President & Chief Executive Officer at United Rentals
Thank you, operator, and good morning, everyone. Thanks for joining our call. I want to frame my comments today around one word, demand. 2022 is shaping up to be a year of record demand for our services, and this is the driving force behind the strong first quarter results we reported, and it underpins our decision to update our guidance.
As you saw yesterday, we now expect our total revenue, adjusted EBITDA and free cash flow to be above our original outlook. This reflects the positive impact of the new cycle we talked about in January, and we're excited to continue that conversation today. I'll start with some highlights in the quarter. It became clear that this was not typical seasonality. Our rental revenue tends to be down from Q4 to Q1 as winter section, and that's true for the industry as well. But this year, we saw only about half of that normal decline. And as you may recall, we brought in more fleet than usual at the end of last year, and that capacity helped us to capitalize on demand and deliver strong results in key metrics.
Our first quarter rental revenue and adjusted EBITDA both increased by 31% year-over-year to record levels, and we improved our adjusted EBITDA margin by 270 basis points to 45%. This gave us a strong flow-through of 57% for the quarter. And we also drove a 200 basis point improvement in return on invested capital to 10.9%. And while the numbers speak for themselves, it's the drivers behind the numbers that we want to focus on today. First, the underlying macroeconomic growth, which continues to move in the right direction, also, the sustained rebound in many of our end markets coming out of COVID; and lastly, rental penetration in the construction and industrial sectors. We expect all three tailwinds to continue for the foreseeable future.
We're also confident that we're gaining share with key customers as we leverage our ability to solve their problems. This is the best way to further differentiate United Rentals in the customer's eyes. And importantly, we see runway here as well. And there's a future tailwind emerging from the infrastructure legislation. We're starting to have conversations with customers about federal projects that should kick off in 2023. And it's a diverse mix with projects for road and bridge work, water control, harbors and ports, and also on the power grid.
I also want to call attention to something that may not be so apparent on the surface, which is just how good our team is at managing growth. When demand ramps up in our business, it requires a tremendous amount of operating discipline, especially with customer service. We're very fortunate to have a world-class team standing behind our strategy. There's tangible value to this, and we set the Company up to be opportunistic, and our people excel at execution. I'll give you some quick examples. The first quarter gave us a big lever for growth, with demand running above seasonality. We have the right people and the right fleet in place to pull that lever.
And as a result, we achieved a 13% year-over-year increase in fleet productivity, with strong incremental flow-through to the bottom line. The team also excelled at safety, keeping our recordable rate below one for the quarter while safely on-boarding and training over 1,400 new employees.
On the ESG front, we made headway on a number of initiatives. For example, in March, we added power bank systems to our fleet. These lithium battery packs have zero emissions and replaced some of the diesel fuel used by generators. The OEMs are beginning to move faster with R&D, which should make hybrid and electrical solutions more viable on job sites, and we welcome that because we're firmly committed to a sustainable future that makes sense for our customers. So stay tuned for more updates on that going forward.
To flesh out the backdrop for everything I just described, our operating environment is, in many ways, the same positive broad-based outlook we shared with you in January, but with an extra layer of visibility.
Our line of sight for the balance of '22 has improved based on what we saw in Q1, including the number of projects underway, with solid backlogs and the level of customer bid activity. Not surprisingly, our customer confidence index improved as well, and the underlying data supports it. All of our regions had significant double-digit increase in rental revenue. In fact, year-over-year growth in the first quarter outpaced the growth we saw in Q4. Another positive indicator is the continued strength in the pricing environment for used equipment.
When we made a strategic decision to sell less equipment in the quarter relative to our initial plans to make sure we could take care of the customers in the robust demand we were seeing. But when you look at what we did sell, our OEC recovery levels improved from the fourth quarter, and our used margins set a new record. More broadly, the data on construction starts and backlogs, the ABI and the Dodge Momentum Index all remain positive. In fact, it's hard to find a leading construction indicator that isn't flash in green right now. We factored all of this into our guidance, along with some projected headwinds like inflation.
We're not immune to the challenges in the macro, but we mitigated the impact of inflation in Q1, and we're confident that we'll continue to manage through any challenges successfully; so that's the big picture. And I'll round it out with some details at the market level. In the first quarter, our rental revenue from non-res construction was up 28% year-over-year, and infrastructure was up 17%. Industrial also trended up, with 13% year-over-year growth. And that 13% growth is encouraging because industrial was on its way to recovery before the pandemic hit.
Once the supply chain is sorted out, we expect that industrial like infrastructure will be another sizable runway for us beyond 2022. Our Specialty segment had another excellent quarter led by our power business. Every specialty line delivered double-digit year-over-year growth in rental revenue, and the segment as a whole grew almost 48%, including the benefit from General Finance. It's been 11 months since we completed that acquisition. In the mobile storage and modular office business is clicked right into place. We've given these specialty businesses more resources, and they're cross-selling ahead of schedule. This has all the hallmarks of a home run for our customers.
When we said at the time we closed that deal that we wanted the double size of that business in five years while 11 months in, we're firmly on track to make that happen. Additionally, in specialty, we opened 13 cold starts in the fourth quarter -- in the first quarter towards our target of about 40 cold starts this year.
So to sum it up, I've conveyed the scope of the market opportunity going forward and our competitive positioning to capture that growth. The prevailing trends that matter to our business are market-driven, and our markets are healthy. It's why we've been bullish about this year from day one and why we raised our guidance when demand continued to track above our initial forecast. 2022 is off to a very strong start with all the makings of a year of record results.
Now, Jess will go over those results, and then we'll go to Q&A. Jess, over to you.