Earnings Call Transcript - URI Q1 2026

Operator, Operator

Good morning, everyone, and welcome to the United Rentals Investor Conference Call. Please be advised that this call is being recorded. Before we begin, please note that the company's press release comments made on today's call and responses to your questions contain forward-looking statements. The company's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control. And consequently, actual results may differ materially from those projected. A summary of these uncertainties is included in the safe harbor statement contained in the company's press release. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10-K for the year ended December 31, 2025, as well as the subsequent filings with the SEC. You can access these filings on the company's website at www.unitedrentals.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that the company's press release and today's call include references to non-GAAP terms, such as free cash flow, adjusted EPS, EBITDA and adjusted EBITDA. Please refer to the back of the company's recent investor presentation to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer; and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Please go ahead, sir.

Matthew Flannery, President and Chief Executive Officer

Thank you, operator, and good morning, everyone. Thanks for joining our call. Yesterday afternoon, we reported a strong start to 2026, including first quarter records across revenue, EBITDA and EPS. I was very pleased by the growth, margins and fleet productivity we reported, as the team continues to execute against our North Star of putting the customer first. The momentum we're carrying into our busy season, along with our customers' feedback for their business, supports our expectations that this will be another record year, as further evidenced by our updated guidance. This is all attributed to our 28,000 team members who are laser-focused every day on serving the customer and delivering against our goal to be their partner of choice. What exactly does this mean? Well, it means we have a broad unmatched offering of both gen rent and specialty products. We invest in industry-leading technology to make both the customer and our own operations more productive and efficient. And most importantly, we have a track record of providing superior service our customers can depend on. This didn't happen by accident. We've developed sustainable competitive advantages through our differentiated value proposition and operational excellence, allowing us to deliver consistent performance and shareholder value. Now having said all this, today, I'll give a quick recap of our first quarter results, followed by what's driving our optimism for the year. And then Ted will go into more details around the numbers, before we open up the call for Q&A. So let's start with the quarter's results. Our total revenue grew by 7% year-over-year to nearly $4 billion. And within this, rental revenue grew by almost 9% to $3.4 billion, both first quarter records. Fleet productivity of 2.3% contributed to OER growth of 6.5%. Adjusted EBITDA came in at $1.8 billion, resulting in a margin of 44.1%, a 60 basis point improvement year-over-year when you exclude the H&E benefit. And finally, adjusted EPS came in at $9.71, up 10% year-over-year and another first quarter record. Now let's turn to customer activity. We continue to see healthy growth across both our gen rent and specialty businesses. Within specialty, which grew 14% year-over-year, we saw growth across all lines of business and opened 17 cold starts. By vertical, our construction end markets saw strong growth led by nonresidential construction and infrastructure. And on the industrial side, power and mining and minerals were notable standouts, with power continuing to post double-digit growth. We saw a wide variety of new projects kick off in the quarter, spanning health care, infrastructure, power, industrial manufacturing and, of course, data centers. And for you soccer fans out there, we expect to be a key partner for the World Cup starting here in the second quarter. Now turning to the used market. We sold $680 million of OEC at a 51% recovery rate. We're on track to sell approximately $2.8 billion of fleet this year supported by strong demand for used equipment. In conjunction with these sales, we spent $874 million on rental CapEx. This was spread across replacement and growth CapEx, with a focus on specialty and bringing in additional gen rent equipment where we see strong demand. Subsequently, we generated free cash flow of $1.1 billion. We're set up for another strong year of cash generation, which is a critical feature of the company. As a reminder, the combination of our industry-leading profitability, capital efficiency and the flexibility of our business model enables us to generate meaningful free cash flow throughout the cycle, which can be redeployed in ways that allow us to create long-term shareholder value. Finally, we allocated capital in the quarter consistent with our framework, which starts with a healthy balance sheet. After supporting both organic and inorganic growth, we returned $500 million to shareholders during the quarter through a combination of share buybacks and our dividend. Our leverage of 1.9x remains well within our targeted range, leaving plenty of dry powder to support growth and return excess capital to shareholders. Now let's turn to the rest of 2026. As evidenced by our updated guidance, the year is playing out better than we expected just a few months ago. Feedback from the field continues to be optimistic, particularly for large projects. We're carrying a strong momentum into our busy season and we feel confident we're positioned to win in the marketplace. So to sum it all up, our unwavering focus on our strategy, which includes our differentiated value proposition, positions us well to compete effectively in the marketplace. Our customers know they can depend on us. And our team is executing with strong capabilities. We see multiyear tailwinds for large projects and believe we're well positioned for these opportunities. And we'll continue to monitor and manage our cost structure and operate with capital discipline. I'm confident the combination of our resilient business model, prudent capital allocation and balance sheet strength will allow us to continue to drive profitable growth, generate strong free cash flow and deliver compelling returns to our investors. And with that, I'll hand the call over to Ted to review our financial results, and then we'll take your questions. Over to you, Ted.

Ted Grace, Chief Financial Officer

Thanks, Matt, and good morning, everyone. As Matt just shared, we're off to a strong start to the year with first quarter records across total revenue, rental revenue, EBITDA and EPS. More importantly, we're pleased to be raising our full year guidance based on the momentum we're carrying into our busy season and strong customer sentiment. Before we get into the details of the outlook, let's dive into the first quarter numbers. As you saw in our press release, rent revenue increased $274 million year-over-year, or 8.7%, to a first quarter record of over $3.4 billion, supported primarily by growth from large projects and key verticals. Within this, OER increased by $163 million or 6.5%, driven by 5.7% growth in our average fleet size and fleet productivity of 2.3%, partially offset by assumed fleet inflation of 1.5%. Also within rental revenue, ancillary and re-rent grew by nearly 18%, adding a combined $111 million as ancillary growth continues to outpace OER. Pivoting to used, we sold $680 million of OEC in the quarter, generating $350 million of proceeds at an adjusted margin of 47.4% and a 51.5% recovery rate. So solid used results overall. Next, let's turn to EBITDA. Excluding the $52 million net benefit we realized with the termination of the H&E acquisition in the year-ago period, EBITDA increased $140 million to a first quarter record of almost $1.76 billion. This was primarily driven by a $160 million increase in rental gross profit, partially offset by a $12 million decline in used gross profits. Excluding the impact of H&E, SG&A increased $16 million year-over-year, but declined as a percent of revenue, while gross profit from other lines of businesses increased $8 million. Looking at profitability, our first quarter adjusted EBITDA margin was 44.1%, reflecting a 60 basis point improvement year-over-year excluding the impact of H&E. As expected, we continue to see geographically dispersed large projects driving much of our growth while customer demand for ancillary services also remains strong. Nonetheless, as you saw this quarter, with the benefit of strong cost management, we expanded our underlying margins year-over-year. And while we'll always have normal quarter-to-quarter variability in costs, it remains our goal to achieve flat margins for the full year. To give you a little more color on the cost controls, I'll note that we recorded $45 million of restructuring charges in the first quarter, which were primarily related to the consolidation of overlapping facilities and head count reductions. Additionally, we took steps across the organization to control variable costs with a significant focus on labor and outside hauling. And while it's still early in the year, we're pleased with the results of these initiatives. Shifting to CapEx, gross rental CapEx was $874 million, translating to around 19% of our full year spend at midpoint and in line with historical first quarter levels. Moving to returns and free cash flow, our return on invested capital of 11.8% remained comfortably above our weighted average cost of capital, while free cash flow for the quarter exceeded $1.05 billion. Turning to our balance sheet. Net leverage remained very comfortable at 1.9x at the end of March, with total liquidity of almost $3.4 billion. On the capital allocation front, we returned $500 million to shareholders in the quarter, including $125 million via dividends and $375 million through repurchases. Now let's shift to the guidance we shared last night, which reflects our confidence in delivering another year of strong results. Total revenue is now expected in the range of $16.9 billion to $17.4 billion, an increase of $100 million versus our initial guidance, while used sales are still expected at around $1.45 billion. At midpoint, this implies full year growth ex used of roughly 7%. In turn, we've also raised our adjusted EBITDA guidance by $50 million to a range of $7.625 billion to $7.875 billion. On the fleet side, we've increased our gross CapEx guidance by $100 million to a range of $4.4 billion to $4.8 billion, reflecting the stronger demand we see. This now implies net CapEx of $2.95 billion to $3.35 billion. And finally, we're guiding to another year of strong free cash flow in the range of $2.15 billion to $2.45 billion, with the increase in CapEx offset by higher cash flow from operations. Shifting to capital allocation, it remains our plan to repurchase $1.5 billion of shares in 2026. Combined with our dividend, this will return roughly $2 billion to our shareholders this year, equating to approximately $32 per share or a return of capital yield of about 4% based on our current share price. So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.

Operator, Operator

Certainly. Thank you, Mr. Grace. Please follow the operator instructions to ask a question. We'll go first this morning to David Raso with Evercore ISI.

David Raso, Analyst, Evercore ISI

I want to focus on margins and the cost saving initiatives versus maybe some fuel cost concerns. As you mentioned, right, the margins were up 60 bps year-over-year, incrementals were 53%. The amount of savings in the first quarter, be it labor, some of the real estate you spoke of, I'm coming up with something like $10 million. So even without that, margins were up 40 bps, incrementals were 49%. And the reason I go through those numbers is the rest of the year, and I'm just using midpoints, I appreciate that, but the rest of the year, you're now implying margins down 20 bps year-over-year, incrementals only 42.5%. And I just want to make sure how much we should be looking at the first quarter, is a little bit of an anomaly on savings and the margin? And why would we then, if it's not an anomaly, the margins would be down the rest of the year, year-over-year?

Ted Grace, Chief Financial Officer

Yes. I'll start there and then we can go from there. So thanks for the question, David. I'd say, as always, we caution people against anchoring to the midpoint. It goes without saying we're very pleased with the start to the year we've had. And certainly, the underlying improvement, excluding whatever the benefit was from restructuring, and you're probably in a reasonable ZIP code assuming around $10 million of benefit in the first quarter, there's still a lot of game to be played. We feel very good about the trajectory we're on, excellent execution in the first quarter, but we've got to sustain that through the busy season, which is to say the second and third quarter. So if you look at the results, it was really kind of all 3 big areas of costs that provided leverage: labor, delivery and R&M. So we feel like there's a broad-based kind of contribution to the improvement. But again, we've got to sustain that through the busy season. And the area that is probably going to be the most important to focus on will be delivery through the busy season. And so we feel really good about the start to the year. The team is incredibly focused, after taking care of customers, focusing on cost is job #2. So Matt, I don't know if you'd add anything?

Matthew Flannery, President and Chief Executive Officer

No, I think you covered it, but I want to anchor on the midpoint and, more importantly, the efforts we put in place that we talked about to help mitigate some of the cost challenges that came with the repositioning and some of the other challenges, the team is doing a good job, and we'll continue to run that play.

David Raso, Analyst, Evercore ISI

And a follow-up on that, then I'll hop off, can you give us any sense of how you're thinking about fleet productivity after the 2.3% in the first quarter? Cadence full year, whatever you want to provide us would be great.

Matthew Flannery, President and Chief Executive Officer

Sure, David. Yes, we feel like the supply-demand dynamics in the market are conducive to driving positive fleet productivity. As you know, our goal is always to overcome that 1.5% inflation bogey that we put out there, and I'm glad to see the team did that in Q1. And frankly, that's our expectation in our guidance when we start every year. So on track, feel good about it. And when I think about it qualitatively, we continue to get positive rate. We feel good. Rate is still a good guy. The time utilization, which we've been talking about running at a high level for a few years now and maybe even thought that would be a headwind this year, I'm pleased to say the team are continuing to achieve high levels of time utilization. And then the biggest change when we think about Q4, which got a lot of explaining and a lot of focus, was really an anomaly, and that's why we talked so much about some of the challenges and mix, and we didn't face those mix headwinds like we did in Q4. So we don't expect to have those headwinds again. But once again, we'll continue to update you guys as we go along.

Operator, Operator

We'll go next now to Rob Wertheimer with Melius Research.

Rob Wertheimer, Analyst, Melius Research

I'm most curious about your customer commentary. I'm wondering what the timeline is, especially for larger projects — when do conversations about how customers feel turn into preorders or planning for specific projects, and as those transitions start to happen, is that discernible? Also, as a follow-up: dirt movement and dirt equipment started moving upwards a quarter or two ago. There are a lot of mixed signals in the industry, but some saw that as a leading indicator. Do you think that's a tangible sign that we've hit the bottom and are working our way up, and is that part of the strengthening demand you're seeing?

Matthew Flannery, President and Chief Executive Officer

Yes, Rob. Regarding the planning aspects, as you might imagine, the larger the project the more advance notice customers need to give their suppliers, particularly equipment suppliers, about what they will need. We'll continue to do that. It's a continuous pipeline of projects and conversations, so we have more visibility on those large projects and feel good about our positioning and the overall demand in that area. As for dirt, it makes sense that dirt could be a leading indicator, and we're seeing strength across our portfolio. You saw a 6% gen rent number, and that couldn't happen if it were just driven by dirt. Whether that's a leading indicator for further acceleration, I agree the pipeline is strong, but I wouldn't extrapolate those numbers to us because we aren't seeing a separation. Maybe the dealership network is impacting that number as well, which is good. Overall, we feel good about the demand cycle and where we are with major projects.

Operator, Operator

We'll go next now to Mike Feniger with Bank of America.

Michael Feniger, Analyst, Bank of America

I was just hoping, Ted, if you could just talk about ancillary costs, repositioning costs. Just if we think about the bridge, I know this gets a lot of attention, is that pressure intensifying in 2026 versus 2025? How we mark to market with what we're seeing potentially on the fuel side? And clearly, we're seeing the cost savings come through and that should build. Does that kind of offset maybe any increases that you're seeing there if we look at kind of a bridge on the margins for '26 versus '25.

Ted Grace, Chief Financial Officer

Yes. There's a lot to unpack there, Mike, but thanks for the question. So ancillary growth, the relative growth to OER kind of held constant with what we saw last year. And so obviously, a big part of what we focus on strategically is taking care of our customers, and the team is doing a great job there. I would say from the standpoint of thinking about the contribution margin from ancillary, probably very much in line with that 20% we've talked about. No appreciable change in the first quarter. And I don't think we'd be looking for any appreciable change at this point for the year. On the repositioning side, the team did a great job managing across those big 3 cost areas I talked about, and that does very much include delivery. If you look at our rental results, the rental gross margin was up 50 basis points year-on-year. And again, all 3 of those contributed. But delivery, which is the area where we see kind of the most focus on execution, improved about 10 or 15 basis points as a percent of revenue year-on-year. So a great job given the fact that we did see almost 9% rental revenue growth. When you dig into the details, the biggest portion of repositioning will be and has been in specialty, and you saw that in numbers. They were still probably about 30 basis points behind the curve, but that's a huge improvement versus what we saw last year. If you think about the drag on margins last year within specialty, it averaged about 150 or 200 basis points year-on-year per quarter. And now we're talking about a number that's probably in the order of 30 basis points. So they're doing an incredible job managing that, because there is a healthy amount of repositioning this year, we've talked about kind of the demand drivers, and we've talked about the focus on capital efficiency, fleet efficiency, and that will continue to be the case. On fuel, something we're obviously monitoring and managing very closely. The majority of our exposure, as you know, Mike, is a pass-through. So that gets managed a couple of different ways, but the delivery calculator is the most obvious one, and that's something that we update regularly to help pass through kind of the higher costs we could incur based on higher diesel prices. And then on the internally consumed diesel, we manage that through an active hedging program. So a lot of focus there. The team is doing a great job, and we feel like we should be able to manage through any reasonable situation there. Matt, anything you'd add?

Matthew Flannery, President and Chief Executive Officer

No, I think you covered it well.

Michael Feniger, Analyst, Bank of America

Great. And Matt, just for my follow-up, I know we talked about rate, I mean there's been a discussion around competitive dynamics, particularly on the gen rent side and competition there. You mentioned the fleet productivity and rate being a good guy. Are you seeing anything on the ground on maybe intensifying competition on gen rent? Or is this the one-stop shop model that you guys have been building kind of separates you a little bit from maybe some of that competitive intensity? Just curious if you can kind of comment on that.

Matthew Flannery, President and Chief Executive Officer

I mean I've been doing this for 35 years and there's always somebody that wants what you have, right? So what you need to do is differentiate yourself. And to the end of your point there, we spent a lot of time building a competitive moat around our offering and making sure that we're targeting our customers' needs, but also targeting the customers that value that. And we feel really good about where we're positioned. We think the major project pipeline plays into our opportunity to solve, give more solutions to our customers. So we feel good about our positioning and where we are. And the supply-demand dynamics, as I said earlier, to David's question, we feel good about the supply-demand dynamics in the industry, and that should continue to drive positive fleet productivity.

Operator, Operator

We'll go next now to Steven Fisher of UBS.

Steven Fisher, Analyst, UBS

Congratulations on the quarter. Just a follow-up on the rest of the year. You mentioned, Ted, that delivery is really going to be one of the key focus areas. Can you just talk about what are the keys to making sure that that works out favorably in the way you want it to? And then in terms of just any other additional inflation for the rest of the year, to what extent do you have an expectation that will be addressed by rate? Or will that remaining $15 million or so of planned cost reductions cover that extra inflation?

Matthew Flannery, President and Chief Executive Officer

Yes, Steve. I'll take the first part about delivery because it's important to understand we're not going to eliminate the challenges of repositioning and delivery; the goal is to mitigate them. The good news is we've implemented new processes that worked in Q1. I think Ted was referring to the challenge in Q2 and Q3, which is to keep that up as the system gets even busier, and we are heavily focused on it. There will still be repositioning costs. The other cost actions we've taken are also intended to help mitigate those costs because we still want to drive capital efficiency. We prefer to move fleet rather than simply buy more when we win new deals, and that will remain a focus. So our approach is two-pronged: execute on moving fleet more efficiently and pursue any other cost opportunities to help support that demand. That way we can continue to run the business and support our customers efficiently. Ted, you can speak to other inflationary items.

Ted Grace, Chief Financial Officer

Yes, Steve. Outside of fuel, the year has played out as expected from an inflation standpoint. The areas we've talked about most are labor, and we've managed that very effectively, as shown by our first quarter results. Across the business, we captured about 50 basis points of labor absorption. We discussed that in January and we're off to a good start. Even with ongoing labor inflation, we're getting that kind of pull-through. Other inflationary areas include real estate and insurance, which were built into the plan and are playing out as expected. Regarding the $15 million of cost reductions you mentioned, I'm assuming you're referring to incremental restructuring expense. To clarify, you saw the $45 million of charges we took in the first quarter. For the full year, we're expecting $55 to $65 million, so at the midpoint that's about $60 million, leaving another $15 million to go. Of the first $45 million, about two-thirds were real estate related from closing overlapping facilities in the first quarter, and the remaining one-third was headcount related. Those are the two big buckets likely for the rest of the year, though it's more likely to be real estate; on headcount we're in a good position but we'll provide periodic updates. All of this was built into our expectations. For the year, David estimated the first quarter benefit was around $10 million; for the full year we estimate the benefit will be roughly $45 million to $50 million. That was included in initial expectations, we're on track, and you'll see that benefit come in a linear fashion across the rest of the year.

Matthew Flannery, President and Chief Executive Officer

No, I think you covered it well.

Operator, Operator

We'll go next now to Ken Newman of KeyBanc Capital Markets.

Kenneth Newman, Analyst, KeyBanc Capital Markets

So maybe going back to the inflation piece here. I know there's been some broader market worries around some of these new Section 232 methodologies, and I'm assuming you're already protected from any potential surcharges from suppliers just given that you locked in those prices at the end of last year. But when I think about the fact that you are seeing a little bit stronger growth to start the year out, can you maybe just talk a little bit about your ability to maybe accelerate fleet growth if needed? And if you can still be price/cost positive if inflation starts to ramp further from here?

Matthew Flannery, President and Chief Executive Officer

Sure, Ken. As you noted, we lock in our prices for the year. Embedded in those contracts, we talk to our key suppliers and most of our vendors about wanting the ability to flex up, and we contractually have the ability to flex down, although that does not seem to be in our immediate future. That flexibility and our vendors' ability to respond to flexes is an important part of our vendor relationships. So if the end market develops that way and demand continues to outpace our expectations, as it did in Q1, we have the opportunity to flex.

Kenneth Newman, Analyst, KeyBanc Capital Markets

And just to clarify on this last question: again, I know it's early as people try to look through this, but are any of your suppliers coming to you or pushing for surcharges at this point, or is it still too early?

Matthew Flannery, President and Chief Executive Officer

Well, we don't discuss our negotiations with partners, but we are very disciplined about sticking to our original deal. So I would say we're not really worried about that.

Kenneth Newman, Analyst, KeyBanc Capital Markets

Makes sense. Okay. For the follow-up, maybe just talk a little about the M&A pipeline. The free cash flow profile still seems pretty strong. How active is the pipeline compared with when we last talked a quarter ago? And I'm curious whether the macro environment today makes it harder or easier to do deals.

Matthew Flannery, President and Chief Executive Officer

Yes. I wouldn't say the macro environment has changed; the pipeline hasn't really changed over the last couple of years, with the exception of COVID. The deal pipelines remain pretty consistent. The real challenge for us isn't how many deals to look at; it's expectations, and how many align with us in terms of what we expect from a deal and the returns we require, and finding that willing dance partner. But there's no lack of opportunities to look at, and we continue to work the pipeline. We've got a great M&A team and business development team. As you can imagine, we'd lean towards specialty, specifically adding new products. But we'll do tuck-ins as well in the general rental business if it fills a need and gives us capacity in a growing market. So stay tuned. To your point, we have plenty of dry powder and we'll continue to work the pipeline.

Operator, Operator

We'll go next now to Kyle Menges of Citigroup.

Kyle Menges, Analyst, Citigroup

Great. Maybe first off, could you talk a little bit about just if you're seeing anything particularly in local markets? Any early impacts from the geopolitical uncertainty and a fading rate cut theme impacting those markets? And I think you had embedded roughly flat local market growth in your previous guidance. Any change there?

Matthew Flannery, President and Chief Executive Officer

No. We think the local market continues to be stable. That's a positive development. Earlier last year and the year before, some markets were still being impacted negatively, but overall the local markets have stabilized as we expected. The project pipeline on major projects and our specialty growth continue to drive the growth we have been executing on and anticipated for this year. So we feel good about the end market.

Kyle Menges, Analyst, Citigroup

Great. That's helpful. And then certainly a theme that's had a bit of a resurgence recently is just OEM dealers pushing more into rental or expanding their rental fleets. Just how do you see that impacting competitive dynamics in the industry? And I'm also curious roughly what you think your product overlap is with the typical OEM dealer rental fleet.

Matthew Flannery, President and Chief Executive Officer

Really not much overlap there. It's something that we're aware of, and there's a handful of them around the country that do a good job locally and regionally. But it's not something that, in our competitive dynamics or if we were doing a competitive analysis, really doesn't fall high on our radar, unless maybe in a specific local market's competitive analysis. So nothing there really to talk about from our perspective.

Operator, Operator

We'll go next now to Angel Castillo with Morgan Stanley.

Angel Castillo, Analyst, Morgan Stanley

Congrats on a strong quarter. I want to return to the M&A question and look back a bit. Could you talk about the roughly $700 million in acquisitions you've completed over the last two quarters? Any color on what those assets are, how much they may be contributing to sales, and any other details you can share? In particular, I'm trying to understand the split this quarter between general rental and specialty organic versus inorganic growth, and how much of the revenue increase was already baked into the guide versus how much might be driven by those acquisitions. Also, any impact on dollar utilization would be helpful.

Matthew Flannery, President and Chief Executive Officer

Yes. Sure, Angel. On the M&A front, as you saw, we spent about $400 million in the first quarter, slightly less than that. Those were four small deals, and the two larger ones were done in the first week of January, so they were already embedded in our guidance. That means there is only a small amount of impact on the rest of the year from the other two. Looking at deals across all of last year and this year, they represent roughly 1% of revenue growth — not a huge number, but still strategically important. To answer the latter part of your question, they are a contributor in some way, but not the reason for our beat or our updated guidance. Ted, anything you have to add?

Ted Grace, Chief Financial Officer

The last piece on the impact on dollar utilization, I think, very de minimis. I mean to Matt's point, it was a handful of small acquisitions, none of which obviously are even collectively are going to move the needle in any appreciable manner.

Angel Castillo, Analyst, Morgan Stanley

Very helpful. And then I wanted to go back to the demand question. You talked about seeing I guess, in the mega projects area continuing to see, I guess, strength and things coming in maybe a little bit better than you had expected, as well as strengthening some of the end markets. Could you just give us a little bit more color on kind of the various key end markets, how you're seeing that play out? Any particular pockets where you saw a little bit more strength than you had anticipated than the seasonality? And whether that was projects moving faster, weather allowing it or just perhaps your execution, win rates coming in better than you had anticipated? Just trying to understand, I guess, the underlying demand side versus maybe some more idiosyncratic, again, URI execution, win rate type of things?

Matthew Flannery, President and Chief Executive Officer

Well, I think the large project pipeline has been discussed broadly. Data centers have been a major focus, but as I said in my opening remarks, the opportunity is much broader than just data centers. Nonresidential construction overall, even excluding data centers, remains very strong, so growth in nonresidential is broad-based. Regarding other end markets contributing to growth, I mentioned in my opening remarks that infrastructure and power continue to expand at double-digit rates. Power has been a particularly strong end market we've focused on for some time. Those are the primary drivers. This is all without petrochemicals really picking up yet, which still weighs on year-over-year comparisons. We expect the project pipeline and the potential pickup in petrochemicals to continue to support growth for the foreseeable future.

Operator, Operator

We'll go next now to Tami Zakaria of JPMorgan.

Tami Zakaria, Analyst, JPMorgan

Congrats on the great results. I'm curious about the World Cup that you mentioned, should we model a sizable maybe onetime tailwind from that in the second quarter? And related to that, do you expect the event to drive demand for both specialty and gen rent or one or the other?

Matthew Flannery, President and Chief Executive Officer

Tami, in the scale of our company, I wouldn't model anything extra for the World Cup. It's already been embedded in our guidance. As you can imagine, for large events like that, we knew before the year started what we were going to need to support those folks with. But in the scale of our business, there's not any one project or event that's going to make a meaningful difference. That's a great part of having such a broad portfolio. I hope that answers your question.

Tami Zakaria, Analyst, JPMorgan

It does. And a quick one, the $100 million increased gross CapEx, is that driven by general rental or specialty?

Matthew Flannery, President and Chief Executive Officer

It's across the portfolio. Specialty is growing faster and we did 17 cold starts, so a bit more of our growth CapEx will be allocated to specialty to support those cold starts and the growth. We'll also spend some on general rental products that are tight to support major projects, so spending will be spread across the portfolio with a heavier weighting toward specialty.

Operator, Operator

We'll go next to Tim Thein of Raymond James.

Timothy Thein, Analyst, Raymond James

First question, a follow-up on delivery cost recovery. Matt, could you speak to how the company is positioned today compared with past periods when diesel and flatbed trucking rates spiked? How has the company evolved and what tools have you built out over the years? Is there a way to assess how your positioning today differs from how it would have been in those previous periods of higher cost inflation?

Ted Grace, Chief Financial Officer

Yes. Tim, I can start there and then Matt can definitely fill in some more blanks. But obviously, we've long focused on costs and certainly making sure that we're managing delivery effectively. So I think if you were to look at analogous periods, 2022 would probably be the first one that comes to mind in terms of a year where you saw a meaningful increase in diesel prices, and you could say what happened in that episode. So on-highway diesel prices increased over 50% in 2022 year-on-year. If you were to look at the impact that had on our fuel line, it would have been probably like a 15 basis point increase as a percent of revenue. And so you can see it's something that is highly managed at that point. Delivery costs on the whole moved in a similar amount. And I think if you were to look at our margins in 2022 ex used, they increased considerably. So not that you can draw parallels between every period, but certainly, I think it serves as a good example of our ability to manage through these kinds of environments pretty effectively. Matt, anything you'd add there?

Matthew Flannery, President and Chief Executive Officer

No. No, I think you covered it well.

Timothy Thein, Analyst, Raymond James

Okay. On the specialty segment, revenue is up, I think call it 14% year-over-year. If I look at the ending asset base, which I may be wrongfully using as a proxy for OEC, it was up about 16%. My assumption has been that specialty tends to generate higher levels of asset efficiency, which I'm sure you would endorse, so I'm struggling with that. I would have thought the relationship would be a bit different. Is there something within that you would call out? I'm trying to think through why you wouldn't see a higher level of revenue relative to the investment in that business. Hopefully that makes sense.

Ted Grace, Chief Financial Officer

I'd say intuitively, your assumption is correct that you do tend to get stronger dollar in those assets and you can see that productivity historically. Truthfully, I'll need to come back to you on that. I'm guessing it's probably a function of timing, but I can't think of anything on an underlying basis that would have turned that relationship upside down. So if it's okay, Tim, I'll come back to you on that.

Operator, Operator

We'll go next now to Jamie Cook with Truist Securities.

Jamie Cook, Analyst, Truist Securities

Congrats on a nice quarter. First question, Ted: it was the first quarter in a while that I think we've seen the gen rent margins improve year over year. How should we think about the gen rent margins as we progress through the year? Is there any reason the first quarter was an anomaly? Second, the first quarter came in better than expected. I know there was a pipeline job that had a softer start in the fourth quarter. How is that job going, and is the first-quarter outperformance because that job restarted, implying a catch-up that may not be sustainable? You raised guidance, but by less than the beat, so I'm trying to work through that.

Ted Grace, Chief Financial Officer

Sure. I'll start off, and Matt, please jump in. In terms of the rest of your gen rent margin, we don't provide segment margins, as you know. We talked about the focus the team had starting in January on both sides of the business. You asked about gen rent, and they really delivered. If you look at that gen rent gross rental margin being up 150 basis points, it was roughly equal contribution from labor, delivery and leveraging depreciation. And within that, R&M was still a positive. So the team really did a great job, and that will continue to be the focus. As I think we talked about earlier, the key will be sustaining a lot of this through the second quarter, with delivery being the one that will probably take the most focus. So if you look at that in the first quarter in gen rent, that was about 50 basis points of leverage. The team did a great job. We've got to sustain that through the busy part of the season as we get deeper in the year. But what I would say on the whole, as we've talked about, the goal is flat margins for the full year excluding the H&E benefit from last year. That's on an EBITDA basis, so it's across the business. Certainly, our goal across both segments would be to perform very well. So that was the first part. On the second part, the matting project that we talked about in January that affected the fourth quarter from a timing perspective, we've been delivering assets to that project. It has not entirely kicked off yet, but we've been mobilized. With that said, as we talked about in the fourth quarter, matting was down year-on-year in the fourth quarter. It was up in the first quarter. And so that obviously was a big factor in the swing of fleet productivity that Matt talked about, that headwind we absorbed in the fourth quarter, just as a function of the timing of that start that we thought would have been in the fourth quarter and ended up being in the second quarter. And then as it relates to the follow-through of the quarter, it's hard for us to speak to anybody's external expectations. If you think about the $100 million revision to revenue and the $50 million to EBITDA, part of that was the first quarter being a little stronger. You can see that we raised CapEx, so obviously that's going to contribute after the first quarter. But we're off to a great start. We feel really good about where we're heading. And those are the two big components within that revision. Matt, anything I missed or you'd add?

Matthew Flannery, President and Chief Executive Officer

No, you covered it well.

Operator, Operator

We'll go next now to Steve Ramsey of Thompson Research Group.

Steven Ramsey, Analyst, Thompson Research Group

On time utilization holding or being a positive, would you say that's mega project driven slowly? Or would you say that local market stabilizing kind of any breakout on time utilization drivers?

Matthew Flannery, President and Chief Executive Officer

I mean it's everything, right? Because it's about having the right fleet in the right places for where demand is showing up. So it's good planning. It's good discipline, about only bringing in equipment when you need it, from the branch managers and the district managers out there. So I'd say it's across the whole portfolio. We couldn't drive this level of time utilization from just one or the other end market sector. So it's across the board, Steve.

Operator, Operator

We'll go next now to Scott Schneeberger of Oppenheimer.

Scott Schneeberger, Analyst, Oppenheimer

A couple of questions. One on just following up on the branches and, Matt, some of the things you said earlier. Just to get a little more clarity, was it more general rental or more specialty? I inferred specialty from the commentary, but just a little more clarity. And you, I think, said you're going to do fewer cold starts this year than last year. Following up on Steven Fisher's question and your answer there, what is the strategy? Can you do more with less, or will we see in the out years a reacceleration of the cold starts?

Matthew Flannery, President and Chief Executive Officer

Sure, Scott. On the branch closures, it actually wasn't more specialty; a lot of it was split across the portfolio. With the acquisitions we did, we held on to some of those Ahern facilities longer than necessary during integration, and there were some smaller deals you might not see. We don't buy companies to cut costs; we buy them to support growth, and sometimes we keep real estate and later realize we don't need it all. So it was only a couple dozen branches against a huge portfolio. Not to make too much of it, but the closures were very surgical and posed no revenue risk — we wouldn't have closed any if there was risk to revenue. As for cold starts, we did 17 in the quarter. In January we said we were targeting around 40. There is a continual pipeline; if the team gets ahead of schedule we'll increase the number. There's no change in how we view the opportunities — it's a matter of execution, finding the right real estate and people. Each specialty business has a pipeline of markets and opportunities they want to enter, and we work through that methodically.

Scott Schneeberger, Analyst, Oppenheimer

Great. I appreciate that incremental clarification. My follow-up is just on the smaller projects, smaller customers, a lot of talk on this call about a lot of demand activity with the large. Curious what you're seeing and hearing from the smaller customers on their environment.

Matthew Flannery, President and Chief Executive Officer

I think they feel good about the end markets. In general, I would say it's about where our expectations were: as an aggregate, the local market business has stabilized. We don't see many markets with negative growth or where we need to pull fleet out because the local market cannot absorb it and lacks projects. So we feel good about that across the board. I would continue to call that stable, which is consistent with our expectations for the year.

Operator, Operator

And gentlemen, it appears we have no further questions this morning. Mr. Flannery, I'll turn things back to you, sir, for any closing comments.

Matthew Flannery, President and Chief Executive Officer

Thank you, operator, and thanks to everyone on the call. We appreciate your time today and I'm glad you could join us. Our Q1 investor deck has the latest updates. And as always, Elizabeth is available to answer your questions. So look forward to speaking to you all in July. And until then, please stay safe. Operator, please end the call. Thanks.

Operator, Operator

Thank you, Mr. Flannery. Thank you, Mr. Grace. Again, ladies and gentlemen, this brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.