William Grace
Executive Vice President and Chief Financial Officer at United Rentals
Thanks, Matt, and good morning, everyone. I'm going to start my comments by adding some more color on a record fourth quarter results before pivoting towards 2024 guidance, which points to another strong year for the company. One quick reminder before I jump into the numbers. As usual, the figures I'll be discussing are as-reported, except where I call them out as pro forma, which is to say the prior period is adjusted to include Ahern's standalone results. So with that said, let's get into the numbers.
Fourth quarter rental revenue was a record $3.12 billion. That's a year-over-year increase of $372 million, or 13.5%, supported by diverse strength across our end markets and our strong positioning on large projects. Within rental revenue, OER increased by $313 million or 13.9%. An increase in our average fleet size contributed 15.1%, while as-reported fleet productivity added 0.3%, partially offset by assumed fleet inflation of 1.5%. Also, within rental, ancillary revenues were higher by $61 million, or 14.2%, which was consistent with rental revenue growth. I'll add that re-rent declined $2 million year-on-year. On a pro forma basis, which, as you know, is how we look at our results rental revenue increased 7.6% year-on-year with fleet productivity up 2.4%, reflecting a healthy rate environment that continues to be supported by good industry discipline.
Turning to used results, fourth quarter proceeds increased better than 7% to $438 million as we continue to take advantage of a strong retail market to refresh our fleet at attractive returns by recovering roughly 62% for our original fleet cost. Our adjusted used margin was flat sequentially at 55.3%, while the year-over-year decline in margin reflected the ongoing normalization of the used market we have been talking about for the last several quarters.
Moving to EBITDA, adjusted EBITDA for the quarter was a record at $1.81 billion, reflecting an increase of $162 million or 10%. The year-on-year dollar change includes a $197 million increase from rental, within which OER contributed $195 million while ancillary and re-rent added $2 million on a combined basis. Outside of rental, used sales were a headwind of about $10 million to adjust EBITDA, while other non-rental lines of businesses were up $4 million. SG&A in the quarter increased $29 million due primarily to increases in variable costs. As a percentage of sales, however, SG&A declined at about 100 basis points to 10.5% of total revenue.
Looking at fourth quarter profitability, our adjusted EBITDA margin decreased 150 basis points year-on-year to 48.5% due largely to the combined impact of Ahern and used margins. When looked at pro forma, our EBITDA margin ex-used was down just 20 basis points, translating to flow through of 46% versus the 38% you can see on an as reported basis. And finally, our adjusted earnings per share increased 16% to $11.26.
Shifting to capex, gross rental capex was $430 million, reflecting a return to a more normalized seasonal cadence supported by improvements in the supply chain. You can also see this in our net rental capex, which declined $8 million.
Turning to return on invested capital and free cash flow, ROIC increased 90 basis points year-on-year to 13.6%, exceeding our weighted average cost of capital by over 260 basis points. Free cash flow also remains a good story with the year coming in at just over $2.3 billion, translating to a free cash margin of 16.1%, even as we continue to fund significant organic growth. The business continues to generate very strong free cash flow on both an absolute and relative basis. As Matt said, this provides us with a lot of flexibility to drive shareholder value across the cycle through both investment in growth and the return of excess capital to our investors. More on this in a bit.
Moving to the balance sheet, our net leverage ratio at the end of the quarter improved two-tenths of a turn sequentially to 1.6 times, while our total liquidity exceeded $3.3 billion at year's end. And as a reminder, we continue to have no long-term note maturities until 2027. Notably, all of this was after returning over $1.4 billion to shareholders in 2023. This included $1 billion through share repurchases and $406 million via dividends. Combined, this translated to the return of over $20 per share during the year.
Now let's look forward and talk more about our 2024 guidance. Total revenue is expected in the range of $14.65 billion to $15.15 billion, implying full-year growth of about 4% at midpoint. Within total revenue, I'll note that our used sales guidance is implied at roughly $1.5 billion or down mid-single digits year-on-year on a percentage basis, which implies slightly better growth within our core rental revenue. Within used, I'll add that we expect to sell around $2.5 billion of OEC, translating to a recovery rate of about 60% versus roughly 66% in 2023, but historical norms that are more in the 50% to 55% range.
Our adjusted EBITDA range is $6.9 billion to $7.15 billion at midpoint, excluding the impact of used, this implies flow through in the 40s [Phonetic] and flattish adjusted EBITDA margins versus as-reported flow through of around 30% at approximately 70 basis points of year-on-year margin compression at the midpoint of guidance. On the fleet side, our gross capex guidance is $3.4 billion to $3.7 billion with net capex of $1.9 billion to $2.2 billion. And finally, we are guiding to another strong year of free cash flow in the range of $2 billion to $2.2 billion.
Now let's shift to our updated balance sheet and capital allocation strategy. First and foremost, we remain focused on funding growth, where we can generate attractive returns, both organically and through acquisitions. Beyond that, our goal is to allocate excess free cash flow to drive shareholder value. And to this end, last night we announced several exciting things:
First, consistent with the intentions we shared a year ago when we introduced our dividend, we are increasing our quarterly payment by 10% to $1.63 per share, or $6.52 per share annualized. I'll add that it remains our plan to consistently grow our dividend in line with long-term earnings.
Second, we plan to repurchase $1.5 billion of common stock in 2024, an increase of $500 million versus what we bought in 2023. So in total, we intend to return over $1.9 billion to shareholders this year, equating to almost $30 per share or a return of capital yield of over 5% based on our current share price.
Lastly, and importantly, we were able to do this while also lowering our targeted full cycle leverage range by half turn to 1.5 times to 2.5 times. As a reminder, this reduction follows the similar half turn reduction we announced in mid-2019. As most of you know, this is something we've been working towards with the idea of building an even stronger company and critically driving shareholder value. What's more, this has all been achieved after fully funding growth.
Just to provide some perspective, since 2019, when we introduced the first leg of our enhanced capital allocation strategy, our revenue has increased by more than 50%, our EBITDA has increased closer to 60%, and our earnings per share has grown more than 130%. While at the same time, our leverage ratio has declined from 2.6 times at the end of 2019 to 1.6 times at the end of 2023. This combination of results has supported very strong shareholder value creation that our team is very proud of and remains very focused on sustaining.
So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.
