Ted Grace
Executive Vice President and Chief Financial Officer at United Rentals
Thanks, Matt, and good morning, everyone. As you saw in the results we reported last night, the team did a great job delivering across the board, both in the quarter and for the full year. And importantly, as you can see in our guidance, we expect these trends to continue in 2023. Combined with the enhancements to our capital allocation strategy that we've announced this quarter, we are confident that we will continue to drive meaningful long-term value creation for our shareholders.
I'll dig into this more in a bit, but first, let's dive into the quarter. Fourth quarter rental revenue was a record $2.74 billion. That's an increase of $435 million or nearly 19% year-over-year. Within rental revenue, OER increased by $354 million or 18.6%. Our fleet average -- our average fleet size increased by 14.2%, which provided a $270 million benefit to revenue, and fleet productivity increased by healthy 5.9%, which added another $113 million. This was partially offset by our usual fleet inflation of 1.5% or roughly $29 million.
Also within the rental, ancillary revenues were higher by $81 million or 23.1% year-over-year, while re-rent was essentially flat. Outside of rental, fourth quarter used sales increased by roughly 26% to $409 million as we sold some fleet we have held back on selling earlier in the year. To help accomplish this, we brought in our channel mix for used sales in Q4 to something closer to normalized levels. The net of this was our adjusted use margins increased by 940 basis points year-over-year to 61.6% supported by strong pricing.
Let's move to EBITDA. Adjusted EBITDA for the quarter was $1.65 billion, another record and an increase of $338 million or 25.8% year-on-year. The dollar change included a $291 million increase from rental within which OER contributed $256 million. Ancillary added $34 million and re-rent was up $1 million. Outside of rental, used sales added about $83 million to adjusted EBITDA, while other non-rental lines of businesses contributed another $18 million. SG&A was a $54 million headwind to adjusted EBITDA due primarily to higher commissions and the continued normalization of certain discretionary costs. As a percentage of sales, however, SG&A was down slightly year-over-year.
Looking at fourth-quarter profitability, our adjusted EBITDA margin increased 280 basis points to 50.0%. Excluding the benefit of used sales, flow-through was in line with recent quarters at a healthy 59%. I'll add that within the fourth quarter results, in the roughly three weeks we owned Ahern, the business contributed about $54 million of total revenue, the vast majority of which was rental and roughly $20 million of EBITDA. And finally, fourth quarter adjusted EPS was $9.74 per share. That's an increase of $2.35 per share or almost 32% year-on-year.
Turning to capex, the fourth quarter gross rental capex was $980 million, and net rental capex was $571 million. This represents an increase of $205 million in net capex year-over-year, which positions us well for the growth we see in 2023.
Now, let's look at return on invested capital and free cash flow. ROIC was another highlight at a record 12.7% on a trailing 12-month basis. That's up 50 basis points sequentially and an increase of 240 basis points year-on-year. Free cash flow also continues to be very strong, with the year coming in at $1.76 billion or a free cash margin of better than 15%, all while continuing to fund growth.
Turning to the balance sheet. Our leverage ratio at the end of the quarter was 2.0 times on an as-reported basis, including the impact of the Ahern acquisition. More importantly, on a pro forma basis, our year-end leverage ratio was flat sequentially at 1.9 times. And finally, our liquidity at the end of the quarter was a very robust $2.9 billion with no long-term note maturities until 2027.
Now, let's look forward and talk about our 2023 guidance. Total revenue is expected in the range of $13.7 billion to $14.2 billion, implying full-year growth of about 20% at the midpoint and pro forma growth of roughly 12%. This increase is supported by the momentum we've carried into the New Year, particularly within rental revenue and the contribution from Ahern. Within total revenue, I'll note that our used sales guidance is implied at $1.3 billion, with the expectation that we'll sell roughly $2 billion of OEC. This 35% increase in used sales year-over-year primarily reflects two things. First, is the normalization of our used sales as the supply chain continues to improve. And second, a substantially larger fleet, including the addition of Ahern to our business.
We remain focused on efficiently converting this growth to our bottom line. Our adjusted EBITDA range is $6.6 billion to $6.85 billion. On an as-reported basis, including the impact of Ahern, at the midpoint, this implies roughly flat full-year adjusted EBITDA margins and flow-through of about 48%. On a pro forma basis, however, which we think is the more appropriate way to think about it, our guidance would imply roughly 80 basis points of margin expansion and flow through in the mid-50s.
On the fleet side, our initial gross capex guidance is $3.3 billion to $3.55 billion, with net capex of $2 billion to $2.25 billion.
And finally, our free cash guidance is $2.1 billion to $2.35 billion. To be clear, this is before dividends and repurchases. Assuming these two factors are a use of cash of roughly $1.4 billion that leaves $825 million of remaining free cash flow to fund additional growth or reduce net debt.
Now before we go to Q&A, I want to make some additional comments on our updated capital allocation strategy. Specifically around our plans to return excess cash to our investors. As you heard Matt say, we are very pleased to be adding a dividend program to our mix. Based on an initial yield of 1.5%, we expect to pay $5.92 in dividends per share in 2023. This will translate to approximately $400 million this year or roughly 18% of free cash flow. We expect that our first quarterly dividend payment of $1.48 will be made on February 22, with all four payments expected within the calendar year.
Following the transformation of the company over the last decade or so, we feel that it's the appropriate time to add this last element to our capital return strategy to help drive greater shareholder value. Not only will this help expand the universe of potential investors, we expect that it will also provide another means of enhancing total returns for our investors over time. It also reflects the confidence we have in our operating model to consistently generate considerable excess free cash flow after investing in growth. We're also very pleased to announce the restart of our share repurchase program, which we paused in November with the announcement of Ahern. The restart is probably a bit ahead of schedule, but the integration is off to a great start and the decision is well supported by the financial performance we expect this year. It's our intention to repurchase $1 billion of the $1.25 billion authorization in calendar 2023.
As Matt said, these two programs combined should return approximately $1.4 billion to our shareholders this year or about $20 per share at the same time that we continue to see substantial growth in our earnings.
Finally, I want to be clear that these announcements are being made in the context of our continued commitment to a disciplined balance sheet strategy. Our financial strength has served the company and its shareholders very well, and we're not planning any changes there.
So with that, we'll turn to Q&A. Operator, could you please open the line?
