line with that 20% we have talked about. No appreciable change in the first quarter, and I do not think we would be looking for any appreciable change at this point for the year.

On the repositioning side, the team did a great job managing across those big three cost areas I talked about, and that does very much include delivery. If you look at our rental results, the rental gross margin was up 50 basis points year-on-year. And again, all three of those contributed. But delivery, which is the area where we see the most focus on execution, improved about 10 or 15 basis points as a percent of revenue year-on-year. So a great job given the fact that we did see almost 9% rental revenue growth. When you dig into the details, the biggest portion of repositioning will be and has been in Specialty. And you saw that in the numbers.

They were still probably about 30 basis points behind the curve, but that is a huge improvement versus what we saw last year. If you think about the drag on margins last year within Specialty, it averaged about 150 to 200 basis points year-on-year per quarter. And now we are talking about a number that is probably on the order of 30 basis points. So they are doing an incredible job managing that because there is a healthy amount of repositioning this year. We have talked about the demand drivers and we have talked about the focus on capital efficiency and fleet efficiency, and that will continue to be the case.

On fuel, something we are obviously monitoring and managing very closely—the majority of our exposure, Mike, is a pass-through. That gets managed a couple different ways, but the delivery calculator is the most obvious one, and that is something that we update regularly to help pass through the higher costs we could incur based on higher diesel prices. And then on the internally consumed diesel, we manage that through an active hedging program. So a lot of focus there. The team is doing a great job, and we feel like we should be able to manage through any reasonable situation there. Matt, anything you would add?

Matthew Flannery: No. I think you covered it well.

Michael J. Feniger: Great. And, Matt, just for my follow-up, there has been discussion around competitive dynamics, particularly on the Gen Rent side. You mentioned fleet productivity and rate being a good guy. Are you seeing anything on the ground on intensifying competition on Gen Rent, or is the one-stop shop model that you have been building separating you a little bit from that competitive intensity?

Matthew Flannery: I mean, I have been doing this for 35 years, and there is always somebody that wants what you have. Right? So what you need to do is differentiate yourself. And to the end of your point there, we have spent a lot of time building a competitive moat around our offering and making sure that we are targeting our customers' needs, but also targeting the customers that value that. We feel really good about where we are positioned. We think the major project pipeline plays into our opportunity to give more solutions to our customers. So we feel good about our positioning and where we are.

And the supply-demand dynamics, as I said earlier to David's question, we feel good about the supply-demand dynamics in the industry that should continue to drive positive fleet productivity. Thanks, Mike.

Operator: Thank you. We will go next now to Steven Fisher of UBS. Steven, please go ahead.

Steven Fisher: Thanks. Good morning, and congratulations on the quarter. Just a follow-up on the rest of the year—you mentioned, Ted, that delivery is really going to be one of the key focus areas. Can you talk about what are the keys to making sure that works out favorably in the way you want it to? And then in terms of any other additional inflation for the rest of the year, to what extent do you have an expectation that it will be addressed by rate, or will that remaining $15 million or so of planned cost reductions cover that extra inflation?

Matthew Flannery: Yes, Steve. I will take the first part on delivery because I think it is important to understand we are not going to eliminate the challenges of repositioning and delivery—the point is to mitigate it. The good news is we put some new processes in place, and those have worked in Q1. The goal is to continue to do that when the system gets even busier, and I think Ted was referring to the challenge in Q2 or Q3. We have a lot of focus there. But there still will be repositioning costs. The other cost actions we have taken are really to also help mitigate that, because we still want to have strong capital efficiency.

We still want to move fleet versus just buy more fleet when you land new deals. So that will continue to be a focus for us. It will be two-pronged: the execution of moving fleet more efficiently, as well as making sure any other cost opportunities are there to help mitigate supporting that demand, so we can continue to run the business and support our customers in an efficient manner. And then, Ted, you can talk to other inflationary—

Ted Grace: Yeah, Steve. Outside of fuel, the year has played out as expected from an inflation standpoint. Areas that we have talked the most about—obviously you have got the labor piece. We have been able to manage that really effectively. You can see that in our first-quarter results. If you look at the numbers across the business, we got the better part of about 50 basis points of labor absorption. We talked in January about the importance of that. We are off to a good start, so very pleased there. Even in the face of ongoing inflation on the labor front, we are getting that kind of pull-through.

The other areas that continue to be inflationary—we have talked about real estate, we have talked about insurance being two of the other big ones. Again, they were built into the plan. They are playing out as expected. So I do not think there is anything to point to there. In terms of the $15 million of cost reductions you mentioned, I am guessing you are talking about the incremental restructuring expense that we would have called out—so I just want to clarify that, and if that is the case—okay, perfect. So, obviously, you would have seen the $45 million of charges we took in the first quarter. For the full year, we are expecting $55 to $65 million.

So at the midpoint, you would say $60 million—so there is another $15 million to go. When you look at the first $45 million, about two-thirds would have been real estate-related—closure of overlapping facilities that we did in the first quarter. And the balance, the other third, was headcount-related. So probably those are the two big buckets that we would be looking at across the rest of the year, although it is more likely to be real estate than headcount. We are in a good position, but we will have updates there periodically. And all that was built into our expectations.

For the year, just to reiterate—David had a pretty good estimate of what the first-quarter benefit was, around $10 million. For the full year, we have estimated that the full-year benefit would be on the order of $45 to $50 million. So that was built into the initial expectations. We are on track, and you will see that come in, you know, in a linear fashion across the balance of the year.

Steven Fisher: That is perfect. And then just maybe a bigger-picture question about the facility closures. I am curious about the trade-offs here. I assume these are branches closing. Clearly, you get lower cost, but to what extent have you found ways to mitigate the lost revenues or other benefits from having less branch density? And if you have found ways to mitigate that, is there broader applicability to your whole footprint or even the whole industry? Or is this a situation where it is a trade-off—you just needed to lower costs?

Matthew Flannery: There was not really—the good news is there was not too much of a trade-off here, other than maybe some shop space, because we did not exit any markets. So no known revenue attrition that we are worried about here. You know, 95% plus of our equipment is delivered. So that consolidation did not have a revenue impact. And we really were specific and surgical in doing it in markets where, through acquisitions, we may have held on to some extra real estate, and as we looked at it, we just did not need it. We still have some headroom even after the consolidation for growth because we do expect to continue to grow.

So we are talking about, in a business of 1.7 thousand-plus branches—or let us just keep it to North America, so a little less than that—we closed a couple dozen branches. So not a big deal, but it is a good question because that was one of our points: let us not hurt the business. But if we have excess that we do not need to utilize, let us not hold on to it. And that is the way we looked at it.

Steven Fisher: Thanks very much.

Matthew Flannery: Thanks, Steve.

Operator: We will go next now to Jerry Revich of Wells Fargo Securities. Jerry, please go ahead.

Jerry Revich: Yes. Hi. Good morning, everyone. Matt, Ted, I am wondering if we can unpack the outstanding performance in dollar utilization in the quarter. That accelerated by about a point versus normal seasonality, and the first quarter tends to be a pretty tough quarter to get rate overall. Can you unpack the cadence of demand over the course of the quarter? And it sounds like the quarter played out better than what you thought when we spoke together in January for last quarter's call. Could you unpack what were the positive demand or pricing variances that you saw over the course of the quarter across General Rent and Specialty?

Matthew Flannery: We will not get into that last part of the question, but even though we do not give the components of fleet productivity, let us be clear—we still focus on it relentlessly at the branch level. Capital to drive high time utilization, and as well as making sure we have a very unique offering—let us make sure we get paid for it. So we still focus on rate and time at the branch level; we just do not call it out that way. But as I said earlier, this not only continues to be a strong focus for us, but the demand that is out there is another part of this.

When the supply-demand dynamics are good, we are going to make sure that we utilize that opportunity. As far as the dollar utilization, it is really an expression of that. Ted, anything you want to cover specifically?

Ted Grace: I guess you are doing the imputed version of this, Jerry, but obviously it comes back to a lot of things Matt talked about. We are very pleased to build fleet on rent in the quarter. You can see the rental revenue growth was strong at 8.7% and we had strong fleet productivity. So it came together, obviously, to support what was a nice improvement in that dollar, and another way to express that is the fleet productivity.

Jerry Revich: Cool. Thank you. And then to circle back on fleet productivity over the course of the year, and we can look at dollar as a proxy for that, the comps get pretty easy as we head into the back half of 2026 for the industry. Based on the range of industry data, supply-demand having improved, normal pricing on a monthly basis in an upturn does suggest there is potential for fleet productivity to accelerate significantly over the course of the year. It is early and things have to fall in place, but I just want to circle back to the earlier comments about north of 1.5% fleet productivity targets.

It feels like our exit rate in the first quarter really points to a sharp acceleration as we head through the year—again, normal seasonality in an up cycle plays out.

Matthew Flannery: Yes. Better than our guidance and, frankly, our goal every year—and as we plan with the team—is to make sure we overcome that inflation.

Ted Grace: The simplest way: we want to grow rental revenue faster than we grow fleet.

Matthew Flannery: Right, and it is not any more complicated than that. We will continue to manage that, but the other components of fleet productivity beyond rate—there is a lot of focus on rate—we have been running time at a high level. I am very pleased to say it is not a headwind for us. If we get to a point like we did in 2022 where it is a negative trade-off, then we will manage that appropriately. We have to make sure we are responsive to our customers' needs. But we think we can do that; we have been doing it for years. Mix is the wild card, and that is why we do not try to predict this.

We had no expectation of having 0.5% in Q4—that was all mix-related. So outside of that, we feel good about the dynamics to drive positive fleet productivity. And as we get all the results, we will explain to you if it comes out different than we expected, positively or negatively, with the mix dynamic. That is really the part that is very hard for us to predict.

Ted Grace: But we do feel good, as is embedded in our updated guidance, about the opportunity to outpace inflation.

Matthew Flannery: Thank you. Thanks, Jerry.

Operator: We will go next now to Ken Newman of KeyBanc Capital Markets. Ken, please go ahead.

Ken Newman: Hey. Thanks. Good morning, guys.

Matthew Flannery: Morning, Ken.

Ken Newman: Maybe going back to the inflation piece here. I know there have been broader market worries around some of these new Section 232 methodologies, and I am assuming you are already protected from any potential surcharges from suppliers given that you locked in those prices at the end of last year. But when I think about the fact that you are seeing a little bit stronger growth to start the year, can you talk about your ability to accelerate fleet growth if needed and if you can still be price-cost positive if inflation starts to ramp further from here?

Ted Grace: Sure, Ken. Well, as you accurately mentioned, we do lock in our prices for the year.

Matthew Flannery: And then better than that, we talk to our key suppliers—most of our vendors—about the ability to flex up, and we certainly have contractually the ability to flex down, although that certainly does not seem to be in our immediate future. But that flexibility and our vendors' ability to respond to those flexes is a real important part of the relationship we have with our vendors. So we do think, if the end market plays out that way and demand continues to outpace our expectation like it did here in Q1, we should certainly have the opportunity to flex.

Ken Newman: And just to clarify, are any of your suppliers pushing for surcharges at this point, or is this still too early?

Matthew Flannery: We do not talk about our negotiations with our partners, but we are very, very disciplined about sticking to our original deal. So we are not really worried about that.

Ken Newman: Makes sense. And then for the follow-up, maybe just talk a little bit about the M&A pipeline. The free cash flow profile still seems pretty strong here. How active is the pipeline versus when we last talked a quarter ago? And does the macro environment today make it harder or easier to do deals?

Matthew Flannery: I would not say the pipeline has changed really over the last couple of years, with the exception of COVID. The deal pipeline remains pretty consistent. The real challenge for us is not how many deals to look at—it is expectations and how many meet our expectations to do a deal and the returns we expect on a deal, and to get that willing dance partner. But there is no lack of opportunities to look at. We continue to work the pipeline. We have a great M&A team and business development team. And, as you can imagine, we would lean towards Specialty, specifically adding in new products.

But we will do tuck-ins as well in the General business if it fills a need and gives us capacity in a growing market. So stay tuned. To your point, we have plenty of dry powder. We will continue to work the pipeline.

Ken Newman: Perfect. Thanks.

Matthew Flannery: Thanks, Ken.

Operator: Thank you. We will go next now to Kyle Menges of Citigroup. Kyle, please go ahead.

Kyle Menges: Great. Thanks for taking the question. Maybe first off, could you talk a little bit about if you are seeing anything, particularly in local markets—any early impacts from the geopolitical uncertainty and a fading rate-cut theme impacting those markets? And I think you had embedded roughly flat local market growth in your previous guidance. Any change there?

Matthew Flannery: No. We think the local markets continue to be stable. That is a positive thing, whereas maybe earlier last year, the year before, you were seeing some markets that were still being impacted negatively. But overall, I would say the local market stabilized, and that was our expectation. And the project pipeline on the major projects, as well as our Specialty growth, continue to drive some of the growth drivers that we have been not only executing on, but that we expected for this year. So we feel good about the end market.

Kyle Menges: Great. That is helpful. And then a theme that has had a bit of a resurgence recently is OEM dealers pushing more into rental, expanding their rental fleet. How do you see that impacting competitive dynamics in the industry? And roughly what do you think your product overlap is with the typical OEM dealer rental fleet?

Matthew Flannery: Really not much overlap there. It is something that we are aware of, and there are a handful around the country that do a good job locally and regionally. But it is not something that, in our competitive dynamics—or if we were doing a competitive analysis—really falls high on our radar unless maybe in a specific local market’s competitive analysis. So nothing there really to talk about from our perspective.

Kyle Menges: Great. Thank you.

Matthew Flannery: Thanks, Kyle.

Operator: We will go next now to Angel Castillo with Morgan Stanley. Angel, please go ahead.

Angel Castillo: Thanks, and good morning, and congrats on a strong quarter here. Just hoping to go back to the M&A question, but maybe a little bit backward-looking. You talked about roughly $700 million in acquisitions you have done over the last two quarters. Any color on what those assets are, how much they may be contributing to sales, and any details you can share? In particular, I am trying to understand, as you think about Gen Rent and Specialty, the organic versus inorganic split this quarter and the expectation—how much maybe was already baked into the guide versus how much might be partly driving the revenue increase. Any impact to dollar utilization would also be helpful. Thank you.

Matthew Flannery: Sure, Angel. On the M&A piece, as you saw, we spent about $400 million in the first quarter—slightly less than that. Those were four small deals, the majority of which—the two larger ones—were done in January. So those were already embedded in our guidance. You are talking about a small amount of impact on the rest of the year for the other two. And then when you think about deals over the course of all of last year and this year, we are talking about, like, 1% of revenue growth. So not a huge number, but still strategically things that we decided to do.

So to answer the latter part of that question, a contributor in some way, but not the reason for our beat or for our updated guidance. And, Ted, anything to add?

Ted Grace: The last piece on the impact on dollar yield, I think very de minimis. To Matt's point, it was a handful of small acquisitions, none of which—collectively—are going to move the needle in any appreciable manner.

Angel Castillo: Very helpful. And then I wanted to go back to the demand question. You talked about seeing, in the mega projects area, continuing strength coming in maybe a little bit better than you had expected, as well as strengthening in some end markets. Could you give us more color on the various key end markets? Any particular pockets where you saw more strength than anticipated, given the seasonality—whether that was projects moving faster, weather allowing it, or perhaps URI execution and win rates coming in better than anticipated?

Matthew Flannery: I think the large project pipeline has been talked about pretty broadly, and certainly data centers have been a big part of that, and everybody focuses on that. But as I said in my opening remarks, it is a lot broader than just data centers. Non-res construction overall, even ex-data centers, is still really strong. So the growth in non-res is pretty broad. Then when I think about the other end markets that have added to growth, I talked a little bit in my opening remarks about infrastructure. And power continues to grow at double digits. Power has been a really strong end market that we have been focused on for a while now. Those are really the drivers.

And this is without petrochem really picking up yet—that is still a bit of a drag on a year-over-year basis. So we think the project pipeline and then the opportunity in petrochem to pick up will continue to give us growth for the foreseeable future.

Angel Castillo: Very helpful. Thank you.

Matthew Flannery: Thanks, Angel.

Operator: We will go next now to Tami Zakaria of JPMorgan. Tami, please go ahead.

Tami Zakaria: Hey. Good morning. Thank you so much, and congrats on the great results. I am curious about the World Cup that you mentioned. Should we model a sizable, maybe one-time tailwind from that in the second quarter? And related to that, do you expect the event to drive demand for both Specialty and Gen Rent, or one or the other?

Matthew Flannery: Sure, Tami. In the scale of our company, I would not model anything for the World Cup. It is already been embedded in our guidance. As you can imagine, for large events like that, we knew before the year started what we were going to need to support those folks with. But in the scale of our business, there is not any one project or event that is going to make a meaningful difference. That is a great part of having such a broad portfolio. I hope that answers your question.

Tami Zakaria: It does. Thank you. And a quick one: the $100 million increase in gross CapEx—is that driven by General Rental or Specialty?

Matthew Flannery: Across the portfolio. Specialty is growing at a faster clip, and we did 17 cold starts, so it is always going to have a little bit more of our growth CapEx to support those cold starts and the growth. But we are also going to spend some money on some Gen Rent products that are tight, specifically for some major project support. So it will be spread across the portfolio.

Ted Grace: A little more heavyweight Specialty.

Tami Zakaria: Understood. Thank you.

Operator: We will go next now to Tim Thein of Raymond James. Tim, please go ahead.

Tim Thein: Great. Thank you. Good morning. First question, just to follow up on delivery cost recovery. I am curious, Matt, if you can speak to how the company is positioned today versus historical periods when diesel and flatbed trucking rates really spiked—how the company has evolved. Is there a way to handicap how you are positioned today versus how it might have been different in years past when we look at periods of higher cost inflation?

Ted Grace: Yeah, Tim, I can start there, and then Matt can fill in some more blanks. Obviously, we have long focused on costs and making sure we are managing delivery effectively. If you were to look at analogous periods, 2022 would probably be the first one that comes to mind in terms of a year where you saw a meaningful increase in diesel prices and you could say, what happened in that episode? On-highway diesel prices increased over 50% in 2022 year-on-year. If you were to look at the impact that had on our fuel line, it would have been probably like a 15 basis point increase as a percent of revenue.

You can see it is something that was highly managed at that point. Delivery costs on the whole moved in a similar amount. If you look at our margins in 2022 ex-used, they increased considerably. Not that you can draw parallels between every period, but certainly I think it serves as a good example of our ability to manage through these kinds of environments pretty effectively. Matt, anything you would add there?

Matthew Flannery: No. I think you covered it well.

Tim Thein: Okay. Then, Ted, just on the Specialty segment. Revenue is up, call it, 14% year-over-year. If I look at the ending asset base—which I am maybe wrongfully using as a proxy for OEC—that was up, like, 16%. My assumption has been that Specialty tends to generate higher levels of asset efficiency, which I am sure you would endorse. I would have thought that relationship would have been a bit different. Is there something within that you would call out? Just trying to think through why you would not see higher level of revenue relative to the investment in that business.

Ted Grace: I would say intuitively your assumption is correct—that you do tend to get stronger dollar in those assets, and you can see that productivity historically. Truthfully, I will need to come back to you on that. I am guessing it is probably a function of timing, but I cannot think of anything on an underlying basis that would have turned that relationship upside down.

Tim Thein: Fine. Thank you.

Matthew Flannery: Thanks, Tim.

Operator: Thank you. We will go next now to Jamie Cook with Truist Securities. Jamie, please go ahead.

Jamie Cook: Hi. Good morning, and congrats on a nice quarter. First question, Ted—it was the first quarter in a while we have seen the Gen Rent margins improve year-on-year. How should we think about the Gen Rent margins as we progress throughout the year? Is there any reason why the first quarter was an anomaly? And second, obviously the first quarter came in better than expected. I know there was that pipeline job that had a softer start in the fourth quarter. How is that job going—was the first-quarter outperformance because that job restarted and potentially there is a catch-up, and whatever we saw in the first quarter is not sustainable?

You raised your guidance, but you raised it by less than the beat—just trying to work through that. Thank you.

Ted Grace: Sure. I will start off, and Matt, please jump in. In terms of the rest-of-year Gen Rent margin, we do not provide segment margins, as you know. We talked about the focus the team had starting in January on both sides of the business. But, yes, on Gen Rent, they really delivered. If you look at that Gen Rent rental gross margin being up 150 basis points, it was roughly equal contribution from labor, delivery, and leveraging depreciation. And within that, R&M was still a positive. The team really did a great job. That will continue to be the focus.

As we talked about earlier, the key will be sustaining a lot of this through the second quarter, with delivery being the one that will take probably the most focus. In the first quarter in Gen Rent, that was about 50 basis points of leverage. The team did a great job. We have to sustain that through the busy part of the season as we get deeper in the year. On the whole, as we have talked about, the goal is flat margins for the full year, excluding the H and E benefit from last year. That is on an EBITDA basis, so it is across the business.

But certainly our goal across both segments would be to perform very well. On the matting project that we talked about in January that affected the fourth quarter from a timing perspective, we have been delivering assets to that project. It has not entirely kicked off yet, but we have been mobilized. With that said, as we talked about in the fourth quarter, Matting was down year-on-year in the fourth quarter. It was up in the first quarter.

That obviously was a big factor in the swing of fleet productivity that Matt talked about—that headwind we absorbed in the fourth quarter just as a function of timing of that start that we thought would have been in 4Q; it ended up being February. As it relates to the follow-through of the quarter, hard for us to speak to anybody’s external expectations. If you think about the $100 million revision to revenue and the $50 million to EBITDA, part of that was the first quarter being a little stronger. You can see that we raised CapEx, so that is going to contribute after the first quarter. We are off to a great start.

We feel really good about where we are heading. Those are the two big components within that revision. Matt, anything I missed?

Matthew Flannery: No. You have it. Have a good one.

Jamie Cook: No. I am good. Thank you very much.

Matthew Flannery: Okay. Thanks so much.

Operator: We will go next now to Steven Ramsey of Thompson Research Group. Steve, please go ahead.

Steven Ramsey: For sure. On time utilization holding or being a positive, would you say that is mega-project driven solely, or would you say that is local market stabilizing? Any breakout on time utilization drivers?

Matthew Flannery: It is everything, because it is about having the right fleet in the right places for where demand is showing up. So it is good planning. It is good discipline about only bringing in equipment when you need it from the branch managers and the district managers. I would say it is across the whole portfolio. We could not drive this level of time utilization from just one or the other end market sector. So it is across the board, Steve.

Steven Ramsey: Okay. That does it for me. Thanks.

Matthew Flannery: Great. Thanks, Steve.

Operator: Thank you. We will go next now to Scott Schneeberger of Oppenheimer. Scott, please go ahead.

Scott Schneeberger: Thanks very much. Couple questions. One on following up on the branches and some of the things you were saying earlier, Matt. Was it more Gen Rent, more Specialty? I inferred Specialty from the commentary, but would like a little more clarity. And you said you are going to do fewer cold starts this year than last year. Following up on Steven Fisher’s question and your answer there, what is the strategy—can you do more with less, or will we see in out years a reacceleration of the cold starts? Thanks.

Matthew Flannery: Sure, Scott. On the first part about the branch closures, it actually was not more Specialty—and if you think about it, it was split pretty much across the portfolio. As you think about the acquisitions we did, we held on to some of those Ahern facilities maybe longer than we needed to as we were going through that integration. Think about things like that, and then some of the smaller deals that maybe you do not get visibility to. We do not buy companies for cost-cutting measures. We buy them to help support growth. Sometimes we hold on to that real estate and find out in the long term we do not need it all.

So it is a couple of dozen branches against a huge portfolio. Not to make too much about it, but it was very surgically viewed and there was no risk to revenue. We would not have closed one if there was risk to revenue. As far as the cold starts, we did 17 in the quarter. I think we said in January we were targeting around 40. There is a continual pipeline of that. If the team gets ahead of schedule and ahead of that pipeline, we will raise the number as we go. I would not say there is any change in how we are viewing the opportunities.

It is just a matter of executing—finding the real estate, finding the people. There is a pipeline for each one of the Specialty businesses about where there are opportunities to grow and the markets they would like to get into, and we just work through that in a very methodical manner.

Scott Schneeberger: Great. Thanks. Appreciate that incremental clarification. My follow-up is on the smaller projects, smaller customers. A lot of talk on this call about demand activity with the large—curious what you are seeing and hearing from the smaller customers on their environment? Thanks.

Matthew Flannery: They feel good about the end markets. In general, I would say it is about where our expectations were—that, in aggregate, the local market business has stabilized. We do not see many markets where there is negative growth or we need to pull fleet out because the local market is not going to be able to absorb it and they do not have a lot of projects. We feel good about that across the board. I would continue to call that stable, which is consistent with what our expectations were for the year.

Scott Schneeberger: Sounds good. Thanks.

Matthew Flannery: Thanks, Scott.

Operator: And, gentlemen, it appears we have no further questions this morning. Mr. Flannery, I will turn things back to you for any closing comments.

Matthew Flannery: Thank you, operator, and thanks to everyone on the call. We appreciate your time today, and I am glad you could join us. Our Q1 investor deck has the latest updates, and as always, Elizabeth is available to answer your questions. We look forward to speaking to you all in July. Until then, please stay safe. Operator?

Operator: Please end the call. Thanks.

Operator: Thank you, Mr. Flannery. Thank you, Mr. Grace. Again, ladies and gentlemen, this brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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