UNITED RENTALS, INC. Q4 FY2024 earnings call

• Matt Flannery noted solid Q4 results with record revenue, EBITDA, and EPS, growth in construction and industrial end markets, strong demand for used equipment, and the foundation for future growth.
• Ted Grace discussed detailed financials, including fourth quarter rental revenue record, used sales proceeds and margins, EBITDA details, profitability, CapEx, free cash flow, and 2025 guidance. He also highlighted the acquisition of H&E and the company's focus on being the best rental company.
• Emphasis on the company's industry-leading technology, service, and operational excellence, as well as investment in specialty, technology, and capacity.

Total revenue grew 9.8% year-over-year to almost $4.1 billion. Rental revenue was a record $3.4 billion, up 9.7%. Specialty rental revenue grew more than 30% year-over-year, with an 18% growth even without Yak. Used equipment sales in the quarter were a record $850 million. Fourth quarter adjusted EBITDA was a record $1.9 billion, with a margin of over 46%, and adjusted EPS was a record $11.59. Rental revenue growth was supported by large projects and key verticals, with OER increasing by $177 million or 6.9%, driven by average fleet size growth and fleet productivity, partially offset by assumed fleet inflation of 1.5%. Ancillary and re-rent grew by 22% and 30% respectively.

• Total revenue expected in range of $15.6 billion to $16.1 billion, implying full year growth of 3.3% at midpoint.
• Adjusted EBITDA range $7.2 billion to $7.45 billion.
• Gross CapEx guidance $3.65 billion to $3.95 billion, net CapEx $2.2 billion to $2.5 billion.
• Free cash flow guidance $2 billion to $2.2 billion.
• Quarterly dividend increased by 10% to $1.79 per share.

The company's business and operations are subject to a variety of risks and uncertainties beyond its control, which may cause actual results to differ materially from projected. A summary of these uncertainties is in the Safe Harbor statement in the press release, and a more complete description is in the annual report on Form 10-K and subsequent SEC filings.

Q: Congratulations on a nice year. Maybe you could just touch upon the bigger than usual ancillary and re-rent. What's the main activity driving that? Was that sort of more shifting of equipment around that you got fees on? And maybe what's the next -- the expectation for the next few quarters on that, if you could even forecast it? And I suppose the bigger picture question here is on the margin side, what would you have to see in order to get flow-through back into the kind of 50% plus range?

A: Ted Grace said ancillary and re-rent growth was due to storm-related opportunities and specialty growth. On margins, relative growth rates, inflation absorption, and intentional investments in things like cold-starts and technology matter. Matt Flannery added they still drive towards strong margins.

Q: First one would be just cadence of growth in first half. Are you guys baking anything that's more second half weighted?

A: Matthew Flannery said they won't get into quarterly guidance, but CapEx is on a similar cadence to 2024, with no back weighting, flowing with normal seasonality and customer demand.

Q: First question here. What was the specialty organic growth in the quarter? And if you could talk to the color on the dispersion between the individual business lines within specialty, that would be great?

A: Matthew Flannery said specialty grew 30%, 18% ex Yak. Growth was from cold-starts and adding new products, with areas like Pac-Van, Yak, ROS, and power showing strong organic growth.

Q: Matt, maybe just starting on fleet productivity. The target that you outlined in terms of the ability to outrun inflation of 1.5%, I think still believe in that in terms of realistic target for '25? And then maybe as part of that, is there an area where maybe there's, I don't know, better opportunity in terms of whether it's time or rate? And maybe you could just speak to that in terms of how you're thinking about just the broader fleet productivity setup for '25?

A: Matthew Flannery said they feel good about fleet productivity performance, believe in outrunning inflation, and it's embedded in 2025 guidance, with a constructive rate environment and mix as variables.

Q: In your press release, just diving more into that customer optimism. So you noted that in your press release, we've talked about it here today on the call. Just curious how much of that's actually translating to greater activity today? And then in any areas where it hasn't resulted in an uptick in activity yet, can you describe maybe what customers are waiting for, whether it's greater certainty around interest rates policy, labor availability or just anything else that you would like to call out, please?

A: Ted Grace said customer optimism is sentiment-based, a forward 12-month expectation, showing improvement in net responses. It's supported by expectations of accommodative monetary policy and a positive broader environment, but hard to get granular on specific waiting factors.

Q: On infrastructure bill and those funds flowing, we talked to high level about large projects and I think that would be in both but more large. What are you seeing there? Are you seeing those funds flow? It sounds like you're expecting the same in '25 as you were in '24 but I want to carve out that piece specifically out of -- away from mega projects, away from small local projects.

A: Ted Grace said they continue to see growth in infrastructure, though funding allocation is difficult, and expect continued growth in 2025 related to infrastructure spending.