Sunbelt Rentals Holdings, Inc.

Greetings, and welcome to the Sunbelt Rentals Fiscal Fourth Quarter 2026 Earnings Conference Call-In Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation, and you may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask that you please ask one question, one follow-up, then return to the queue. As a reminder, this conference is being recorded, and if anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to Kevin Powers, Senior Vice President, Investor Relations. Kevin, please go ahead.

Great. Thank you, Operator, and good morning, everyone. Today, we're reviewing our fourth quarter and year-end results ended April 30, 2026, with comments on operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks will be followed by an open Q&A. Let me remind you that today's call will include four 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 as well as other filings with the SEC. Today, we're reporting financial results on a U.S. GAAP basis. In addition, we'll be discussing our 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. This morning, I'm joined by Brendan Horgan, our Chief Executive Officer, and Alex Pease, our Chief Financial Officer. I'll now turn the call over to Brendan.

Thanks, Kevin, and good morning, everyone. As always, we'll kick off the call with a safety update before we move on to the strategic and operational highlights for the year. So, beginning on slide five. Safety remains foundational to our success and is central to our culture at Sunbelt Rentals. For me, one of the more powerful reminders of this is our annual safety week, which we hosted last month. As I visited branches across the business and saw firsthand the deep commitment our teams have, to not only protecting one another, but our customers. It's clear to see how our engagement continues to translate into measurable results. World-class safety program and the ownership of Engage for Life by teams throughout the business. These results reflect sustained investment in training, technology-enabled safety monitoring, and a culture of standards and accountability across all of our locations. World-class safety performance not only protects our people, but also drives operational efficiencies and strengthens customer confidence in our brand. So, to our Sunbelt team members listening in, thank you for your efforts to date and your ongoing commitment to engage for life. Turning now to slide six to highlight key messages for fiscal year 26. The business delivered record Q4 and full year revenues of $2.8 billion and $11.2 billion, growing 8.9% and 3.4% respectively over last year, which came in above the top end of our March guidance. This revenue produced $4.7 billion adjusted EBITDA, drove a record free cash flow of $2.1 billion, contributing to record returns to shareholders of $1.9 billion through share repurchases and dividends. Momentum accelerated through the end of the year with 8% fourth quarter rental revenue growth, led by specialty growth of 15% and general tool growth of 4%. This performance demonstrates the continued strength, resilience, and diversity of our business and end markets. In addition, rental rates remained resilient, reflecting structural progression and disciplined investments. We continue to expand our footprint through 51 greenfield openings and 24 locations via bolt-on. Our top line momentum built throughout the year with mega project strengths, both in starts and pipeline, demand for energy solutions, significant live events, and large strategic account activity. In addition, We continue to experience what we call equilibrium between completions and starts in our local non-residential construction markets, meaning in essence that starts and completions are in balance, and importantly, our leading indicators remain positive, perhaps illustrated best by our significant fourth quarter momentum gains. Lastly, we're pleased to have announced a strategic transaction expanding our specialty offerings. that we believe will aid in the delivery of strong returns to shareholders. Let's turn to slide seven for some added color on this transaction. So I'll spend just a few minutes on the acquisition we announced this morning, which aligns with our capital allocation priorities, advances our Sunbelt Ford Auto Strategy, and further positions Sunbelt for long-term growth. We're excited to announce the acquisition of Reliant Asset Management, which creates our 13th specialty business line, Sunbelt Rentals Modular Solutions. Reliant, which trades under the ARIES brand, serves as a foundational entry point into the attractive modular solutions market. This will be a core part of the Sunbelt formula for driving complementary growth and specialty and general tool while growing our addressable markets. Modular is a highly complementary vertical to our other site services related offerings, such as ground protection, temporary structures, temporary walls, and temporary fencing, which entirely aligns with our Sunbelt 4.0 strategy. ARIES brings a national reach, a strong management team, and a meaningful backlog with a significant cross-selling opportunity through Sunbelt's strategic sales coverage and existing customer relationships. Today, ARIES is in just 14 of Sunbelt's top 50 markets, which clearly gives us substantial runway to grow density over time through both greenfields and additional bolt-on M&A. Portable storage is also under-penetrated in the existing fleet, which is another area for further investment, customer, and revenue gains. We look forward to capitalizing on the natural synergies Modular Solutions brings as we continue to integrate its offering into the power of Sunbelt. Let's now take a look at some of the construction industry trends and forecasts on slide eight. This is our usual presentation of Dodge Starts, Dodge Momentum Index, the Architectural Billing Index, and the Fed Funds Rate. The U.S. Dodge Momentum Index continues to signal strength in construction demand, providing a positive backdrop for our business. This leading indicator tracks commercial projects with projected starts values of less than $500 million as they first enter the planning stage and serves as a predictor, therefore, of construction starts to come over the next 12 to 18 months. This best represents an indicator for what we commonly refer to as local non-residential construction. The momentum figures and starts on this slide feed into the put in place figures on slide nine. providing a broader view of the U.S. construction markets and North American rental market outlook. According to Dodge, total U.S. construction put in place excluding residential is expected to reach approximately $1.3 trillion in 2027, with continued growth through the end of the decade. Our construction markets are highly diversified across local non-residential, large, and a broad sector range of megaprojects and infrastructures. As you saw in our fiscal 2026 results, and you will see in our fiscal 27 guide, our business growth continues to outpace the North American construction market. This is driven by our scale and market diversity, breadth of solutions, and the continued structural progression of our business and industry. Now turning to our full year results in more detail on slide 10. Total revenue and rental revenue both grew 3.4% to a record $11.2 billion and $10.3 billion respectively, with general tool and specialty sequentially strengthening throughout the year. Adjusted EBITDA declined 2% year-over-year, with margins compressing 200 basis points to 41.9%. Margins were impacted by three factors. First, inconsistent with what we experienced and detailed throughout the year, Our growth in the year was largely volume-led, carrying costs such as asset fleet repositioning to drive utilization and unlock pockets of market opportunities and growth. Second, particularly related to the fourth quarter, margins reflected a greater contribution from specialty, which carries, as you know, a lower EBITDA margin than general tool, but delivers extremely attractive returns on investment and runway for growth. Margin mix was also impacted by a higher contribution from ancillary revenues in areas such as E&D, fuel, and re-rent. When these profitable revenues outpace pure rent revenues, they'll impact margins. Third, and also specific to Q4, we lapsed the previously communicated reversal of a $28 million receivables provision recognized in the fourth quarter last year related to a customer Chapter 11 filing in the fourth quarter of 2024. Excluding the reversal benefit recognized in the prior year, adjusted EBITDA margin in the quarter declined 290 basis points. We invested $2.2 billion in CapEx as we maintained discipline in capital deployment, focusing on fleet replacement and targeted growth areas. Finally, we generated record-free cash flow of $2.1 billion, which was up 23% year-over-year, demonstrating our ability to fund growth while returning significant capital to shareholders, which in fiscal year 2026, we returned nearly $1.9 billion through share buybacks and dividends, demonstrating the resilience of our business and continued ability to invest in growth. Slide 11 illustrates our North America fleet-on-rent trend. where we are experiencing continued strength and momentum. Large strategic customers and megaproject activity is fueling growth, and we continue to see positive leading indicators. And importantly, the industry supply and demand dynamics are healthy, which when combined with structural progression, continue to support a resilient rate environment. Our diversified business model and deep customer relationships are driving increased cross-selling between North America General Tool and specialty segments. We also continue to build momentum through the network of 537 locations that have been added during 3.0 and thus far in Sunbelt 4.0, which are maturing and contributing to our growth. As you see here, our fleet on rent growth momentum has continued in May and June. Moving to slide 12, which shows equipment rental revenue growth on a billings per day basis across our segments. North America General Tool delivered consistent, low single-digit growth throughout the year, accelerating to 4% in Q4. This was driven by positive volume momentum and resilient rates in end markets, which continued to be mixed. Local non-residential construction markets, which I've mentioned, remained in this equilibrium state. where we believe starts are generally in balance with completions. Therefore, growth is being driven by the ongoing strength of megaproject landscape and the broader construction markets. North America's specialty delivered a strong 14% growth in Q4 and 6% for the full year. Growth was driven by broad-based project demand across markets, from megaprojects to live events to demand for energy solutions. This performance was broad across multiple specialty lines, including power and HVAC, load banks, scaffolding, temporary fencing, structures, trench safety, and ground protection. So when comparing Q4 rental revenue growth to Q1 by segment, General Tool exited the year to pace four times its entry and specialty nearly three times. This momentum in Q4 gives us confidence and the trajectory for fiscal year 2027. And with that, I'll hand the call over to Alex to review the financials in more detail. Alex.