Ladies and gentlemen, good morning. My name is Abby. I will be your conference operator today. At this time, I would like to welcome everyone to the Herc Holdings Inc. First Quarter 2023 Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again. Thank you. I will now turn the conference over to Leslie Hunziker, Senior Vice President of Investor Relations. You may begin. Thank you, operator, and good morning, everyone. Welcome to Herc Rentals First Quarter 2023 Earnings Conference Call and Webcast. Earlier today, our press release, presentation slides, and 10-Q were filed with the SEC, and all are posted to the events page of our IR website at ir.hercrentals.com. This morning, I'm joined by Larry Silber, President and Chief Executive Officer, Aaron Birnbaum, Senior Vice President and Chief Operating Officer, and Mark Humphrey, Senior Vice President and Chief Financial Officer. Today, we're reviewing our first quarter 2023 results 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's move on to our safe harbor and GAAP reconciliation on slide three. Today's call will include forward-looking statements. These statements are based on the environment as we see it today, therefore involve risks and uncertainties. I would caution you that our actual results could differ material from the forward-looking statements made on this call. You should also refer to the risk factors section in our annual report on Form 10-K for the year ended December 31, 2022, and our quarterly report on Form 10-Q for the period end March 31, 2023. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the conference call materials. A replay of this call can be accessed via dial-in and through the webcast on our website. Replay instructions were included in our earnings release this morning. We have not given permission for any other recording of this call and do not approve or sanction any transcribing of the call. Finally, please mark your calendars to join our meetings and presentations at three conferences this quarter. The Goldman Sachs Industrial Conference in New York City on May 9th, KeyBanc's Industrial Conference on June 1st in Boston, and Wells Fargo's Industrial Conference in Chicago on June 14th. I'll now turn the call over to Larry Silber. Thank you, Leslie, and good morning, everyone. Before I begin, I want to take a moment to introduce Mark Humphrey. Mark was promoted to Chief Financial Officer in late March with the departure of Mark Irion, who, as you may know, left to take the CEO role of privately held TNT Crane & Rigging. Mark Humphrey has been a member of our executive team since joining Herc nearly seven years ago, and we're excited to have him lead this role and drive our long-term financial strategy. He is a highly knowledgeable, proven financial leader who has already demonstrated his capabilities as our Chief Accounting Officer. Additionally, Mark brings 30 years of financial experience, including having previously served as CFO for Alico, Inc., a Nasdaq-traded company. I look forward to all of you getting to know him. Let's get started on slide number four. We're off to a solid start in 2023. Revenue and Adjusted EBITDA were at all-time first quarter record highs, driven by continued double-digit volume growth and 7% higher rental rate growth year-over-year. Our flexible business model, diverse customer base, and broad equipment portfolio allowed us to capture top-line growth in Q1 across both core and specialty categories. Our capital allocation strategy focused on profitable growth investments, hitting the mark as evidenced by our record first quarter return on invested capital of 10.6% and 80 basis point increase over last year. On slide number five, you can clearly see that we're significantly outperforming the equipment rental industry. ARA estimates that the industry grew 6% in the first quarter compared with our rental revenue growth of 24%. Revenue from national and mega projects, as well as local infrastructure work remains robust. The largest rental companies with fleet capacity and the strongest branch networks are winning an outsized portion of the construction starts. In addition to record rental revenue, we more than doubled fleet sales on an OEC basis in the first quarter versus prior year, generating 52% proceeds as a percent of OEC compared with 45% last year. The increase was due to our favorable sales channel mix shift, as well as the ongoing strength of the used equipment market. We are in a great position for continued growth through the balance of the year. Team Herc has been advancing the key initiatives of our strategic plan while at the same time continuing to execute well, remaining flexible to react to seasonal market conditions and be able to pivot quickly to capitalize on areas of growth. If you turn to slide six, in addition to leveraging our scale as a market leader, the successful execution of our growth strategies also contributed to our outsized performance relative to the overall industry. We increased revenue in our core categories through fleet investments as well as acquisitions and new greenfield facilities that support branch network optimization. Revenue from our high-margin ProSolutions specialty business grew double digit in the first quarter, incrementally benefiting from new products, new locations, and cross-selling synergies. Our innovative customer-facing digital capability called ProControl Next Gen continues as a catalyst to new project wins, especially at the national account level. At the same time, we're committed to responsible ESG operating practices built on a strong cultural foundation, a safety-first protocol, and a pledge to continue to work hard to do more for our employees, customers, and suppliers. In the first quarter, we were recognized among great places to work in Canada. Finally, between fleet investments, strategic M&A, dividend growth, and opportunistic share repurchases, I'm confident that Herc is allocating capital in the right areas and at the right time. With that, I'll turn it over to Aaron to take you through the high-level operational drivers in the first quarter, and then Mark is going to walk you through the first quarter financial metrics. Aaron? Thanks, Larry. Good morning, everyone. The excellent performance of our operations and field support teams, combined with tight supply of equipment and steady demand, have created a favorable environment for us. Our record first quarter results for revenue and profitability served as a continuation of last year as we outperformed the market due to geographic expansion, new account wins, and fleet investments. Turning to slide eight, our day starts with safety, which is at the core of everything we do. As you know, our major internal safety program focuses on perfect days. That is days with no OSHA-reportable incidents, no at-fault motor vehicle accidents, no DOT violations. We strive for 100% perfect days throughout the organization. In the first quarter, on a branch-by-branch measurement, all of our branch operations achieved at least 97% of days as perfect. Equally notable, our TRIR improved to 0.45, our best first quarter performance ever. On slide nine, let me shift to a progress update on our growth strategies. One of the key initiatives of our urban market growth strategy is expansion through greenfield locations and acquisitions. In the first quarter, we added nine locations to our network, three greenfield locations and six locations from three new acquisitions. As you know, we focus on acquisition opportunities in high-growth markets that complement our current branch network and fit our strategic, financial, and cultural filters. Moreover, many of the mega projects being announced are in the geographies where we have focused our acquisitions in greenfield additions, such as Phoenix, Houston and Austin, Texas, and Detroit. We spent $138 million in net cash in the quarter on acquisitions. Multiples remain steady as you pay a little less for general rental companies and a little more for specialty rental companies. One of our acquisitions in the quarter was a trench business in Texas. This was our fourth trench acquisition since 2021. Trench storing is a growing category for us that is synergistic with our other products like earthmoving equipment and pump solutions. Of the other acquisitions, one was in Miami, a top 10 market, and one was in St. Louis, a top 35 market. These acquisitions support our strategic goal of increased density in urban markets. Our acquisition process is now a core competency for us. We are quickly integrating these new bolt-on businesses and are excited to welcome their teams to Herc while creating value for our people and our customers. We've budgeted $500 million of acquisitions again this year and with the strong pipeline we are seeing, we are confident we can get it done. In addition to acquisitions, as Larry said, growing our core and specialty fleet through new equipment investments is a key strategy. On slide 10, our first quarter results reflect an increase in average OEC fleet of 29% over last year's comparable period. Equipment rental revenue increased 24% compared with the prior year first quarter. As we mentioned on the last call, we expected seasonality to return in Q1, which is typically the lowest demand quarter of the year. In the prior two years, there was no significant seasonality due to the pent-up demand coming out of the COVID period. With supply constraints still very much real for fleet, we brought in equipment during the first quarter that was delayed from 2022 to prepare for the customer requests we are getting for midyear 2023. April to date, we are beginning to see improvement in seasonal demand, as you would expect. On slide 11, you can see our fleet composition at OEC on the left side of the page. Total fleet is now $5.9 billion as of March 31st, 2023. We've maintained a higher margin specialty fleet at about 24% of the total. Of course, there's room to grow there, but we are also growing the core fleet as mega projects, infrastructure, and manufacturing projects are heavily weighted toward classic equipment. Our fleet expenditures at OEC totaled $348 million in the first quarter. As I just mentioned, we continue to accept new fleet deliveries as we prepare for incremental growth in 2023. We disposed of $144 million of fleet at OEC in the recent quarter, $80 million more than last year's similar period. In the first quarter, we capitalized on the strong used equipment market while shifting disposals to higher return wholesale and retail channels, which is a new focused disposition strategy for us. Our sales teams are now digitally equipped with comprehensive information on our used fleet inventory and are incentivized to focus on the higher return sales channels. This paid off in the first quarter as proceeds from disposals were 52% of OEC compared with 45% last year, and selling margin improved by 300 basis points in the latest quarter. The average age of our disposals was 90 months in the first quarter, with average fleet age at about 47 months. After two years of reducing fleet sales to compensate for supply chain deficiencies, we are working to get back to a more normal sales cadence this year. We are planning for a roughly similar level of sales as the 1st quarter in each of the remaining quarters. In addition to a best-in-class fleet, you can see on slide 12 that we have a diverse, well-balanced customer mix made up of large national accounts and local contractors operating in North America with a wide range of equipment needs across a variety of end markets. Our national account business is benefiting from tailwinds from federal and privately funded mega projects, large infrastructure jobs, and manufacturing of EV, semiconductor, petrochemical, and LNG facilities, to name a few. In addition, there is contingent maintenance work in every market in North America, especially when it comes to repairing and upgrading roads, water and sewer systems, as well as transportation-related facilities. Furthermore, general facility and warehouse maintenance occurs year-round in any economic environment. Local accounts, which represent 55% of rental revenue in the first quarter, are growing due to Herc's penetration through our acquisition and greenfield strategy, as well as regional growth in infrastructure, education, data centers, and local utilities. We have a robust sales program in place to acquire new local accounts. I recently had a channel check with our regional vice presidents, and based on reservations and indications from our sales teams, demand is building at a strong pace consistent with seasonal expectations. We aren't seeing any cancellations, postponements, or delays out of the ordinary. Onshoring and fiscal stimulus trends have accelerated. These megaprojects represent the beginning of a multiyear flow of dollars into the industrial space. Based on everything we are hearing, I'd say we are very optimistic about the upcoming construction season. As one of the largest players in the rental industry, our fleet capacity, digital capabilities, on-site management expertise, and broad location network sets us up to win substantially more than our fair share of the market's growth. I want to thank Team Herc for their commitment to operational excellence and safety. Their professionalism shows up in the execution of our services to our customers every single day. It's a valuable differentiator for Herc. I'll pass the call on to Mark. Thanks, Aaron. Good morning, everyone. I'm happy to be here today and pleased to be in a position to lead the company's financial strategy as its CFO. As Larry mentioned earlier, I've been supporting Herc for almost seven years, since just after the spin, and I believe the company has never been better positioned to capitalize on the market opportunities before us. We have invested in a best-in-class fleet, we're growing our national footprint, we're developing leading-edge customer-facing technologies, and we have a strong balance sheet that offers plenty of flexibility. I'm excited to take on this new role and look forward to meeting all of you. With that, let's get into the first quarter financial results. Slide 14 summarizes our key metrics for the first quarter. You can see the record rental revenues that reflect continued market share growth. Strong pricing and volume on rent fueled the 24% rental revenue growth for the first quarter. About 75% of the growth was organic, a quarter came from acquisitions. We continue to grow our established core business organically, our organic growth was almost three times that of the rental market in the quarter. While both core and specialty rental revenue were up double digit in the period, our studio entertainment business was under pressure from production slowdowns coming out of the post-COVID period of overproduction and now the potential writers' strike. Excluding the impact of the studio entertainment business, equipment rental revenue growth would have been several hundred basis points stronger. For total revenue, the benefits of the still strong used equipment market and our sales channel shift to wholesale and retail delivered incremental growth. Adjusted net income in the first quarter of 2023 increased 17%. Adjusted EBITDA increased 30% over the prior year to a record first quarter $308 million, and our Adjusted EBITDA margin remained flat at 41.6% in Q1 2023. The used equipment sales activity had some impact on Adjusted EBITDA margin growth year-over-year as we more than doubled dispositions at OEC compared with first quarter 2022. Used equipment sales margin, however, increased 300 basis points year-over-year to approximately 35% on higher proceeds. REBITDA margin for the quarter was up 10 basis points to 42.4%. Excluding the impact of the studio entertainment business, REBITDA margin would have been 43.3% in the quarter, a 50 basis point improvement year-over-year. REBITDA flow-through in the first quarter also was impacted by the slowdown in the studio entertainment business. If we exclude that business from the calculation in both years, REBITDA flow-through would have been 45.4%, a 530 basis point improvement compared with last year's first quarter. We are off to a great start with margin improvement and flow-through expansion in our base businesses. As a reminder, Q1 is the seasonally weakest quarter, and therefore, we expect this to be the low water mark for the year with EBITDA flow-through moving back to the mid-fifties for the full year 2023. Additionally, we believe the strong demand we're experiencing across the manufacturing, industrial, and infrastructure markets will make up for the impact of any shortfall of studio entertainment on our original EBITDA guidance. Finally, our effective business model allows us to continue to invest in our equipment, locations, and our people, in addition to creating value for our shareholders. ROIC was our first quarter record, increasing 80 basis points to 10.6%. On slide 15, the graph on the upper left illustrates our success in consistently driving rate growth. This is always an important metric to manage, especially when faced with cost pressures due to inflation. In the first quarter, rate was up 7% year-over-year, continuing the quarterly momentum of the last several years. We're still targeting mid-single-digit rate growth for 2023, utilizing our proven and effective pricing tools, the discipline and professionalism of our sales team, and the rollover benefits from the contract rate increases we began securing last year. In the first quarter, we saw stable, low double-digit rate increases in the spot market while contracts continued to be favorably renegotiated. This year's plan for a mid-single-digit rate increase is expected to be more front-half loaded as the spot market will encounter a significantly tougher comp in the back half of the year. As mentioned, our average fleet on rent at OEC in the first quarter was lower than our average fleet growth of 29%. In a normal supply environment, we place orders in Q4 and schedule deliveries for the spring in time for the construction season. In the current environment, we are placing orders almost a year out and taking receipt as soon as our vendors can deliver the equipment. As we cautioned in the fourth quarter, this impacted time utilization in the seasonal first quarter of 2023. Taking the new fleet now ensures we'll be able to respond to our customers' increasing equipment needs this summer. This impact, combined with a decline in studio entertainment revenue, also impacted dollar utilization in the first quarter. For 2023, we're continuing to target incremental improvement in annual dollar utilization on our base business, excluding studio entertainment, as we move into stronger seasonal periods and continue to capture rate. On slide 16, you can see we have no near-term maturities and ample liquidity to fund our growth goals for 2023 and into the future as we allocate capital to invest in our business and drive fleet growth into this cycle. We remain confident in our business model and are committed to increasing shareholder value. In the first quarter, we announced a 10% increase in our quarterly dividend for 2023 to $63.25, or $2.53 per share for the year. We repurchased nearly 0.5 million shares of our common stock at an average price of $111 per share. Net capital expenditures exceeded cash flow from operations in the first quarter with cash outflows of $78 million before acquisitions. We took a lot more fleet in the fourth quarter of 2022 and in the first quarter of 2023 than we typically would in the winter months, which is a primary driver of our 29% fleet growth year-over-year. Our current leverage ratio at 2.5x is well within our 2x-3x target range and in line with our expectations as we invest in growth. We typically move to the lower end of the range in weaker economic environments where we would adjust new fleet purchase orders and ramp up sales of older equipment to align supply and demand and protect cash. This is a playbook we've executed on before. Our flexibility with suppliers, the resiliency of the used equipment buyers, and the fungibility of our fleet gives us the levers we need to adjust to any market moves. However, as Aaron mentioned, there's no indication of a slowdown in any of our key growth areas today. Moving on to slide 17. In the upper left, you can see the continued strength in our primary end markets. The ARA estimate for 2023 North American rental industry revenue was $63 billion. That's approximately 4% growth over 2022. As we've discussed, our rental revenue growth is substantially eclipsing the broader industry growth rate. We expect this outperformance to continue. In this environment, the advantages of scale are magnified, the big rental companies that are focused on diversified end markets and have the ability to service through the strength in mega projects will continue to get bigger, faster. Two of our end markets are industrial and non-residential construction. Both have solid outlooks projected for 2023. Combined, these end markets reflect about 2/3 of our customer base, both are likely to outperform other consumer-driven markets this year. Taking a look at the industrial spending forecast in the top right chart, Industrial Info Resources is projecting $397 billion of incremental spending in 2023, the highest level on record. Dodge's forecast for non-residential construction starts is being driven by an unprecedented amount of new mega project construction in chip, EV, battery, and LNG plants as the onshoring of U.S. manufacturing capacity continues to gather steam. Starts in 2023 are estimated to be $412 billion on top of last year's record $427 billion. We should emphasize that these are just starts to new projects and are being driven by multiyear construction builds that will continue into 2024 and 2025. The dotted line on both of these charts reflect growth over the pre-pandemic levels. You can see that last year and the next four years are projected to be the strongest periods of activity that this industry has ever seen. Additionally, there's another $293 billion in non-residential, non-building or infrastructure projects slated for 2023. That's a 17% increase over 2022. These projects are supported by federal funds approved in the infrastructure package, the CHIPS and Science Act, and the Inflation Reduction Act. The current strength in mega-projects and infrastructure activity is not particularly sensitive to short-term interest rates and clearly has a structural tailwind. These large projects benefit bigger rental companies of scale with larger, more diverse rental fleets. As one of the leading North American rental companies, Herc stands to benefit more favorably from this trend. Therefore, along with another year of pricing power, we are reiterating our plan for outsized growth again in 2023. This is on slide 18. With expectations for stronger operating leverage as we roll over some of the 2022 inflationary challenges, we continue to forecast Adjusted EBITDA will be in the range of $1.45 billion-$1.55 billion, which represents growth of 18%-26%. Our plan for net fleet CapEx of $1 billion-$1.2 billion allows us to maintain double-digit growth in fleet on rent. We should also see an increase in our used equipment sales in 2023 as we return to a more normal level of fleet replacement, as Aaron previously mentioned. Interest expense which was up roughly 109% in the first quarter year-over-year, will continue to increase in 2023, reflecting the accumulation of Fed rate increases and our continued M&A funding. Of course, we expect our leverage ratio to remain in our 2x-3x target range. We are experiencing all the trends consistent with an industry in an upcycle and intend to continue to address the needs of our customers as we execute on our growth strategy. With that, I'll turn the call back to Larry. Thanks, Mark. Now please turn to slide 19. Everything we do starts with our vision, mission, and values, and a purpose statement that focuses on equipping our customers and communities to build a brighter future. We do what's right. We're in this together. We take responsibility. We achieve results, and we prove ourselves every day. Now, operator, please open the lines for questions. Thank you. As a reminder, if you would like to ask a question, press star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster. We'll take our first question from Jerry Revich with Goldman Sachs. Your line is open. Yes. Good morning, everyone. Good morning. And Mark, congratulations again. All right. Thank you. I'm wondering if we could just talk about the cadence in dollar utilization. you know, the entertainment business has been rolling off for, you know, four quarters now. Now that it's stabilizing, I'm wondering if you're thinking about dollar utilization is back to flat to up year-over-year, potentially heading into the second quarter since the entertainment comps get a lot easier. Can you just talk about how you anticipate the cadence? Yeah. I mean, I think when you think about dollar utilization, we will see it growing throughout Q2 as we roll into the seasonal roll out of the seasonal adjusted first quarter into second quarter. Then I think you will see it stabilize or maybe even outpace 2022's dollar utilization as we roll into Q3. Super. Then, can we just talk about fleet growth specifically? Obviously, you took stronger deliveries than you normally would in the winter of year for the past two quarters. You know, now that we've entered the construction season, can you talk about whether fleet on rent growth has caught up with overall fleet size growth in April based on what you're seeing so far? Yeah. Sorry, this is Larry. We're beginning to see, you know, our normally adjusted, you know, revenue growth and fleet growth coming out of the, you know, the seasonal first quarter into Q2. We'll continue to take fleet. We took, as you mentioned, we took a, you know, an outsized portion of our fleet in Q1 as well as in Q4. We'll continue to take fleet. I think we've, we took about 25% of our ordered fleet in Q1. We expect to continue to take that fleet throughout the year, we'll adjust, you know, if need be. We're seeing fleet sort of equalizing with our utilization as we go into the height of the construction season. Thanks, Larry. Aaron, can I ask you just one more to expand on your M&A comments. You mentioned valuations are becoming more attractive in general rental. I'm wondering if you could just talk about how the pipeline looks and the magnitude of the valuation improvement that you're seeing. You know, is that a function of companies maybe having issues refinancing or refinancing at higher rates given the rate move for the smaller competitors? Sure, Jerry. Our pipeline's good. There's a full pipeline. We think we can fulfill our goals for the year. The valuations are really stable versus where they've been over the last year. What I was trying to allude in my comments was that, you know, you pay a little bit more on a multiple for a specialty business versus a general rental business, right? They're very stable from where they were over the prior two years with all the other transactions we've done. Got it. Thank you. Thank you. We will take our next question from Rob Wertheimer with Melius Research. Your line is open. Hi. Thanks. Just looking for a little bit more, you know, deeper on the end market. You mentioned RFPs are solid. I wonder if you could talk to us about, I don't know whether an RFP is typically done for a $20 million building or a $100 million building or what, and then how those RFPs compare with prior years. Sure. This is on the RFP front, we did comment that it's stable. There's still a strong activity of requests for proposals coming into us for work. Typically, those are for industrial plants that either we currently do work with or new opportunities. You use a number of about $20 million. Typically, you don't see RFPs for those size jobs. The larger jobs, say, you know, $300 million and up or a mega project, you definitely would see an RFP come in for that. Perfect. Okay. This would be a relatively, I mean, maybe last year was strong because the mega projects had already kicked off, or maybe just contextualize how RFPs are today versus, you know, last year and the last several years. Yeah. They're stable. Activity is strong and/or increasing. We're actually seeing probably RFPs from end markets and customers that we wouldn't have seen the prior year. I think that's indicative of the health of the demand for rental fleet. Okay. You know, and I think, Jerry- We have time for one question. Rob, maybe just one other. I think, the reason we may be seeing more of them as well is, you know, the recognition that we are one of the, you know, one of the top rental companies with a broader reach in terms of geographic reach and a broader fleet and more fleet to be able to support that. We're receiving that recognition and receiving a larger number of those inquiries than we have in the past. Okay. I'll stop there. Thank you. Thank you. We will take our next question from Sherif El-Sabbahy with Bank of America. Your line is open. Hi. Good morning. Good morning, Sharif. I, one question I had is just that given that you're still placing orders well in advance and given the runway you see on projects and the pickup in CapEx this year, how are you thinking about those orders as you're placing them? Yeah. No, great questions, Sherif. You know, we've placed about 85% of our CapEx plan in, you know, in hard orders with our vendors. We have slots available to us and the rest if we need them. We're monitoring and measuring that. I would tell you that, you know, in the core fleet, lead times are still extended in that 12 -month to 18-month period. We are seeing some improvement. We are getting greater visibility as to when that fleet's available so that we can properly place it in the markets that have that demand. We have a lot of flexibility in our, in our procurement still. We're really prudently managing how we execute the deliveries of that fleet. Thank you. Then just on rate, it's continued to accelerate sequentially. You've continued to guide to sort of a mid-single digit range. How should we think about that throughout the year, the cadence of it? I mean, I think, Sherif, this is Mark. When you think about it, right? We kind of built a seven number in Q1, as you roll that forward into Q2, sequentially throughout the months, right, probably slight increase as we tipped into March and into April. I think, you know, that seven-ish range in the first half of the year is doable. I think where you run into the challenge is in the back half of the year where the comps on the non-contract or the spot rate becomes a really big hurdle. That's the reason we continue to sort of guide into this mid-single digit range. We'll see how the back half of the year behaves, but right now the only thing we know is there are tough comps sitting there in the back half of the year. Understood. Thank you. We will take our next question from Neil Tyler with Redburn. Your line is open. Good morning. Thank you. A couple please. Guys, you called out the RMO market as being particularly resilient. Can you remind me pretty much please, you know, pretty much how much that represents of your end markets, of your business as best you can define it? Then second one. On the channel checks, Aaron, that you referred to, can you just perhaps expand a little bit on the questions that are being asked and really what you're asking those regional managers to look for? Okay One question on the broader market data on the American Rental Association data. Obviously the rental market is growing at a significantly lower pace than would be normally assumed given the rate of non-resi put in place activity, and particularly if you back the current sort of rate cadence out of that. Is that equipment constraint that's limiting the broader market growth, or is there something else at play there that you can help us understand? Thank you. Neil, I'll take the first one. The MRO market is really activity under roof. There's a lot of different end markets that have maintenance operations. It could be airports, it could be hangars in airports, it could be warehouses. All of those type of different end markets that. You got your industrial petrochemical environments support for the industrial petrochemical markets, where they're manufacturing parts and shipping goods. Those all have continued maintenance from electrical, mechanical contractors on a regular basis. We don't really measure the size of that. We just know it's a big market that a lot of our diverse customer mix plays in. The other question you had was about our channel checks. What we tend to find, in our discussions with our regional vice presidents, and this is also a lot of time in the field. We, myself and others, you know, we're visiting branches, we're visiting with customers. The general tools that we use to measure that is how's our reservations look? What's the expected reservation cadence on, for our OEC growth? What markets are showing the most promise? Secondly, on the mega project side, there's a lot of data we're tracking on the mega projects. As they come out of the ground, these RFPs come to us, as they start breaking dirt out there. On the EV car manufacturing and battery front, right? Some of these buildings are already built up, and they're ordering fleet for the transformation that they're doing on the electrical front. These are all different data points that we're looking at to see if all the positive numbers we're seeing on the graphs is translating into actually equipment being reserved and going out on rent. In Q2 is really what we're focused on right now. Thank you. You had one more question about the size of the rental market. The rate it's growing at. Yeah. Yeah. Neil, this is Mark. I think, and it's a really good question, and I think from my perspective, right, we had a sort of a 12%-13% growth rate in 2022 in the ARA. Right now we're kind of staring at this 4%-4.5%. All of the other data would indicate that it's probably something bigger than that. You know, the only thing I can tell you is that, you know, there could be revisions to that data, might be revisions to that data up. At this point, you know, who knows? Okay. I guess the, you know, the sort of the perspective I'm, I was hoping you might share is, you know, to what extent you're still over-indexing in terms of fleet delivery relative to the broader market. You know, how far down the list do you have to go before you reach the point where the supply constraints are limiting the ability to take delivery of fleet at the moment? I'm not seeing that. I mean, I think, you know, in the prepared remarks, right, we're sort of out— If, if the number is 4%-4.5%, I mean, we're outpacing that organically at 3 x right now. And, you know, the fleet that we have sort of allows us to hit the demand that we've projected throughout the construction year of 2023. Okay. Thank you very much. That's helpful. We will take our next question from Seth Weber with Wells Fargo. Your line is open. Hi, guys. Good morning. This is Larry Stavitski on for Seth this morning. Hi, Larry. Hello. Hi. I just had a question on, you know, if you have a view on the percentage of your projects that are financed locally versus big money center banks and what you're hearing from customers, in terms of that, you know, the banking situation and lending? No real color on that. I'll tell you that the big projects, as we do our channel checks, there's no postponements or delays due to financing. Okay. Gotcha. Gotcha. Then, just switching gears. Your free cash flow, are you still expecting that neutral for the year or how should we think about that going, you know, for 2023? Hey, Larry. Yeah, this is Mark. I think yes, that's a reasonable expectation, free cash flow neutral for 2023. Yeah. Okay. All right. That's all I have. Thanks, guys. Thank you. Thank you. We will take our next question from Ken Newman with KeyBanc. Your line is open. Hey, good morning, guys. Mark. Good morning. C ongrats on the new position. Thank you. First question from me. You know, I just wanted to clarify on the acquisitions you made in the quarter, and I think at 5.5 x, if my math is right, it implies around $25 million of EBITDA before synergies. I'm curious, one, is that in the right ballpark, and is that contemplated in the maintained guide? How do we think about the timing of the contribution from those acquisitions through the year? Yeah, Ken. again, this is Mark. Yeah, your numbers are pretty close to right in terms of the overall impact of the acquisitions at 5.5 x. The largest of those three acquisitions was literally done on the second day prior to the quarter end, and so that impact really was negligible to us in Q1. All of that would be baked in as we roll forward into the remainder of the year. Okay. when I think about that in the context of the maintained guide, is that just modestly offset by some of the moving pieces in entertainment or mix or, just any color there? Yeah. I mean, I think, right, if you have a, you know, what a $20 million+ of acquired EBITDA, right? You have three quarters of that that would potentially impact the year. Yeah, I mean, I think when we think about sort of the combination of the acquisitions that are in the door, plus all the other opportunities that Aaron has spoke about, we believe that that should more than offset any of the softness that we potentially will experience here in Q2 around this writers' strike. Gotcha. For my follow-up here, I just wanted to switch over to SG&A margin. you know, this is one of the higher quarters for SG&A margin that you've had in a while. Understand there's again, the moving pieces on the fleet and entertainment mix. Any help you can kind of help us think about the cadence of SG&A margin as we progress through the year, and how do you think about that relative to 2022? Yeah. No. Good question. Actually, I mean, my math has about 70 basis point improvement, Q1 2023 SG&A margin over 2022. I think, you know, we're still projecting, if you think about this from a REBITDA margin perspective, we're still shooting for that 100 basis poin - 200 basis point REBITDA margin expansion year-over-year as we've publicly stated. You will continue to gain leverage in that line and the DOE line as we walk through 2023. That's helpful. Thanks. Absolutely. We'll take our next question from Mig Dobre with Baird. Your line is open. Thank you, and good morning, everyone. Just a clarification for me, if I may, on the CapEx commentary. The way I heard it is that you're expecting similar disposals as you had in Q1 for the rest of the year. I think Larry mentioned that in Q1, you received about a quarter of the fleet that you were planning on for the year. If I look at, and I kind of put those two together, it would imply to me that net CapEx is coming in somewhere around $800 million as opposed to the $1 billion-$1.2 billion that you've guided. Can you talk a little bit to that? I mean, am I missing something here? Yeah. It was 25% of the net CapEx is what we received in the first quarter. If I misled you, I apologize. 25% of the net CapEx that we expected, we received. As Aaron said, yeah, our disposals will be similar. Obviously, minor, you know, movements quarter-to-quarter, but similar to what we experienced in the first quarter throughout the remaining three quarters. Yeah. Sorry to press you on this because that still puts us at $800 million and, you know- Our guidance is still in that, you know, $1 million-$1.1 million range of net CapEx for the year. I guess maybe what I'm really trying to get at here is, have you changed your gross CapEx expectations for the year at all relative to the prior commentary you provided last year? No. I mean, Mig, this is Mark. I mean, we're still staring squarely at that $1 billion-$1.2 billion range for net fleet CapEx spend in 2023. Okay. As, as you think about the rest of the year, considering the fact that you're obviously gonna have more fleet coming in, how comfortable are you with the ability to ramp up utilization? I obviously do understand that there's some seasonality in the business, but you're also gonna have, frankly, more fleet and, you know, we've seen some softness in Q1. How do you think about that? yeah, Mig. you know, last year. We feel good about the fleet that's coming in and our ability to get the time unit we need and get the growth we need and take care of our customers in 23. Some of the core categories of fleet. Like reach forklifts, aerial were very, very hot last year to the point where we were actually losing opportunities with customers because we couldn't provide the fleet. Strategically, we've been focused on investing in our core fleet. Some of those categories ran really unreasonably hot last year on time utilization. We don't expect to get some of those back to that same level in 2023. We really don't want to because we want to capture more customer opportunity, which in essence will drive more revenue and have less sold-out situations. We feel confident about where we're sitting right now, and as our volume we see in April building, our utilization is following. Maybe my final question here, and I guess the thing that I'm struggling with a little bit is your flow-through margin guidance, which obviously implies pretty significant acceleration. At the same time, we are looking at maybe more modest pricing gains in the back half than what we've currently seen. To your point, the year-over-year comparison in terms of utilization is very difficult in certain categories. At least in my thinking, that should pressure flow through on our EBITDA. Again, you know, as you think about this acceleration in incremental margins, how do we get there from where we currently are? Thank you. Yeah. I mean, Mig, this is Mark. I mean, I think there's really there's 2 areas, right? We will have should expect to have margin expansion in 2023. I think the piece of it that you didn't mention there is really as we continue to cross over the inflationary pressures of 2022 into 2023, certainly allows for additional flow-through opportunity, and that's where that guide to the mid-50s% is coming from. Understood. Thank you. Absolutely. We will take our next question from Steven Fisher with UBS. Your line is open. Thanks. Good morning. Wanted to just follow up on the impact of the bank failures and situation. I think you said to Seth Weber that there's no impact expected on larger projects. What do you think the broader impact of credit tightening will be on your markets? I guess to just establish a baseline, what are you seeing in the residential and commercial construction slice of your business? What's that running year-over-year in Q1 and kind of what are you planning for in terms of magnitude of changes for the rest of the year? Thank you. Yeah. Steve, this is Larry. As we have said in the past, the residential market really isn't a slice of our business. We don't participate in it. If we do any business, it's by accident and not by intent. And as far as what I'll call the low end or light commercial, that sort of went away with COVID and really hasn't returned. It really will have no impact whether that's impacted by, you know, the local banking issues or not. I don't feel that, you know, local banking is gonna have, at least at this point, you know, any impact on us because most of our work locally is around infrastructure, state and local government type of activity, which is, you know, funded through tax rolls and tax dollars, not necessarily through banking. Also, you know, we're a believer that, you know, the local markets can have an awful lot of resiliency to support some of these mega projects and larger projects as a spillover. As you know, there's a lot of fleet going to the larger mega projects. There'll be a fair amount of work and fleet available to the local activity, and those local contractors will be picking up that local activity. We're not expecting to see any of it. It might have an impact, quite frankly, on the smaller rental companies, the mom-and-pop rental companies who either can't get that credit to fund new fleet acquisitions or may be, you know, resistant or fearful that they don't want to, you know, sort of extend themselves, and you know, take on that extra debt to build their fleet. So, you know, for the moment, we don't feel it, we don't see it, and we don't think it'll have a, you know, an impact to us. Terrific. Thank you. We will take our next question from Brian Sponheimer with Gabelli Funds. Your line is open. Good morning, everyone. Morning, Brian. Hey, Brian. I am just curious about capital allocation and how you weigh growing the business through M&A. You know, you mentioned 5.5x EBITDA, versus obviously, you know, you did some repo in the quarter, you know, buying your own stock at four and change, for basically an acquisition of yourself. Just curious as to the thought process there? Yeah, look, you know, I think both are opportunistic, Brian. You know, M&A is opportunistic as well as we have taken on a share repurchase on an opportunistic basis. We'll continue to look at both of those opportunistically on go forward. Of course, when we meet with our board, we'll talk about our capital allocation strategy going forward. As you know, we still have, you know, $200 million+ t hat we can do on share repurchase, and we said we're still gonna, you know, target that $500 million worth of worth of spend on acquisitions. Again, they're both opportunistic from our standpoint. All right. Terrific. Mark, congratulations again, and look forward to talking to y'all later. Thanks, Brian. We'll take our next question from David Raso with Evercore ISI. Your line is open. Hi. Thank you. I think as people think about rates beyond 2023, contract pricing versus spot, I mean, the generalization's going to be if mega projects are going to drive the business, right, contract will probably drive the pricing. Maybe a little more color. I think you gave a little kind of qualitative color, but a better sense of the contract pricing that you're looking at when you discuss these multi-year projects. Yeah. Hey, David, this is Mark. I mean, I think when we think about it's probably a 60/40, 65/35 split. I think when you look forward into 2024, right, the flywheel effect of the contracts continue to rain down on us. That's the piece of this flywheel that we've been building from the back half of 2022 into 2023, and will continue to benefit us into 2024. Again, can you clarify which is 65 and which is 35, just so we get that straight, the split? 65 contract, 35... Okay. Again, I know you want, you don't wanna quantify on the call exactly where you're getting from contractors, but the trend for, let's say, the second half of the year, sounds like the total company rental rate, you're guiding sort of, you know, 2%-3% to get the average back down to mid-single for the year. Is contract pricing higher than spot pricing toward the end of the year? We're just trying to get a sense of that rate momentum into 2024. Is contract pricing expected to be higher than spot pricing as we exit 2023? I would say as you exit, it's probably more at the level of even. Okay. Exiting 2023 into 2024. All right. Perfect. Okay, I appreciate it. Thank you. Absolutely. We'll take our final question from Steven Ramsey with Thompson Research Group. Your line is open. Hi. Good morning. On national accounts growth, can you maybe parse out to some degree the strength there? It's doing better than local. How much of that is mega projects and how much of national account growth is not mega projects? Yeah. Our national account growth, which is a basket of identified accounts that we call national accounts, that's growing faster than the core business. Those type of customers are gonna get an outsized piece of the mega project work. Our portfolio of national accounts is expanding with our strategic end market vision and the way we kind of vertically run our sales organization. We're in a real good spot to capture opportunities in the mega project world. Okay. Helpful. Then maybe can you talk to national accounts making up a greater percentage of revenue in the first quarter than what you ran at last year. Do you expect as you get more into mega projects ramping up that national accounts and local accounts will be split fairly evenly in by the end of this year or early next year? In this, you know, in the different quarters of the year, you have different penetration of where the revenue's coming from, local or national account. In the winter, typically, the local business kind of is a little bit lower than the national business. The local business kind of ramps up through the peak season Q2, Q3, first part of Q4. Now, with the amount of work that is planned and discussed in this mega environment, we could see that shift kind of going heavier towards the national side. It might look more like it did in the first quarter through other parts of this year. Okay. That does it for me. Thank you. Thanks. I will now turn the call back to Leslie Hunziker for any closing remarks. Great. Thank you for joining us on the call today. We look forward to updating you on our progress in the quarters to come. Of course, if you have any further questions, please don't hesitate to reach out to us. Have a great day, everyone. Ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.