Q1 2027 Sunbelt Rentals Holdings Inc Earnings Call

September 9, 2026

Operator: Greetings, and welcome to the Sunbelt Rentals first quarter fiscal year 2027 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. We ask you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations. Kevin, please go ahead.

Speaker #1: Greetings, and welcome to the Sunbelt Rentals first quarter fiscal year 2027 earnings call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker #1: You may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask that you please ask one question in one follow-up, then return to the queue.

Speaker #1: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0 on your telephone keypad. It's not my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations, Kevin, please go ahead.

Operator: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations. Kevin, please go ahead.

Speaker #2: Thank you, operator. And good morning, everyone. This morning, I'm joined by Brendan Horgan, our Chief Executive Officer and Alex Pease, our Chief Financial Officer.

Kevin Powers: Thank you, operator, and good morning, everyone. This morning, I am joined by Brendan Horgan, our Chief Executive Officer, and Alex Pease, our Chief Financial Officer. Today, we will review our first quarter results for the period ended 31 July 2026, discuss our operating and financial performance, and we will share industry perspectives and strategic outlook. We will then open the call for questions. Let me remind you that today's call will include forward-looking statements. These statements are based on the environment as we see it today and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the press release and 8-K filing, as well as other filings with the SEC. Today, we are reporting financial results on a US GAAP basis.

Speaker #2: Today, we will review our first quarter results for the period ended July 31, 2026, discuss our operating and financial performance, and we will share industry perspectives and strategic outlook.

Speaker #2: We will then open the call for questions. Let me remind you that today's call will include forward-looking statements. These statements are based on the environment as we see it today and are subject to risk and uncertainties that could cause actual results at different materially from our expectations and projections.

Kevin Powers: These statements are based on the environment as we see it today and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the press release and 8-K filing, as well as other filings with the SEC. Today, we are reporting financial results on a US GAAP basis.

Speaker #2: These risks and uncertainties include but are not limited to the factors identified in the press release and AK filing, as well as other filings with the SCC.

Speaker #2: Today, we are reporting financial results on a US gap basis. In addition, we will be discussing non-gap information that we believe is useful in evaluating the company's operating performance.

Kevin Powers: In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations to these non-GAAP measures to the closest GAAP equivalent can be found in the earnings release and the conference call materials. Before we start, I will note that we will be attending the Morgan Stanley Annual Laguna Conference next week, and we hope to see some of you there. Now I would like to turn the call over to Brendan.

Speaker #2: Reconciliations to these non-GAAP measures to the closest GAAP equivalent can be found in the earnings release and the conference call materials. Before we start, I'll note that we'll be attending the Morgan Stanley Laguna Conference next week, and we hope to see some of you there.

Speaker #2: And now, I'd like to turn the call over to Brendan.

Speaker #3: Great, thanks, Kevin, and good morning, everyone. As you've now come to expect, we'll begin with an update on our safety performance before heading into the Q1 highlights.

Brendan Horgan: Great. Thanks, Kevin, and good morning, everyone. As you have now come to expect, we will begin with an update on our safety performance before heading into the Q1 highlights. I am proud to report that we continue to see world-class safety performance across the organization. In the quarter, we achieved a total recordable incident rate of 0.46 and a lost time rate of 0.14. Results like these do not happen overnight. They reflect the strength of our Engage for Life culture and our team's relentless focus on doing the right things the right way. I cannot thank our team members enough for their commitment to safety, dedication to our customers, and their drive to get better every day. Our culture of continuous improvement and disciplined execution remains a key differentiator for Sunbelt, and it continues to show up in our performance, especially reflected in our recent results.

Speaker #3: I'm proud to report that we continue to see world-class safety performance across the organization. In the quarter, we achieved a total recordable incident rate of 0.46 and a lost time rate of 0.14.

Speaker #3: Results like these do not happen overnight. They reflect the strength of our engaged-for-life culture and our team's relentless focus on doing the right things the right way.

Brendan Horgan: They reflect the strength of our Engage for Life culture and our team's relentless focus on doing the right things the right way. I cannot thank our team members enough for their commitment to safety, dedication to our customers, and their drive to get better every day. Our culture of continuous improvement and disciplined execution remains a key differentiator for Sunbelt, and it continues to show up in our performance, especially reflected in our recent results.

Speaker #3: I cannot thank our team members enough for their commitment to safety, dedication to our customers, and their drive to get better every day. Our culture of continuous improvement and disciplined execution remains a key differentiator for Sunbelt, and it continues to show up in our performance, especially reflected in our recent results.

Speaker #3: Now, on to the quarter. We delivered record first-quarter results in revenue, adjusted EBITDA, adjusted operating profit, and adjusted EPS. These results were supported by strong levels of demand across a broad range of end markets.

Brendan Horgan: Now on to the quarter. We delivered record Q1 results in revenue, adjusted EBITDA, adjusted operating profit, and adjusted EPS. These results were supported by strong levels of demand across a broad range of end markets, including mega projects, energy, live events, industrial non-construction MRO, along with another quarter of stability and demand in our local non-residential construction markets. Notably, rental revenue growth was broad throughout our customer base, with strength across small and medium enterprises and outsized growth with our large and strategic customers. Growth that significantly outpaced the broader market, demonstrating the strength of our leading position and breadth of expertise and solutions. The momentum we're seeing across the business gives us confidence in the trajectory of the year ahead. As a result of this, we are raising our fiscal 2027 guidance for revenue, adjusted EBITDA, and CapEx.

Speaker #3: Including mega projects, energy, live events, and industrial non-construction MRO, along with another quarter of stability and demand in our local non-residential construction markets. Notably, rental revenue growth was broad throughout our customer base.

Brendan Horgan: Notably, rental revenue growth was broad throughout our customer base, with strength across small and medium enterprises and outsized growth with our large and strategic customers. Growth that significantly outpaced the broader market, demonstrating the strength of our leading position and breadth of expertise and solutions. The momentum we're seeing across the business gives us confidence in the trajectory of the year ahead. As a result of this, we are raising our fiscal 2027 guidance for revenue, adjusted EBITDA, and CapEx.

Speaker #3: With strength across small and medium enterprises, and outsized growth with our large and strategic customers. Growth that significantly outpaced the broader market demonstrating the strength of our leading position and breadth of expertise and solutions.

Speaker #3: The momentum we're seeing across the business gives us confidence in the trajectory of the year ahead, and as a result, we are raising our fiscal '27 guidance for revenue, adjusted EBITDA, and CapEx.

Speaker #3: Alex will cover this and our financial performance. In greater detail shortly, but first, I'd like to highlight the quarter and the drivers that underpin our confidence in the business.

Brendan Horgan: Alex will cover this and our financial performance in greater detail shortly, but first, I'd like to highlight the quarter and the drivers that underpin our confidence in the business. Total revenue grew 11% and rental revenue increased 13% as growth accelerated across North America General Tool and Specialty, which increased 7% and 25% respectively. Adjusted operating profit increased 14%, with margins expanding to 24.4%, while adjusted EBITDA increased 9% at a margin of 42.2%, compared with 43.2% last year. The adjusted EBITDA margin performance was consistent with our expectations, reflecting faster growth in ancillary revenues and in Specialty. Although this mix shift affects EBITDA margin, Specialty generates structurally higher returns on investment than General Tool, meaning each point of sales mix towards Specialty will, over time, enhance our return on capital.

Speaker #3: Total revenue grew 11%, and rental revenue increased 13%. As growth accelerated across North America General Tool and specialty, which increased 7% and 25% respectively.

Speaker #3: Adjusted operating profit increased 14%, with margins expanding to 24.4%, while adjusted EBITDA increased 9% at a margin of 42.2%, compared with 43.2% last year.

Speaker #3: The adjusted EBITDA margin performance was consistent with our expectations, reflecting faster growth and ancillary revenues and in specialty. Although this mixed shift affects EBITDA margin, specialty generates structurally higher returns on investment than general tool, meaning each point of sales mix toward specialty will over time enhance our return on capital.

Brendan Horgan: The adjusted EBITDA margin performance was consistent with our expectations, reflecting faster growth in ancillary revenues and in Specialty. Although this mix shift affects EBITDA margin, Specialty generates structurally higher returns on investment than General Tool, meaning each point of sales mix towards Specialty will, over time, enhance our return on capital.

Speaker #3: Finally, adjusted EPS increased 20.4% to a first quarter record of $1.18, driven by higher operating profit and the benefit of our share repurchase program.

Brendan Horgan: Finally, adjusted EPS increased 20.4% to a Q1 record of $1.18, driven by higher operating profit and the benefit of our share repurchase program. These results reflect our disciplined investment, stronger pricing execution, improved recovery of fuel and delivery costs, and most importantly, our ability to deliver for our customers. That success is driven by the hard work, best-in-class execution, and customer-obsessed mindset of our team members. During the quarter, we continued to win across a broad range of opportunities, from serving as the sole rental provider on a leading hospital expansion in Rochester, Minnesota, to supporting one of Canada's largest data center developments in Saskatchewan, to summer cooling solutions for large distribution and warehouse operations, and of course, one of our most-watched projects this summer, the 2026 FIFA World Cup.

Speaker #3: These results reflect our disciplined investment, stronger pricing execution, improved recovery of fuel and delivery costs, and, most importantly, our ability to deliver for our customers.

Speaker #3: That success is driven by the hard work, best-in-class execution, and customer-obsessed mindset of our team members. During the quarter, we continued to win across a broad range of opportunities.

Brendan Horgan: That success is driven by the hard work, best-in-class execution, and customer-obsessed mindset of our team members. During the quarter, we continued to win across a broad range of opportunities, from serving as the sole rental provider on a leading hospital expansion in Rochester, Minnesota, to supporting one of Canada's largest data center developments in Saskatchewan, to summer cooling solutions for large distribution and warehouse operations, and of course, one of our most-watched projects this summer, the 2026 FIFA World Cup.

Speaker #3: From serving as the hospital expansion in Rochester, Minnesota, to supporting one of Canada's largest data center developments in Saskatchewan, to summer cooling solutions for large distribution and warehouse operations, and of course, one of our most-watched projects this summer, the 2026 FIFA World Cup.

Speaker #3: While these are only a few examples of our proven position as a partner of choice for the most complex projects, we're experiencing strong, broad-based customer activity which continues to support higher fleet on rent levels, higher utilization, and strengthening rate momentum.

Brendan Horgan: While these are only a few examples of our proven position as a partner of choice for the most complex projects, we're experiencing strong, broad-based customer activity, which continues to support higher fleet on rent levels, higher utilization, and strengthening rate momentum. As local activity remains stable, we're encouraged by the positive leading indicators, especially in two specific areas. First, when we look at the Dodge Momentum Index, it continues to show increased positive movement in planning activity, which historically moves into construction starts within 12 to 18 months. Second, industry supply and demand remains balanced, supported by strong utilization levels and improved pricing. Manufacturers have maintained capacity discipline while fleet investment remains closely aligned with customer demand. As project activity expands, particularly across mega projects and energy demand, customer requirements become more complex. Providers with scale, fleet availability, and specialized expertise are best positioned to win.

Speaker #3: As local activity remains stable, we're encouraged by the positive leading indicators especially in two specific areas. First, when we look at the Dodge momentum index, it continues to show increased positive movement in planning activity, which historically moves into construction starts within 12 to 18 months.

Speaker #3: Second, industry supply and demand remain balanced, supported by strong utilization levels and improved pricing. Manufacturers have maintained capacity discipline, while fleet investment remains closely aligned with customer demand.

Brendan Horgan: Second, industry supply and demand remains balanced, supported by strong utilization levels and improved pricing. Manufacturers have maintained capacity discipline while fleet investment remains closely aligned with customer demand. As project activity expands, particularly across mega projects and energy demand, customer requirements become more complex. Providers with scale, fleet availability, and specialized expertise are best positioned to win.

Speaker #3: As project activity expands, particularly across mega projects and energy demand, customer requirements become more complex, providers with scale, fleet availability, and specialized expertise are best positioned to win.

Speaker #3: We believe these dynamics position Sunbelt to capture attractive growth opportunities across our markets. Against this backdrop, broad-based growth accelerated throughout general tool and specialty.

Brendan Horgan: We believe these dynamics position Sunbelt to capture attractive growth opportunities across our markets. Against this backdrop, broad-based growth accelerated throughout General Tool and Specialty. General Tool benefited from increased fleet on rent and activity across our local markets and strategic accounts. While Specialty delivered strong growth, notably across powered HVAC, climate control, scaffolding, flooring, pump, ground protection, and temporary fencing. Within Specialty, energy solutions remain a significant opportunity for Sunbelt. As power needs become increasingly complex, our customers are looking for partners who can deliver both equipment and expertise. Through our Energy Management as a Service offering, we are helping customers manage these needs across the project lifecycle, positioning us exceptionally well to capture ongoing growth. What continues to differentiate Sunbelt is our ability to leverage the full breadth of our platform to serve customers in more meaningful ways.

Speaker #3: General tool benefited from increased fleet on rent and activity across our local markets and strategic accounts. While specialty delivered strong growth, notably across Power HVAC, climate control, scaffolding, flooring, pump, ground protection, and temporary fencing.

Speaker #3: Within Specialty, energy solutions remain a significant opportunity for Sunbelt. As power needs become increasingly complex, our customers are looking for partners who can deliver both equipment and expertise.

Brendan Horgan: As power needs become increasingly complex, our customers are looking for partners who can deliver both equipment and expertise. Through our Energy Management as a Service offering, we are helping customers manage these needs across the project lifecycle, positioning us exceptionally well to capture ongoing growth. What continues to differentiate Sunbelt is our ability to leverage the full breadth of our platform to serve customers in more meaningful ways.

Speaker #3: Through our energy management as a service offering, we're helping customers manage these needs across the project lifecycle. Positioning us exceptionally well to capture ongoing growth.

Speaker #3: We'll continue to differentiate Sunbelt as our ability to leverage the full breadth of our platform to serve customers in more meaningful ways. Through the power of Sunbelt as we call it, we are increasingly bringing together our general tool and specialty offerings, which now include modular solutions capabilities.

Brendan Horgan: Through the Power of Sunbelt, as we call it, we are increasingly bringing together our General Tool and Specialty offerings, which now include modular solutions capabilities. This enables us to support a broader range of customer needs, and the integrated approach deepens customer relationships, increases share of wallet, and creates new cross-selling opportunities throughout our current and future customer base. Importantly, our system integration of Aries into Sunbelt was complete in early August, which will help support future needs. As we integrate modular solutions into our offering, the immediate cross-selling opportunity is evident. Our teams are introducing modular solutions to existing Sunbelt customers, while former Aries customers are gaining access to a broader General Tool and Specialty portfolio. This early adoption reinforces our view that customers value multiple solutions through a single relationship.

Speaker #3: This enables us to support a broader range of customer needs, and the integrated approach deepens customer relationships, increases share of wallet, and creates new cross-selling opportunities throughout our current and future customer base.

Speaker #3: Importantly, our system integration of ARES into Sunbelt was completed in early August, which will help support future needs. As we integrate modular solutions into our offering, the immediate cross-selling opportunity is evident.

Brendan Horgan: As we integrate modular solutions into our offering, the immediate cross-selling opportunity is evident. Our teams are introducing modular solutions to existing Sunbelt customers, while former Aries customers are gaining access to a broader General Tool and Specialty portfolio. This early adoption reinforces our view that customers value multiple solutions through a single relationship.

Speaker #3: Our teams are introducing modular solutions to existing Sunbelt customers while former ARES customers are gaining access to a broader general tool and specialty portfolio.

Speaker #3: This early adoption reinforces our view that customers value multiple solutions to a single relationship. Looking ahead, we see meaningful opportunities to expand modular through greenfield openings, fleet investment, and continued integration across the power of Sunbelt.

Brendan Horgan: Looking ahead, we see meaningful opportunities to expand modular through greenfield openings, fleet investment, and continued integration across the Power of Sunbelt. Modular Solutions is currently in just 14 of our top 50 Sunbelt markets, and we continue to expect to significantly scale the business in the coming years. With that, I will turn it over to Alex for more detail on the quarter and updated outlook.

Speaker #3: Modular Solutions is currently in just 14 of our top 50 Sunbelt markets, and we continue to expect to significantly scale the business in the coming years.

Speaker #3: With that, I'll turn it over to Alex for more detail on the quarter and updated outlook.

Speaker #2: Thanks, Brendan. And thank you to everyone who joined us on the call today. As Brendan noted, first quarter momentum was strong across the business, led by broad-based growth across general tool and specialty.

Alex Pease: Thanks, Brendan, and thank you to everyone who joined us on the call today. As Brendan noted, Q1 momentum was strong across the business, led by broad-based growth across General Tool and Specialty. This was supported by the ongoing structural progression across our business and our industry, as well as continued execution of our strategy to deepen market presence and expand our addressable market opportunities. Total revenue increased 11.2% to $3.1 billion, while rental revenue grew 12.5% to $2.9 billion. The contribution from Aries acquisition contributed approximately 100 basis points to rental revenue growth, and we estimate that the contribution from our efforts to support the FIFA World Cup added another 250 basis points to rental revenue growth in the quarter. Total company average OEC increased 6%, and also within rental revenue, ancillary revenues grew at more than two times rental revenue growth.

Speaker #2: This was supported by the ongoing structural progression across our business and our industry, as well as continued execution of our strategy to deepen market presence and expand our addressable market opportunities.

Speaker #2: Total revenue increased 11.2% to $3.1 billion, while rental revenue grew 12.5% to $2.9 billion. The contribution from the ARES acquisition added approximately 100 basis points to rental revenue growth, and we estimate that our efforts to support the FIFA World Cup contributed another 250 basis points to rental revenue growth in the quarter.

Alex Pease: The contribution from Aries acquisition contributed approximately 100 basis points to rental revenue growth, and we estimate that the contribution from our efforts to support the FIFA World Cup added another 250 basis points to rental revenue growth in the quarter. Total company average OEC increased 6%, and also within rental revenue, ancillary revenues grew at more than two times rental revenue growth.

Speaker #2: Total company average OEC increased 6% and also within rental revenue, ancillary revenues grew at more than two times rental revenue growth. Moving to used equipment, while sales were $85 million compared to $103 million last year, we saw a recovery rates increase pointing to pricing stabilization and demand within the used equipment market.

Alex Pease: Moving to used equipment, while sales were $85 million compared to $103 million last year, we saw recovery rates increase, pointing to pricing stabilization and demand within the used equipment market. As we continue to scale our new retail channel, we expect used equipment margins to improve further. Depreciation expense was $556 million, and adjusted operating profit increased 13.8% to $759 million, with operating margins expanding 60 basis points to 24.4%. The improvement in margins was primarily due to SGA expense leverage and a reduction of depreciation expense as a percent of sales, reflecting our disciplined approach to fleet growth investments. Adjusted EBITDA increased 8.7% to $1.3 billion at a margin of 42.2%, compared to the prior year quarter of 43.2%. We estimate that roughly three-quarters of the year-over-year margin change reflected higher relative growth in ancillary revenue, partially offset by rate improvement.

Speaker #2: As we continue to scale our new retail channel, we expect used equipment margins to improve further. Appreciation expense was $556 million and adjusted operating profit increased 13.8% to $759 million.

Speaker #2: Operating margins expanded by 60 basis points to 24.4%. The improvement in margins was primarily due to SG&A expense leverage and a reduction of depreciation expense as a percent of sales, reflecting our disciplined approach to fleet growth investments.

Alex Pease: The improvement in margins was primarily due to SGA expense leverage and a reduction of depreciation expense as a percent of sales, reflecting our disciplined approach to fleet growth investments. Adjusted EBITDA increased 8.7% to $1.3 billion at a margin of 42.2%, compared to the prior year quarter of 43.2%. We estimate that roughly three-quarters of the year-over-year margin change reflected higher relative growth in ancillary revenue, partially offset by rate improvement.

Speaker #2: Adjusted EBITDA increased 8.7% to $1.3 billion at a margin of 42.2% compared to the prior year quarter of 43.2%. We estimate that roughly three-quarters of the year-over-year margin change reflected higher relative growth in ancillary revenue, partially offset by rate improvement.

Speaker #2: Importantly, adjusted EBITDA margin improved 350 basis points sequentially from the fourth quarter, reflecting better recovery of higher fuel and delivery costs as well as pricing momentum.

Alex Pease: Importantly, adjusted EBITDA margin improved 350 basis points sequentially from the Q4, reflecting better recovery of higher fuel and delivery costs, as well as pricing momentum. Finishing up the P&L, interest expense was $107 million, and adjusted pre-tax profit was $652 million. Adjusted EPS increased 20.4% to $1.18 per share. Turning to our segments, North America General Tool total revenue increased 5.7% to $1.7 billion. Rental revenue increased 7.4%, and dollar utilization was consistent with last year at 47%. This improved growth was driven primarily by higher fleet on rent, supported by rate improvement. Adjusted operating profit increased 4%, and adjusted EBITDA increased 3.2% at a margin of 51.5% compared to 52.8% last year. We estimate that about half the margin change in the quarter was the result of higher fuel costs, which was partially mitigated by rate. Continuing with our segments.

Speaker #2: Finishing up the P&L, interest expense was $107 million and adjusted pre-tax profit was $652 million. Adjusted EPS increased 20.4% to $1.18 per share. Turning to our segments.

Speaker #2: North America General Tool total revenue increased 5.7% to $1.7 billion. Rental revenue increased 7.4% and dollar utilization was consistent with last year at 47%.

Speaker #2: This improved growth was driven primarily by higher fleet on rent, supported by rate improvement. Adjusted operating profit increased 4% and adjusted EBITDA increased 3.2% at a margin of 51.5% compared to 52.8% last year.

Alex Pease: This improved growth was driven primarily by higher fleet on rent, supported by rate improvement. Adjusted operating profit increased 4%, and adjusted EBITDA increased 3.2% at a margin of 51.5% compared to 52.8% last year. We estimate that about half the margin change in the quarter was the result of higher fuel costs, which was partially mitigated by rate. Continuing with our segments.

Speaker #2: We estimate that about half the margin change in the quarter was the result of higher fuel costs, which was partially mitigated by rate. Continuing with our segments.

Speaker #2: North American Specialty total revenue increased 24.5% to $1.1 billion. Rental revenue grew 25.3%, and dollar utilization increased 300 basis points to 77%. Growth was broad-based across multiple verticals, led by Power and HVAC, and also benefited from recent acquisitions as well as World Cup-related activity.

Alex Pease: North American Specialty total revenue increased 24.5% to $1.1 billion. Rental revenue grew 25.3%, and dollar utilization increased 300 basis points to 77%. Growth was broad-based across multiple verticals led by power and HVAC, and also benefited from recent acquisitions, as well as World Cup-related activity. Our acquisition of Aries in May added approximately 300 basis points to specialty rental revenue growth in the quarter. Adjusted operating profit increased 24.3%, with margins consistent with last year, supported by ancillary revenue growth of more than 40%, with strong returns on capital. Adjusted EBITDA increased 19%, with a margin of 45.8% compared to 48% last year. We estimate that about three-quarters of the margin change in the quarter was due to higher relative growth of ancillary revenues.

Speaker #2: Our acquisition of ARES in May added approximately 300 basis points to specialty rental revenue growth in the quarter. Adjusted operating profit increased 24.3%, with margins consistent with last year, supported by ancillary revenue growth of more than 40% and strong returns on capital.

Alex Pease: Adjusted operating profit increased 24.3%, with margins consistent with last year, supported by ancillary revenue growth of more than 40%, with strong returns on capital. Adjusted EBITDA increased 19%, with a margin of 45.8% compared to 48% last year. We estimate that about three-quarters of the margin change in the quarter was due to higher relative growth of ancillary revenues.

Speaker #2: Adjusted EBITDA increased 19% with a margin of 45.8% compared to 48% last year. We estimate that about three-quarters of the margin change in the quarter was due to higher relative growth of ancillary revenues.

Speaker #2: As a reminder, within ancillary revenues, these offerings to our customers reflect the specialized expertise and labor-intensive installation often required for our solutions, particularly in complex energy management projects.

Alex Pease: As a reminder, within ancillary revenues, these offerings to our customers reflect the specialized expertise and labor-intensive installation often required for our solutions, particularly in complex energy management projects. These projects deliver attractive returns, deepen rental penetration, and expand our addressable market. UK total revenue was $240 million. Adjusted EBITDA was $61 million at a margin of 25.4%, while adjusted operating profit margin expanded 10 basis points to 8.3%. In addition, dollar utilization improved to 54%. We continue to remain focused on actions to improve margins and return on investment within this segment. Moving on to CapEx, gross rental capital expenditures nearly doubled to $759 million, and net rental capital expenditures increased 78% to $682 million. The higher level of investment is supporting existing customer project wins while we are experiencing higher time utilization across the fleet as our project pipeline continues to grow. Shifting to returns and cash flow.

Speaker #2: These projects deliver attractive returns, deepen rental penetration, and expand our addressable market. UK total revenue was $240 million, adjusted EBITDA was $61 million, at a margin of 25.4%, while adjusted operating profit margin expanded 10 basis points to 8.3%.

Speaker #2: In addition, dollar utilization improved to 54%. We continue to remain focused on actions to improve margins and return on investment within this segment. Moving on to CapEx.

Alex Pease: In addition, dollar utilization improved to 54%. We continue to remain focused on actions to improve margins and return on investment within this segment. Moving on to CapEx, gross rental capital expenditures nearly doubled to $759 million, and net rental capital expenditures increased 78% to $682 million. The higher level of investment is supporting existing customer project wins while we are experiencing higher time utilization across the fleet as our project pipeline continues to grow. Shifting to returns and cash flow.

Speaker #2: Gross rental capital expenditures nearly doubled to $759 million, and net rental capital expenditures increased 78% to $682 million. The higher level of investment is supporting existing customer project wins while we are experiencing higher time utilization across the fleet, as our project pipeline continues to grow.

Speaker #2: Shifting to returns and cash flow. Our return on investment on a trailing 12-month basis remains strong at 14.6%, which was an improvement from year-end, and we expect continued progress this year.

Alex Pease: Our return on investment on a trailing 12-month basis remains strong at 14.6%, which was an improvement from year-end, and we expect continued progress this year. Free cash flow in the quarter was $70 million, and the change compared to the prior year reflects significant growth in CapEx combined with the timing of cash payments in Q1 related to equipment landings, which occurred in Q4 2026. We expect free cash flow generation to improve throughout the year as our business continues to demonstrate through-the-cycle cash generation. This supported the opening of 13 greenfield locations in the quarter and will remain on track to open approximately 55 this year. We also completed two acquisitions, including the previously announced Aries acquisition, which combined added 17 specialty locations.

Speaker #2: Free cash flow in the quarter was $70 million and the change compared to the prior year reflects significant growth in CapEx combined with the timing of cash payments in the first quarter, related to equipment landings, which occurred in the fourth quarter of 2026.

Speaker #2: We expect free cash flow generation to improve throughout the year, as our business continues to demonstrate, through this cycle, strong cash generation. This supported the opening of 13 greenfield locations in the quarter, and we remain on track to open approximately 55 this year.

Alex Pease: We expect free cash flow generation to improve throughout the year as our business continues to demonstrate through-the-cycle cash generation. This supported the opening of 13 greenfield locations in the quarter and will remain on track to open approximately 55 this year. We also completed two acquisitions, including the previously announced Aries acquisition, which combined added 17 specialty locations.

Speaker #2: We also completed two acquisitions, including the previously announced ARES acquisition, which combined added 17 specialty locations. On the balance sheet, next net leverage was $1.8 times at the end of July.

Alex Pease: On the balance sheet, net leverage was 1.8 times at the end of July, within our long-term target range of one to two times. Liquidity remains strong at approximately $3.8 billion. Of note during the quarter, we completed an offering of $1.2 billion in unsecured senior notes consisting of a $450 million tranche at a rate of 4.95% and a $750 million tranche at a rate of 5.65%. The success of these transactions demonstrates the strength of our balance sheet and our investment-grade rating, as well as extending our debt maturity profile and providing additional financial flexibility. We intend to use the net proceeds for refinancing existing debt, funding capital expenditures and working capital, and supporting other business opportunities. During the quarter, we returned $363 million to shareholders through share repurchases and dividends.

Speaker #2: Within our long-term target range of 1 to 2 times. Liquidity remained strong at approximately 3.8 billion. Of note, during the quarter, we completed an offering of $1.2 billion in unsecured senior notes consisting of a $450 million tranche at a rate of 4.95% and a $750 million tranche at a rate of 5.65%.

Speaker #2: The success of these transactions demonstrates the strength of our balance sheet and our investment-grade rating as well as extending our debt maturity profile and providing additional financial flexibility.

Alex Pease: The success of these transactions demonstrates the strength of our balance sheet and our investment-grade rating, as well as extending our debt maturity profile and providing additional financial flexibility. We intend to use the net proceeds for refinancing existing debt, funding capital expenditures and working capital, and supporting other business opportunities. During the quarter, we returned $363 million to shareholders through share repurchases and dividends.

Speaker #2: We intend to use the net proceeds for refinancing existing debt, funding capital expenditures, and working capital and supporting other business opportunities. During the quarter, we returned $363 million to shareholders through share repurchases and dividends.

Speaker #2: In the quarter, we made our final fiscal year 2026 dividend payment of $75 per share under our previous UK framework, and we are now transitioning to quarterly dividends as a US-listed company.

Alex Pease: In the quarter, we made our final fiscal year 2026 dividend payment of 75 cents per share under our previous UK framework, and we are now transitioning to quarterly dividends as a US-listed company. Our first quarterly dividend of 30 cents will be paid on 2 October, and our capital allocation priorities remain consistent: organic growth, bolt-on M&A, supporting our progressive dividend, and finally, share repurchases. Now let's move to fiscal 2027 guidance. We are raising our outlook for the year and now expect total revenue growth between 6% and 9% and rental revenue growth between 7% and 10%. These updated ranges reflect our Q1 performance, continued strength across our large and strategic customers, strong mega-project activity, as well as stable local non-residential construction markets. We now expect adjusted EBITDA of between $4.92 billion and $5.12 billion.

Speaker #2: Our first quarterly dividend of $0.30 will be paid on October 2nd, and our capital allocation priorities remain consistent: organic growth, bolt-on M&A, supporting our progressive dividend, and, finally, share repurchases.

Speaker #2: Now let's move to fiscal 2027 guidance. We're raising our outlook for the year and now expect total revenue growth between 6 and 9 percent and rental revenue growth between 7 and 10 percent.

Alex Pease: Now let's move to fiscal 2027 guidance. We are raising our outlook for the year and now expect total revenue growth between 6% and 9% and rental revenue growth between 7% and 10%. These updated ranges reflect our Q1 performance, continued strength across our large and strategic customers, strong mega-project activity, as well as stable local non-residential construction markets. We now expect adjusted EBITDA of between $4.92 billion and $5.12 billion.

Speaker #2: These updated ranges reflect our first quarter performance, continued strength across our large and strategic customers, strong mega-project activity, as well as stable local, non-construction, non-residential construction markets.

Speaker #2: We now expect adjusted EBITDA of between $4.92 billion and $5.12 billion. This represents solid year-over-year dollar growth, and we continue to expect full-year margins to be broadly consistent with the prior year.

Alex Pease: This represents solid year-over-year dollar growth, and we continue to expect full-year margins to be broadly consistent with the prior year. On fleet investment, we are raising gross capital expenditure guidance to between $2.75 billion to $3.15 billion and raising net rental capital expenditure guidance to between $2.4 billion and $2.8 billion. These increases are driven by demand that has exceeded our original expectations, particularly across mega projects, specialty, and energy. The additional investment is targeted toward these specific growth opportunities and supported by committed customer demand and strong fleet productivity. With these increases to guidance, we continue to expect strong free cash flow generation throughout the year while investment levels are increasing to support accelerating growth opportunities across the business. We remain confident in our ability to generate meaningful cash flow and create long-term value for shareholders.

Speaker #2: On fleet investment, we're raising gross capital expenditure guidance to between $2.75 billion to $3.15 billion. And raising net rental capital expenditure guidance to between $2.4 billion and $2.8 billion.

Speaker #2: These increases are driven by demand that has exceeded our original expectations, particularly across mega projects specialty and energy. The additional investment is targeted toward these specific growth opportunities and supported by committed customer demand and strong fleet productivity.

Alex Pease: The additional investment is targeted toward these specific growth opportunities and supported by committed customer demand and strong fleet productivity. With these increases to guidance, we continue to expect strong free cash flow generation throughout the year while investment levels are increasing to support accelerating growth opportunities across the business. We remain confident in our ability to generate meaningful cash flow and create long-term value for shareholders.

Speaker #2: With these increases to guidance, we continue to expect strong free cash flow generation throughout the year, while investment levels are increasing to support accelerating growth opportunities across the business.

Speaker #2: We remain confident in our ability to generate meaningful cash flow and create long-term value for shareholders. Before we begin the Q&A, I'm going to pass it back to Brendan to give us some closing thoughts.

Alex Pease: Before we begin the Q&A, I am going to pass it back to Brendan to give us some closing thoughts.

Speaker #3: Thanks, Alex. And to wrap things up, if there's one takeaway from today's call, it is that we have clear top-line and bottom-line growth and momentum.

Brendan Horgan: Thanks, Alex. To wrap things up, if there is one takeaway from today's call, it is what we have clear top-line and bottom-line growth and momentum with broad-based strength across the business. As an organization, we remain laser-focused on our customer success obsession, share gains, driving improved utilization, progressing rate further, improved recovery of fuel and delivery costs, and advancing the operational excellence initiatives that support further efficiency gains. The team delivered a strong quarter and as reflected in our increased guidance today, the beginning of what we expect to be a great year. With that, operator, we will open the call for questions.

Speaker #3: With broad-based strength across the business, as an organization, we remain laser-focused on our customer success obsession, share gains, driving improved utilization, progressing rate further, improved recovery of fuel and delivery cost, and advancing the operational excellence initiatives that support further efficiency gains.

Brendan Horgan: As an organization, we remain laser-focused on our customer success obsession, share gains, driving improved utilization, progressing rate further, improved recovery of fuel and delivery costs, and advancing the operational excellence initiatives that support further efficiency gains. The team delivered a strong quarter and as reflected in our increased guidance today, the beginning of what we expect to be a great year. With that, operator, we will open the call for questions.

Speaker #3: The team delivered a strong quarter and has reflected in our increased guidance today. The beginning of what we expect to be a great year.

Speaker #3: And with that, operator, we will open the call for questions.

Speaker #1: Thank you. We'll now be conducting a question-and-answer session. As a reminder, if you'd like to be placed into the question queue, please press star 1 on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. As a reminder, if you would like to be placed into question queue, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Operator: You may press star two if you would like to remove your question from the queue. As a reminder, please ask one question, one follow-up, then return to the queue. One moment please, while we poll for questions. Our first question today is coming from Rob Wertheimer from Melius Research. Your line is now live.

Speaker #1: And as a reminder, please ask one question, one follow-up, then return to the queue. One moment, please, while we pull for questions. Our first question today is coming from Rob Wertheimer from Melius Research.

Speaker #1: Your line is now live.

Speaker #4: Thanks. Good morning. So obviously, it's strong revenue momentum. Up margins up, which is great. When you look at margin performance overall, ancillary drag, I guess we can call it kind of a good thing, you had some fuel costs.

Rob Wertheimer: Thanks. Good morning. Obviously strong revenue momentum, op margins up, which is great. When you look at margin performance overall, ancillary drag, I guess we can call that kind of a good thing. You had some fuel costs. Can you kind of remind us on what time frame you typically recover fuel cost? Does it feel as easy to do that, as typical or as it should in this environment? In other words, can you get back pretty easily on that?

Speaker #4: Can you remind us of the typical timeframe in which you recover fuel costs? And does it feel as easy to do that as usual, or as it should be, in this environment?

Speaker #4: In other words, can you get back pretty easily from that?

Speaker #3: Yeah, sure. Good morning, Rob. From a fueling standpoint, there's three points, of course, where we charge for the service of fueling: fueling at the rental return—which is no harder than it's ever been, and is really just mechanical.

Brendan Horgan: Yeah, sure. Good morning, Rob. From a fueling standpoint, there are three points, of course, where we charge for the service of fueling. Fueling at the rent to return, which is no real harder than it has ever been, and it is remarkably just mechanical. Second will be on larger on-site fueling services that are part and parcel of an overall package, and also would include in that larger live events. There we have a range of different agreements that are part of the overall engineered design and solution with pricing to the customer. Then of course, a large element of that is just what we charge for the service of delivery and pickup of our rental assets. It is also worth pointing out in all that, this is all very high ROI because we are making margin on all that.

Speaker #3: Second will be on larger on-site fueling services that are part and parcel of an overall package. And also would include in that larger live events.

Speaker #3: And there we have a range of different agreements that are part of the overall engineered design and solution with pricing to the customer. And then, of course, a large element of that is just what we charge for the service of delivery and pickup of our rental assets.

Brendan Horgan: There we have a range of different agreements that are part of the overall engineered design and solution with pricing to the customer. Then of course, a large element of that is just what we charge for the service of delivery and pickup of our rental assets. It is also worth pointing out in all that, this is all very high ROI because we are making margin on all that.

Speaker #3: It's also worth pointing out in all that, this is all very high ROI because we're making margin on all that. The margin is very a bit between those different tranches and different sort of project applications and scale.

Brendan Horgan: The margins vary a bit between those different tranches and different sort of product applications and scale. Nonetheless, we are seeing that progress as you have seen that sequentially, as you pointed out, that we are seeing all this actually flow through positive incrementally to adjusted operating income.

Speaker #3: But nonetheless, we are seeing that progress as you've seen you pointed out that we are seeing all this actually flow through positive incrementally to adjusted operating income.

Speaker #4: Okay, perfect. And then obviously, revenue growth is pretty strong. Can you just update us on how you think about flow-through? I don't know if there's any abnormal inflation pressures or just investments you're doing or whether we continue to see kind of healthy flow-through.

Rob Wertheimer: Okay, perfect. Obviously revenue growth is pretty strong. Can you just update us on how you think about flow-through? I do not know if there is any abnormal inflation pressures or some investments you are doing or whether we continue to see kind of healthy flow-through. I will stop there. Thanks.

Speaker #4: I'll stop there. Thanks.

Speaker #3: Yeah, thanks, Rob. Look, we look at flow-through from an EBITDA flow-through standpoint. We look at EBITA or an operating profit flow-through. And I think really the question is answered in the guide.

Brendan Horgan: Yeah. Thanks, Rob. We look at flow-through from an EBITDA flow-through standpoint. We look at an EBITA or an operating profit flow-through. I think really the question is answered in the guide. So we have increased our rents revenue guide, and we have actually maintained our margin. You heard Alex talk about how ancillary revenue growth is significantly outpacing that of pure rental revenue growth, and that demonstrates really the focus and the discipline and the operational excellence initiatives that the business has underway that are driving incremental margins, in those ancillaries. As I have just said, they are being accretive.

Speaker #3: So, we've increased our rental revenue guide, and we've actually maintained our margin. You heard Alex talk about how ancillary revenue growth is significantly outpacing that of pure rental revenue growth.

Brendan Horgan: You heard Alex talk about how ancillary revenue growth is significantly outpacing that of pure rental revenue growth, and that demonstrates really the focus and the discipline and the operational excellence initiatives that the business has underway that are driving incremental margins, in those ancillaries. As I have just said, they are being accretive.

Speaker #3: And that demonstrates really the focus and the discipline and the operational excellence initiatives that the business has underway that are driving incremental margins in those ancillaries.

Speaker #3: And there, as I've just said, they're being accretive.

Speaker #4: Thank you.

Rob Wertheimer: Thank you.

Speaker #1: Thank you. Next question is coming from Annelise Mullen from Morgan Stanley. Your line is now live.

Operator: Thank you. Next question is coming from Annelise Vermeulen from Morgan Stanley. Your line is now live.

Speaker #5: Hi, good morning, Brendan and Alex. My first question is also on the margins. You're keeping your EBITDA margin guide flat year over year, but your operating profit margins are higher for the first time in a couple of years, I think.

Annelise Vermeulen: Hi, good morning, Brendan and Alex. My first question was also on the margins. You are keeping your EBITDA margin guide flat year-over-year, but your operating profit margins are higher for the first time in a couple of years, I think. That is despite the fact that I think you said previously Aries would be a margin drag in year 1. So can we unpack that progress a little bit in terms of how much is the lower depreciation charge? How much is better rates or better utilization, better fuel pass-through that you have already touched on? Any mixed effects to consider, clearly with specialty growing faster? Putting all that together, would you expect to continue to progress operating profit margins in the coming quarters? That is the first one.

Annelies Vermeulen: Hi, good morning, Brendan and Alex. My first question was also on the margins. You are keeping your EBITDA margin guide flat year-over-year, but your operating profit margins are higher for the first time in a couple of years, I think. That is despite the fact that I think you said previously Aries would be a margin drag in year 1.

Speaker #5: And that's despite the fact that I think you said previously, Aries would be a margin drag in year one. So can we unpack that progress a little bit in terms of how much is the lower depreciation charge?

Annelies Vermeulen: So can we unpack that progress a little bit in terms of how much is the lower depreciation charge? How much is better rates or better utilization, better fuel pass-through that you have already touched on? Any mixed effects to consider, clearly with specialty growing faster? Putting all that together, would you expect to continue to progress operating profit margins in the coming quarters? That is the first one.

Speaker #5: How much is better rates or better utilization, better fuel pass-through that you've already touched on? Any mix effects to consider? Clearly, with Specialty growing faster.

Speaker #5: And putting all that together, would you expect to continue to progress operating profit margins in the coming quarters? That's the first

Speaker #2: Okay, so there was a lot there, Annelise. I'll do my best, and then just feel free to ask follow-ons if I don't get it all.

Alex Pease: Okay, so there was a lot there, Annelise. I will do my best and then just feel free to ask follow-ons if I do not get it all. First of all, underlying the guide, we are continuing to assume that Specialty growth will outpace General Tool. So you will continue to have this mix impact of Specialty growth growing significantly more than General Tool, even though both segments will continue to demonstrate strong growth levels. So you will have that dynamic there. We also, because of the significant amount of mega-project activity and live events, will still see significantly higher ancillary growth. So again, as a reminder, and especially for this quarter, 75% of the margin was explained by this higher level of ancillary growth. We would anticipate that to continue.

Speaker #2: So first of all, underlying the guide, we are continuing to assume that specialty growth will outpace general tools. So you'll continue to have this mix impact, especially growth growing significantly more than general tool, even though both segments will continue to demonstrate strong growth levels.

Speaker #2: So you will have that dynamic there. We also because of the significant amount of mega project activity and live events, we'll still see significantly higher ancillary growth.

Alex Pease: So you will have that dynamic there. We also, because of the significant amount of mega-project activity and live events, will still see significantly higher ancillary growth. So again, as a reminder, and especially for this quarter, 75% of the margin was explained by this higher level of ancillary growth. We would anticipate that to continue.

Speaker #2: So again, as a reminder, and especially for this quarter, 75% of the margin was explained by this higher level of ancillary growth. We would anticipate that to continue.

Speaker #2: In terms of the other factors that you mentioned, Brendan talked about fuel, typically takes a quarter or so before we start realizing the benefits of the fuel surcharges and so we should anticipate seeing that.

Alex Pease: In terms of the other factors that you mentioned, Brendan talked about fuel typically takes a quarter or so before we start realizing the benefits of the fuel surcharges. So we should anticipate seeing that. Then all of the operational efficiency initiatives that we are executing on around delivered cost recovery, as we mentioned, managing overtime expenses, staffing levels, those sorts of things, are already generating significant operational benefits, and we will begin to see the financial benefits of those. Last thing I will mention is we have actually not baked in a lot of momentum on rate despite the fact rate improvement has accelerated through the quarter. So that would represent upside to the guide. We have also pointed out in our prepared remarks that the local residential construction markets remain stable, and that is also what is embedded in our guide. So hopefully that helped unpack your question a little bit.

Speaker #2: And then all of the operational efficiency initiatives that we're executing on around delivered cost recovery, as we mentioned—managing overtime expenses, staffing levels, those sorts of things—are already generating significant operational benefits, and we'll begin to see the financial benefits of those.

Speaker #2: Last thing I'll mention is we've actually not baked in a lot of momentum on rate, despite the fact rate improvement has accelerated through the quarter.

Alex Pease: Last thing I will mention is we have actually not baked in a lot of momentum on rate despite the fact rate improvement has accelerated through the quarter. So that would represent upside to the guide. We have also pointed out in our prepared remarks that the local residential construction markets remain stable, and that is also what is embedded in our guide. So hopefully that helped unpack your question a little bit.

Speaker #2: So that would represent upside. To the guide, we've also pointed out in our prepared remarks that the local residential construction markets remain stable. And that's also what's embedded in our guide.

Speaker #2: So hopefully that helped unpack your question a little bit.

Speaker #5: Yeah, super clear. Thank you, Alex. And then the second one was on the CapEx guide, which you've raised today. So could you talk a bit about where that additional fleet is going and how much of that is indicative of what you expect for demand into next year rather than in this fiscal year?

Annelise Vermeulen: Yeah, super clear. Thank you, Alex. Then the second one was on the CapEx guide, which you have raised today. So could you talk a bit about where that additional fleet is going and how much of that is indicative of what you expect for demand into next year rather than in this fiscal year? As part of that, do you have any concerns around over-fleeting in the industry, given all the CapEx increases we have seen across the sector so far this year? Thank you.

Annelies Vermeulen: Yeah, super clear. Thank you, Alex. Then the second one was on the CapEx guide, which you have raised today. So could you talk a bit about where that additional fleet is going and how much of that is indicative of what you expect for demand into next year rather than in this fiscal year? As part of that, do you have any concerns around over-fleeting in the industry, given all the CapEx increases we have seen across the sector so far this year? Thank you.

Speaker #5: And as part of that, do you have any concerns around overfleeting in the industry, given all the CapEx increases we've seen across the sector so far this year?

Speaker #5: Thank you.

Speaker #3: Sure, Annelise. I'll take that. Look, this CapEx that was deployed in the quarter, and the CapEx that we have guided here today, the increase in the balance of the year CapEx, this is very much opportunity CapEx.

Brendan Horgan: Sure, Annelise, I will take that. Look, this CapEx that was deployed in the quarter, and the CapEx that we have guided here today, the increase in the balance of your CapEx, this is very much opportunity CapEx. So the growth CapEx inside of that, not that, which is not the replacement CapEx, is going to areas of immediate opportunity. Be that our Specialty same-store branches, greenfield openings, which have been very biased to Specialty over the course of the quarter, mega project wins, et cetera. I guess really important your question, though, when it comes to, are we concerned with industry over-fleeting? Certainly the way that we are seeing things today, I mentioned in the prepared remarks, we see a pretty strong discipline from an OEM capacity standpoint. Said another way, they are just not creating all that much or manufacturing all that much more equipment going into the marketplace.

Speaker #3: So the growth CapEx inside of that, not that which is not the replacement CapEx, is going to areas of immediate opportunity. Be that our specialty same-store branches, greenfield openings, which have been very, very biased to specialty over the course of the quarter, mega project wins, etc.

Speaker #3: I think it's really important in your question, though, when it comes to are we concerned with industry overfleeting? And certainly the way that we're seeing things today, I mentioned in the prepared remarks, we see pretty strong discipline from an OEM capacity standpoint.

Brendan Horgan: I guess really important your question, though, when it comes to, are we concerned with industry over-fleeting? Certainly the way that we are seeing things today, I mentioned in the prepared remarks, we see a pretty strong discipline from an OEM capacity standpoint. Said another way, they are just not creating all that much or manufacturing all that much more equipment going into the marketplace.

Speaker #3: Said another way, they're just not creating all that much or manufacturing all that much more equipment. Going into the marketplace. And yes, we've seen CapEx raises from other public companies.

Brendan Horgan: Yes, we have seen CapEx raises from other public companies. It really demonstrates the big getting bigger. Because the opportunities that we are talking about today in many of these markets are just that. Customers looking for a far broader solution that the likes of Sunbelt are able to deliver. One thing we have been watching extraordinarily closely as we think about that local non-res market that we are talking about has good demand but is stable on a year-over-year basis. How much of the fleet growth is going to our same-store general tool? If you look at it in round numbers, our fleet size is about 1.4 bigger at the end of July than it was last year.

Speaker #3: It really demonstrates the big getting bigger because the opportunities that we're talking about today in many of these markets are just that. Customers looking for a far broader solution that the likes of Sunbelt are able to deliver.

Speaker #3: One thing we've been watching extraordinarily closely as we think about that local non-res res market that we're talking about has good demand but is stable on a year-over-year basis.

Brendan Horgan: One thing we have been watching extraordinarily closely as we think about that local non-res market that we are talking about has good demand but is stable on a year-over-year basis. How much of the fleet growth is going to our same-store general tool? If you look at it in round numbers, our fleet size is about 1.4 bigger at the end of July than it was last year.

Speaker #3: How much of the fleet growth is going to our same-store general tools? So if you look at it round numbers, our fleet size is about 1.4 bigger at the end of July than it was last year.

Speaker #3: And if you look at where that has grown, only $100 million or so has gone to our general tools, same stores, meaning those branches only have 1% more fleet than they had a year ago.

Brendan Horgan: If you look at where that has grown, only 100 million or so has gone to our general tool same stores, meaning those branches only have 1% more fleet than they had a year ago. Look at the growth that they delivered in the quarter, which gives us great comfort that we are not over-fleeting that local non-res business. Even though we continue to see improved signs there, what you are seeing from the businesses, which is a bit added on to your first question that Alex covered, you are seeing improved time utilization. You are seeing improved rental rate. You are seeing improved operational excellence, discipline, and execution. Look no further than seeing a rental revenue growing at 12.5% versus depreciation growing at 2.5%. Very important that we are in this really good place from a supply and demand standpoint.

Speaker #3: And look at the growth that they delivered in the quarter. Which gives us great comfort that we're not overfleeting that local non-res business, even though we continue to see improved signs there.

Brendan Horgan: Even though we continue to see improved signs there, what you are seeing from the businesses, which is a bit added on to your first question that Alex covered, you are seeing improved time utilization. You are seeing improved rental rate. You are seeing improved operational excellence, discipline, and execution. Look no further than seeing a rental revenue growing at 12.5% versus depreciation growing at 2.5%. Very important that we are in this really good place from a supply and demand standpoint.

Speaker #3: What you're seeing from the business is, which is a bit added on to your first question that Alex covered, you're seeing improved time utilization.

Speaker #3: You're seeing improved rental rates. You're seeing improved operational excellence, discipline, and execution. And look no further than rental revenue growing at 12.5% versus depreciation growing at 2.5%.

Speaker #3: Very important that we're in this really good place from a supply and demand standpoint.

Speaker #5: Perfect. Thank you, Brendan. See you at Laguna.

Annelise Vermeulen: Perfect. Thank you, Brendan. See you at Laguna.

Annelies Vermeulen: Perfect. Thank you, Brendan. See you at Laguna.

Speaker #3: Thank you.

Speaker #2: Thank you.

Brendan Horgan: Thank you.

Speaker #1: Thank you. Next question is coming from Jerry Revich from Wells Fargo. Your line is now live.

Operator: Thank you. Next question is coming from Jerry Revich from Wells Fargo. Your line is now live.

Speaker #4: Yes, hi. Good morning, everyone. Alex, I want to just go back to the comments that you made earlier in terms of rental rate being a positive surprise.

Jerry Revich: Yes. Hi, good morning, everyone. Alex, I'm wondering if you could just go back to the comments that you made earlier in terms of the rental rate being a positive surprise. Can you just frame that for us? Typically, in an upcycle, we see rental rate during construction season up 50 to 100 basis points per month. Is that the magnitude of improvement that you're seeing? Can you just calibrate us on where your general rental time yield stands, versus prior cycle highs? Just to put that in perspective. Thanks.

Speaker #4: Can you just frame that for us? Typically, in an upcycle, we see rental rate during construction season up 50 to 100 basis points per month.

Speaker #4: Is that the magnitude of improvement that you're seeing? And can you just calibrate us on where your general rental time you'd stand versus prior cycle highs just to put that in perspective?

Speaker #4: Thanks.

Speaker #2: Sure. Sure. So I'll give you sort of the current state on the battlefield and then Brendan can talk about prior cycles, just given his history.

Alex Pease: Well, I'll give you sort of the current state on the battlefield, and then Brendan can talk about prior cycles, just given his history. We obviously don't comment specifically on rate. What I will say is the momentum with rate has been improving as we've gone through the year, and we're continuing to see that in through August. As Brendan would've mentioned in his prepared remarks and also in his response to Annelise's question, supply and demand is tight. Utilization rates are up, and fleet on rent is up. All that would point to a very supportive rate environment. That's sort of consistent with what we would see through the balance of the year.

Speaker #2: We obviously don't comment specifically on rate, but what I will say is the momentum with rate has been improving as we've gone through the year.

Speaker #2: And we're continuing to see that in through August. So as Brendan would have mentioned in his prepared remarks and also in his response to Annelise's question, supply and demand is tight.

Alex Pease: As Brendan would've mentioned in his prepared remarks and also in his response to Annelise's question, supply and demand is tight. Utilization rates are up, and fleet on rent is up. All that would point to a very supportive rate environment. That's sort of consistent with what we would see through the balance of the year.

Speaker #2: Utilization rates are up. And fleet on rent is up. So all that would point to a very supportive rate environment. So that's sort of consistent with what we would see through the balance of the year.

Speaker #2: Obviously, as I mentioned in my response to Annelise's comment, to the extent the rate environment continues to accelerate, that would be upside to our guidance.

Alex Pease: Obviously, as I mentioned in my response to Annelise's comment, to the extent the rate environment continues to accelerate, that would be upside to our guidance, and I'll turn it over to Brendan to comment on how this compares to prior cycles.

Speaker #2: And I'll turn it over to Brendan to comment on how this compares to prior cycles.

Brendan Horgan: Yeah. First, Jerry, thanks, but I'll just say, I don't think Alex said surprise. If he did say surprise, didn't mean to say surprise. We weren't surprised with rate over the course of the quarter. That was exactly what we expected. We challenged the team this year to drive the overall economics. With the capital investment that the team has earned in the business, they've done just that. So they've delivered strength in time utilization, strength in wins, and strength in rental rate that progressed nicely from a momentum standpoint from May to June to July and moving forward. From a historical standpoint time utilization, we're in a really good position. We're in a really good position compared to our historical highs. So we're going to be in those top sort of two or three years that we've had over time.

Speaker #3: Yeah. First, Jerry, thanks, but I'll just say I don't think Alex said surprise. If he did say surprise, didn't mean to say surprise. We weren't surprised with rate.

Speaker #3: Over the course of the quarter, that was exactly what we expected. We challenged the team this year to drive the overall economics, and with the capital investment that the team has earned in the business, they've done just that.

Speaker #3: So they've delivered strength and time utilization, strength and wins, and strength in rental rate. That progressed nicely from a momentum standpoint from May to June to July.

Brendan Horgan: So they've delivered strength in time utilization, strength in wins, and strength in rental rate that progressed nicely from a momentum standpoint from May to June to July and moving forward. From a historical standpoint time utilization, we're in a really good position. We're in a really good position compared to our historical highs. So we're going to be in those top sort of two or three years that we've had over time.

Speaker #3: And moving forward, from a historical standpoint, time utilization, we're at a really good position. We're in a really good position compared to our historical highs.

Speaker #3: So we're going to be in those top sort of two or three years that we've had over time. And it appears as though so does the industry.

Brendan Horgan: And it appears as though so does the industry. But it's worth pointing out, just as our team would say to us, "Hey, I'm at my all-time high in a particular district, region," et cetera, we'll remind them that our quantities are a lot higher than they were before. So if you own 1,000 in a market as opposed to owning 500 of a particular Cat Class in a market, you have the ability to extract even higher time utilization with having healthy availability there to say yes to our customers. Look, as we all know, when it comes to rental rates in this industry, first things first. Think about how resilient pricing was over the last few years, and look at now the momentum in pricing. Momentum's required, a bit of swagger is required, and that's exactly what the team's delivering.

Speaker #3: But it's worth pointing out, just because—just as our team would say to us, "Hey, I'm at my all-time high in a particular district, region, etc."—we'll remind them that our quantities are a lot higher than they were before.

Speaker #3: So if you own 1,000 in a market as opposed to owning 500 of a particular cat class in a market, you have the ability to extract even higher time utilization with having healthy availability there to say yes to our customers.

Speaker #3: So look, as we all know, when it comes to rental rates in this industry, first things first. Think about how resilient pricing was over the last few years, and look at the momentum in pricing now. And momentum's required—a bit of swagger is required—and that's exactly what the team's delivering.

Brendan Horgan: Look, as we all know, when it comes to rental rates in this industry, first things first. Think about how resilient pricing was over the last few years, and look at now the momentum in pricing. Momentum's required, a bit of swagger is required, and that's exactly what the team's delivering.

Speaker #4: Yeah, super appreciate the context. And then, from the semis end market standpoint—the pricing improvement that we're seeing is with semis CapEx actually still coming down.

Jerry Revich: Yeah, super appreciate the context. From the semis end market standpoint, the pricing improvement that we're seeing is with semis CapEx actually still coming down, the CapEx plans from the industry are to go back towards 2024 level highs. Can you just put that in perspective for us on what that could mean for Sunbelt back in 2024, Brendan? Where was your fleet deployed towards semis and electronics, just so we can get a sense for the magnitude of upside as they ramp new semi fab facility CapEx from here?

Speaker #4: The CapEx plans from the industry are to go back towards 24-level highs. Can you just put that in perspective for us on what that could mean for Sunbelt back in 24?

Speaker #4: Brendan, where was your fleet deployed towards semis and electronics, just so we can get a sense of the magnitude of upside as they ramp new semi-fab facility CapEx from here?

Speaker #3: Yeah. I mean, look, we are, as I said, in terms of the CapEx, similar to how we executed in the first quarter in terms of where that CapEx was pointed.

Brendan Horgan: Yeah. Look, we are, as I said, in terms of the CapEx, similar to how we executed in the first quarter in terms of where that CapEx was pointed. The increased guide that we gave follows precisely that same path. I do think as we win more megas, and it's a very broad range of mega projects, not just those that you would have cited or embedded in your question. We'll see more of that allocate that way as well. But also further investment in some of the energy opportunities that we're seeing, some of the energy wins that we're seeing, and we expect that to continue to be at a very high time utilization level and with progressing rental rates.

Speaker #3: The increased guy that we gave follows precisely that same path. I do think as we win more megas and it's a very broad range of mega projects, not just those that you would have cited or embedded in your questions, we'll see more of that allocate that way as well.

Speaker #3: But also further investment in some of the energy opportunities that we're seeing, some of the energy wins that we're seeing. And we expect that to continue to be at a very high time utilization level and with progressing rental rate.

Brendan Horgan: But also further investment in some of the energy opportunities that we're seeing, some of the energy wins that we're seeing, and we expect that to continue to be at a very high time utilization level and with progressing rental rates.

Speaker #2: The only other point I'd make on your specific question, Brendan touched on it, but our mega project universe is incredibly diverse. It spans entertainment venues.

Alex Pease: The only other point I would make, on your specific question, Brendan touched on it, but our mega project universe is incredibly diverse. It spans entertainment venues, infrastructure projects, transportation projects. Semiconductor, which was your specific question, is only 3%. If you broaden your question to data centers more broadly, that is only 13%. So combined, that is 16% of our mega project universe. So we are certainly not over-indexed to that. The other point I would make is, of the projects in the funnel, a full 80% are either upcoming, ramping, or active. So the vast majority have at least a three-year time horizon ahead of us, and then there is 20% that are ramping down. So there is much more to come than is already behind us, would be the only additive points that I would make.

Speaker #2: IT infrastructure projects, transportation projects, semiconductor—which was your specific question—is only 3%. If you broaden your question to data centers more broadly, that's only 13%.

Speaker #2: So combined, that's 16% of our mega project universe. So we're certainly not over-indexed to that. The other point I'd make is of the projects in the funnel, a full 80% are either upcoming ramping or active.

Alex Pease: So combined, that is 16% of our mega project universe. So we are certainly not over-indexed to that. The other point I would make is, of the projects in the funnel, a full 80% are either upcoming, ramping, or active. So the vast majority have at least a three-year time horizon ahead of us, and then there is 20% that are ramping down. So there is much more to come than is already behind us, would be the only additive points that I would make.

Speaker #2: So, the vast majority have at least a three-year time horizon ahead of us, and then there's 20% that are ramping down. So there's much more to come than is already behind us, would be the only additive point that I'd make.

Speaker #4: I appreciate the discussion. Thank you.

Jerry Revich: Appreciate the discussion. Thank you.

Speaker #3: Thanks, Jerry.

Brendan Horgan: Thanks, Jerry.

Speaker #1: Thank you. Next question is coming from Kyle Mendes from City Group Inc. Why is that live?

Operator: Thank you. Next question is coming from Kyle Menjes from Citigroup Inc. Your line is now live.

Kyle Menjes: Great. Thank you, guys. You touched on growth in small and medium-sized customers in the quarter. It sounds like you are just assuming a stable outlook for those customers going forward. Just would love to hear what you think has driven the growth, and just your thoughts on potential upside to that stable outlook and maybe what needs to happen to actually see that upside come through.

Speaker #5: All right. Thank you, guys. You touched on growth in small and medium-sized customers in the quarter. I mean, it sounds like you're just assuming a stable outlook for those customers going forward.

Speaker #5: Just would love to hear what you think has driven the growth and just your thoughts on potential upside to that stable outlook and maybe what needs to happen to actually see that upside come through.

Speaker #3: Yeah. Kyle, as part, I will refer to slide 7 and then slide 8 to answer this. But when we talk about stability, I want to be a bit more clear in terms of how precisely we are measuring this.

Brendan Horgan: Yeah, Kyle, I will refer to slide 7 and then slide 8 to answer this. When we talk about stability, I want to be a bit more clear in terms of how precisely we are measuring this. We have mentioned before our synthetic analysis of starts versus completion. All of you are familiar with Dodge. Dodge actually tracks projects from pre-planning, planning, design, bid, award, and then starts. Dodge themselves does not have a classification of a project as complete. So what we have done is we have created a synthetic version of that. If it is a six-story or below hotel, and on average that takes 22 months, that is what we plug into the system, and we have found this to be remarkably accurate over time.

Speaker #3: We've mentioned before our synthetic analysis of starts versus completion. All of you are familiar with Dodge. Dodge actually attracts projects from pre-planning, planning, design, bid, award, and then starts.

Brendan Horgan: Dodge actually tracks projects from pre-planning, planning, design, bid, award, and then starts. Dodge themselves does not have a classification of a project as complete. So what we have done is we have created a synthetic version of that. If it is a six-story or below hotel, and on average that takes 22 months, that is what we plug into the system, and we have found this to be remarkably accurate over time.

Speaker #3: Dodge themselves does not have a classification of a project as complete. So what we've done is we've created a synthetic version of that. So if it's a six-storey or below hotel and on average that takes 22 months, that's what we plug into the system.

Speaker #3: And we have found this to be remarkably accurate over time. And to put that in perspective, if we look at sort of a 28-month period from January 23 through April 2025, we saw 28 months that 28-month period where we saw completions outpacing starts in a rather meaningful way that actually led to a square footage reduction of 22% between that period and the 23 through between the 21 and 22 period to the 23 and 25 period.

Brendan Horgan: To put that in perspective, if we look at a 28-month period from January 2023 through April of 2025, we saw 28 months, that 28-month period where we saw completions outpacing starts in a rather meaningful way that actually led to a square footage reduction of 22% between the 2021 and 2022 period to the 2023 and 2025 period. What we have seen now from May of 2025 through today is 16 months of flat or positive. So that is how we are describing quite detailed, technically, how we see stability in that local non-res. When we look to see it move forward, we are looking for all the signs that we track internally, and those positive internal elements for us are our quotes, our reservations, our continuing contracts, daily contracts, et cetera, which we are all seeing point positive.

Speaker #3: What we've seen now from May of 2025 through today is 16 months of flat or positive. So that's how we're describing quite detailed technically how we see stability in that local non-res.

Brendan Horgan: What we have seen now from May of 2025 through today is 16 months of flat or positive. So that is how we are describing quite detailed, technically, how we see stability in that local non-res. When we look to see it move forward, we are looking for all the signs that we track internally, and those positive internal elements for us are our quotes, our reservations, our continuing contracts, daily contracts, et cetera, which we are all seeing point positive.

Speaker #3: When we look to see it move forward, we’re looking for all the signs that we track internally, and those positive internal elements for us are our quotes, our reservations, our continuing contracts, daily contracts, etc.

Speaker #3: which were all seen point positive. And then I will refer to the DMI on slide 7, and you'll see there once again, we have another high.

Brendan Horgan: I will refer to the DMI on slide 7, and you will see there, once again, we have another high. That is planning activity. That is speaking specifically to that local non-res construction, because those are projects under a half a billion, not including manufacturing. In July alone, we saw 59 projects of over $100 million in value. Similar to what Alex talked about on the mega project landscape side, even those projects are remarkably diverse between hospitals, solar. There is a bit of data center in there, but they are the smaller ones, research facilities, government buildings, recreational, just to name a few. That is what we see. It is why we are confident in terms of saying that we have good stability there, good supply and demand, and we look forward with quite a degree of confidence.

Speaker #3: So that's planning activity. So that's speaking specifically to that local non-res construction because those are projects under half a billion not including manufacturing. And just in July, alone, we saw 59 projects of over 100 million dollars in value.

Speaker #3: And similar to what Alex talked about on the mega project projects are remarkably diverse between hospitals, solar. There's a bit of data center in there, but they're the smaller ones.

Brendan Horgan: There is a bit of data center in there, but they are the smaller ones, research facilities, government buildings, recreational, just to name a few. That is what we see. It is why we are confident in terms of saying that we have good stability there, good supply and demand, and we look forward with quite a degree of confidence.

Speaker #3: Research facilities, government buildings, recreational—just to name a few. So that's what we see. It's why we are confident in terms of saying that we have good stability there, good supply and demand, and we look forward with quite a degree of confidence.

Kyle Menjes: That's great color, Brendan. Thank you for that. Just on Aries, would love to hear maybe your early learnings, now that you've completed the acquisition. Just also, I think you've mentioned potential greenfield store openings. Would just love to hear a little bit more about how you're thinking about maybe greenfields versus further M&A to augment that Aries portfolio.

Speaker #5: That's great, Kyle or Brendan. Thank you for that. And then just on Aries, would love to hear maybe your early learnings now that you've completed the acquisition.

Speaker #5: And then just also, I think you've mentioned potential greenfield store openings. Would just love to hear a little bit more about how you're thinking about maybe greenfields versus further M&A to augment that Aries portfolio.

Speaker #3: Sure. We have a very strong pipeline from an M&A standpoint. In the quarter, we added 30 locations. And that's a mix between 17, of course, which were Aries, and 13 greenfield.

Brendan Horgan: Sure. We have a very strong pipeline from an M&A standpoint. In the quarter, we added 30 locations, and that's a mix between 17, of course, which were Aries and 13 greenfield. Overall there between general tool and specialty, you're 26 and 4. I'm glad you asked the question in terms of how we're seeing things actually progress with Aries. We have a great lead funnel, and to be exact, we have 669 leads that have been tracked by what is today the Sunbelt Modular Solutions team with an overall value of GBP 24 million. To put that in perspective, that's one quarter worth of cross-selling, generating that level of opportunity for growth. There's over GBP 2.5 million landed and 14 of that, which is in actually hard RFPs. So we feel really strong and encouraged about that cross-selling and collaboration.

Speaker #3: So overall, they're between general tool and specialty year 26 and 4. I'm glad you asked the question in terms of how we're seeing things actually progress with Aries.

Speaker #3: We have a great lead funnel. And to be exact, we have 669 leads that have been tracked by what is today the Sunbelt modular solutions team, with an overall value of $24 million.

Brendan Horgan: We have a great lead funnel, and to be exact, we have 669 leads that have been tracked by what is today the Sunbelt Modular Solutions team with an overall value of GBP 24 million. To put that in perspective, that's one quarter worth of cross-selling, generating that level of opportunity for growth. There's over GBP 2.5 million landed and 14 of that, which is in actually hard RFPs. So we feel really strong and encouraged about that cross-selling and collaboration.

Speaker #3: Now, put that to put that perspective, that's one quarter worth of cross-selling generating that level of opportunity for growth. There's over two and a half million landed and 14 of that, which is in actually a hard RFPs.

Speaker #3: So we feel really strong and encouraged about that cross-selling and collaboration. I also mentioned on the call, as of August 1st, the systems integrations were complete.

Brendan Horgan: I also mentioned on the call, as of 1 August, the systems integrations were complete, so we have bounds of confidence that we will see that business grow significantly over the course of time and also contribute to even stronger growth for our broader specialty and general tool business.

Speaker #3: So, we have bounds of confidence that we will see that business grow significantly over the course of time, and also contribute to even stronger growth for our broader specialty and general tool business.

Kyle Menjes: Great. Thank you, Brendan.

Speaker #5: Great. Thank you, Brendan.

Speaker #3: Thank you.

Brendan Horgan: Thank you.

Speaker #1: Thank you. Next question is coming from Ken Newman from Key Bank Capital Markets. Your line is now live.

Operator: Thank you. Next question is coming from Ken Newman from KeyBanc Capital Markets. Your line is now live.

Speaker #6: Hey, good morning, guys. Thanks for taking the question and congrats on the nice quarter. I wanted to follow up on the question earlier about the increased fleet capex guide.

Ken Newman: Hey, good morning, guys. Thanks for taking the question and congrats on the nice quarter. Wanted to follow up on the question earlier about the increased fleet CapEx guide. I think one of your larger competitors noted earlier this year that it could be difficult for suppliers to further flex up production if demand were to continue to accelerate. Curious, are you guys seeing a similar dynamic from your specialty suppliers? Maybe just any color on how you think about balancing the opportunity to flex up production if demand comes in stronger versus maybe allowing the utilization rates and the dollar utilization rates to improve even further in that tightness.

Speaker #6: I think one of your larger competitors noted earlier this year that it could be difficult for suppliers to further flex their production if demand were to continue to accelerate.

Speaker #6: I'm curious, are you guys seeing a similar dynamic from your specialty suppliers and maybe just any color on how you think about balancing the opportunity to flex their production if demand comes in stronger versus maybe allowing the utilization rates and the dollar utilization rates to improve even further in that tightness?

Ken Newman: Curious, are you guys seeing a similar dynamic from your specialty suppliers? Maybe just any color on how you think about balancing the opportunity to flex up production if demand comes in stronger versus maybe allowing the utilization rates and the dollar utilization rates to improve even further in that tightness.

Speaker #3: Yeah, I think it's a fair characterization. I mean, let's face it—when it comes to primary OEMs that supply the industry, there's clear prioritization in terms of who gets the allocations first.

Brendan Horgan: Yeah, I think it's a fair characterization. Let's face it, when it comes to primary OEMs that supply the industry, there's clear prioritization in terms of who gets the allocations first. As you've come to expect from us, we are constantly working with our OEMs quite a long ways down the line. It is fair to say for certain high-demand SKUs, whether that be Telehandlers, Ultra Booms, power generation in the certainly 300 kW and above environments, there's not a whole heck of a lot of spare capacity out there. As a result of that, we are able to get our preferred position to contribute to what we've guided in terms of increase. There's not a whole heck of a lot of flex capacity out there beyond that.

Speaker #3: And as you've come to expect from us, we are constantly working with our OEMs quite a long ways down the line. It is fair to say for certain high-demand SKUs, so whether that be telehandlers, ultra booms, power generation in the certainly 300 KW and above environment, there's not a whole heck of a lot of spare capacity out there.

Brendan Horgan: It is fair to say for certain high-demand SKUs, whether that be Telehandlers, Ultra Booms, power generation in the certainly 300 kW and above environments, there's not a whole heck of a lot of spare capacity out there. As a result of that, we are able to get our preferred position to contribute to what we've guided in terms of increase. There's not a whole heck of a lot of flex capacity out there beyond that.

Speaker #3: And as a result of that, we are able to get our preferred position to contribute to what we guided in terms of increase. There's not a whole heck of a lot of flex capacity out there beyond that.

Speaker #3: But all of that is going to contribute to even more positive, as we talked about—as you mentioned in your question—dollar utilization, the ability to inch up time utilization further, and it creates a strong rate environment.

Brendan Horgan: But all of that is going to contribute to even more positive, as we talked about, as you mentioned in your question, dollar utilization, ability to inch up time utilization further, and it creates a strong rate environment.

Speaker #6: Yep. That makes sense. And then for the follow-up, Brendan, I think you mentioned earlier that data centers around 13% of the rental revenue exposure today.

Ken Newman: Yep, that makes sense. And then for the follow-up, Brendan, I think you mentioned earlier that data centers are around 13% of the rental revenue exposure today. Obviously, I think a lot of investors are hyper-focused on the AI infrastructure build-out here in the States. Curious, do you have any color on what you're seeing from activity, as it relates to maybe the rising moratoriums that you've seen across the country in recent months, or just any comments on visibility to that sector through the remainder of the year?

Speaker #6: Obviously, I think a lot of investors are hyper-focused on the AI infrastructure build-out here in the States. Curious, do you have any color on what you're seeing from activity as it relates to maybe the rising moratoriums that you've seen across the country in recent months, or just any comments on visibility to that sector through the remainder of the year?

Speaker #3: Yeah, sure. I mean, answered simply, we're seeing increased starts. So, projects that were planned are progressing to the actual start phase. Alex talked about the shape overall of the megaprojects in terms of their phases.

Brendan Horgan: Yeah, sure. Answered simply, we're seeing increased starts. Projects that were planned progressing to the actual start phase. Alex talked about the shape overall of the mega projects in terms of their phases. As we're seeing that, we continue to see the pipeline fill. When Alex talked about the spread of overall mega project activity, that's actually what the mega projects have been in terms of segment from effectively this year through 2030. Yes, data centers is 13% of that overall. You have big contributing areas like energy and the rest that he mentioned. We are seeing some of that moratorium realities coming into effect in certain localities. However, in most of those that come to my mind right away, one of which is within 5 miles as a crow flies from where we're sitting this morning.

Speaker #3: And as we're seeing that, we continue to see the pipeline fill. Now, when Alex talked about the spread of overall mega project activity, that's actually what the mega projects have been in terms of segment from effectively this year through 2030.

Speaker #3: So yes, data centers is 13% of that overall. You have big contributing areas like energy and the rest that he mentioned. We are seeing some of that moreatorium realities coming into effect in certain localities.

Brendan Horgan: Yes, data centers is 13% of that overall. You have big contributing areas like energy and the rest that he mentioned. We are seeing some of that moratorium realities coming into effect in certain localities. However, in most of those that come to my mind right away, one of which is within 5 miles as a crow flies from where we're sitting this morning.

Speaker #3: However, in most of those that come to my mind right away, one of which is within five miles as a crow flash from where we're sitting this morning, we see that we see that there are many starts that have just started before the moratorium.

Brendan Horgan: We see that there are many starts that have just started before the moratorium. Then certainly when you talk to our teams and our strategic sellers, what is to follow all of that is energy. It's a big part of the opportunities that we're seeing. This ranges from examples like bridge power, commissioning, certainly live events that you're seeing, redundancy desires, lack of grid reliance and capacity, and then really just a general increased demand for electrification. So we're not concerned about an oversaturation in one particular area.

Speaker #3: And then certainly when you talk to our teams and our strategic sellers, what is to follow all of that is energy. And it's a big part of the opportunities that we're seeing.

Speaker #3: And this ranges from examples like Bridge Power, seeing, redundancy desires, lack of grid reliance and capacity, and then really just a general increased demand for electrification.

Speaker #3: So it's not a we're not concerned about an oversaturation in one particular area.

Speaker #6: Thanks.

Speaker #1: Thank you. Next question is coming from Tammy Zakaria from JP Morgan. Your line is now live.

Ken Newman: Thanks.

Operator: Thank you. Next question is coming from Tami Zakaria from JP Morgan. Your line is now live.

Tami Zakaria: Hey, good morning. Thank you so much. Nice quarter. I wanted to circle back on all the rate comments, which I thought was quite interesting. My question is the rate improvement you're seeing driven by your self-help initiatives, like the intelligent customer pricing program or

Speaker #7: Hey, good morning. Thank you so much nice quarter. I wanted to circle back on all the rate comments, which I thought was quite interesting.

Speaker #7: So my question is, is the rate improvement you're seeing driven by your self-help initiatives, like the Intelligent Customer Pricing Program, or are overall industry rental rates improving?

Tami Zakaria: Is the overall industry rental rates improving. Or asked another way, it seems the industry rental environment is improving, but yours is improving more or faster due to self-help. Is that a fair comment?

Speaker #7: Or asked another way, it seems the industry rental environment is improving, but yours is improving more or faster due to self-health. Is that a fair comment?

Speaker #3: Look, I think the I don't know what others' rates are doing other than the typical intelligence that we deploy. By calling, etc. Look, our pricing is coming from number one discipline, that we in the industry have shown now through the cycle.

Brendan Horgan: Look, I don't know what others' rates are doing other than the typical intelligence that we deploy by calling, et cetera. Our pricing is coming from, number one discipline that we in the industry have shown now through the cycle. Number two, through our ordinary plumbing and our ordinary intelligent customer pricing or dynamic pricing that we've had for quite some time. Yes, of course, we have this new next-level customer dynamic pricing pilot that we've talked very widely about, but I wouldn't attribute these actual gains from that at this juncture. We're seeing promise in those, and ultimately, when we do roll that out throughout the entire organization, we'll share that with you. This is good old-fashioned discipline.

Speaker #3: Number two, through our ordinary plumbing and our ordinary intelligent customer pricing or dynamic pricing that we've had for quite some time. And yes, of course, we have this new next level customer dynamic pricing pilot that we've talked very widely about.

Brendan Horgan: Yes, of course, we have this new next-level customer dynamic pricing pilot that we've talked very widely about, but I wouldn't attribute these actual gains from that at this juncture. We're seeing promise in those, and ultimately, when we do roll that out throughout the entire organization, we'll share that with you. This is good old-fashioned discipline.

Speaker #3: But I wouldn't attribute this these actual gains from that at this juncture. We're seeing promise in those. And ultimately, when we do roll that out throughout the entire organization, we'll share that with you.

Speaker #3: This is good old-fashioned discipline. This is customers understanding that we are delivering breadth in solutions. We're delivering expertise in solutions. And furthermore, as the structural progression continues, pricing of 2%, 3%, 4%, 5% here and there is not the difference maker for our customers.

Brendan Horgan: This is customers understanding that we are delivering breadth in solutions, we are delivering expertise in solutions, and furthermore, as the structural progression continues, pricing of 2%, 3%, 4%, 5% here and there is not the difference-maker for our customers. It is the right product for the right application, all tied together the right way to deliver success for their project. We just have overall momentum and a good landscape in order to execute.

Speaker #3: It's the right product for the right application, all tied together the right way to deliver success for their projects. So, we just have overall momentum and a good landscape in order to execute.

Tami Zakaria: Understood. That is very helpful. My next question is more near term. How should we think about the sequential improvement in EBITA margin in Q2 versus Q1? I think typically you see, due to seasonality, call it about 150 to 200 basis points of sequential improvement. Is that a fair assumption, or are there other puts and takes we need to be mindful of for Q2?

Speaker #7: Understood. That’s very helpful. My next question is more near-term: How should we think about the sequential improvement in EBITDA margin in Q2 versus Q1?

Speaker #7: I think typically you'll see due to seasonality, call it about 150 to 200 basis points of sequential improvement. Is that a fair assumption, or are there other puts and takes we need to be mindful of for two Qs?

Speaker #3: Yeah, so I think we didn’t guide the Q2, but I will say our expectation is you should see margin progress as we go through the year.

Alex Pease: Yeah. I think, we didn't guide the Q2, but I will say, our expectation is you should see margin progress as we go through the year. We pointed to essentially flat margins year over year. All the things that we've been talking about around rate, around some of the operational efficiency movements, around the very strong utilization rates, around rental revenue growth significantly outpacing depreciation growth, all of that would support turning the corner as we get towards the back half of the year. Last thing I'd say is, we haven't talked about this yet, but we are extremely committed and confident in our ability to deliver the 200 basis points of margin improvement that we talked about during our Capital Markets Day, and sort of have line of sight to this level.

Speaker #3: We pointed to essentially flat margins, year over year. And all the things that we've been talking about around rate, around some of the operational efficiency, movements around the very strong utilization rates, around rental revenue growth, significantly outpacing depreciation growth, all of that would support turning the corner as we get towards the back half of the year.

Speaker #3: The last thing I'd say is, we haven't talked about this yet, but we are extremely committed to and confident in our ability to deliver the 200 basis points of margin improvement that we talked about during our Capital Markets Day, and we sort of have line of sight to this level.

Alex Pease: Last thing I'd say is, we haven't talked about this yet, but we are extremely committed and confident in our ability to deliver the 200 basis points of margin improvement that we talked about during our Capital Markets Day, and sort of have line of sight to this level.

Speaker #3: And as Brendan mentioned in his call, because of the strong margin performance, you'll continue to see ROIC progress as we go through the year as well.

Alex Pease: As Brendan mentioned in his call, because of the strong margin performance, you'll continue to see ROIC progress as we go through the year as well.

Tami Zakaria: Understood. Thank you.

Speaker #7: Understood. Thank you.

Speaker #1: Thank you. And next question today is coming from Suisini Varanasi from Goldman Sachs. Your line is now live.

Operator: Thank you. Our next question today is coming from Suhasini Varanasi from Goldman Sachs. Your line is now live.

Speaker #8: Hi, good morning. Thank you for taking my questions. My first question is on rates, please. It's very encouraging to see the rate improvement that you've flagged during the call.

Suhasini Varanasi: Hi. Good morning. Thank you for taking my questions. My first question is on rates, please. It is very encouraging to see the rate improvement that you flagged during the call. Is it possible to maybe unpack how much was the contribution from rates versus volumes in the quarter? In Specialty in particular, did the World Cup contribute in particular to rates? Was there a meaningful difference in rates excluding that live event? Maybe if you could give some color on early trading, that would be helpful. Thank you.

Speaker #8: Is it possible to maybe unpack how much was the contribution from rates versus volumes in the quarter? And did in specialty in particular, did the World Cup contribute in particular to rates?

Speaker #8: Was there a meaningful difference in rates excluding that live event? And maybe if you could give some color on early trading, that would be helpful.

Speaker #8: Thank you.

Speaker #3: Sure. Let's start with early trading. Look, August felt like Q1 and hence gave us confidence for the increased guide that we've shared today. The World Cup would be negligible in terms of impact on pricing whether it be in the quarter or certainly for the year.

Brendan Horgan: Sure. Let us start with early trading. Look, August felt like Q1 and hence gave us confidence for the increased guide that we have shared today. The World Cup would be negligible in terms of impact on pricing, whether it be in the quarter or certainly for the year. We are not going to break down the details between rates and time utilization. Rather, I will just refer back to our comments of strength and momentum in both. Look back at, again, 2.5% growth in depreciation, 12.5% growth in rents revenue.

Speaker #3: We're just not going to break down the details between the component parts—between rates and time utilization. Rather, I'll just refer back to our comments about the strength and momentum in both.

Speaker #3: And look back at, again, two and a half percent growth in depreciation in 12 and a half percent growth in rental revenue.

Speaker #8: Thank you very much. And my next question is just a housekeeping one, please. Given the growth rate and depreciation, which is so much slower compared to rental revenue growth in the quarter, how should we think about the phasing of depreciation growth for the rest of the year, especially in context of your CapEx guidance raise?

Suhasini Varanasi: Thank you very much. My next question is just a housekeeping one, please. Given the growth rate and depreciation, which is so much lower compared to rental revenue growth in the quarter, how should we think about the phasing of depreciation growth the rest of the year, especially in context of your CapEx guidance rates? Thank you.

Speaker #8: Thank you.

Speaker #3: Yeah. You will see consistent with our guide, we'll see that depreciation grow compared to the two and a half percent as we progress sequentially through the quarter.

Brendan Horgan: Yeah, you will see, consistent with our guide, we'll see that depreciation grow compared to the 2.5% as we progress sequentially through the quarter. We'll see that in specialty and general tool as we remain focused and measured with that allocation as we go through the year. But you'll see that as we progress.

Speaker #3: And we'll see that in specialty and general tool, as we remain focused and measured with that allocation as we go through the year. But you'll see that as we progress.

Suhasini Varanasi: Thank you.

Speaker #3: Thank you.

Brendan Horgan: Thank you.

Speaker #1: Thank you. Next question today is coming from Neil Tyler from North Child and Company Redburn. Your line is now live.

Operator: Thank you. Next question today is coming from Neil Tyler from Rothschild & Co, Redburn. Your line is now live.

Speaker #5: Hey, good morning. Thank you. A couple from me, please. Firstly, just coming back to the topic of time utilization that you were discussing earlier.

Neil Tyler: Hey, good morning. Thank you. A couple from me, please. Firstly, just coming back to the topic of time utilization that you were discussing earlier. I just want to ask a couple of questions around, given the timing of landings, as we think through the remainder of this year, are you still expecting time utilization to be broadly stable? Or are you anticipating moving up through the gears, relative to I guess those best two or three years that you mentioned earlier, Brendan. Can you still expect to get towards what was a previous peak? Thinking about that previous peak over the longer term, your earlier answer suggested to me that as a larger business, there should be scope to raise that peak essentially. Is that the right way to think about asset utilization more broadly?

Speaker #5: I just want to ask a couple of questions around, given the sort of timing of landings and as we think so through the remainder of this year, are you still expecting time utilization to sort of be broadly stable?

Speaker #5: Or are you anticipating sort of moving up through the gears relative to, I guess, those best two or three years that you mentioned earlier, Brendan?

Speaker #5: Can you still sort of expect to get towards what was a previous peak? And then sort of thinking about that previous peak over the longer term, your earlier answer suggested to me that as a larger business, there should be scope for to raise that peak essentially.

Neil Tyler: Can you still expect to get towards what was a previous peak? Thinking about that previous peak over the longer term, your earlier answer suggested to me that as a larger business, there should be scope to raise that peak essentially. Is that the right way to think about asset utilization more broadly?

Speaker #5: Is that the right way to think about, I guess, asset utilization more broadly? Is that the first question? And then I'll come on to my follow-up.

Neil Tyler: That's the first question, then I'll come onto my follow-up.

Speaker #3: Sure, Neil. I mean, I think we have to answer these both in the context of the segment. So it's important that you look at general tool time utilization as general tool time utilization, and John Washburn and the team who lead that business focus on that by region, by district, by SKU, by CAC class.

Brendan Horgan: Sure, Neil. I think we have to answer these both in the context of the segment. So it's important that you look at general tool time utilization as general tool time utilization, and John Washburn and the team who lead that business focused on that by region, by district, by SKU, by Cat Class. Yes, we expect that with scale, we can set new heights. It's all part and parcel of our operational excellence programs that we have shared so clearly over time. I wouldn't go so far as to say that we're expecting significant incremental progression as we go through the year. There will be a certain seasonality element, of course, that we'll come on to. From a specialty standpoint, once again, we're looking at that by SKUs within specialty. But also remember overall, specialty carries a lower time utilization than does general tool.

Speaker #3: And yes, we expect that with scale, we can set new heights. It's all part and parcel of our operational excellence programs that we have shared so wouldn't go so far as to say that we're expecting significant incremental progression as we go through the year.

Brendan Horgan: I wouldn't go so far as to say that we're expecting significant incremental progression as we go through the year. There will be a certain seasonality element, of course, that we'll come on to. From a specialty standpoint, once again, we're looking at that by SKUs within specialty. But also remember overall, specialty carries a lower time utilization than does general tool.

Speaker #3: There will be a certain seasonality element, of course, that will come onto. And from a specialty standpoint, once again, we're looking at that by SKUs within specialty, but also remember overall, specialty carries a lower time utilization than does general tool.

Speaker #3: But you would have seen, of course, in the quarter about a 300 basis point improvement from a dollar utilization standpoint in specialty. So I would say really more stable as we go through the year rather than significant upside from a time utilization.

Brendan Horgan: But you would've seen, of course, in the quarter, about a 300 basis point improvement from a dollar utilization standpoint in specialty. I would say really more stable as we go through the year rather than significant upside from a time utilization standpoint.

Speaker #6: Yeah, the only point that I'd add, which we covered in some of the prior comments on capital, all of this capital is pointed towards directly towards customer demand.

Alex Pease: Yeah, the only point that I'd add, which we covered in some of the prior comments on capital, all of this capital is pointed directly towards customer demand. This is not speculative capital. It's going towards mega projects. It's going to large national strategic accounts and identified specialty opportunities. Given that dynamic, you wouldn't expect to have a material impact on time utilization.

Speaker #6: This is not speculative capital. It's going towards mega projects. It's going to large national strategic accounts. And identified specialty opportunities. So given that dynamic, you wouldn't expect to have a material impact on time utilization.

Speaker #5: Got it. That's very helpful. Thank you. And then the second question was really a follow-up to, again, earlier comments, Brendan, when you were answering around sort of semis and data centers, and you mentioned the relationship with power.

Neil Tyler: Got it. That's very helpful. Thank you. The second question was really a follow-up to, again, earlier comments, Brendan, when you were answering around semis and data centers, and you mentioned the relationship with power. I wanted to just clarify because obviously there are power projects that are being constructed, and then there's obviously your power business and power and HVAC. Is there any sort of alteration in the duration of rental in your power business in terms of you actually playing the role of bridging power in those projects, or are you specifically more talking about servicing the construction of utility type power and other?

Speaker #5: And I wanted to just clarify because obviously there are power projects that are being constructed and then there's obviously your power business and power and HVAC.

Speaker #5: Is there any sort of alteration in the duration rental in your power business in terms of you actually sort of playing the role of bridging power in those projects?

Neil Tyler: Is there any sort of alteration in the duration of rental in your power business in terms of you actually playing the role of bridging power in those projects, or are you specifically more talking about servicing the construction of utility type power and other?

Speaker #5: Or are you specifically more talking about servicing the construction of utility-type power and other?

Speaker #3: Well, I mean, the short answer is all of the above. There is a significant if we look at the pipeline of mega project, of that 21% that we cited specifically, there is certainly an element of that that is pointed directly to actually power some of the data center work that's going on.

Brendan Horgan: Well, the short answer is all of the above. If we look at the pipeline mega project, of that 21% that we cited specifically, there is certainly an element of that that is pointed directly to actually power some of the data center work that's going on. But there are many other aspects of that outside of that, and that's more just toward the grid in general. From a duration standpoint, it just depends. Commissioning is going to be eight to 12 months when we are specifically commissioning, depending on what it is, whether it's a data center or it is a different type of project. Also, of course, as part of that, you have the load bank contribution. Live events, well, they're live events. A Super Bowl duration is different than a construction project.

Speaker #3: But there are many other aspects of that outside of that. And that's grid in general. And then from a duration standpoint, it just depends.

Brendan Horgan: From a duration standpoint, it just depends. Commissioning is going to be eight to 12 months when we are specifically commissioning, depending on what it is, whether it's a data center or it is a different type of project. Also, of course, as part of that, you have the load bank contribution. Live events, well, they're live events. A Super Bowl duration is different than a construction project.

Speaker #3: Commissioning is going to be 8 to 12 months when we're specifically commissioning depending on what it is, whether it's a data center or it's a different type of project.

Speaker #3: And then also, of course, as part of that, you have the load bank contribution. Live events, well, they're live events. A Super Bowl duration is different than a construction project.

Speaker #3: And we have powering construction, which is different than the bridge power, the commissioning, the live events. big piece, which is just behind the meter and general electrification, as I've said.

Brendan Horgan: We have a powering construction, which is different than the bridge power, the commissioning, the live events. Then, of course, there is the big piece, which is just behind the meter and general electrification, as I have said. Rest assured, there is a lot more to come from us overall when it comes to this Energy Management as a Service that we are seeing big opportunity in.

Speaker #3: Rest assured, there's a lot more to come from us overall as it comes to this or when it comes to this energy management as a service.

Speaker #3: That we're seeing big opportunity in.

Speaker #5: That's very helpful again. Thank you.

Neil Tyler: That is very helpful again. Thank you.

Speaker #6: Thank you.

Brendan Horgan: Thank you.

Speaker #1: Thank you. Next question is coming from Alan Wells from Jefferies. Your line is now live.

Operator: Thank you. Next question is coming from Allen Wells from Jefferies. Your line is now live.

Speaker #7: Hey, good morning, gentlemen. Just two very quick ones from me. Firstly, just on the FIFA World Cup revenues. Obviously, you flagged the 250 basis points impact on growth, but I'm not sure if I missed it.

Allen Wells: Hey, good morning, gentlemen. Just two very quick ones from me. Firstly, just on the FIFA World Cup revenues. Obviously, you flagged the 250 basis points impact on growth. I am not sure if I missed it, but did you split out how that was allocated between gen, rent, and specialty? Is there any color you can provide on how we should think about the drop-through on that revenue and if it was accretive to margin in each division? That is my first question. The follow-up question would just be going back to some of the questions on the rate environment. Anecdotally, we hear over the last 18 months or so, there have been one or two of the competitors that you have that have been pretty aggressive on rate.

Speaker #7: But did you split out how that was allocated between gen rent and specialty? And then is there any color you can provide on how we should think about the drop-through on that revenue and if it was accretive to margin in each division?

Speaker #7: That's my first question. And then the follow-up question would just be going back to some of the questions on the rate environment. And it goes to we hear over the last 18 months or so, there'd been one or two of the kind of competitors that you had that had been pretty aggressive on rate.

Allen Wells: The follow-up question would just be going back to some of the questions on the rate environment. Anecdotally, we hear over the last 18 months or so, there have been one or two of the competitors that you have that have been pretty aggressive on rate.

Speaker #7: I just wondered if you could maybe make some comments on the general rate environment, what you're seeing out there in terms of some of that rate discipline.

Allen Wells: I just wondered if you could maybe make some comments on the general rate environment, what you are seeing out there in terms of some of that rate discipline. Is it coming back a little bit? Is that helping the broader rate environment overall for Sunbelt? Thank you.

Speaker #7: Is it coming back a little bit? Is that helping the broader rate environment overall for Sunbelt? Thank you.

Speaker #3: Sure. I mean, from a GT versus specialty standpoint, it's 75, 25, 80, 20. Specialty to GT. From a World Cup revenue standpoint, and look, as you'd have seen in the print, it was incremental to operating adjusted operating income margins.

Brendan Horgan: Sure. From a GT versus specialty standpoint, it is 75/25, 80/20 specialty to GT from a World Cup revenue standpoint. Look, as you would have seen in the print, it was incremental to adjusted operating income margins, and that is the important thing to us because ultimately that is going to be also accretive from an ROI standpoint. I think we have said a lot when it comes to the rate environment, the pricing environment, our focus and our discipline, and I think that largely the industry is taking a very similar role. Most importantly for us, as I said before, our customers are looking for breadth in solutions, expertise in solutions, capability, proven track record, and resume. That gives us the confidence as we move forward. There will always be some out there who will price differently, but that is not getting in our way to advance pricing.

Speaker #3: And that's the important thing to us because ultimately that's going to be also accretive from a ROI standpoint. I think we've said a lot when it comes to the rate environment, the pricing environment.

Speaker #3: Our focus and our discipline—and I think that, largely, the industry is taking a very similar role. And, most importantly for us, as I said before, our customers are looking for breadth in solutions, expertise in solutions capability, proven track record, and resume. And that gives us the confidence as we move forward.

Speaker #3: There will always be some out there who will price differently. But that's not getting in our way to advance pricing.

Speaker #7: Great. Thank you.

Allen Wells: Great. Thank you.

Speaker #3: Thank you.

Brendan Horgan: Thank you.

Speaker #1: Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over for any further closing comments.

Speaker #3: Great. Thank you, operator. And thank you all for joining this morning. We were pleased to share a good first quarter and our optimism for the balance of the year.

Brendan Horgan: Great. Thank you, operator, and thank you all for joining this morning. We were pleased to share a good Q1 and our optimism for the balance of the year. We will look forward to seeing some of you at the conference next week. Otherwise, we will speak with you in December as part with our Q2 results. Thank you.

Speaker #3: And we will look forward to seeing some of you at the conference next week. Otherwise, we'll speak with you in December as part of our Q2 results.

Speaker #3: Thank you.

Speaker #1: Thank you. That does conclude today's teleconference. You may disconnect your line at this time. And have a wonderful day. We thank you for your participation today.

Operator: Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.