United Rentals Q1 2025 Earnings Call Transcript

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April 24, 2025
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Operator

Good morning, and welcome to the United Rentals Investor Conference Call. Please be advised that this call is being recorded. Before we begin, please note that the company's press release, comments made on today's call and responses to your questions contain forward looking statements. The company's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control and consequently actual results may differ materially from those projected.

Operator

A summary of these uncertainties is included in the Safe Harbor statement contained in the company's press release. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10 ks for the year ended 12/31/2024, as well as to subsequent filings with the SEC. You can access these filings on the company's website at www.unitedrentals.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that the company's press release and today's call include references to non GAAP terms such as free cash flow, adjusted EPS, EBITDA and adjusted EBITDA.

Operator

Please refer to the back of the company's recent investor presentations to see the reconciliation from each non GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Please go ahead, sir.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thank you, operator, and good morning, everyone. Thanks for joining our call. Yesterday afternoon, we were pleased to report our first quarter results, which reflected a solid start to the year. We saw growth across both our industrial and construction end markets. Demand for used equipment remains healthy and importantly, our customers continue to feel good about their own outlooks.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

As you've heard me discuss before, a key element of our strategy is being the partner of choice for our customers. And thanks to the team's steadfast commitment to this, which always includes putting safety first, we delivered first quarter records across revenue and adjusted EBITDA. This is facilitated by our focus on operational excellence and innovation. And as you saw through our reaffirmed guidance, 2025 is on track to be another year of profitable growth, reinforced by the momentum we've carried into our busy season. Today, I'll review our first quarter results, followed by why we feel confident in our 2025 guidance.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And finally, I'll discuss how we think about managing the business for the long term success. And then Ted will discuss financials in detail before we open up the call to Q and A. So with that, let's start with the first quarter results. Our total revenue grew by 6.7% year over year to $3,700,000,000 and within this, rental revenue grew by 7.4% to $3,100,000,000 both first quarter records. Fleet productivity increased to 3.1% as reported and 1.9% pro form a for YAC, which we've now lapped.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Adjusted EBITDA increased to a first quarter record of $1,700,000,000 translating to a margin of nearly 45%. And finally, adjusted EPS came in at $8.86 Now let's turn to customer activity. We continue to see growth in both our gen rent and specialty businesses. In fact, specialty rental revenue grew 22% year over year and 15% pro form a for YAC. We opened eight specialty cold starts in the first quarter and expect to open at least 50 this year.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

By vertical, our construction end market saw solid growth across both infrastructure and non res construction, while our industrial end market saw particular strength within power and chemical process. We continue to see new projects kicking off with a few recent examples including data centers, pharmaceuticals, airports and industrial manufacturing facilities. Now turning to the used market, we sold over $740,000,000 of OEC, which was a first quarter record. The demand for used equipment remains healthy and we're on track to sell an estimated $2,800,000,000 of fleet this year. We spent over 700,000,000 on rental CapEx in the quarter in response to solid customer demand.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

As you'd expect, growth continues to be led by large projects where all elements of our strategy position us to be the partner of choice. We drove free cash flow of nearly 1,100,000,000 setting us up for another year of strong cash generation, which we view as a hallmark of the company. 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, and in turn, allocate that capital in ways that allow us to create long term shareholder value. Finally, capital allocation. Priority number one for us is funding growth while maintaining a healthy balance sheet.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

After the organic growth we supported in the quarter, we returned nearly $370,000,000 to shareholders through a combination of share buybacks and our dividend. Our leverage of 1.7 times remained towards the lower end of our targeted range, leaving plenty of dry powders to support both inorganic growth and to return excess capital to our shareholders. And to this point, following the completion of our prior share repurchase authorization last month, I'm pleased to share that our board has approved a new $1,500,000,000 program as Ted will discuss shortly. Now let's turn to the rest of 2025. As evidenced by our reiterated guidance, our expectations for the year are unchanged.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

The year is off to a start we anticipated, while feedback from the field continues to be optimistic, particularly for large projects. The momentum we're carrying into our busy season, along with backlogs and our customer confidence index are all supportive of our outlook. I'll note, we've not seen a change in customer outlooks for the balance of 2025. But with all that said, we understand the recent concerns around the macro uncertainty. And if things change, we feel confident in our ability to react to best support both our customers and our stakeholders.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And as we think about the long term, our strategy is built on how we can competitively differentiate ourselves and outpace the market. When we listen to the voice of the customer, we gain additional conviction that our one stop shop offering is critically important. The power of cross selling, let's just take our long established relationships and accelerate our growth by meeting our customer demands with both our Generate and Specialty products. And when we layer on our technology offerings, we're able to provide our customers a truly unique experience. And while we've had Specialty as part of our business mix for many years, we believe this growth engine has a lot of runway ahead, supported by both geographic white space and additional products and adjacencies that we can add to our portfolio to continue to better serve our customers.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

To bring this to light, we have a large national account customer with a long standing relationship, primarily with our GenRent team. And as we dug into how we could better serve the customer's needs, we learned we had the opportunity to be a better partner. This included not just providing additional products, but also innovating together, such as feeding information directly into their own internal tracking systems. And through our partnership, we learn more about the customer's requirements and added specialty products to fit the bill. Well, to make a long story short, over just two years, we've increased their spend with us by 12 times by becoming an enterprise of solutions, and specialty has increased from 10% of their spend with us to 40%.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

This example is another strong proof point of our go to market strategy. In closing, we remain focused on being the best partner to our customers. We're on track for another year of profitable growth and we believe the longer term outlook we see combined with our business model, strategy, capital discipline and our competitive advantages will allow us to generate compelling shareholder returns. And with that, I'll hand the call over to Ted, and then we'll take your questions. Ted, over to you.

William Grace
William Grace
Executive VP & CFO at United Rentals

Thanks, Matt. Good morning, everyone. As Matt just shared, 2025 is off to a good start with first quarter records across total revenue, rental revenue and EBITDA, which combined with the momentum we're carrying into our busy season and encouraging customer sentiment, is enabling us to reaffirm our full year guidance. So with that said, let's jump into the numbers. First quarter rental revenue was a record at $3,150,000,000 That's a year on year increase of $216,000,000 or 7.4%, supported again by growth from large projects and key verticals.

William Grace
William Grace
Executive VP & CFO at United Rentals

Within this, OER increased by $118,000,000 or 4.9%, driven by 3.3% growth in our average fleet size and fleet productivity of 3.1%, partially offset by assumed fleet inflation of 1.5. Also within rental, ancillary and re rent grew by 1915%, respectively, adding a combined $98,000,000 of revenue. This outsized growth relative to OER was primarily driven by specialty, where delivery represents a bigger portion of revenue from our matting business and where our other specialty businesses support customers with value added services like fueling and installation as part of our one stop shop strategy. Turning to our used results. As Matt mentioned, we took advantage of strong demand to sell a first quarter record amount of OEC, generating $377,000,000 of proceeds at an adjusted margin of 47.2% and a 51% recovery rate.

William Grace
William Grace
Executive VP & CFO at United Rentals

Moving to EBITDA. As I mentioned, adjusted EBITDA was a first quarter record at $1,670,000,000 translating to an increase of $84,000,000 or 5%. Within this, rental gross profit contributed $89,000,000 This was partially offset by used where the continuing normalization of the market drove a 13% decline in used gross profit dollars, translating to a $26,000,000 headwind to adjusted EBITDA. SG and A increased by $47,000,000 year over year, including $12,000,000 of H and E related merger costs. Excluding these costs, our growth in SG and A was roughly in line with growth in rental revenue.

William Grace
William Grace
Executive VP & CFO at United Rentals

And finally, the EBITDA contribution from other non rental lines of businesses increased $68,000,000 primarily due to the $64,000,000 breakup fee we received from the termination of the H and E deal. Looking at profitability, our first quarter adjusted EBITDA margin was 44.9%, implying 60 basis points of compression. Notably, and as our press release highlighted, this includes a $52,000,000 net benefit related to the breakup fee, which is the $64,000,000 less the $12,000,000 of related SG and A costs. Although it doesn't impact EBITDA, we also absorbed roughly $13,000,000 of bridge financing fees related to the deal that are included in our net interest expense. Taken together, our first quarter results included a net pretax benefit of $39,000,000 Bringing this back to margins, excluding the H and E benefit and the impact of used sales, our EBITDA margin compressed 150 basis points year over year.

William Grace
William Grace
Executive VP & CFO at United Rentals

Similar to last quarter, I thought it'd be helpful to talk through a few of the key factors here ahead of Q and A. Now, of course, margins in any given quarter will fluctuate with normal variability. But at a high level, several of the dynamics in Q1 were consistent with what we talked about in January. First, ancillary revenue again significantly outpaced our core rental growth. These are core elements of our service offering, particularly within specialty that come at a lower margin than our core rental business but have attractive returns as they don't employ much capital.

William Grace
William Grace
Executive VP & CFO at United Rentals

As importantly, they provide a unique aspect to customer service that both differentiates United Rentals and helps drive deeper customer engagement. So from this perspective, we view this as good business, but it does have a dilutive impact on margins that we'd estimate at about 50 basis points in Q1 or about a third of the 150 basis point decline. Secondly, first quarter delivery costs were up driven by a few dynamics, including our growth in matting and the increased dispersion of growth across our footprint. A byproduct of the latter is the greater need to reposition fleet in support of high time utilization. Said differently, these are choices we make between costs and capital efficiency with the idea of supporting returns.

William Grace
William Grace
Executive VP & CFO at United Rentals

For the quarter, these additional repositioning costs impacted our margin by about 30 basis points. And finally, given where we sit in the current cycle, our OER growth remains relatively low in a still fairly inflationary environment. At the same time, we continue to make long term strategic investments in important areas like specialty cold starts and technology, both of which enable us to be the partner of choice to customers and provide attractive returns. The combination of these factors and normal variability in our costs accounted for the balance of the decline, so call it about 70 basis points. Importantly, these are all contemplated within the ranges provided in our guidance.

William Grace
William Grace
Executive VP & CFO at United Rentals

And lastly, on the P and L side of things, our adjusted earnings per share was $8.86 including a $0.45 benefit from H and E. Shifting to CapEx. First quarter gross rental CapEx was $7.00 $7,000,000 in line with normal seasonality. Moving to returns and free cash flow. Our return on invested capital of 12.6% remained well above our weighted average cost of capital, while free cash flow totaled a robust $1,080,000,000 Our balance sheet remains quite strong with net leverage of 1.7 times at the end of the quarter and total liquidity of over $3,300,000,000 I'll note, this was after returning $368,000,000 to shareholders in the first quarter, including $118,000,000 via dividend and $250,000,000 via repurchases.

William Grace
William Grace
Executive VP & CFO at United Rentals

Looking forward, following the completion of our repurchase program last month, we are pleased to share that our Board approved a new $1,500,000,000 program supported by our continued strong free cash flow generation and healthy balance sheet. The new program will begin this quarter and is expected to be completed by the end of the first quarter of twenty twenty six. For the year, it is our intent to repurchase a total of $1,500,000,000 of common stock, including the shares we repurchased in the first quarter. At our current share price, this represents about 4% of our market capitalization. In total, we intend to return roughly $2,000,000,000 in cash to shareholders in 2025, equating to over $30 per share or a return of capital yield of better than 5%.

William Grace
William Grace
Executive VP & CFO at United Rentals

So to wrap up my prepared remarks, overall, another solid quarter that puts us in a position to reaffirm guidance on total revenue, EBITDA, CapEx and free cash flow. The balance sheet remains in great shape, providing strong optionality for the business, while our commitment to capital discipline keeps us positioned to support long term shareholder value. And with that, let me turn the call over to the operator for Q and A. Operator, please open the line.

Operator

Certainly. Thank you, Mr. We'll go first this morning to David Raso of Evercore ISI.

David Raso
Senior Managing Director & Partner at Evercore

Hi, thank you for the time. I'll let others sort of dig into the margin questions. I was curious about two things, the implied revenue growth the rest of the year and how tariffs are impacting conversations with your customers. So first on the revenue growth, if you pull out the used equipment sales, the rest of the year, the sales guide is implying up about 3%. When you look at the CapEx and the used sales and the OEC you're looking to sell, it seems like the average fleet size growth is going to be 3%.

David Raso
Senior Managing Director & Partner at Evercore

So it almost implies no meaningful help at all from fleet productivity. Is that conservatism or something else you're trying to signal, especially you noted in the first quarter, the timing was still fairly healthy that you're moving equipment around. So just curious how that dovetails into the fleet productivity guide? And then to follow-up on the tariff, how does the potential inflation from tariffs on new equipment sales, right? Meaning for an OEM raising price, does your customer then look at rental as a better alternative right now?

David Raso
Senior Managing Director & Partner at Evercore

Or particularly, does it give you any umbrella to maybe raise rates or at least that conversations leaning that way versus maybe some negative of the inflation impacting the level of construction activity, be it lumber or whatever it may be impacting construction project decisions? Thank you.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Sure, David. This is Matt. I'll take the tariff part first and then both Ted and I can discuss the revenue back half revenue growth or back third, two thirds. When we think about the tariffs, first of all, our 2025 CapEx is fully negotiated and well over 80% of it already has POs and is should will not be impacted by tariffs in any way. In the future, to your point about what would happen if our partners did have to got significant tariffs and did have to make some changes in the future.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Well, couple of points to your to your comment, we probably have to pass it on like happened post COVID when when we all had to enjoy some some pretty healthy increases. And then secondly, you know, there'd be some decisions to make. There's we've got vendors a couple of vendors in every category equipment we buy, and there's not a product category that I could think of that doesn't have a non tariff impacted partner. So there'd be a way for us to manage through it and whatever we did have to absorb would be something the whole industry absorbed and to your point could be an umbrella coverage for maybe some increased productivity. Not our preference, but certainly something we have the ability to do.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

From the growth perspective, Ted, you want to take?

William Grace
William Grace
Executive VP & CFO at United Rentals

Yes. The one thing I might add on tariffs and certainly anytime there's uncertainty that tends to favor rental over ownership and we never advocate for uncertainty, but we are in a period of time where there obviously is a couple of things that the macro is trying to struggle with. So I'd say at the margin that's also going to benefit rental even more than we think some of the other advantages we have over ownership. On the implied revenue side, I guess the one piece you didn't really weave into that question, David, was the impact of inflation. And so when we think about that OEC growth, that's in nominal terms.

William Grace
William Grace
Executive VP & CFO at United Rentals

And so I think when you do the math, you'd see that adjusting for that, we'd want to make sure that we are contemplating the effect of inflation, which obviously ties back to fleet productivity. And in terms of just the growth rate, kind of what you saw in the first quarter versus what would be implied in the back three quarters. Obviously, we've now lapped YACC. So as people think about that relative there's relative growth rates, they just want to be mindful of that shift as well. And we could begin if you want to touch on any part of that?

David Raso
Senior Managing Director & Partner at Evercore

Well, at the end of

David Raso
Senior Managing Director & Partner at Evercore

the day, when you look at the size of the average OEC growth implied from a fairly normal cadence of what you're going to sell, the OEC being sold and of course the gross landed fleet per quarter. Just to level set a little bit, sounds like the fleet productivity, which is 1.9% in the first quarter ex YAC, right, pro form a, let's call it. The rest of the year, those fleet productivity numbers implied or at least level set, they're lower than the 1.9%. Is that fair? Like the first quarter

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Not really. I'd say they're they're pretty they're I'd say it'd be pretty steady, David, is what our listen. We're not in the in the game of forecasting them because there's a big portion of it. This is an output of what our revenue construct looks like, specifically in mix. But generally, what's embedded in the guide, and especially if you're using the midpoint, is a continuation of that type of positive fleet productivity.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And that's what our expectation is, and that's what is embedded in the guidance.

David Raso
Senior Managing Director & Partner at Evercore

Alright. That's very helpful. Thank you so much.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks.

Operator

Thank you. We'll go next now to Rob Wertheimer at Melius.

Rob Wertheimer
Director of Research at Melius Research LLC

Hi. Thank you. I'd like to dig into a couple of the margin drivers that you guys called out, which was helpful. And basically trying to figure out how temporary they are. Fleet repositioning, I wonder if you could kind of expand on what the dynamics were that led to that.

Rob Wertheimer
Director of Research at Melius Research LLC

I think you said maybe broadening out of growth. Is that repositioning done and thus that kind of headwind fades? And maybe the same question just on mix, maybe that's within specialty, whether that reverts or whether you see continuation of that mix profitable ROIC but lower margin drag? Thanks.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Hey, Rob. I'll talk about the repositioning repositioning a little bit and Ted can touch on the mix. So just think about the past couple of years before 2024 when we had such broad based growth, we really didn't pull any equipment from any markets. Everybody had the opportunity to put the fleet they had to work and in some instances even more, right? So when we think about now where major projects are really driving a big part of our growth and the local markets vary depending on where you are.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Now instead of just sending new equipment to manage these new projects, right, which was a much more cost effective way because it's coming right from the manufacturer, we're relocating equipment, right? So we're staging equipment. We're bringing it in from other places to serve these large projects. So I think that fleet balancing is what we're referring to that's driving a little bit of extra cost when you think about what we were able to do historically. And then Ted on the mix?

William Grace
William Grace
Executive VP & CFO at United Rentals

Yes. Rob, in terms of thinking about specialty in the quarter itself, the mix certainly the ancillary grew there at a healthy pace relative to OER, still had very healthy OER growth. But we had an uptick in delivery and for a couple of different reasons, part of that would have been Yak and part of it would have been the repositioning of fleet just given the nature of projects ending and starting and just the greater dispersion in growth we've talked about all year. So that would have been about 150 basis points of the 600 basis point decline in gross margins. That will really depend on how the year itself plays out.

William Grace
William Grace
Executive VP & CFO at United Rentals

Elsewhere within that margin construct, we probably had about 50 basis points of impact from higher subcontract labor. Those are value added services we're providing to customers to really help them with their projects and alleviate pain points in their business processes. So that again is really driven by serving our customers. And there's another 30 basis points related to fuel services, again, of those ancillary services we do with the request of customers. So when you add that up, you'd be looking at the better part of two thirty basis points or so I think related to that mix.

William Grace
William Grace
Executive VP & CFO at United Rentals

Depreciation just to dimensionalize that, because that was another important part of that revenue bridge. That was about three thirty basis points of the 600 basis points in specialty gross margins, really all of which related to YAC.

Rob Wertheimer
Director of Research at Melius Research LLC

Okay. That makes perfect sense. And then just as a minor follow-up, I know repositioning will continue as the market continues to shift, but would you say it's lumpy, the more you did in 1Q is the bulk of it? Or is that continuing on through the year? And I'll stop.

Rob Wertheimer
Director of Research at Melius Research LLC

Thanks.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

The honest answer is we're on top of it, but we're not sure. We certainly did a deep dive when we saw the drag on the margins and looked at and we we're pretty comfortable with the decisions the team made. But I would say, you know, this is really an output of where the demand shows up and where we have to put the fleet. We are on top of it. We've got a pretty good system to make sure we're making the right decisions and bidding out to third party haulers in an effective manner.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And if there is an anomaly, we'll report it out to you guys as it comes along.

Rob Wertheimer
Director of Research at Melius Research LLC

Thank you.

Operator

Thank you. We go next now to Angel Castillo at Morgan Stanley.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Hi, good morning. Thanks for taking my question. Maybe just to kind of continue on that. Ted, was wondering if you could expand just on uncertainty of whether some of these headwinds may be persist or not. What does that imply in terms of your ability to deliver either on the low end or the high end of the guide?

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Just any implications there would be helpful.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes. And I'm going to jump in here, Angel, just to be clear so that no one misconstrues my answer to Rob's last question. We're not implying that all these costs are going to persist or not. When you think about the ancillary, that's really an output of what the customer's needs are. It's a good decision.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

It's gonna bring us more EBITDA dollars. It's just if the revenue construct gets higher than the midpoint, the EBITDA might not move along with it at the same pace as our OER rental. So but it's still the right decision. Not doing it isn't an option. We're putting money in the tilt, so to speak, and taking care of our customer.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

What I was speaking to Rob about was that, whatever it is, 10,000,000 to $15,000,000 of repositioning. We don't really know how much of that will repeat because it's going to be responsive to where the equipment needs are. Ted, please.

William Grace
William Grace
Executive VP & CFO at United Rentals

I think that answered the question.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Perfect. That's very helpful.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

To the I'm sorry, to the last part your question, contemplated, this isn't a big enough number to move us anywhere within the guide. We feel very comfortable about reiterating the guidance.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Got it. That's helpful. Thank you. And maybe could you expand a little bit more on just the underlying demand trends? It sounds like your customers remain pretty optimistic here.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Just curious, how did you see utilization or general kind of overall demand kind of shift or change between January and February versus maybe March and more recently April and what you're seeing there?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes. We don't really talk about monthly sequential in any way, shape or form. But we've the year is playing out as expected. And we talked about it being very similar to 2024 when we came out with the guidance in January, and that's what we're seeing. We really we don't talk about whether we were big enough now and diverse enough that we don't have those type of issues to have to call out.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And I would say that the year is playing out in a standard seasonal growth pattern and gives us a lot of confidence that there will be the demand to meet our goals here, and that's why we reiterated our guidance.

Angel Castillo
Angel Castillo
Executive Director at Morgan Stanley

Understood. Thank you.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks.

Operator

Thank you. We go next now to Jamie Cook with Truist Securities.

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

Hi, good morning. I guess two questions. One, Ted, just for you, understanding the puts and takes of the margins in the quarter and the incremental margins in the quarter. I'm just wondering your confidence in the 50% to 60% through cycle incremental margin for United Rentals, just given where the incrementals have been. It seems aggressive, like the top line just had to grow to double digit rate in order for you to achieve that.

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

So just your confidence there, maybe we should start thinking about EBITDA growth versus incremental. So that's my first question. And then my second question, obviously, the cash flow is strong, increased authorization is a positive. But just what you're seeing on the M and A front with the H and E deal falling through, Wondering given the uncertainty in the market, is there opportunities for you guys to sort of be more opportunistic and your preference for specialty versus gen rent? Thanks.

William Grace
William Grace
Executive VP & CFO at United Rentals

Yes, Jamie, I'll take that first one. I think Matt will probably take the second. But nothing has changed in our view of our ability to drive margin expansion over the course of the cycle. One of the things we've talked about over really 2024 and now 2025 is the fact that we're in a relatively slower growth phase of the cycle that's still relatively inflationary. It's not our expectation that these kinds of conditions will last for a multiyear period.

William Grace
William Grace
Executive VP & CFO at United Rentals

Expectation is that the economy and our markets do obviously accelerate as you get more accommodative Fed and better interest rate policies that support overall economic growth. And as we get there, that obviously gives us the ability to leverage fixed costs more efficiently. And so nothing has changed from that perspective. The other thing that's just something we highlighted today was obviously this revenue construct and the impact we've had from providing more ancillary, which we view as a good thing. It has the effect on margins and flow through we've talked about, but it's very good business that supports customers and adds EBITDA dollars just not the same margin we would in our core business.

William Grace
William Grace
Executive VP & CFO at United Rentals

So we can if there's any follow-up on that side, let me know. Otherwise, I'll hand it over to Matt.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes. So from the M and A

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

front, we had a pretty robust pipeline before the AT and E deal and that pipeline remains. So to the focus areas that we really like to hone in on, certainly it's adding any new products and services to our customer base. We've done very well with that when you think about YAC and general finance before that. So that's our primary focus. But adding more capacity within specialty, where we still have white space and penetration opportunities to support this double digit growth trend that we're on would be another area of focus.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And there's still a pretty good pipeline that the team's working through. We have plenty of dry powder, as we talked about earlier, at 1.7 times leverage and a strong balance sheet. We have the capability. So we certainly are still in the M and A game. We just have to find the right dance partner and make sure it meets our very high bar.

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

Thank you very much.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks.

Operator

Thank you. We'll go next now to Michael Finiger of Bank of America.

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Yes. Hey, guys. Thanks for taking my question. Just on the specialty growth, even ex M and A up 15%, just I know you touched on it earlier. Is there anything you can flesh out in terms of what's driving that in terms of end markets, product lines?

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Is it gaining more customer share? Wallet, is it the cold starts? Just your confidence on that kind of double digit growth rate that we've kind of seen from specialty so far for the rest of this year?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Well, I think it's all of the above, right? So and when you think about the example I gave in the opening remarks about even with long standing relationships, we could as we continue to add more products and services to our portfolio, even with long standing relationships, we find we have opportunities. And also, they have to have the demand. So the kind of projects that specifically our larger customers tend to have are more complex and need more support. And we're there to meet that support.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

I think that's driving a lot of specialty growth. But then also as we add these new products to our platform and the ability to scale them up is another big opportunity, and we still have white space there. And that would be dismissive of what's happened in one of our most established ones, which is Power. Our Power HV and AC team still grow double digits and one of our strongest growers in the company as they not only get more penetration, but add more products to their portfolio. So it's really across the board, which is why you hear the confidence in our voice, a double digit growth for specialty for the foreseeable future.

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Great. And Matt, just to follow-up, just like, gen rent is still positive, but clearly in a slow growth phase right now. Just in terms of the cycle, how to think about it, do you have to go negative first before we see a reacceleration? Based on the conversations in the field, what would be that catalyst for a reacceleration? Is it more de escalation of tariffs?

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Is it Fed rate cuts? Is it deregulation? I mean, you look back in 02/2009, obviously, that was a very severe recession. There was just a very long lag for non res to recover. Do you think that is the case this go around when we're kind of talking about maybe a reacceleration in some areas like the local markets or some areas that

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

have been soft? Thank you.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yeah. So we certainly don't think it needs to go negative. We feel like we're in the slow part of the cycle and we're not going negative. But to your point about the local market, we're much more highly penetrated in the local market with GenRent. And that's a bigger needle mover for them.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

But they still have some of the opportunities that we have in large projects to help offset that. And I think although most of our growth is coming from specialty, I think our GenRent team is well positioned to as the market picks back up, as the local market repairs, whether that's driven by interest rates, just overall stronger economy, whatever, we're very well positioned. We've kept our capacity. We didn't overreact to the slower growth, which although maybe it drags on margins a little bit, it's the right long term decision. So we feel really good about where we're positioned.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

We don't think we have to turn negative for an acceleration.

William Grace
William Grace
Executive VP & CFO at United Rentals

And Mike, I might just add from a vertical perspective, the two areas that have been most challenging there have been residential and residential related and kind of call it the oil patch. So I think those are verticals that people understand have had kind of unique challenges. But to the degree you saw those inflect, that would be a positive for the gen rent growth.

Michael Feniger
Michael Feniger
Director of Equity Research at Bank of America Merrill Lynch

Thank you.

Operator

Thank you. We'll go next now to Tim Fine of Raymond James.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

Great, thanks. Just wanted to circle back as a follow-up on earlier question on tariffs. And you covered it with respect to the CapEx impact from new equipment. But I was just curious from an OpEx perspective, to the extent we were to see parts pricing change or be impacted by tariffs. Is there protection there or how would we think about that?

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

I guess it's hypothetical at this point, but can you maybe just update us on that point?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yeah. It's a fair point, Tim, but still all negotiated for '25. So we're locked in for '25. But it's it's no different than the fleet costs. We negotiate our parts and our our fleet costs with our partners annually.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And in '26, if if there's some stuff there, we're gonna have to make sure we're aligned with the folks that can either bypass having to push them on or or avoid them altogether. And and and that'll be part of our '26 negotiation, but nothing that we see in '25.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

Okay.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

And then Matt, just you highlighted that as have several others, the strength of the larger national account business and how we've been dealing with this softness in the local account business, which is our market for some time, which is seems to be continuing. But I'm just curious if that A, is that creating any sort of a mix headwind for United? And I guess if so, it would could it be more pronounced in what is a seasonally softer quarter, just normally, lower activity in the first quarter? Is that more pronounced or none of the above? I'm just curious from a mix impact, is there any sort of headwind there?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes. I don't think there'll be any further headwind to your point about Q1 being a slower part of the year and not the part of the year we bring in the more CapEx, that could have some impact on that repositioning costs that we talked about. From an ancillary perspective, it's really mostly driven by the very high level of growth in specialty and the extra products and services we provide with that offering. So nothing that I think is going to change seasonally. It'll depend.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

I think we'll continue to see the demand and therefore where we put our fleet to play out similar to '24. I guess the one difference would be as we continue to grow the YAC business, we continue to grow the specialty footprint through cold starts. I think that's driving some of the ancillary for all for good reasons, really for good cross sell growth.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

Okay. All right. We'll leave

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

it there. Thank you for the time.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks, Tim.

Operator

We'll go next now to Jerry Revich of Goldman Sachs.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Yes. Hi. Good morning, everyone. I'm wondering if we could just pull on the M and A thread. One of the hallmarks of where you folks have added value over the years has been just M and A and the ability to improve those operations.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

And so as you sit here today, given the size of the company, can you just talk about how active the runway is on a multiyear basis on the M and A pipeline? There is some concern that the magnitude of acquisitions that you folks have been able to deliver in the past that opportunities that might be slowing. So wondering if you could just talk about what that looks like on a multiyear basis as you sit here today.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

We don't really forecast to that or plan like any kind of budgetary goals for for m and a, we think that leads to bad behavior. But as far as when we're thinking about what the pipeline looks like, I mean, we we don't have the expectation that we don't have enough runway on m and a. Whether it it may be more like a string of pearls or even big pearls when we think about where can we fit out some of the specialty offerings. But I don't think we sat here a couple years ago and said, wow, matting would be a great thing to add. So we're continually investigating new opportunities, but there's some there's still some chunky deals out there, certainly not as much on the gen rent space as as what the other opportunities are, but we still think there's plenty of M and A runway.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

We don't really put a target on it, Terry, because that's not the way we think about it. We're just constantly working the pipeline and see what meets our threshold and what could be a good use of capital and strategically beneficial.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Appreciate the color, Matt. And separately, obviously, you folks pulled cost levers really well in recessions. As we think about a potential recession scenario, can you just talk about the levers that you could pull in this coming cycle? So we spoke about ancillary revenues, subcontractor costs, etcetera. To what extent, if we were to see a negative economic outlook, could we see greater margin opportunities for you folks similar to what you folks were able to deliver most recently in 2020?

William Grace
William Grace
Executive VP & CFO at United Rentals

Yes, I'll take that one and Matt jump in if there's anything you want to add. At the end of the day, I think both from an OpEx and a CapEx standpoint, we've got a lot of flexibility. I feel like your question was more oriented towards margins. And so when you think about the nature of our cost structure and really our the core operating costs, something on the order of about 50% is going to be highly correlated to volume. So it's going be things like pickup and delivery and repair and maintenance, discretionary items like T and E or overtime, those we can flex very readily and they move with demand.

William Grace
William Grace
Executive VP & CFO at United Rentals

So that part of it, we feel very good about modulating in the downturn. You certainly saw that during COVID as an example. There's a relatively small part of our cost structure that we would do with fixed. It's probably on the order of the very low double digits. In between, it's really a function of labor and benefits and that is as flexible as you're willing to make tough decisions on teammates and that's something we want to protect at all costs when we're able to.

William Grace
William Grace
Executive VP & CFO at United Rentals

It's really going to be the interplay of how does volume perform versus how do we manage those costs. Certainly, we feel very good about what we demonstrated in 2020. We've only gotten better at managing the cost structure, but a lot of this would obviously depend on the nature of a downturn.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes, I would just add to Ted's point, how deep and how long would make the decisions of that middle 30%, let's call it for lack of a better term of our costs. Just to remind people outside of 'eight, 'nine, when we had to do significant layoffs, during COVID we made the opposite decision. And holding on to that capacity really paid off coming out of that. So that would be what our future outlook would be in a downturn, and we're certainly not trying to speak that into our future, would depend on how aggressively we'd act.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Appreciate it. Thank you.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks.

Operator

Thank you. We'll go next now to Steven Fisher with UBS.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Thank you. Good morning. Just wanted to come back the ancillary pickup. And I know you gave us some good color on the fact that it was the YAC inclusion and some of the fueling services. I guess I'm just kind of curious if there's any other sort of broader reason kind of why now, why this is all happening?

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Obviously, YAC is new, so that would make sense. But are you implementing specifically new initiatives to target the fueling operations? Are there any other particular services that you're kind of trying to bring forth your customers' attention that they can kind of roll this out?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yeah. So to your latter part of your question, the answer is yes. We're continuing to look at ways where we can solve more problems for our customers, right, and in an effective and profitable way. So Yaak certainly was a big driver for it. But even when you think about as we're growing our mobile storage and modular business, the setup for that falls into this category.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Fueling, whether it be not just for generators, but for equipment overall, is another pain point for the customers that if we can continue to increase that touch point, we'll do that. So it's a little bit of both. It's the growth of the platforms like matting and and modular and mobile storage that's driving a lot of it, but also some additional services that we're offering.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Okay. That's helpful. And then just to come back to the the margins for a second, just so I'm totally clear on this. Obviously, the incrementals are implied to be higher for Q2 and Q4. Can you just remind me kind of what the reason is that what's going to drive that improvement in the second part of the year?

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

What's going to be different relative to the first quarter? Thank you.

William Grace
William Grace
Executive VP & CFO at United Rentals

Well, I think this is where it's important to decompose kind of what happened in the first quarter, right? And so you can look at you said flow through, we look at margins, but being down nominally 150 basis points ex H and E termination fee and ex used. But when you cut through kind of the ancillary and dynamics we talked around repositioning, down 70%. And that's really how we think about that core performance. So certainly as we progress through the year, you get into the busier season and you lap some of these costs, some of which were transient, we would expect the business to perform as expected.

William Grace
William Grace
Executive VP & CFO at United Rentals

Now, to the degree where we land is going to depend on how that revenue ends up working out from the standpoint of ancillary probably as much as anything.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Okay. Thank you very much.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks, Steve.

Operator

Thank you. We go next now to Kyle Mingus of Citi.

Kyle Menges
Kyle Menges
Vice President - Equity Research Analyst at Citi

Thank you. Could you guys just touch on just level of confidence in the backlog for the rest of the year? And I understand visibility might normally be about six months out. Could you just talk about maybe level of visibility? And is there more visibility in the backlog now just given more mega projects in the pipeline?

Kyle Menges
Kyle Menges
Vice President - Equity Research Analyst at Citi

And do you have any sort of sense on what percentage of your backlog is mega projects at this point versus maybe last year or kind of, I guess, in a more normal year?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes, sure, Kyle. So I think as far as the profile of the demand from major projects to the rest of the business is pretty similar to what it was last year. Maybe ticked up towards major projects, maybe a hair, but pretty similar. I think as far as the forward looking visibility, certainly higher than the six months on the projects, because we got a plan with our partners. So we have more visibility there.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And I think the backlog data is supporting six months plus of backlog. But more importantly, our customer confidence index continues to give us confidence about the balance of the year. Our leadership team and sales teams that are connecting with our customer on a daily basis out in the field is continuing to give us solid feedback. And then our metrics, actual execution of what we're doing with fleet on rent and utilization rates. We have confidence that for the balance of 2025, we see the runway ahead and that's why we reiterated our guidance.

Kyle Menges
Kyle Menges
Vice President - Equity Research Analyst at Citi

Got it. Makes sense. And then just another tariff question more related to the value of your used fleet. Just how should we be thinking about maybe the value of the used fleet and the overall used market just given maybe some tariffs on new equipment? And are you seeing any early signs of that just in the used market related to tariffs?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

No. It's way too soon. I mean, I don't even know if people have finalized what their costs are going be for most of these vendors. But theoretically, to what you're talking about, like it did post COVID, if the new equipment pricing were to increase out of the ordinary, that would act as an umbrella on used pricing values. We certainly have seen that in the past and we would expect that to happen.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

We don't feel at all that's what happened yet or is what driven the volume that we experienced and demand we experienced in Q1. It's similar to what we had planned for and what we expected. I think it's more about the demand out there in the end market. And to your first question you asked earlier, it's another area of confidence for the outlook for the rest of '25. We sold a record level of OEC and I don't think people are buying equipment to park it in yards.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

So there's still a good amount of work going on out there.

Kyle Menges
Kyle Menges
Vice President - Equity Research Analyst at Citi

Helpful. Thank you.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks, Tal.

Operator

We'll go next now to Tammy Zakaria at JPMorgan.

Tami Zakaria
Tami Zakaria
Executive Director at JP Morgan

Hey, good morning. Thanks for all the comments so far. I have only one question. I think I heard you mention that local markets are more indexed to your gen rent offering right now. I'm curious, is there a structural barrier or reason why specialty maybe could not become a bigger part in local markets?

Tami Zakaria
Tami Zakaria
Executive Director at JP Morgan

Meaning, is there not a scalable market for specialty at the local level? Or could over time specialty could become as big at the local level as it could be for the national accounts?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yeah, I think as our specialty businesses mature, they'll get more penetration locally, but I think the one big part of our one stop shop strategy is cross selling. So we prioritize overall as a company, our larger half of our customer set, which tend to be more on projects and and with bigger customers. So when we get new offerings, we really focus on that part of the cross sell, because they tend to do more complex projects. So this is a decision for us. It doesn't mean that people that there's not local trench work, that there's not local temporary power work.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

It's just our profile and the way we go to market. The maturity of gen rent is so much further down the road and also through a lot of acquisitions that they're just the reality is they're just more penetrated. We do have that opportunity in the future for specialty to continue to get more penetrated locally.

Tami Zakaria
Tami Zakaria
Executive Director at JP Morgan

Great. Thank you.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thank you.

Operator

We'll go next now to Ken Newman of KeyBanc Capital Markets.

Kenneth Newman
Kenneth Newman
Vice President and Equity Research Analyst at KeyBanc Capital Markets

Hey, good morning, guys. Thanks for squeezing me I know it's a smaller part of your mix, but I was curious, can you just talk about what you're seeing in the smaller local accounts and just the expectation for that through the rest of the year? I'm just trying to get a sense of how much padding there is in the guide if that does get incrementally softer as the year progresses?

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

It's really the area that we have the least visibility to. But when you take the aggregate of whether you're looking at a branch, a district, or a region of the activity in there, where the field is very close to the local market and then they do their forecast. We feel confident that we have enough visibility through that ground up mechanism to stay within the ranges of our guidance and certainly you hear the confidence in our voice of reiterating. So we don't expect that. With that being said, it is still a smaller part of our business.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

So therefore, the impact of that variability would be a little bit less than if something happened in a macro that impacted our national accounts. And remember, for people that remember years ago, when we moved to larger customers' national accounts, it wasn't because mega projects, we didn't know this was going to be a thing or these tailwinds that we talked about. It was because when work does slow down, we do feel that the larger contractors sell deeper into the pipeline, and we needed to be aligned with those. And we learned that through the February. And I think that that would also be a buffer to any kind of change.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

I think we're better positioned with those customers.

Kenneth Newman
Kenneth Newman
Vice President and Equity Research Analyst at KeyBanc Capital Markets

Right. Okay, that makes sense. And then just quickly for my follow-up, I just have a clarification question on Yak. I know there's already been a lot of talk about inflation and tariffs. I know you depreciate those assets at Yak to zero, I think over a two or three year period.

Kenneth Newman
Kenneth Newman
Vice President and Equity Research Analyst at KeyBanc Capital Markets

And obviously, lumber is much higher on a year over year basis. Can you remind us how margins in that business could or maybe it doesn't fluctuate with spot lumber prices?

William Grace
William Grace
Executive VP & CFO at United Rentals

I don't think we've experienced much of that ourselves in the kind of woods we're buying. But certainly, we feel comfortable that they can maintain their margins. I'll just leave it at that.

Kenneth Newman
Kenneth Newman
Vice President and Equity Research Analyst at KeyBanc Capital Markets

Thanks.

William Grace
William Grace
Executive VP & CFO at United Rentals

Thanks, Ken.

Operator

We'll go next now to Scott Schneeberger of Oppenheimer.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Thanks, guys. Good morning. Just on specialty rental, curious, it's come up a few times, but this your confidence in continued double digit growth, very impressive. Just curious, could you delve in, you have seven product categories, is everything growing, is there disparity or some carrying the weight and others not keeping up? Just kind of discussing across all seven platforms.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

And is it cold starts that's really driving it? Are you getting market share gains, pricing? Just curious to go in a level or two deeper on how you think you are differentiating in those markets? Thanks.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yeah, no, it's pretty broad and we've talked about that in the past how even our some of our more mature specialty businesses, we're growing double digits. So each quarter it may be a little more choppy, but you'd have to think about the newer platforms with more white space and more cold starts are gonna grow faster. But power being, I think, you know, one of our most mature continues to be one of the leaders in the pack and growth. So it's across the board, it's partly driven by penetration and a big part of it driven by our go to market, right? So between the white space and our go to market and continuing to sell into our targeted customers, we're probably taking share as they maybe were using a myriad of smaller type providers.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

And I think the fact that we can bundle it's a big advantage for us and why we're seeing that growth and have confidence in that future growth.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Thanks. And just one more in specialty and ancillary, kind of following up a bunch of questions there too, but it seems like you all maybe have more to say there. It sounds like you're digging in, perhaps acquisitions can help in that space or maybe some internalization delivery or setup of maybe less outsourcing. Maybe we hear from you all in the future, but I got the sense on earlier questions, there's more you could and would be open to saying, so that's why I'm asking it now.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yeah. Certainly, we're always looking at ways that we can be more efficient. And in sourcing is one of the ways that we'll do that. We'll always balance what we think we are a better provider at versus what we can do. Even within the fueling, we'll use some outside parties to help that certainly depending on the need.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

So it is going to be a mix. We do look at in some of our businesses how can we be a better provider of these ancillary services, but I wouldn't point to any specific targets right now for a couple of reasons. But it's a good thought that you're having and consistent with our continuous improvement mindset of how can we do better from a service and margin perspective.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Got it. Thanks, Matt.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Appreciate it.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks.

Operator

And we'll go next now to Steven Ramsey of Thompson Research Group.

Steven Ramsey
Deputy Director of Research at Thompson Research Group

Hi, good morning. Wanted to think about cross selling. You've done well going from gen rent to specialty. I'm curious if there's any color on cross selling within specialty with these more mature categories and then being able to add on some of the less mature groups within that segment.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Yes, it's a great point. It's something that we focused on with our teams and and something that we're working on actively. Some of these acts naturally go together. Right? And when you think about how we've organized our ROS business, right, which was our restroom trailers and porta johns along with our modular business.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

You would think setups on job sites. So that's a that's one of the areas where we've really focused on putting those together. When we think about what we did with our pump business when we bought Baker and make a full fluid solutions, now we've made it a whole separate region of fluid solutions, right, to treat, transfer and contain. So there's many examples of us doing that, and we continue to try to find as many opportunities we can can to make it seamless for the customer. And that's really what the bundling is all about.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

If we make it easier for them to streamline their vendors and to have one solution provider, it's it's it's a win win situation.

Steven Ramsey
Deputy Director of Research at Thompson Research Group

Okay, that's helpful. And then one other thing

Steven Ramsey
Deputy Director of Research at Thompson Research Group

on the ancillary re rent, comp getting relatively tough for the last four quarters, two percent to 3% benefit on top of inter rental revenue. Do you expect that same level of benefit in the rest of the year?

William Grace
William Grace
Executive VP & CFO at United Rentals

It's a great question, Stephen. And that's something we're trying to figure out. At the end of the day, it is being responsive to what customers are asking of us. And if we just look at that relative rate in the first quarter, we grew 19% ancillary versus 5% OER. So call it four times relative rate, part of that was of course YAC.

William Grace
William Grace
Executive VP & CFO at United Rentals

But last year, we grew at about, I want to say two times the rate overall. So we've seen an acceleration thus far, but it's hard to predict exactly how this will play out. It is part of our strategy. You heard Matt talk about that. This is being that partner of choice to our customers and making their lives as easy as possible.

William Grace
William Grace
Executive VP & CFO at United Rentals

So time will tell and we'll have an update in July obviously about how this progressed in the second quarter.

Steven Ramsey
Deputy Director of Research at Thompson Research Group

That's excellent. Thanks.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thanks, Stephen.

Operator

Thank you. And gentlemen, that's all the questions we have this morning. Mr. Flannery, I'll turn things back to you, sir, for any closing comments.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Thank you, operator. And to everyone on the call, we appreciate your time. I'm glad you could join us today. As always, our Q1 investor deck has the latest updates, and Elizabeth is available to answer your questions. So please stay safe, and we look forward to speaking to you all in July.

Matthew Flannery
Matthew Flannery
President & CEO at United Rentals

Operator, you can now end the call.

Operator

Thank you very much, Mr. Flannery. Again, ladies and gentlemen, that will conclude today's United Rentals earnings conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.

Executives
Analysts
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Key Takeaways

  • United Rentals delivered a first-quarter record with total revenue of $3.7 billion, adjusted EBITDA of $1.7 billion and adjusted EPS of $8.86, and reaffirmed its 2025 full-year guidance.
  • Specialty rental revenue grew 22% year-over-year (15% pro forma), driven by eight new specialty cold starts in Q1 and a target of at least 50 cold starts for the full year.
  • The company sold a record $740 million of used equipment in Q1 (on track for $2.8 billion this year), generating strong margins and contributing to $1.1 billion in free cash flow.
  • United Rentals returned nearly $370 million to shareholders in Q1 via buybacks and dividends, and approved a new $1.5 billion repurchase program as part of a planned $2 billion capital return in 2025.
  • Q1 margin compression of about 150 bps was largely due to growth in lower-margin ancillary services, fleet repositioning costs and strategic investments in specialty and technology—all within the company’s guided ranges.
AI Generated. May Contain Errors.
Earnings Conference Call
United Rentals Q1 2025
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