UNITED RENTALS, INC. Q3 FY2024 earnings call

• Matt Flannery noted Q3 results reflected growth in construction and industrial end markets, with total revenue, rental revenue, EBITDA, and EPS at records. Emphasized innovation with ProBox OnDemand and next-gen telematics, and quick response to hurricanes Helene and Milton.
• Ted Grace discussed rental revenue records, used results, adjusted EBITDA, capex of $1.3 billion, year-to-date free cash flow over $1.2 billion, strong balance sheet with net leverage 1.8 times and total liquidity almost $2.9 billion.

Total revenue grew 6% year-over-year to almost $4 billion, with rental revenue growing over 7% to $3.5 billion, both third quarter records. Adjusted EBITDA increased to a third quarter record of $1.9 billion, translating to a margin of almost 48%. Specialty rental revenue grew an impressive 24% year-over-year and 15% ex-Yak acquisition. Third quarter rental revenue was a record $3.463 billion, up 7.4% YOY. OER increased by $153 million or 5.8%, with fleet productivity contributing 3.5%. Ancillary and re-rent revenues were higher by $86 million or 15% due to strong specialty business growth. Used sales in the third quarter were a record, generating proceeds of $321 million, with adjusted margin 49.5% and recovery rate 54%.

Reaffirmed guidance with midpoints maintained for total revenue, EBITDA, and capex. Total revenue guidance narrowed to $15.1 billion to $15.3 billion. Adjusted EBITDA guidance narrowed to $7.115 billion to $7.215 billion. Gross capex guidance narrowed to $3.55 billion to $3.75 billion, net capex to $2.05 billion to $2.25 billion. On track to return a record $1.9 billion to shareholders this year.

Business and operations subject to various risks and uncertainties beyond control, which may cause actual results to differ materially from projections. Details in Safe Harbor statement and annual report on Form 10-K.

Q: Good morning. Thanks for the time. You made a comment, Matt, about good momentum into ’25, another year of growth. Can you give us at least how you’re thinking about that between specialty and gen rent growth, and also fleet productivity versus fleet growth?

A: Sure David. When we think about how next year is playing out, and I’ll just talk about this qualitatively because we haven’t even finished our planning process, and that will inform what we actually think our growth will be. But we’re going to have a little bit of carryover in fleet, right, that we feel confident that we’ll put to work, and the on the demand perspective, there’s still a good pipeline of large projects. The wildcard as we get deep with our customers and our field leaders is what’s that local market going to do, and we talked about that a lot this year. Our assumption of interest rates starting to show some give and possibly more coming, we think at least the emotional part of that step has been heard from our customers, so people are starting to feel a little more confident. What kind of activity that actually turns into is the part that we don’t have any quantitative way of feeling that out, but we’re going to figure out from our customers and our field leaders and then we’ll add that growth. But when you think about the ending fleet having a little bit of growth to it, we’ll continue to strive to drive fleet productivity. I’m not going to put a number out there or forecast it, but our goal is to always drive revenue growth more than fleet growth, which is all fleet productivity measures, so we’ll continue to do that. We think specialty certainly has more headwind. I mean, we’ve been, I don’t know since when, but we’ve been eight, probably eight years-plus of specialty growing over 20% each year, and we continue to think that they have that kind of opportunity. The tailwinds that we talk about in the mega projects, infrastructure and the like really plays to our one stop shop full value offering. That also helps specialty drive more growth. That’s the way we think about it, what kind of growth and what kind of growth capex we’ll put in, and we’ll talk about that in January after we’re done with our planning process.

Q: Also, you mentioned the strength of the balance sheet, the cash flow. As you’re aware, the sizeable acquisition in the mobile modular space recently broke apart, so I’ll just give you the platform here if you want to comment at all on the attractiveness of that space - obviously you became a player with Gen Finance. If you can just touch on that, and of course any other M&A landscape comments would be appreciated. Thank you.

A: Sure David. On the first part, we’re very pleased with the acquisition we did with General Finance. We talked about when we bought that, doubling the size of that business in five years. We’re probably ahead of schedule on that, but certainly on track. We feel really good about that. For that space, we like the idea of growing off of that platform a lot, and we’re accomplishing that. We don’t necessarily need to be the biggest provider in that space overall, we just need to be the biggest with our customers, and that’s the way we look at a lot of our adjacent product lines, so pleased there. As far as M&A, we continue to look at the pipeline, right? We’ve got a competency of integration and cross-selling that’s unique and something that really plays well with our customers and within our organization. But the bar’s high, so it’s not always easy to get the right dance partner. We can get the strategic fit, we can get cultural fit, and the last part’s financial, and our bar is high there. I think one of the reasons we’re good integrators is because we’re smart buyers, so we continue to work the pipeline and when something is imminent, we’ll let you all know.