The opening paragraph of the United Rentals investor conference call includes a notification that the call is being recorded and contains forward-looking statements that entail risks and uncertainties potentially affecting actual results. The company advises attendees to review its press release and Form 10-K for a detailed understanding of these risks and notes that it has no obligation to update forward-looking statements. The call references non-GAAP financial measures and directs listeners to the company's recent investor presentations for reconciliations. The speakers on the call are Matt Flannery, President and CEO, and Ted Grace, CFO. The paragraph ends with the handover to Matt Flannery.

The article's second paragraph reports on a strong first quarter for the company, highlighted by records in revenue and adjusted EBITDA. Total revenue increased by 6.7% to $3.7 billion, with rental revenue rising 7.4% to $3.1 billion. Adjusted EBITDA reached a record $1.7 billion with a margin of nearly 45%, and adjusted EPS was $8.86. The company credits its success to operational excellence, innovation, and being a trusted partner for its customers. Growth was noted across industrial and construction markets, with strong demand for used equipment. Specialty rental revenue also saw significant growth, with eight new specialty locations opened in the first quarter and plans for at least 50 more this year. The company remains confident in achieving profitable growth by 2025.

The paragraph discusses the company's strong performance across its construction and industrial markets, highlighting significant achievements such as record first-quarter sales of over $740 million in used equipment and substantial rental capital expenditures. The company generated nearly $1.1 billion in free cash flow, emphasizing its strategy of maintaining profitability, capital efficiency, and business model flexibility to create long-term shareholder value. Capital allocation remains a priority, with a focus on funding growth and maintaining a healthy balance sheet. The company returned $370 million to shareholders through share buybacks and dividends, and its low leverage allows for further growth initiatives and shareholder returns. A new $1.5 billion share repurchase program has been approved to continue this strategy.

The paragraph discusses a company's positive outlook for the year, supported by backlogs, customer confidence, and an optimistic start. Despite macroeconomic concerns, the company is prepared to adapt if needed. Their long-term strategy focuses on competitive differentiation and market leadership through a one-stop-shop offering and cross-selling both generant and specialty products. By leveraging their technology, they provide a unique customer experience and plan to expand their specialty business with new products and geographic opportunities. A case study with a long-term customer showed opportunities for deepened collaboration and innovation.

The paragraph discusses a successful partnership that allowed the company to better understand customer needs and expand its specialty product offerings, significantly boosting their revenue. This strategy led to a twelvefold increase in spending with the company over two years. Specialty product spending now accounts for 40% of customer expenses, up from 10%. The company is optimistic about future growth, emphasizing its strong business model and strategy. Ted Grace then discusses a record-breaking first quarter in 2025 across various financial metrics, driven by increased rental revenue, fleet growth, and the success of specialty services, reaffirming the company's full-year guidance.

In the first quarter, the company achieved a record $1.67 billion in adjusted EBITDA, marking a 5% increase. Strong demand allowed them to generate $377 million from OEC sales at a 47.2% adjusted margin and a 51% recovery rate. The rental gross profit contributed $89 million, but the normalization of the market caused a 13% decline in used gross profit, impacting adjusted EBITDA by $26 million. SG&A expenses rose by $47 million due to merger costs, but without these, growth aligned with rental revenue. The EBITDA from other businesses rose by $68 million, mainly due to a $64 million breakup fee from a terminated deal. This resulted in a net pre-tax benefit of $39 million for the quarter. After excluding this benefit and used sales impact, the EBITDA margin failed by 150 basis points year over year.

In the paragraph, it is noted that United Rentals' ancillary revenue growth is outpacing core rental revenue, providing unique customer service benefits and attractive returns, although at lower margins. This has led to a margin dilution estimated at 50 basis points in Q1. Increased delivery costs, related to growth in matting and fleet repositioning, further impacted margins by 30 basis points. Despite low OER growth in an inflationary environment, the company is investing in strategic areas like specialty cold starts and technology to maintain strong customer partnerships. Overall, these factors contributed to a 150 basis points margin decline, within expected guidance ranges. The adjusted earnings per share was $8.86, including a $0.45 benefit from H&E, and first-quarter gross rental CapEx was $707 million, consistent with seasonal trends.

The company reported a return on invested capital of 12.6%, which exceeded their weighted average cost of capital, and generated $1.08 billion in free cash flow. They have a strong balance sheet with a net leverage of 1.7 times and total liquidity of over $3.3 billion, even after returning $368 million to shareholders in the first quarter through dividends and share repurchases. The board approved a new $1.5 billion share repurchase program, slated to begin this quarter and conclude by Q1 of 2026, contributing to an expected total stock repurchase of $1.5 billion for the year, representing about 4% of market capitalization. The company aims to return roughly $30 per share to shareholders, yielding over 5% in return of capital. Overall, the company had a strong quarter, is reaffirming its financial guidance, and maintains a robust balance sheet, ensuring it remains well-positioned for long-term shareholder value. The call then shifted to a Q&A session led by the operator, with David Raso of Evercore ISI asking a question.

The paragraph discusses the implications of tariffs on equipment sales and revenue growth. Revenue growth excluding used equipment is projected to rise by about 3%, with fleet size also increasing by 3%, but without significant gains in fleet productivity. The text then shifts to the impact of tariffs, explaining that most of the 2025 CapEx won't be affected due to existing agreements. If tariffs were to impact costs, there might be a need to pass these costs on to customers, similar to post-COVID trends. Additionally, the impact of potential inflation from tariffs may lead customers to consider renting as a cost-effective option, while higher prices could negatively influence construction activity and project decisions.

The paragraph discusses the impact of tariffs and economic uncertainty on equipment purchasing and renting decisions. It suggests that uncertainty favors renting over owning. Ted Grace highlights how inflation affects implied revenue growth, noting the importance of considering inflation when evaluating growth rates. The conversation also touches on the impacts of past events on current growth assessments and the significance of fleet productivity. David Raso adds that average growth should be understood within a normal pattern of sales and fleet additions.

The paragraph features a discussion about fleet productivity and margin drivers in a business context. In the conversation, Ted Grace emphasizes that fleet productivity, which was 1.9 in the first quarter, is expected to remain steady rather than decline, and this steady productivity is factored into the company's guidance. David Raso acknowledges this explanation. Robert Wertheimer then inquires about margin drivers, particularly the impact of fleet repositioning and mix on profitability and margins. Matthew Flannery explains that fleet repositioning was a response to previous years of broad-based growth, where equipment was not moved from any market, allowing for optimal use of the existing fleet. Ted Grace and Matthew Flannery suggest that these factors are already incorporated into their projections.

The paragraph discusses how major projects are impacting growth, leading to increased costs due to relocating and staging equipment rather than sending new equipment directly from manufacturers. Ted Grace highlights that fleet balancing and repositioning are contributing to a decline in gross margins by 150 basis points. Additionally, higher subcontract labor and fuel services—offered as customer value-added services—are impacting margins by 50 and 30 basis points, respectively. Overall, these factors contribute about 230 basis points to the margin decline, with depreciation also playing a significant role in revenue adjustments.

The paragraph is a conversation involving several people discussing the impact of repositioning and market shifts on specialty gross margins. Robert Wertheimer asks whether the repositioning work is concentrated in a particular quarter or spread throughout the year. Matthew Flannery explains that while they are managing the situation well, the process depends on where demand arises and how the fleet is deployed. Angel Castillo inquires about the uncertainties related to these headwinds and their impact on meeting financial guidance. Flannery clarifies that not all costs will persist and emphasizes that the outcomes depend on customer needs and how they affect revenue and EBITDA performance.

The paragraph discusses a conversation about a company's financial decisions and market outlook. The company is confident in its guidance despite a repositioning cost of $10-15 million, which is uncertain in repetition and depends on equipment needs. The demand trends remain positive, aligning with expectations for the year similar to 2024, following a standard seasonal growth pattern. This supports reiteration of their guidance. Ted Grace and Angel Castillo engage in a dialogue about margins, while Matthew Flannery comments on the broader demand, indicating confidence in meeting goals. Jamie Cook from Credit Suisse poses further questions about margin details.

Ted Grace addresses concerns about United Rentals' confidence in achieving a 50% to 60% through-cycle incremental margin, despite current incrementals seeming aggressive. He states that the company still believes in its ability to drive margin expansion over the cycle, even during the current slower growth phase, which is expected to improve with better economic conditions and interest rate policies. Grace further mentions the positive impact of their ancillary revenue on EBITDA, although it doesn't generate the same margins as their core business. He invites further questions if needed.

In the paragraph, Matthew Flannery discusses the robust mergers and acquisitions (M&A) pipeline his team has, noting its focus on adding new products and services and increasing specialty capacity to sustain double-digit growth. Despite just completing the H&E deal, they remain active in seeking suitable M&A opportunities, citing a strong balance sheet and leverage. Michael Feniger then asks about the drivers behind the specialty segment's growth, even without M&A, highlighting a 15% increase. Flannery attributes this growth to adding more products and services, gaining customer share, especially in complex projects with larger clients, and the demand from ongoing relationships.

The paragraph discusses the growth potential and opportunities within a company's specialty products, highlighting that one of their strongest areas, power HVAC, is experiencing double-digit growth. Michael Feniger questions the outlook for GenRent, which is in a slow growth phase, and asks about potential factors that could lead to a reacceleration, such as tariff de-escalation, Fed rate cuts, or deregulation. Matthew Flannery responds, expressing confidence that they are not going negative but are in a slow cycle. He mentions that GenRen's strong presence in local markets is significant but they also have opportunities in large projects.

The paragraph features a discussion about a company's growth strategies and challenges in specific market areas. It highlights that most growth is coming from specialty areas, while the Generant team is well-prepared for market recovery driven by factors like interest rates and economic improvements. They have maintained capacity despite slower growth, as a long-term strategy. Ted Grace adds that residential and related sectors have faced challenges. Tim Thein from Raymond James inquires about the impact of tariffs on operational expenses, particularly concerning parts pricing. Matthew Flannery explains that negotiations for 2025 are finalized, but any issues arising in 2026 will be addressed during that year's negotiations in order to mitigate impacts.

The conversation in the paragraph revolves around potential headwinds for United due to a mix in account strengths, particularly between national and local accounts. Matthew Flannery addresses concerns about the seasonal effects, noting that the first quarter is typically slower and doesn't bring in much CapEx, which could impact repositioning costs. He suggests that growth in specialty products and services is mainly driving their business without significant seasonal changes. Additionally, focusing on growing the specialty footprint is beneficial for cross-sell growth. Jerry Revich from Goldman Sachs then inquires about the company's M&A strategy, noting its historical success in adding value through acquisitions, and asks about the multiyear outlook for M&A opportunities given the company's size.

The discussion focuses on the company's approach to mergers and acquisitions (M&A) and their strategy in the face of a potential economic recession. Matthew Flannery explains that they do not set specific budgetary goals for M&A, as this could lead to adverse outcomes. Instead, they work continuously on their pipeline to find opportunities that are strategically and financially beneficial, with a focus on specialty offerings. Despite potential concerns about the pace of acquisitions, they believe there are still significant opportunities available. Jerry Revich asks about the company's strategy during a recession, particularly concerning cost management. Ted Grace responds, emphasizing the company's operational and capital expenditure flexibility, suggesting they could leverage this to maintain or improve margins if faced with negative economic conditions.

The paragraph discusses the company's cost structure, highlighting how approximately 50% of operating costs are closely linked to volume, including things like pickup, delivery, and discretionary expenses that can adjust with demand. A small portion of costs is fixed, while labor and benefits make up a flexible middle section, contingent on management decisions. Lessons from past downturns, like COVID, have improved cost management strategies, but responses will depend on the downturn's severity. Matthew Flannery emphasizes the importance of retaining capacity as experienced during COVID, contrasting with significant layoffs during the 2008-2009 crisis. He also notes that aggressive actions will depend on future economic conditions. The conversation then shifts to Steven Fisher from UBS for further questions.

The paragraph discusses the company's initiatives to address customer pain points and enhance services, particularly in fueling operations and mobile storage. Matthew Flannery suggests that while the introduction of Yac is a significant factor, the expansion of platforms like matting, modular, and mobile storage is crucial. Steven Fisher asks about margin improvements in Q2 and Q4, and Ted Grace explains that understanding the first quarter's performance requires dissecting various factors. He notes a 150 basis point decrease excluding certain fees, indicating a strategic approach to improving core performance throughout the year.

In this exchange, Kyle Menges from Citi asks about the company's confidence in its backlog for the rest of the year, inquiring about visibility and the proportion of mega projects compared to previous years. Matthew Flannery responds that the demand profile is similar to the previous year, with a slight increase in major projects. He mentions that project visibility extends beyond six months due to planning with partners, and the backlog data supports more than six months of backlog. The company's customer confidence index and field feedback reinforce their confidence. Additionally, strong metrics, such as fleet utilization rates, contribute to their positive outlook for 2025, leading to a reaffirmation of their guidance.

The paragraph is a discussion between Matthew Flannery and Kyle Menges, followed by a question from Tami Zakaria at JPMorgan. Flannery addresses the impact of potential tariffs on new equipment, noting it's too early to see effects on the used market, but mentions that historically, increased new equipment prices can raise used equipment values. He asserts that current demand is aligned with expectations and is driven by end-market demand, not recent tariff-related price changes, which instills confidence for 2025. Tami Zakaria asks about the potential for specialty products to grow in local markets compared to GenRent offerings, and Flannery suggests that as the specialty business matures, local market penetration could indeed increase.

The paragraph discusses the company's focus on cross-selling as part of its one-stop-shop strategy, particularly among larger customers involved in complex projects. This focus is aligned with the maturity and market penetration achievements of GenRen, a segment within the company. The speaker mentions potential opportunities for local market penetration in the future, especially in specialized areas. In response to a question about smaller local accounts, Matthew Flannery acknowledges limited visibility but expresses confidence in the company's forecasts, which are based on a ground-up approach from local markets. He notes that, due to their smaller share of the overall business, variations in these local accounts would have a lesser impact compared to any macro changes affecting national accounts.

The paragraph discusses a company's strategy during economic slowdowns, emphasizing the importance of aligning with larger national accounts to buffer against changes. This approach was learned from the 2008-2009 recession. Ken Newman inquires about depreciation of assets and how spot lumber prices might affect margins in the Yac business. Matthew Flannery responds that they haven't experienced significant effects from lumber price fluctuations and are comfortable with maintaining margins. The conversation shifts to Scott Schneeberger asking about growth in the specialty rent segment, where the company sees confidence in double-digit growth across seven product categories. He inquires about factors driving this growth, such as cold starts, market share gains, and pricing.

The paragraph discusses the growth strategies of a company, highlighting that even mature segments are experiencing double-digit growth. The company is seeing success through the exploration of new platforms with untapped potential ('white space') and improved go-to-market strategies, which have enabled them to capture more market share, often from smaller providers. Additionally, the company is considering insourcing more services to increase efficiency and balance its capabilities with external partnerships. However, there are no specific targets for these changes at the moment. The company remains open to discussing potential acquisitions and enhancements in their specialty and ancillary services in the future.

The paragraph is part of a discussion involving Scott Schneeberger, Steven Ramsey, Matthew Flannery, and Ted Grace about cross-selling strategies and ancillary re-rent benefits. Matthew Flannery explains that the company is focusing on cross-selling within their specialty segment by bundling related services, such as restroom and modular services, and fluid solutions with a goal to streamline offerings for customers. Steven Ramsey inquires about future benefits of ancillary re-rent, noting that the company has seen a 2-3% benefit over the past four quarters. Ted Grace acknowledges the challenge of maintaining this benefit and expresses the company's ongoing efforts to assess future expectations.

The paragraph is an excerpt from an earnings conference call, discussing United Rentals' performance in terms of growth rates. They highlight a 19% growth in ancillary services compared to a 5% growth in OER during the first quarter and acknowledge an acceleration in growth compared to the previous year. The company emphasizes its strategy to be the preferred partner for customers by responding to their needs, with further updates expected in July. Matthew Flannery concludes the call by thanking participants and noting the availability of an investor deck for additional updates, while Elizabeth is available for further questions. The operator then ends the call.

This summary was generated with AI and may contain some inaccuracies.