United Rentals (URI) Q3 2026 earnings call transcript

Thank you, Operator, and good morning, everyone. Thanks for joining our call. Yesterday afternoon, we were very pleased to report our third quarter results, which are a testament to our strategy, the team's dedication to the customer, and the unmasked breadth and scale of our premier offering. We came into 2026 expecting another year of growth. As evidenced by our results, the business continues to perform better than we expected. Large projects across a variety of end markets are driving our growth, and we expect this momentum will carry for the remainder of this year and into next year.

We remain well positioned to outperform the industry with our broad footprint, our unmatched one-stop shop offering, accompanied by exceptional levels of service and leading technology, and of course, our unwavering commitment to safety. These capabilities, combined with our customers' confidence and backlogs, support our revised guidance. We came into the year dedicated to being the partner of choice for our customers, accompanied by a laser focus on finding cost efficiencies.

I'm very pleased with the team's efforts and how the year is playing out. Team United continues to raise the bar, providing an unmatched offering for our customers while also generating strong returns. So, let's get into the details of our third quarter results and our updated full year guidance, and then Ted will get into more details around the numbers before we open up the call to Q&A.

Starting with the quarter's results, total revenue grew by 16% year-over-year to $4.9 billion. Within this, rental revenue grew by 18% to $4.3 billion, both quarterly records. Complete productivity of 6.5% contributed to OER growth of 12.9%. I'll note that time and mix all contributed to the quarter's productivity along with rate.

Adjusted EBITDA was a record of $2.3 billion, resulting in a margin of 47.6%, an improvement of 160 basis points year over year. And finally, adjusted EPS came in at $15.55, up 33% year-over-year and another quarterly record.

Now, let's discuss customer activity. The third quarter again saw growth across both our gen rent and specialty business. Specialty was a standout with rental revenue growth of 35% year-over-year, including 12 cold starts, which brings us to 40 cold starts here to date. Notably, each specialty line of business reported strong double-digit growth in the quarter.

By vertical, the trends of the first half of the year carried into the third quarter. Construction continues to grow across non-residential and infrastructure. And on the industrial side, power once again posted double-digit growth, as did metals and minerals.

As I mentioned earlier, a variety of end markets drive our growth. This diversified exposure is an important and very intentional part of our strategy. With this in mind, we saw projects kick off in the third quarter across numerous end markets, including energy, manufacturing, infrastructure, and data centers.

Now, turning to the used market, we sold $677 million of OEC at a 51% recovery rate. The demand for used equipment remains strong, and we still expect to sell approximately $2.8 billion of fleet this year.

Given the demand from our customers and our replacement of sold equipment, we spent $1.8 billion on gross rental capex in the quarter. This takes us to $4.7 billion year-to-date. The combination of a strong demand environment and fleet productivity underpins this additional spend as we ensure we support our customers while driving profitable growth.

Subsequently, we generated year-to-date free cash flow of $1.4 billion. Even with higher CapEx needs, we're able to generate meaningful free cash flow due to a combination of our industry-leading profitability, capital efficiency, and the flexibility of our business model.

This strong free cash flow is redeployed in ways that allow us to augment shareholder value and is a critical part of our strategy. Finally, our capital allocation in the quarter reflects the disciplined framework we employ. Our balance sheet is very healthy, allowing us to support both organic and inorganic growth, and to also return nearly $500 million to shareholders during the quarter through a combination of share buybacks and our dividend. Our leverage of 1.8 times remains well within our targeted range of one and a half to two and a half times, leaving plenty of dry powder to support growth and to return excess capital to our shareholders.

We've long talked about the importance of financial strength to support our strategy and to drive long-term value creation. To this point, we were very pleased to see S&P acknowledge our efforts with their upgrade of our credit rating to investment grade earlier this month.

As we enter the last few months of 2026, our focus is unchanged. The demand environment for large projects remains robust, supporting our revised guidance, which reflects over 12% total revenue growth, with EBITDA margins over 46%, all at the midpoint. We increased our CapEx guidance to over $5.3 billion at the midpoint as we see the opportunity to put even more equipment on rent while generating strong free cash flow and returns.

So in conclusion, the United Rentals team's diligent focus on our strategy day in and day out is delivering results we're all very proud of. Over the last nearly 30 years, we built and continue to expand a value proposition which differentiates us in the industry. Our business model is truly unique and goes beyond purely equipment rental. By layering on technology, innovation, and unmatched service across both our specialty and general businesses, we support our customers' productivity and drive a better partnership. And for our shareholders, this translates to profitable growth, strong free cash flow, and compelling returns.

And with that, I'll hand it over to Ted to review our financial results, and then we'll take your questions. Over to you, Ted.

Thanks, Matt. Good morning, everyone. As Matt just shared, the team delivered strong results that exceeded even our raised expectations from last quarter. quarterly records for total revenue, rental revenue, EBITDA, and EPS. Beyond that, we raised our full-year guidance for revenue and EBITDA to reflect our expectations that this performance will continue through year-end in support of a record 2026. But before we get into the details of the updated guidance, let's review the third quarter's results. As you saw in our press release, rental revenue increased 17.8% to over $4.3 billion, supported once again by the team's strong execution across large projects and key verticals. Within this, OER increased by 12.9%, driven by a 7.9% increase on our average fleet size and fleet productivity of 6.5%, partially offset by assumed fleet inflation of 1.5%.

And finally, within rental revenue, ancillary and re-rent grew over 37%, again outpacing OER growth by a healthy margin. Pivoting to used, we sold $677 million of OEC in the quarter, generating $348 million of proceeds at an adjusted margin of 46.3% and a 51.4% recovery rate. As that mentioned, consistent with our initial guidance, we're on track to sell approximately $2.8 billion of OEC this year at a recovery rate in the low 50s in what remains a healthy used equipment market.

Next, let's turn to Adjusted EBITDA, which increased $385 million to a record of over $2.3 billion. This was driven primarily by a $417 million increase in rental gross profit and an $8 million increase in used gross profits.

SG&A increased by $54 million, trade inflating to a 20 basis point improvement as a percentage of revenue, while gross profits from other lines of businesses added $14 million.

Looking at profitability, our third quarter adjusted EBITDA margin increased 160 basis points to 47.6%, reflecting another quarter of strong cost discipline. While there will always be some quarter-to-quarter variability, we are very pleased with our team's ability to efficiently leverage our third quarter growth to offset the impacts of both lower margin ancillary and re-rent revenues and other inflationary pressures.

Shifting to CapEx, we've responded to robust customer demand by investing over $4.7 billion in gross rental CapEx year-to-date, which is an increase of almost $1 billion year-over-year.

Moving to returns and free cash flow, our return on invested capital increased 30 basis points year-over-year to 12.3%, which remains comfortably above our weighted average cost of capital, while our free cash flow year-to-date has exceeded $1.4 billion.

Turning to our balance sheet, net leverage remains very comfortable at 1.8 times at the end of September with total liquidity of over $2.6 billion.

As Matt mentioned, we were very pleased to see S&P's recognition of our commitment to maintaining a strong balance sheet by upgrading our credit rating to investment grade earlier this month. We view this as a testament to our disciplined financial policies around leverage, liquidity, and maturity management, as well as the strength and durability of our free cash flow.

Turning to capital allocation, through the third quarter, we returned roughly $1.5 billion to shareholders, including $1.125 billion through repurchases and $371 million via dividends. Now, let's move to the guidance we shared last night, which reflects our confidence in delivering another record year. Total revenue is now expected in the range of $18 to $18.2 billion, an increase of $450 million at midpoint versus our prior guidance, while use sales are still expected at around $1.45 billion. At midpoint, this now implies full-year total revenue growth ex-use of better than 13% versus our initial 2026 guidance of closer to 6%. In turn, we've also raised our adjusted EBITDA guidance by $300 million to a range of $8.3 to $8.4 billion, reflecting our continued expectation to bring the revenue growth to the bottom line and finish the year strong.

Notably, at midpoint, excluding the benefit of the H&E termination fee last year and the gain on sale of our scaffolding business this year, this implies a roughly 70 basis point improvement in our full year EBITDA margin compared to the goal we initially shared in January of a flat full year margin.

On the fleet side, driven by strong customer demand, we've increased our gross CapEx guidance by $300 billion to a range of $5.2 to $5.5 billion. This now implies net capex of $3.75 to $4.05 billion.

And finally, we are reaffirming another year of strong free cash flow in the range of $2.15 to $2.45 billion, which reflects an increase in our cash flow from operations offset by higher capex. I think it's important to call out that we've invested significantly in our fleet this year to drive strong organic growth, positioning the business for attractive returns over the coming years while also generating substantial free cash flow. And finally, on the capital allocation front, we still intend 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 per share or a return of capital yield of over 3 based on our current share price So with that let me turn the call over to the operator for Q Operator please open the line Certainly Thank you Mr Grace Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1.

Thanks, David. I mean, what you're touching on, right, you see we're doing all three components very strongly here in the quarter with the productivity of 6.5 that you saw. With all that being said, rate's been climbing and been a good guy for us for quite some time, and that's necessary because of the inflation that we're all experiencing in the industry. So we expect that to continue next year. Certainly the demand environment and the high time utilization, to your point, assist that. So we feel really good about that opportunity.

And as far as the CapEx, we'll get to that when we get to January guidance. But it's a fair point that maybe running at this level of time utilization isn't the most prudent thing to do. We're doing it out of necessity right now, right? But we could temper that a little bit next year. which would require a little more CapEx, but not a lot. I think we'll get to that in January once we get through our planning process here throughout the fourth quarter and let you guys know in January.

Yeah, we're seeing positive fleet productivity throughout all business units and throughout all project types and all customer sets. So this isn't just unique to projects or local market or industrial. This is across the board concerted effort for all of us to make sure we recapture the cost that we're absorbing.

Sure, Rob. It's really been a lot of internal management and process change more than anything. The reality is a tighter market could require more movement. So I think the team's done a great job. We obviously put more process changes and eyeballs into it. And it wasn't that the team was doing anything wrong last year. We just needed to see how we could do it better. We have a team that's very responsive to customer demand, and if we could bundle some of those responses together and put a little more elbow grease into making sure cost was a big variable in these decisions, that's the result that you saw.

Yeah, I certainly think that surety of supply and the one-stop shop value proposition have definitely taken more prominence really in the last year plus. When you run a big site, not having a bunch of vendors running around is very helpful for the folks that have to control the security and the safety of that site. And I think probably all the large companies are playing favorable there, but we certainly think our unique value prop advantages us there.

Sure. Thanks for the question, Jerry. Yeah, to your point, this is something we've been talking about publicly since January, something we challenged a team to do early in the year, and they've delivered incredibly well. Certainly, we've gotten very good labor absorption, and you can see that in both sides of the businesses. and you mentioned R&M, but almost back to Rob's question, I think the team's also done an extraordinary job on the delivery side. And so we said that all three of those would be critical to producing better margins year on year.

In terms of the restructuring, that's really played out in line with expectations, so the benefits have been consistent, and they really are not a big part of what's driven the year on year improvement. So they've been helpful for sure, and we were prepared to take those actions. But at the end of the day, it's really been the team's focus on leveraging growth efficiently. So you think about growth. I mean, growth itself has been very strong, stronger than we expected. That composition of growth has been very strong. You can see that in the fleet productivity.

And then to your point, you know, the team has just done a really good job driving efficiency across those big three buckets. And, you know, that's something we've long talked about. It's a challenge we've got to meet every year. We feel like the team's done a great job prior to 26, to be honest, and we talked about that publicly.

And going forward, almost coming back to something David asked about, the sustainability, this is just how we run the business. And so there's always going to be an ebb and flow to all these dynamics, but certainly our expectation is we'll continue to deliver. Our goal is to deliver margin expansion always, and we feel like we've got a good recipe to continue driving strong results.

So we don't get too specific in verticals, but certainly we feel like we're very well positioned to be that partner of choice. for the kinds of contractors that build the kind of facilities you're alluding to, you know, the very high spec, you know, demanding customers. So we feel very good there. Not sure we'd kind of quantify what that translates to specifically, but we're doing very well there. And on the power side, you know, we saw double-digit growth. It's been a trend we've been talking about publicly for a while. And so certainly, you know, that's actually not going to be the behind-the-meter piece as much as it is working with investor-owned utilities across generation, transmission, distribution, all of which have been key elements to our power vertical strategy really for over a decade since we introduced it in 2016, Matt?

Yeah, and I think the broader point is our end markets are very diverse. We cover a broad range of end markets both in construction and in industrial as well as infrastructure and all with the same fungible assets. I think that's really the story there. For example, even in power, we're not doing a bunch of specialty power assets, right, or large scale to power some of these projects. We're really staying in our lane, and I think it's playing out really well for us. It gives us a lot of flexibility.

Yeah, so touching on the first piece, Angel, look, inflation is very real. It's certainly not benign. It's certainly not deflationary. I think it depends on the bucket.

You know, on the one hand, you look at that labor absorption we talked about. I mean, frankly, that's why we're absorbing above trend merit increase. And we think that's important. We want to take care of our people. I think we pride ourselves on being, you know, the employer of choice. And that certainly means taking care of your people in a lot of ways. And so I can tell you, we proudly think about the way that we reward our team for the great job they deliver. But honestly, the underlying increase is above trend. And yet you're still seeing the team offset that through productivity gains.

Within R&M, you can imagine that's another area where our suppliers are focused on their pricing on parts, and yet we've been able to manage that very effectively. And within delivery, what is incredible, I think people see what's happening with diesel. They can see what's happening with freight rates. And yet here again, we've been able to offset that. So it's not at all to suggest that we're in some kind of deflationary beneficial cost environment. And going forward, you know, we'll see how next year shapes up. There's a lot of dynamics to consider as we get into planning internally and then what that translates to from a forecasting perspective.

But, you know, I'd come back to our goal is to be as efficient as possible and, you know, consistently deliver strong margin performance across the business. And as far as the rate component to the second part of your question about fleet productivity, First of all, we manage rate and time rigorously. It's the mix of the two that matters, which is why we talk about fleet productivity.

But to be clear, we manage rate throughout the year. There's no magic date or point where we're doing renewals. We work with our customers throughout the year, making sure there's a balance of getting paid for our value and making sure they can do what they need to do on the job, both physically and economically. And we think we've found a really good balance, and we don't expect that to stop anytime soon.

Sure. And I think we talked a little bit about this last quarter, but when you think about our capital allocation philosophy, it always starts with the balance sheet and where we position. Certainly, over the years, we've seen us evolve that strategy, get to the point where we've got a very strong balance sheet that will allow us to do pretty much anything we think makes the most sense for the company and the shareholders. As a result of that, we changed our internal financial policy such that we felt comfortable moving the investment grade.

And the concern we'd previously had was the potential constraints that could put on inorganic growth. But as the company has grown and the scale has gotten bigger and bigger and what that's done for our financial capacity, we realized that, frankly, we had the ability to do anything we wanted with the existing constraints. And as a result, we've changed that internal financial policy and communicated that externally. And that's really what's precipitated at least one of the upgrades.

So it doesn't change much. It really doesn't change anything internally. So there's no quote unquote cost. The benefit is obviously those tighter spreads that we get you know within the IG issuer IG issuer versus high yield I wouldn want to speak for the market but certainly people can look at kind of triple B minus credits to get a sense for kind of what their yields would look like relative to ours. And we think it'll be a very appreciable benefit that will, over time, as we refinance debt or issued debt for whatever reason, accrue benefit to the shareholders. But it doesn't change that strategy of starting with a strong balance sheet, investing in organic growth, funding smart M&A and then returning the excess capital to our shareholders.

It's really going to be that kind of framework, I think, certainly for 2027 to be a reasonable assumption that that's the framework we use to figure out that capital allocation strategy.

Well, if there was any impact on our ability to do M&A, frankly, we wouldn't be doing this. So we don't see any impact there. And as far as the buybacks, stay tuned. I think we've been pretty consistent there. Yeah, we've got to go through that planning process to see what that growth opportunity is, what the investment looks like organically, get a sense for what that part of the use of cash would be. And then obviously we'll assess kind of the M&A opportunity. And then what's left over, consistent with history, I think you can expect us to return that excess capital to our shareholders.

So I wouldn't anticipate any change there to Matt's point.

Sure, Seth. So we would continue to call it stable. Now, to be a little more information there for you, it probably gave us a couple of points of growth here in this quarter, But the big driver here is still the mega projects, the large projects, and our large customers driving this growth. So we like the fact that there was a little bit of growth there. As far as is that a pivot point, we don't know. And for the second part of your question, we'll stick in our lane, as I said earlier. We have no idea how to forecast what that lag would be. What we do have is the ability to get, especially as we go through our budget process, to have boots on the ground feedback.

and that's what we'll learn, and we'll count more on that than any kind of thoughts about what a lag would be. But we have heard for a while now sentiment has been more positive. We have seen a little bit of growth in a lot of these local markets, so we are feeling good about the direction of it.

Thanks, Matt. And I guess just on the specialty business, I think you're talking north of 40 cold starts this year. do you think that would accelerate next year and have you started to see any change in the competitive landscape in the specialty categories?

Yeah, so we're slightly ahead of target this year. This is kind of a continuum of markets that our teams in each business unit have on their docket of where they want to grow into. We haven't done that work yet. That's part of the budget process. So I don't want to try to predict what we're going to come out with. But we still have white space geographically in some of these markets and really the ability to grow some density in markets where we already exist in some product lines as we've been outgrowing the existing facilities. So I think there'll be more opportunity and we'll update you guys in January. As far as the competitive set, there's always competitors that want to get into what we're doing, right?

Somebody always covets thy neighbor's revenue, so to speak. What I will say is the barrier to entry and the value prop that we've built is really strong. So I think we've got a pretty good competitive moat there as far as what we offer to the customer.

Thanks, guys. Talk to you soon.

I don't really have any additional color. in aggregate. We're giving you a number in aggregate, what the puts and takes in all these different markets, right? The 1,800 branches that we're in almost in the U. S. and Canada, it'd be really hard to homogenize that for you as far as what's driving it. But we are seeing local markets that do have some growth and we'll update you guys of what we think that's going to turn into in 2027, but I don't really have any additional call for you.

Yeah, we view ancillary as responsive to customers' needs and their requests, not really something we'll predict. I'm certain that specialty growth is one driver of it. I'm certain that projects do tend to need more of it. But as we continue to add more offerings and customers are aware of what we have to offer them, it'll be interesting to see how that spreads. I think more importantly is we're just being a better provider to our customers. So for us, we don't have a target for it to grow it or to not grow it. It's to make sure we're in position to respond when the customer asks us to do something for them that's related to our products and our services.

So really no ability to predict there because it is a responsive, non-CAPEX-driven type of volume.

Thanks, Kyle.

Sure, Chad. I'd say yes to both. So it is the work that we see right in front of us right now. We had talked about how we're driving historically high time utilization. So this isn't a pull forward of stuff we're going to need next year. But certainly the fact that we think 2027 is going to be a growth year gives us the confidence to support these growth needs that we have late in the year here in Q4. So it's really a little bit of both. And as far as I forgot the second part of your question.

Oh, yeah, just general versus specialty. Oh, yeah, thank you. So you see the growth of specialty. So really for quite a few years now, specialty gets an overweighted amount of the growth capex to support the full starts and the growth that they're having. Outside of that, then once you get beyond specialty, within our GenRent portfolio, we're really utilizing our full portfolio on these major projects because you think about it's pretty evenly spent throughout those categories that we carry in our GenRent source.

Yeah, it's hard to break down too specifically, but certainly when you think about the value proposition of being a one-stop shop, I mean, that is a good example of cross-selling. And so certainly as we've been providing more and more products and services on these large projects that lend themselves very well to it, it certainly benefits, I guess, what you would call cross-sell. To us, it's solving problems for customers and making their lives as easy as possible.

And that all kind of comes back to the strategy we've been talking about, being that partner of choice. But it's hard to peel it apart, Chad.

Yeah, I would say it's the latter, Mick. I mean, this goes hand-in-hand with the demand environment and the time utilization that we're driving and part of the reason why you see a CapEx raise here. So it is the latter, and sometimes it's – I would say most of it. I won't say all because there's always something that we're getting to support a customer's need that we don't necessarily have in that market. Sometimes it's the more efficient play, especially for a short-term need or for something that, you know, we don't have access to handily at that moment of need. but overall it is indicative of the combination of demand and high time utilization that we're running.

It's a good question. I would say ultimately, certainly, as we pivot some of the stuff into CapEx and we internalize those cash flows, it's going to benefit your OER line. But one of the things, again, is solving problems for customers. And so I think, you know, you've long seen kind of rerun as part of our business for a lot of different reasons, whether it's sourcing additional capacity or providing those things as a one-stop shop service provider that for one reason or another we don't own or don't want to own. So I'm hesitant to get too specific, but I think your logic makes sense. As we do convert some of that rerun into OER via CapEx, that's going to benefit, you know, our core results.

It's not that big a number in the overall scheme of things and not something that we planned for. So it's hard even for us to model what that would be, so I don't know how to guide you to how you would, frankly.

Yeah, sure. So to the flooding supply, I mean, the industry has shown really good discipline on supply and demand, including the OEM. So we feel good about that backdrop. More importantly, we feel really good about the demand going forward. So we're not overly concerned about that. And as far as our ability to access, you see this year with the raised capex throughout the year, we've got real good relationships and flexibility with our partners where we do feel we're able to react quickly and respond quickly to opportunities. But there's a lot of planning in that and a lot of forward-looking information that we're sharing with our partners to make sure we can do that effectively. So we do feel good about supply demand and our ability to participate appropriately in that.

Thanks, Jim.

Yeah, I mean, certainly, you know, I won't re-ask the dynamics we talked about a year ago, but, you know, but I'd say that the biggest thing we did call out was that repositioning a year ago and the team's done a good job. To some of my earlier points, you know, Steve, I'm getting the gist of your question is if you're trying to see what's implied at the midpoint of guidance on the fourth quarter.

And, you know, we've long cautioned people against anchoring at the midpoint of our guidance. I mean, on the one hand, it's inevitable. and anchors these conversations because it's an easy point to point to, but it's not without risk.

So we've got a range. We feel very good about the momentum we're carrying, you know, throughout the year into the fourth quarter, fundamental performance we would not expect to deviate. And I just remind people the sensitivity of that calculation, right? I mean, if you think about a 1% variance in EBITDA where you hold everything else constant, that equates to about a 50 basis point swing in the implied margin. year on year. And so, you know, without obviously decomposing all the factors, you know, that influence a quarter because it varies quarter to quarter, you know, I'll just say we feel really good about the, you know, the year-to-date execution, we feel really good about, you know, our expectations for the fourth quarter.

Where we end up, time will tell, but if you're inferring that something's changed or anything along those lines, we, you know, there's nothing has.

Typically, we have adequate coverage where they are, but if there happens to be a large project in a really remote area, more times than not, we're able to get an onsite to service it that way. if we think it's a market that's going to continue to grow outside of the major project, then we certainly have no hesitation putting a cold start in there. But our coverage is pretty good, especially here in the U. S. and in Canada. So we feel we rarely need to add a store in rent just for a major project.

Thanks, Steve.

Yeah, thanks for the question. The dynamics we had to manage through in the third quarter were not dissimilar to what we managed through in the second quarter, whether it's that impact from the outgrowth of A. S. Lairn rerunt, I would say that the headwind, which obviously saw its offset, was similar. was similar. And even within fuel, right? We talked about the headwind we absorbed in fuel last quarter. It was pretty similar third quarter over second quarter. So not a lot of change there. Shouldn't surprise people. But, you know, obviously what you saw was, you know, our ability to again leverage that growth, the composition of growth, and just very good cost execution across the, across the company.

So as we get through the budget process, we'll probably get a little deeper into that. I think most of them are longer term, but there's certainly some productivity improvements in there. Some of them are less easily to input into a margin conversation, but just productivity of some of our human capital, I certainly think longer term we should get productivity in the shops from some of the technology we're using. and certainly free up some time for our managers to use more of their time to drive the business. So I think there's a range of opportunities, probably more towards the long term, but we'll update, you know, appropriately as we learn. And this isn't all to take away from the opportunity, but just as a reminder, I mean, we've long embraced continual improvement.

And so while, you know, a lot of the AI tools, you know, have a lot of potential and we're really excited, we view it as a continuation of what we've been driving internally to drive productivity for several decades.

Sorry. Like the which margin expansion? U sales. Oh, use? Yeah, look, we've been very pleased. I'd say overall that market has performed as expected. You know, we rewind a year ago and we talked about we felt like 2025 was kind of the bottom innings of that normalization process. And we saw that progressively. If you think about it, the first half of 25 played out versus the second half. and obviously we've progressed through 26 pretty well. So it feels like the market's normalized. Certainly it's a very deep market, plenty of demand. You can see that in our results. In terms of the margins, you know, I think we're back to kind of what we would say are normalized margins.

And so I would not encourage people to think there's going to be a huge amount of variability there. The likelihood is we're kind of, again, back in this normalized market. but good news is things have played out as we kind of expected them to.

Yeah, so we've really tried to pivot this discussion away from flow-through because I think it almost simplifies things. And really our goal is to drive margin expansion across the cycle. And we feel like that's what we've done. Certainly, as we've talked about, in some periods of time, it's easier to do and easier to show, and other times it's more difficult or it gets clouded by dynamics, whether that's used to kind of your earlier point, Daniel, or whether it's, you know, obviously this outgrowth of ancillary and rerun.

I would just say going forward, our focus is on driving profitable growth and then being as efficient as possible. And that obviously implies driving core margin expansion. And, you know, similar to what we talked about in 23 and 24 and 25, we're going to help people see what the underlying results look like as best as possible. But as we go forward, certainly our goal, again, is going to be to drive, you know, strong margins and ultimately margin expansion is the goal.

Sure. We usually think about capital cost avoidance when we're thinking about rental versus owning. But to your point, those come at a cost. So I think the most important part is how can we help our customers drive efficiency? We believe fleet, right, technology and part of that, and fleet is a great way for them to do that. So we make sure we provide that. And we do think rentals the better way. You could own fleet and get some productivity out of the usage. But we feel strongly that rentals proven to be the better way for them to do that. So I think it's a big part of our value proposition to continue to help customers drive efficiency to improve their margins and competitiveness in their markets.

Yeah, I would say we feel better than we did 6 to 12 months ago, certainly. You see that not only in the race guidance, but in the activity that's going around in the industry. and the end markets we serve are very, very broad, even within non-res. And I know there's been a lot of talk underlying in that commentary, people worrying how long the data center is going to continue.

Well, that sits in our non-res business. And even if you take data centers out, we've got strong double-digit growth within non-res. And then we think about infrastructure, power, LNG, even upstream oil and gas is doing well right now, but growing. but growing. So those opportunities remain. And that's with a couple of end markets not being strong, like industrial manufacturing, we think is a potential future opportunity for us.

Residential, which then will drive more non-res work, right, is still down. And downstream, oil and gas. Petrochem overall, on the downstream side, which is an area where we have a lot of run and maintain work, a lot of turnaround work, that's just not getting done right now because those folks are busy as heck right now, as you can imagine. So we feel really good about the long-term view here and certainly more bullish than we did six to 12 months ago.

And the one thing I might add, Neil, is I think people know we survey our customers regularly and they continue to feel very good about their own prospects. So this is something that Matt and Elizabeth and I have gotten a lot of questions on in the last, let's just say, six plus months, given what's happened with energy pricing and inflation and what the market's discounting on rates and understandable concerns around, you know, whether it's the short end of the curve, the long end of the curve.

Throughout all that volatility that markets have wrestled with, I would tell you our customers have felt consistently positive. And that's certainly, you know, as of the most recent reading. So that also helps underpin our confidence in kind of what that outlook looks like.

Great. Thanks, operator. And once again, folks, we apologize for the tech disruption. But to everyone on the call, we appreciate your time. I'm glad you could join us. And our Q3 investor deck has the latest updates. And as always, Elizabeth is available to answer your questions. So until we speak to you again in January, have a safe and happy holiday season, and have a great end to your year. Operator, you can now end the call.