Sunbelt Rentals Holdings, Inc.

Greetings, and welcome to the Sunbelt Rentals Fiscal Third Quarter 2026 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow a formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask you to please limit yourselves to 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. It's now my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Today, we're reviewing our third quarter results ended January 31st, 2026, with comments on operations and our financials, including our view of the industry and strategic outlook. The prepared remarks will be followed by an open Q&A. 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 our Form 10, as well as other filings with the SEC. Today, we're reporting financial results in a gap-based In addition, we'll be reviewing or we'll be discussing non-GAAP financial 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. This morning, I'm joined by Brendan Horgan, our CEO, and Alex Pease, our CFO. I'll now turn the call over to Brendan.

Thanks, Kevin, and good morning, everyone. This is a landmark set of results for the company in the sense that this is the first under the name Sundell Rentals and our first since we successfully moved our primary listing to the New York Stock Exchange on March 2nd. This milestone was achieved with a monumental amount of work. And as such, I'd like to use this as an opportunity to thank our leadership and team members across our finance, tax, legal, IR, and HR functions for their diligent work thorough, and quality work. It's an exciting time for the business, so let's get into it, beginning as usual with safety on slide five. Safety of our people, our customers, and the members of the communities we serve. Safety is a core operating priority for Sunbelt and a key indicator of execution discipline. As you can see, Both our total reportable incident rate and lost time rate continue to trend lower, even as we support higher activity levels and a larger footprint. That progress reflects consistent focus on training, standardized processes, leadership priorities, and accountability across this organization. Importantly, these improvements are structural. They are not one-off. Our industry-leading safety performance supports higher productivity, better customer outcomes, a more engaged workforce, and is foundational to our success. So, to the team, thank you for your ongoing dedication to the perpetual improvement to our Engage for Life culture. Turning now to slide six, and to cover the key messages you will hear from Alex and me today. First, this is a solid set of results in line with our expectations with group rental revenue growth at 2.6% for the quarter, despite the ongoing impact of a quieter hurricane season compared to an active period in the second and third quarters of last year. On an underlying basis, growth in the third quarter was 4%, a sequential improvement from the first two quarters. Second, the strength of free cash flow after CapEx investment in fleet and business expansion demonstrates the through-the-cycle free cash flow power of this business at our present scale and margin. generated record-free cash flow of 1.4 billion years to date, which is an 83% improvement on last year. Third, while our key construction and markets remain mixed, we continue to be reassured that the local non-residential market is now in equilibrium in terms of completions no longer outpacing starts. Additionally, we continue to see positive momentum in many of our internal and external leading indicators. Mega project activity, continues to be strong across data centers, healthcare, infrastructure, energy, and manufacturing, and we are winning share across our regional and national strategic customers. Fourth, our strong free cash flow generation has enabled us to return nearly $1.4 billion to shareholders year-to-date through dividend payments and share buybacks, and we commenced our new share buyback program of up to $1.5 billion at the beginning of March, to coincide with the relisting on the New York Stock Exchange. Finally, based on recent performance and trends, we've narrowed and increased the midpoint of our full-year rental revenue growth guidance. Moving on to the financial highlights of the first half on slide seven. Notably, these Q3 results are the first to be presented under US GAAP. This impacts some of the key income statement lines, particularly EBITDA, which is lower principally due to the differences in the accounting for leases under U.S. GAAP, with most of the costs going into operating expenses and compensating reductions to non-rental depreciation and interest further down the income statement. Alex will cover this in more detail shortly. Total rental revenues were up 2.6% in the quarter, strengthening sequentially and consistent with the full-year guidance we gave in December. Leading indicators, both internal and external, that we track have continued to trend positively, and therefore we remain cautiously optimistic that these trends in our business will continue and are early but positive signs for the local non-residential construction portion of our end markets. As when they do recover, we expect our growth momentum to further accelerate and our results to strengthen. In the third quarter, total company adjusted EBITDA, reflecting the impact of U.S. GAAP accounting was $1.1 billion at a 41% margin. Noteworthy, our North American year-to-date adjusted EBITDA margins were 45%. And I'll further note, this includes all central costs across the group. As we explained in the results for the first two quarters, these margins reflect disproportionately higher specialty growth rates at lower EBITDA margins but higher return on investment. They also reflect the mixed effect of higher ancillary revenues, the proactive reposition of our fleet to drive utilization and unlock pockets of growth, and increased repair costs as a larger portion of the fleet comes out of warranty coverage. From a capital allocation standpoint and in line with our Sunbelt 4.0 priorities, we've invested $1.8 billion in capex year-to-date, focused on a mix of replacement and growth. Free cash flows, we've said, year-to-date was $1.4 billion, which is a record, demonstrating the resilience of our business while we continue to deliver and invest in growth. This strong cash flow generation is supporting our shared buyback activity. We completed the previous $1.5 billion program at the end of February before commencing the new $1.5 billion program last week. Slide eight shows fleet on rent for North America over the last four years. You can clearly see that our efforts to drive growth with existing fleet has resulted in improved time utilization. This supports a more constructive rate environment and contributes to strengthening ROI. It also demonstrates our disciplined and flexible capital allocation approach. Turning to slide nine. Revenue on a billings per day basis for General Tool grew 2% in a quarter, reflecting positive volume momentum and resilient rates in the end markets, which continue to be mixed. As expected, we continue to experience a moderated local non-res construction market, all set in part by the ongoing strength of the mega project landscape and the broader non-construction markets. Specialty delivered growth of 5% in the quarter, and this strength continues to be broad-based across multiple lines like flooring, temporary fencing, structures and walls, direct safety, and, of course, power and HVAC. On a constant currency basis, UK rental revenue is down 2% in the quarter, reflecting the ongoing challenges in the UK markets. We are making good progress, however, with the restructuring actions that we announced in December. On slide 10, we've set out the main leading indicators for the construction sector, namely Dodge Starts, Dodge Momentum Index, the Architects Billing Index, and Fed Funds Rate. The outlook for construction growth continues to be underpinned by megaprojects and infrastructure work, which remains strong and in many cases gaining further momentum. We've made great progress in megaproject wins year-to-date. with a growing funnel of future projects and advancing market share with our strategic customers, both regionally and nationally. The breadth and depth of our product offering across specialty and general tool lines, our ability to deploy integrated solutions at scale, and our leading fleet quality place Sunbelt at a significant advantage to our competitors. Very few in the industry can even compete in this rapidly evolving space. Combine this with a technology suite that is second to none, and it creates a platform that can deliver world-class customer experience, efficiencies, and value across a wide range of complex applications. As it relates to our local non-res end market, we remain in a moderated environment. However, as I flagged with the Q2 results, both our internal leading indicators, such as quotations, reservations, and continuing contract count activity, and key external indicators, are encouraging. The Dodge Momentum Index, in particular, remains near record highs. Just to remind you, this index represents non-residential projects excluding manufacturing that are below $500 million and entering the planning phase for the first time, and is therefore representative of the future velocity in what we refer to as that local non-residential construction market. This clearly indicates ongoing strong planning activity across our non-residential construction and markets, which will lead to an increase in starts likely within a period of 12 to 24 months. So, while clearly a positive leading indicator, it may take some time for this planning to translate into project starts, and when it does, we are poised to benefit. Before I hand it over to Alex, I'll just touch on our Sunbelt 4.0 strategic plan on slide 11. We're going to give you an updated and detailed progress report on Sunbelt 4.0 at the investor day, so I won't go into any further detail now. As I previously mentioned, our team has been laser-focused on advancing each of the five actionable components, which you know as customer, growth, performance, sustainability, and investment. Our clarity and mission throughout the organization is certain, and our momentum is building. I look forward with the team to highlighting a number of exciting developments while we're together in New York. With that, I will hand it over to Alex.