SUNB

Image source: The Motley Fool. Wednesday, Sept. 9, 2026 at 8:30 a.m. ET Senior Vice President, Investor Relations - Kevin Powers Chief Executive Officer - Brendan Horgan Chief Financial Officer - Alex Pease Operator: Greetings, and welcome to the Sunbelt Rentals First Quarter Fiscal Year 2027 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations. Kevin, please go ahead. Kevin Powers: 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. 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. 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 U.S. GAAP basis. 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'll note that we'll be attending the Morgan Stanley Laguna Conference next week, and we hope to see some of you there. And now I'd like to turn the call over to Brendan. Brendan Horgan: 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 quarter 1 highlights. 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. 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. 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, including mega projects, energy, live events, industrial nonconstruction MRO, along with another quarter of stability in demand in our local nonresidential 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. And as a result of this, we are raising our fiscal '27 guidance for revenue, adjusted EBITDA and CapEx. 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. 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. 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. 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 2 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. 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 Power & 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're helping customers manage these needs across the project life cycle, 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. 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. 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'll turn it over to Alex for more detail on the quarter and updated outlook. Alexander Pease: 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. 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 2x rental revenue growth. 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 SG&A 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 3/4 of the year-over-year margin change reflected higher relative growth in ancillary revenue, partially offset by rate improvement. 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. Finishing up the P&L. Interest expense was $107 million and adjusted pretax 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. 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 & 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 3/4 of the margin change in the quarter was due to higher relative growth of ancillary revenues. 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. U.K. 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. 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 the first quarter related to equipment landings, which occurred in the fourth quarter of 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 we remain on track to open approximately 55 this year. We also completed 2 acquisitions, including the previously announced Aries acquisition, which combined added 17 Specialty locations. On the balance sheet, net leverage was 1.8x at the end of July, within our long-term target range of 1 to 2x. 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%. 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. In the quarter, we made our final fiscal year 2026 dividend payment of $0.75 per share under our previous U.K. framework, and we are now transitioning to quarterly dividends as a U.S.-listed company. Our first quarterly dividend of $0.30 will be paid on October 2, 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're 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 first quarter performance, continued strength across our large and strategic customers, strong mega project activity as well as stable local non-construction -- nonresidential construction markets. 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. 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. These increases are driven by demand that has exceeded our original expectations, particularly across mega projects, Specialty and energy. The additional investment is targeted towards 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. Before we begin the Q&A, I'm going to pass it back to Brendan to give us some closing thoughts. Brendan Horgan: Thanks, Alex. And to wrap things up, if there's one takeaway from today's call, it is what we have to 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 is reflected in our increased guidance today, the beginning of what we expect to be a great year. And with that, operator, we will open the call for questions. Operator: [Operator Instructions] Our first question today is coming from Rob Wertheimer from Melius Research. Robert Wertheimer: So 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? And 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? Brendan Horgan: Yes, sure. Rob, from a fueling standpoint, there's 3 points, of course, where we charge for the service of fueling, fueling at the rental return, which is no real harder than it's ever been, and it's 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. 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 the -- what we charge for the service of delivery and pickup of our rental assets. It's also worth pointing out in all that, this is all very high ROI because we're making margin on all that. The margins vary a bit between those different tranches and different sort of product applications and scale. But nonetheless, we are seeing that progress as you've seen that sequentially, as you pointed out, that we are seeing all this actually flow through positive incrementally to adjusted operating income. Robert Wertheimer: 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? I'll stop there. Brendan Horgan: Yes. 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. 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. 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. And there -- as I've just said, they're being accretive. Operator: Next question is coming from Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: So my first question was also on the margin. So 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, and that's 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've already touched on? Any mix effects to consider, clearly with Specialty growing faster? And putting all that together, would you expect to continue to progress operating profit margins in the coming quarters? That's the first one. Alexander Pease: Okay. So there was a lot there, Annelies. I'll do my best, and then just feel free to ask follow-ons if I don't get it all. So first of all, underlying the guide, we are continuing to assume that Specialty growth will outpace General Tool. So you'll 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, we'll 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. 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. 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. 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. 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. So hopefully, that helped unpack your question a little bit. Annelies Vermeulen: Yes. Super clear. 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? 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? Brendan Horgan: Sure, Annelies. 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. 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, et cetera. I guess it's really important to 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 a pretty strong discipline from an OEM capacity standpoint. 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. 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. One thing we've been watching extraordinarily closely as we think about that local nonres market that we're 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. So if you look at it in round numbers, our fleet size is about $1.4 billion bigger at the end of July than it was last year. And 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 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, what you're seeing from the businesses, which is a bit added on to your first question that Alex covered, you're seeing improved time utilization. You're seeing improved rental rate. You're seeing improved operational excellence discipline and execution. And that look no further than seeing rental revenue growing at 12.5% versus depreciation growing at 2.5%, very important that we're in this really good place from a supply and demand standpoint. Operator: Next question is coming from Jerry Revich from Wells Fargo. Jerry Revich: Alex, I want to just go back to comments that you made earlier in terms of rental rate being a positive surprise. Can you just frame that for us? Typically, in an up cycle, 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? And can you just calibrate us on where your general rental time utilization stands versus prior cycle highs, just to put that in perspective? Alexander Pease: 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. 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, 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 Annelies' question, supply and demand is tight. 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. Obviously, as I mentioned in my response to Annelies' 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. Brendan Horgan: Yes. First, Jerry, thanks, but I'll just say, I don't think Alex said surprised, or if he didn't say surprise, didn't mean to say surprised. 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, and with the capital investment that the team has earned in the business, they've done just that. 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 2 or 3 years that we've had over time. And it appears as though so does the industry. 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, 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. So look, as we all know when it comes to rental rates in this industry, first thing first. Think about how resilient pricing was over the last few years and look at now the momentum in pricing and momentum is required, a bit of swagger is required, and that's exactly what the team is delivering. Jerry Revich: Super. Appreciate the context. And then from the semis end market standpoint, right, 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 '24 level highs. Can you just put that in perspective for us on what that could mean for Sunbelt back in '24, 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? Brendan Horgan: Yes. I mean, look, we are, as I said, in terms of the CapEx, similar to what we -- 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 questions, 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 rate. Alexander Pease: 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 and 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%. 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. So the vast majority have at least a 3-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 points that I'd make. Operator: Next question is coming from Kyle Menges from Citigroup Inc. Kyle Menges: Great. 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. 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? Brendan Horgan: Yes, 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. We've mentioned before our synthetic analysis of starts versus completion. All of you are familiar with Dodge. Dodge actually tracks projects from preplanning, planning, design, bid, award and then starts. 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 6-story or below hotel and on average, that takes 22 months, that's what we plug into the system. 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 -- between the '21 and '22 periods and the '23 and '25 period. 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 nonres. 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, et cetera, which we're all seeing point positive. And I will refer to the DMI on Slide 7. And you'll see there, once again, we have another high. So that's planning activity. So that's speaking specifically to that local nonres construction because those are projects under $0.5 billion, not including manufacturing. And just in July alone, we saw 59 projects of over $100 million in value. And similar to what Alex talked about on the mega project landscape side, even those projects are remarkably diverse between hospitals, solar. There's a bit of data center in there, but the smaller ones, 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 Menges: That's great color, Brendan. And then just on Aries, I would love to hear maybe your early learnings now that you've completed the acquisition. 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 greenfield versus further M&A to augment that Aries portfolio. Brendan Horgan: Sure. Look, 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. So 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 we have 669 leads that have been tracked by what is today the Sunbelt modular solutions team with an overall value of $24 million. Now to put that in perspective, that's 1 quarter worth of cross-selling, generating that level of opportunity for growth. There's over 2.5 million landed and 14 million of that, which is in actually hard RFPs. So we feel really strong and encouraged about that cross-selling and collaboration. I also mentioned on the call, as of August 1, 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 Specialty -- broader Specialty and General Tool business. Operator: Next question is coming from Ken Newman from KeyBanc Capital Markets. Kenneth Newman: Congrats on a nice quarter. I 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? And 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 rate and the dollar utilization rates to improve even further in that tightness. Brendan Horgan: Yes. 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. 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. And 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. 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. Kenneth Newman: Yes. That makes sense. And then for the follow-up, I think you mentioned earlier that data center is 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 moratorium 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? Brendan Horgan: Yes, sure. I mean answered simply, there are -- we're seeing increased starts. So 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. 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. 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 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, we see that there are many starts that have just started before the moratorium. And then certainly, when you talk to our teams and our strategic sellers, what is to follow all of that is energy, energy, energy. And it's a big part of the opportunities that we're seeing. And 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 it's not a -- we're not concerned about an oversaturation in one particular area. Operator: Next question is coming from Tami Zakaria from JPMorgan. Tami Zakaria: Nice quarter. I wanted to circle back on all the rate comments, which I thought was quite interesting. So my question is, is the rate improvement you're seeing driven by your self-help initiatives like the intelligent customer pricing program? Or is the overall industry rental rates are 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? Brendan Horgan: Look, I think the -- I don't know what others rates are doing other than the typical intelligence that we deploy by calling, et cetera. Look, our pricing is coming from, number one, discipline that we and 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. And 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. 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. 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's very helpful. And my next question is more near term. How should we think about the sequential improvement in EBITDA margin in 2Q versus 1Q? 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 2Q? Alexander Pease: Yes. So I think we didn't guide to 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. 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. Last thing I'd say is we didn't -- 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. 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. Operator: Our next question today is coming from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi: My first question is on rates, please. It's 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? And did in Specialty, in particular, did the World Cup contributed in particular to rates? 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. Brendan Horgan: 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. We just -- we're 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 of strength and momentum in both and look back at, again, 2.5% growth in depreciation, 12.5% growth in rental revenue. Suhasini Varanasi: And my next question is just a housekeeping one, please. Given the growth rate in 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? Brendan Horgan: Yes. 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, 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. Operator: Next question today is coming from Neil Tyler from Rothschild & Company Redburn. Neil Tyler: 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 sort of timing of landings and as we think sort of through the remainder of this year, are you still expecting time utilization to sort of to be broadly stable? Or are you anticipating sort of moving up sort of through the gears relative to, I guess, those sort of best 2 or 3 years that you mentioned earlier, Brendan? Can you still sort of expect to get towards what was the 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. Is that the right way to think about, I guess, asset utilization more broadly? That's the first question. And I'll come on to the kind of to my follow-up. Brendan Horgan: 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 focused on that by region, by district, by SKU, by cat class. 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 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 will come on to. 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. 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. Alexander Pease: Yes. 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. 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. Neil Tyler: Got it. That's very helpful. 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, you mentioned the relationship with power. 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 & HVAC. Is there any sort of alteration in the duration of rental in your power business in terms of you actually sort of playing the role of bridging power in those projects? Or is it -- are you specifically talking about servicing the construction of utility type power and other? Brendan Horgan: Well, I mean, the short answer is all of the above. There is a significant -- 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. And then from a duration standpoint, it just depends. 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 is a different type of project. 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. And we have powering construction, which is different than the bridge power, the commissioning, the live events. And then, of course, there's the big piece, which is just behind the meter and general electrification, as I've said. 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 that we're seeing big opportunity in. Operator: Next question is coming from Allen Wells from Jefferies. Allen Wells: Just 2 very quick ones from me. Firstly, just on the FIFA World Cup revenues. Obviously, you flagged the 250 basis points impact on growth. I'm not sure if I missed it, 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? That's my first question. And then a 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 1 or 2 of the kind of competitors that you have that have been pretty aggressive on rate. 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? Is it coming back a little bit? Is that helping the broader rate environment overall for Sunbelt? Brendan Horgan: Sure. I mean it's -- 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 would have seen in the print, it was incremental to operating -- adjusted operating income margins. And that's the important thing to us because ultimately, that's going to be also accretive from an ROI standpoint. I think we've 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. 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. There will always be some out there who will price differently, but that's not getting in our way to advance pricing. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Brendan Horgan: Great. Thank you, operator, and thank you all for joining this morning. We are pleased to share a good first quarter and our optimism for the balance of the year, and we will look forward to seeing some of you at the conference next week. And otherwise, we'll speak with you in December as part of our Q2 results. Thank you. 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. Before you buy stock in Sunbelt Rentals Holdings, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sunbelt Rentals Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Sunbelt Rentals Holdings. The Motley Fool has a disclosure policy. Sunbelt Rentals (SUNB) Q1 2027 Earnings Call Transcript was originally published by The Motley Fool

FORT MILL, S.C., September 09, 2026--(BUSINESS WIRE)--Sunbelt Rentals Holdings, Inc. (NYSE: SUNB, LSE: SUNB) ("the Company"), a leader in the equipment rental industry, today announced financial results for the fiscal first quarter ended July 31, 2026. Fiscal First Quarter 2027 Highlights Total revenue increased 11.2% to $3,115 million Rental revenue increased 12.5% to $2,927 million North America General Tool segment rental revenue increased 7.4% and North America Specialty segment rental revenue increased 25.3% Operating income increased 15.9% to $691 million at a margin of 22.2% Adjusted operating profit increased 13.8% to $759 million, and margin expanded 60 bps to 24.4% Net income increased 17.4% to $438 million and earnings per share increased 23.0% to $1.07 Adjusted EBITDA increased 8.7% to $1,315 million at a margin of 42.2% Adjusted earnings per share increased 20.4% to $1.18 Company is increasing its full-year fiscal 2027 guidance based on strong Q1 results and momentum across the business CEO Comment "I am proud of the team’s efforts in driving strong execution across all aspects of the business which delivered record first quarter results," said Brendan Horgan, Chief Executive Officer. "Our obsession with the success of our customers, strong value proposition, differentiated technology platform and leading scale drove strong growth in the quarter as reflected in a 25% increase in rental revenues within our North America Specialty segment and 7% growth within our North America General Tool segment." "Our performance was underpinned by disciplined execution and strong demand across a diverse range of end markets, including mega projects, energy, live events, industrial, and non-construction MRO, complemented by another quarter of stability and demand in our local non-residential construction markets. Growth in the quarter was geographically broad, spanning our General Tool segment as well as our Specialty business lines. Notably, rental revenue growth was present throughout our small and medium-sized customer base, with outsized growth from our large and strategic customers demonstrating the strength of our leading position, and breadth of expertise and solutions. This performance reflects the dedication, best-in-class execution and customer-obsessed mindset of our team members." Horgan added, "As we look toward the balance of fiscal 2027, we are seeing strong momentum throughout top-line and bottom-line performance. The upward revision to our guidance signals our confidence in the underlying supply and demand landscape, the durability of our structural growth, and the strength of our through-the-cycle free cash flow platform. We believe Sunbelt is well positioned for a year of strong performance." Full-Year Fiscal 2027 Guidance Today, the Company is increasing its fiscal full-year 2027 Guidance. Summary of First Quarter Fiscal 2027 Results Total revenue increased 11.2% to a record $3,115 million driven by rental revenue increasing 12.5% to a record $2,927 million. The Company’s acquisition of Reliant Asset Management (operating under the Aries brand), which closed on May 1, 2026, contributed approximately 100 basis points to rental revenue growth in the quarter. In addition, the Company estimates that the FIFA World Cup contributed approximately 250 basis points to rental revenue growth in the quarter underscoring our proven expertise with complex events as a partner of choice. The Company’s original cost of rental equipment at July 31, 2026, was $20,102 million - increasing 6.0% on average compared to the prior year. The average fleet age was 52 months on an original cost basis, as compared to 50 months at July 31, 2025. Operating income increased 15.9% to $691 million, and operating income margin expanded to 22.2% compared to 21.3% in the prior-year period. Adjusted operating profit increased 13.8% to $759 million, and adjusted operating profit margin expanded 60 bps to 24.4%, compared to 23.8% in the prior-year period. The margin expansion in the quarter was primarily due to a reduction in depreciation expense as a percent of revenue. Net income increased 17.4% to $438 million and earnings per share increased 23.0% to $1.07. Adjusted earnings per share increased 20.4% to $1.18, reflecting adjusted operating profit growth and benefits from the Company’s share repurchase program. Adjusted EBITDA increased 8.7% to $1,315 million and adjusted EBITDA margin was 42.2%, compared to 43.2% in the prior-year period. The adjusted EBITDA margin change compared to the prior-year period primarily reflects higher relative growth of ancillary revenues, partially offset by rate improvement. Return on investment of 14.6% for the trailing twelve month period ended July 31, 2026, was consistent with the prior year period. North America General Tool segment rental revenue increased 7.4% to $1,648 million, and dollar utilization in the quarter of 47% was consistent with the prior-year period. General Tool adjusted operating profit increased to $539 million and adjusted operating profit margin was 30.9% compared to the prior year period of 31.5%. Adjusted EBITDA increased 3.2% to $898 million, and adjusted EBITDA margin was 51.5%, compared to 52.8% in the prior-year period. The year-over-year adjusted EBITDA margin performance primarily reflects higher fuel costs, partially offset by rental rate improvement. North America Specialty segment rental revenue increased 25.3% to $1,070 million, and dollar utilization in the quarter increased to 77% compared to the prior-year period of 74%. The Company’s acquisition of Reliant Asset Management added approximately 300 basis points to rental revenue growth in the quarter. Specialty adjusted operating profit increased 24.3% to $373 million and adjusted operating profit margin of 33.0% was consistent with the prior-year period. Adjusted EBITDA increased 19.0% to $519 million, and adjusted EBITDA margin was 45.8%, compared to 48.0% in the prior-year period. The year-over-year margin performance primarily reflects strong relative growth of ancillary revenues. UK segment rental revenue of $209 million decreased 1.4% compared to the prior-year period, while dollar utilization in the quarter increased to 54% compared to the prior-year period of 53%. UK adjusted operating profit margin increased 10 basis points to 8.3% compared to 8.2% in the prior-year period reflecting improved operational efficiencies. Segment adjusted EBITDA was $61 million compared to $65 million in the prior-year period, and segment adjusted EBITDA margin was 25.4% compared to 26.7% in the prior-year period. Capital Management At July 31, 2026, long-term debt was $8,006 million, net debt was $8,524 million and net leverage was 1.8x, within the Company’s stated range of between 1x to 2x net debt-to-adjusted EBITDA. Excess availability under the senior secured credit facility was $3,750 million, and the Company’s credit facilities are committed for an average of five years at a weighted average cost of approximately 5%. During the first quarter, the Company completed the offering of two tranches of senior notes totaling $1.2 billion, consisting of $450 million of 4.950% notes due 2030 and $750 million of 5.650% notes due 2036. The transaction extends the Company’s debt maturity profile and provides additional financial flexibility, and the company intends to use the net proceeds for general corporate purposes, including refinancing existing debt, funding capital expenditures and working capital, and supporting other business opportunities. Cash flow from operations was $840 million. Gross rental capital expenditures were $759 million and $682 million net of disposal proceeds, and after capital expenditures, free cash flow was $70 million. In addition, the Company repurchased $56 million of common stock, and paid $307 million in dividends. Lastly, the Company opened 13 greenfield locations and invested $669 million, including acquired borrowings, on two bolt-on acquisitions (including the Aries brand) continuing to expand its footprint and diversify its end markets. Quarterly Dividend Declaration Today the Company announced that its Board of Directors ("the Board") has declared a quarterly cash dividend of $0.30 per share of common stock, payable on Friday, October 2, 2026, to stockholders of record as of Friday, September 18, 2026. The Company’s first quarterly cash dividend to be paid quarterly rather than semi-annually reflects the Board’s confidence in Sunbelt Rentals’ strong cash flow generation and advances its long-standing progressive, sustainable dividend policy within a disciplined capital allocation framework. The quarterly dividend replaces the Company's previous UK distribution framework and is intended to provide shareholders with a regular cash return consistent with U.S. market practice. Future dividend declarations will remain subject to approval by the Board, and will depend on business performance, capital requirements and market conditions. Conference Call Information Brendan Horgan and Alex Pease will hold a conference call today to discuss the results and outlook at 8:30am ET (1:30pm BST). The call will be webcast live via the Company’s investor relations website at ir.sunbeltrentals.com and a replay will be available via the website shortly after the call concludes. A copy of this announcement and the slide presentation to be used for the call are available on the Company’s investor relations website. About Sunbelt Rentals Holdings, Inc. Sunbelt Rentals Holdings, Inc., operating primarily as Sunbelt Rentals, is a leading global provider of rental equipment and services based in Fort Mill, South Carolina. Our passionate, customer-centric team of 26,000 employees combines execution-focused resolve with Sunbelt Rentals’ innovative array of rental solutions across a vast network of over 1,600 locations and with a fleet of assets exceeding $20 billion. Sunbelt Rentals is committed to delivering unrivaled quality and support for its customers across an increasingly diverse array of industries, project types and end markets, including construction, live events, maintenance and countless emerging applications ranging from small-scale developments to mega projects. Non-GAAP Financial Measures Key Performance Indicators ("KPIs") We use the KPIs "dollar utilization" and "original equipment cost" (or "OEC") to evaluate our business, measure our performance, identify trends and make business decisions. These measures are not directly comparable to, and should not be considered a substitute for, financial information presented in accordance with GAAP, and may differ from similarly titled metrics or measures presented by other companies. Dollar Utilization We consider "dollar utilization" to be a KPI on a segment basis. Dollar utilization reflects the ratio of rental revenue earned from equipment compared with the original cost of equipment. Dollar utilization is calculated as (i) revenue from equipment rentals in each month during the preceding twelve-month period divided by (ii) average original equipment cost of our fleet measured during such period, in each case on a segment basis. Dollar utilization is influenced by various factors, including the average original equipment cost of our rental fleet, the level of physical utilization of our rental fleet, customer rental rates, ancillary rental revenues, inflation, as well as customer and product mix. Management believes that dollar utilization provides useful information to investors and management to demonstrate how effectively we recover value from our rental assets. Management uses dollar utilization when reviewing operating performance on a segment basis and to help inform capital allocation decisions within the business. Original Equipment Cost We consider OEC to be a KPI on a segment basis. OEC reflects the original cost of our equipment on rent. Management believes that OEC, along with dollar utilization, provide useful information to investors and management to demonstrate the utilization of our rental equipment. Management uses OEC when reviewing operating performance on a segment basis and to help inform capital allocation decisions within the business. Adjusted Operating Profit and Adjusted Operating Profit Margin We use the non-GAAP measure "adjusted operating profit" to evaluate the underlying profitability of our core operations. The composition of this measure is not addressed or prescribed by U.S. GAAP. We define adjusted operating profit as operating income after other (income) expense, net, and before amortization of acquired intangibles, stock-based compensation expense, net, and restructuring costs, which relate to costs associated with the Redomiciliation and U.S. Listing and, in the three months ended July 31, 2026, the operational restructure of the United Kingdom segment. Adjusted operating profit margin is defined as adjusted operating profit divided by total revenues. Management believes that adjusted operating profit and adjusted operating profit margin provide useful information to management and investors about the Group’s underlying profitability without regard to non-core items that may not be indicative of our main business activities, thus allowing for a more meaningful comparison between our core performance over different periods of time, as well as with those of other similar companies. Adjusted Pre-tax Profit We use the non-GAAP measure "adjusted pre-tax profit" to evaluate the underlying profitability of our core operations. The composition of adjusted pre-tax profit is not addressed or prescribed by GAAP. We define adjusted pre-tax profit as net income before provision for income taxes, amortization of acquired intangibles, stock based compensation expense, net and restructuring costs, which relate to costs associated with the Redomiciliation and U.S. Listing and in the three months ended July 31, 2026, relate to costs associated with operational restructure of the United Kingdom segment. Adjusted pre-tax profit represents adjusted operating profit after interest expense, net. Management believes that adjusted pre-tax profit provides useful information to management and investors about the Group’s underlying profitability without regard to non-core items that may not be indicative of our main business activities, thus allowing for a more meaningful comparison between our core performance over different periods of time, as well as with those of other similar companies. EBITDA, EBITDA Margin, Adjusted EBITDA, and Adjusted EBITDA margin We use the non-GAAP measures "EBITDA," "EBITDA margin," "adjusted EBITDA," and "adjusted EBITDA margin" to evaluate our overall financial performance. The composition of these measures is not addressed or prescribed by GAAP. We define EBITDA as net income before provision for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA before stock-based compensation expense, net and restructuring costs, which relate to costs associated with the Redomiciliation and U.S. Listing and in the three months ended July 31, 2026, relate to costs associated with operational restructure of the United Kingdom segment. These items are excluded from adjusted EBITDA to allow investors to make a more meaningful comparison between our core performance over different periods of time, as well as with those of similar companies. EBITDA margin is defined as EBITDA divided by total revenues. Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenues. Management believes that EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin, when viewed with the company’s results under GAAP and the accompanying reconciliations, provide useful information about our operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that EBITDA and adjusted EBITDA help investors gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced. Adjusted Earnings per Share ("Adjusted EPS") We use the non-GAAP measure "adjusted EPS" to evaluate the underlying profitability of our core operations. The composition of adjusted EPS is not addressed or prescribed by GAAP. We define adjusted EPS as earnings per share (basic) before amortization of acquired intangibles, stock based compensation expense, net and restructuring costs, which relate to costs associated with the Redomiciliation and U.S. Listing and in the three months ended July 31, 2026, related to costs associated with the operational restructure of the United Kingdom segment, in each case less taxation on adjusting items. Management believes that adjusted EPS provides useful information to management and investors about the Group’s underlying profitability without regard to non-core items that may not be indicative of our main business activities, thus allowing for a more meaningful comparison between our core performance over different periods of time, as well as with those of similar companies. Adjusted Net Assets, Adjusted Average Net Assets, and Return on Investment We use the non-GAAP measures "adjusted net assets," "adjusted average net assets," and "return on investment" to provide a measure of how effectively we allocate capital to profitable investments. The composition of these measures is not addressed or prescribed by GAAP. We define adjusted net assets as net assets excluding net debt and tax. Adjusted average net assets is defined as adjusted net assets as of each month-end of the preceding thirteen months divided by thirteen. Return on investment is defined as adjusted operating profit generated during the preceding twelve-month period divided by adjusted average net assets. Management believes that a measure of return on investment is widely used by investors. By using adjusted operating profit as the profit component, adjusted return on investment focuses on returns from our actual operating assets and profits generated from our main business activities, which management believes allows for a more meaningful comparison of our operating efficiency between different periods of time, as well as with those of similar companies. Management further uses adjusted return on investment when reviewing operating performance to help inform capital allocation decisions within the business. It also represents one of the metrics used in our executive compensation program. Free Cash Flow We use the non-GAAP measure "free cash flow" to reflect the cash retained by the company prior to discretionary expenditure on acquisitions and returns to stockholders. The composition of these measures is not addressed or prescribed by GAAP. We define free cash flow as net cash provided by operating activities less net expenditure on rental and non-rental equipment (comprising payments for purchases of equipment less disposal proceeds received in relation to sales of equipment). Management believes that free cash flow provides useful information to management and investors as an additional liquidity measure because it measures the amount of cash available, after net expenditures on rental and non-rental equipment, for activities such as making discretionary expenditures on acquisitions and providing returns to stockholders. Net Debt We use the non-GAAP measure "net debt" to provide an indication of the overall level of our long-term indebtedness. The composition of net debt is not addressed or prescribed by GAAP. We define net debt as total debt less cash balances. Management believes that net debt is widely used by investors and credit rating agencies and provides useful additional information to management and investors as an indication of the Group’s financial position and ability to meet its financial obligations. Net Leverage We use the non-GAAP measure "net leverage" to provide an indication of the strength of the Group’s balance sheet. The composition of net leverage is not addressed or prescribed by GAAP. We define net leverage as net debt divided by adjusted EBITDA generated during the preceding twelve-month period. Management believes that providing an indication of the strength of the Group’s balance sheet provides useful additional information to management and investors. Management further believes that using adjusted EBITDA as the profit component for net leverage allows for a more meaningful comparison of our financial position between different periods of time, as well as with those of similar companies. Net leverage also forms part of the executive compensation targets of the Group. Forward-looking Statements This press release contains "forward-looking statements" within the meaning of the federal securities laws, including the U.S. Private Securities Litigation Reform Act of 1995, as amended, including, without limitation, statements concerning the conditions of our industry, our operations, our economic performance and our financial condition, including, in particular, statements relating to our business and growth strategy, and the growth and dynamics of the market segments in which we operate. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "may," "might," "will," "should," "commit," "enable," "estimate," "focused on," "positioned," "project," "plan," "anticipate," "expect," "intend," "outlook," "believe" and other similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation: competition from existing and new competitors; the impact of global economic conditions (including inflation, interest rates, supply chain constraints, tariffs, trade wars and sanctions) and geopolitical risks (including risks related to international conflicts) on us, our customers and our suppliers, in the United States and the rest of the world; currency and interest rate fluctuations; seasonality of our business; our ability to attract, hire and retain qualified personnel; our ability to successfully make acquisitions and integrate acquired companies; changes in the rental rates that we can charge for the equipment in our rental fleet or our services; changes in the construction and industrial markets; changes in political, social and economic conditions and local regulations; changes in the attitude of our customers towards renting, as compared with purchasing, equipment; changes in applicable accounting standards or subjective assumptions, estimates and judgments by management related to complex accounting matters; changes in the mix of products offered in our rental fleet, industry capacity or competition; changes in environmental and safety regulations; changes in government spending or government policies; disruptions of established supply channels; the availability, terms and deployment of capital; and costs and availability of energy, and changes in transportation costs. Further information on the risks that may affect our business is included in filings we make with the U.S. Securities and Exchange Commission from time to time, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2026, and other filings with the SEC. Forward-looking statements made in this press release speak only as of its date, and we undertake no obligation to update them in light of new information or future events, except as required by law. View source version on businesswire.com: https://www.businesswire.com/news/home/20260909291559/en/ Contacts Investor Contact Kevin Powers, Senior Vice President, Investor [email protected] Media Contact H/Advisors Abernathy,Abigail Ruck / Mallory [email protected] / [email protected] (212) 371-5999

This article first appeared on GuruFocus. Total Revenue: Increased 11.2% to $3.1 billion. Rental Revenue: Grew 12.5% to $2.9 billion. Adjusted Operating Profit: Increased 13.8% to $759 million, with margins expanding 60 basis points to 24.4%. Adjusted EBITDA: Increased 8.7% to $1.3 billion, with a margin of 42.2% compared to 43.2% last year. Adjusted EPS: Increased 20.4% to a first-quarter record of $1.18 per share. North America General Tool Rental Revenue: Increased 7.4%, with dollar utilization consistent with last year at 47%. North America Specialty Rental Revenue: Grew 25.3%, with dollar utilization increasing 300 basis points to 77%. UK Total Revenue: $240 million, with adjusted EBITDA of $61 million at a margin of 25.4%. Gross Rental Capital Expenditures: Nearly doubled to $759 million. Free Cash Flow: $70 million in the quarter. Store Locations: Opened 13 greenfield locations in the quarter, on track to open approximately 55 this year; completed two acquisitions adding 17 specialty locations. Warning! GuruFocus has detected 6 Warning Signs with SUNB. Is SUNB fairly valued? Test your thesis with our free DCF calculator. Release Date: September 09, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record first-quarter results with total revenue up 11% and rental revenue up 13%, driven by broad-based demand across mega projects, energy, live events, and industrial MRO. Raised fiscal 2027 guidance for revenue, adjusted EBITDA, and CapEx, reflecting strong momentum and confidence in the year ahead. Specialty segment delivered exceptional growth of 25% in rental revenue, with dollar utilization up 300 basis points to 77%, led by power and HVAC, climate control, and scaffolding. Adjusted EPS increased 20.4% to a record $1.18, supported by higher operating profit and the benefit of share repurchases. Successful integration of Aries acquisition is generating strong cross-selling opportunities, with 669 tracked leads valued at $24 million in the first quarter alone. Strong pricing momentum and rate improvement, supported by disciplined industry supply and balanced fleet investment, with August trading consistent with Q1 performance. Adjusted EBITDA margin declined to 42.2% from 43.2% year-over-year, primarily due to higher relative growth in ancillary revenues and increased fuel costs. Free cash flow was only $70 million in the quarter, impacted by significant CapEx growth and timing of cash payments related to equipment landings. Gross rental capital expenditures nearly doubled to $759 million, raising concerns about potential over-fleeting despite management's reassurances of disciplined allocation. North America General Tool adjusted EBITDA margin decreased to 51.5% from 52.8%, with about half the change attributed to higher fuel costs. UK segment continues to lag with adjusted EBITDA margin of only 25.4%, though management remains focused on improving margins and return on investment. Used equipment sales declined to $85 million from $103 million last year, though recovery rates showed signs of stabilization. Q: Can you unpack the margin performance, specifically the progress in operating profit margins despite the expectation that the Aries acquisition would be a margin drag in year one? How much is from lower depreciation, better rate, utilization, or fuel pass-through, and should we expect continued progress in operating profit margins?A: Alex Pease (CFO) explained that the guidance assumes specialty growth will continue to outpace general tool, creating a mix impact. The company will also continue to see significantly higher ancillary revenue growth, which explained 75% of the margin change in the quarter. Fuel cost recovery typically takes about a quarter to realize benefits. The company has not baked in much momentum on rate, despite rate improvement accelerating through the quarter, which represents potential upside. They remain committed to the 200 basis points of margin improvement outlined at their Capital Markets Day. Q: You raised the CapEx guidance today. Where is that additional fleet going, and do you have any concerns about over-fleeting in the industry given the CapEx increases across the sector?A: Brendan Horgan (CEO) stated that the increased CapEx is "opportunity capital" directed at immediate opportunities like specialty same-store branches, greenfield openings, and mega-project wins. He dismissed concerns about industry over-fleeting, citing OEM capacity discipline. He noted that only about $100 million of fleet growth went to general tool same-stores (a 1% increase), yet those branches delivered strong growth. He highlighted that rental revenue grew 12.5% versus depreciation growth of only 2.5%, indicating a healthy supply/demand balance. Q: You mentioned rental rate improvement was a positive surprise. Can you frame the magnitude of improvement and where general tool time utilization stands versus prior cycle highs?A: Alex Pease (CFO) said rate momentum has been improving through the year and into August, supported by tight supply/demand and higher utilization. Brendan Horgan (CEO) clarified the rate performance was expected, not a surprise, driven by disciplined execution. He noted time utilization is in a strong position compared to historical highs, ranking in the top two or three years. He emphasized that with a larger fleet, the company can extract higher time utilization while maintaining availability to serve customers. Q: Can you discuss the growth in small and medium-sized customers and what could drive upside to the stable outlook for local non-residential construction?A: Brendan Horgan (CEO) detailed their synthetic analysis of construction starts versus completions. After 28 months of completions outpacing starts (through April 2025), they have seen 16 months of flat or positive activity. Internal indicators like quotes, reservations, and daily contracts are positive. The Dodge Momentum Index hit another high in July, with 59 projects over $100 million entering planning. This gives them confidence in the stability of local non-residential markets. Q: What are your early learnings from the Aries acquisition, and how are you thinking about greenfield openings versus further M&A to augment that portfolio?A: Brendan Horgan (CEO) reported a strong M&A pipeline. The company added 30 locations in the quarter (17 from Aries, 13 greenfield). Early cross-selling results are encouraging, with 669 tracked leads valued at $24 million, including over $2.5 million landed and 14 hard RFPs. Systems integration was completed on August 1st, giving them confidence in the business's growth trajectory. Q: Given the CapEx increases across the sector, are you seeing difficulty from suppliers in flexing production, and how do you balance that with allowing utilization to improve?A: Brendan Horgan (CEO) confirmed that for high-demand SKUs like telehandlers, ultra booms, and large power generation (300 kW and above), there is little spare OEM capacity. Sunbelt's preferred position with OEMs allows them to secure allocations for their increased guidance. This tightness will contribute to improved dollar utilization and a strong rate environment. Q: Is the rate improvement driven by self-help initiatives like the Intelligent Customer Pricing Program, or is the overall industry rental rate environment improving?A: Brendan Horgan (CEO) attributed the rate gains to industry-wide discipline shown through the cycle, combined with their existing dynamic pricing tools. He clarified that the new next-level customer dynamic pricing pilot is not yet contributing to results. The improvement is driven by "good old-fashioned discipline" and customers valuing the breadth and expertise of solutions, where a few percentage points in pricing is not the deciding factor. Q: How should we think about the sequential improvement in EBITDA margin in Q2 versus Q1, and are there any puts and takes to be mindful of?A: Alex Pease (CFO) stated they expect margin progress through the year, with essentially flat margins year-over-year. Factors supporting this include rate improvement, operational efficiency initiatives, strong utilization, and rental revenue growth outpacing depreciation. He reiterated confidence in delivering the 200 basis points of margin improvement from their Capital Markets Day, which will also drive ROIC progress. Q: Can you unpack the contribution of rates versus volumes in the quarter, and did the World Cup have a meaningful impact on rates in specialty?A: Brendan Horgan (CEO) noted that August trading felt like Q1, giving confidence for the raised guidance. He stated the World Cup's impact on pricing was negligible. He declined to break down the specific contributions of rate versus time utilization but pointed to the strong momentum in both, referencing the 12.5% rental revenue growth against 2.5% depreciation growth. Q: Given the slower depreciation growth relative to rental revenue, how should we think about the phasing of depreciation growth for the rest of the year in the context of the CapEx raise?A: Brendan Horgan (CEO) confirmed that depreciation growth will increase sequentially through the year, consistent with their guidance, as new fleet is delivered. The growth will be seen across both specialty and general tool as they maintain a focused and measured approach to capital allocation. Q: Are you expecting time utilization to move up through the gears toward previous peaks, and given your larger scale, should there be scope to raise that peak?A: Brendan Horgan (CEO) said time utilization should be viewed by segment. In general tool, they expect to set new heights with scale through operational excellence programs, but do not expect significant incremental progression through the year beyond normal seasonality. Alex Pease (CFO) added that all capital is pointed For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Sunbelt Rentals Holdings, Inc. (SUNB) used its fourth-quarter fiscal 2026 call to press a forward-looking case built less on the reported beat and more on accelerating rental momentum, specialty expansion and a margin recovery path. Adjusted EPS of 74 cents topped the Zacks Consensus Estimate of 73 cents, while revenues of $2.75 billion beat the $2.70 billion consensus mark. Sunbelt Rentals Holdings, Inc. price-consensus-eps-surprise-chart | Sunbelt Rentals Holdings, Inc. Quote Management’s message was that demand remains healthy, specifically in specialty categories and mega projects, even as mix and startup costs continue to weigh on profitability. That balance defined both the prepared remarks and the analyst Q&A. CEO Brendan Horgan said fiscal 2026 ended with stronger-than-expected top-line momentum, with fiscal fourth-quarter revenues up 8.9% to a record $2.75 billion and rental revenues up 8.0%. Full-year revenues reached $11.15 billion. Horgan pointed to 8% fiscal fourth-quarter rental growth, led by 15.1% rise in North America Specialty and 4.4% in General Tool, as evidence that demand broadened into year-end. That finish mattered because Sunbelt used it to support a fiscal 2027 outlook calling for 4.5% to 7.5% revenue growth and 5% to 8% rental revenue growth. CFO Alexander Pease said the central issue was not demand but margin mix. Fiscal fourth-quarter adjusted EBITDA margin fell to 38.7% from 42.7% a year earlier, while full-year adjusted EBITDA margin declined to 41.9% from 44.0%. Management tied the pressure to three factors: more specialty revenues, faster growth in ancillary revenues such as erection and dismantling, fuel and rerent, and higher internal repair and fleet repositioning costs. The lapping of a $28 million receivables provision reversal from the prior year also distorted the comparison. Executives argued the mix shift is strategically attractive even if reported margins stay flat in the near term, because specialty and ancillary activity still carry strong returns on investment and support deeper customer relationships. A major strategic update was the $650 million acquisition of Reliant Asset Management, which operates as Aries Building Systems and expands Sunbelt into modular space solutions. Management framed it as the company’s 13th specialty business line. Horgan said modular broadens Sunbelt’s site-services offering and creates cross-selling opportunities with existing products such as temporary structures, fencing, walls and ground protection. Aries currently operates in 14 of Sunbelt’s top 50 markets, leaving room for density expansion. In Q&A, management said Aries contributes just under 1% of fiscal 2027 guidance, but it also said the business has a clear path to doubling over a few years through greenfields and tuck-in deals. Pease told analysts that specialty should again outgrow General Tool in fiscal 2027, driven by project-related demand, energy solutions, live events and mega projects. He said local non-residential construction remains stable rather than reaccelerating. A Morgan Stanley analyst pressed on the durability of the 5% to 8% rental revenue guide given the 8% fiscal fourth-quarter exit rate. Management responded that some fiscal fourth-quarter activity reflected event-related demand and that the guide still assumes a stable, not improving, local non-residential backdrop. That response left the impression of disciplined guidance. This also showed management is not relying on a cyclical rebound to hit its targets. Another recurring theme was pricing. Pease said dynamic customer pricing is now active in 15 markets, with stable rates and early positive signs, though management said upside from that program is not embedded in guidance. Analysts also focused on mega projects and whether they are diluting margins. Horgan said early project load-ins can pressure margins for a few quarters, but once utilization rises, those projects move closer to the broader business margin profile. Management disclosed that the value of projects in the funnel rose to about $25 billion in the fiscal fourth quarter from about $10 billion in prior quarters, reinforcing confidence in demand even as near-term operating leverage remains uneven. The broader tone from management was confident but measured. Sunbelt continues to prioritize organic investment first, bolt-on M&A second and shareholder returns after that, while staying within its 1x to 2x net leverage range. Net leverage ended at 1.6x in fiscal 2026. That posture fits a company still investing through margin noise. The call repeatedly returned to scale, specialty breadth, network density and cross-selling as the main levers for fiscal 2027 and beyond. SUNB carries a Zacks Rank #3 (Hold), along with a Value Score of D, Growth Score of D, Momentum Score of B and VGM Score of D. In Zacks’ framework, a Rank #3 can be held, but it does not carry the stronger near-term return profile associated with Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The Momentum Score of B stands out as the stock’s strongest style signal, while the weaker Value, Growth and VGM grades point to a less favorable all-around setup. Zacks analysts also emphasize that estimate revisions drive the Rank, so SUNB’s current rating can change after the forecasts are updated following the quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sunbelt Rentals Holdings, Inc. (SUNB) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). 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