United Rentals(US:URI)2023-04-27 18:41Financial Data and Key Metrics Changes - Total revenue grew by 30% to a first quarter record of $3.3 billion, with rental revenue increasing by 26% [16][28] - EBITDA increased by 32% to $1.5 billion, with margins expanding to 45.8%, both first quarter records [16][33] - Return on invested capital reached a new high of 13.1%, up 40 basis points sequentially and 220 basis points year-on-year [34] Business Line Data and Key Metrics Changes - Rental revenue was a record at $2.74 billion, an increase of $565 million or 26% year-over-year [28] - Used sales increased by 84% to $388 million, reflecting a return to normalized volumes after holding back on sales in 2022 [30] - Ancillary revenues rose by $93 million or 28.3%, contributing positively to overall revenue growth [29] Market Data and Key Metrics Changes - Nonresidential construction starts increased over 30% in March, with the Dodge Momentum Index up 24% year-over-year [19] - The ABI points to growth, with forward-looking inquiries continuing in a positive direction [19] - The company noted double-digit growth across all regions, indicating strong demand in various markets [17] Company Strategy and Development Direction - The company is focused on driving profitable growth and returning excess cash to shareholders, with over $350 million returned in the quarter [11] - Long-term strategies include capitalizing on multiyear tailwinds from federal infrastructure spending and investments in clean energy and advanced manufacturing [20][21] - The company plans to host an Investor Day on May 31 to provide an in-depth review of its strategy and financial performance [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in 2023, supported by strong customer demand and positive industry indicators [11][19] - The integration of Ahern is on track, with expectations of improved productivity and operational efficiencies over time [48][116] - Management remains confident in maintaining margins above 45% even in potential downturns, citing structural improvements in the business [88][90] Other Important Information - The company reaffirmed its full-year guidance, expecting total revenue in the range of $13.7 billion to $14.2 billion, implying approximately 20% growth at midpoint [37] - Free cash flow guidance is set at $2.1 billion to $2.35 billion, before dividends and repurchases [39] - The leverage ratio improved to 1.9x, with liquidity exceeding $2.65 billion [35][36] Q&A Session Summary Question: Demand outlook and mega project funding - Management noted strong demand across all business units and geographies, with a constructive market for continued strength [44][45] Question: Impact of Ahern on gross margins - The drag on margins from Ahern was expected and reflects the integration of a lower-margin business [48][72] Question: Productivity expectations with Ahern integration - Management indicated that improvements in productivity will take time, with expectations of narrowing the gap between reported and pro forma results [51][56] Question: Multiyear projects and CapEx thoughts for 2024 - Management expects supply chain conditions to improve next year, reducing the need for pulling forward orders [63][68] Question: Customer mix and demand strength - Demand is skewed towards larger customers, who are better positioned for mega projects, indicating a positive outlook for larger accounts [84][85] Question: Confidence in maintaining margins during downturns - Management expressed confidence in sustaining margins above 45%, citing structural improvements and past performance during downturns [88][90] Question: Specialty pipeline and M&A opportunities - The company continues to explore M&A opportunities, focusing on enhancing specialty offerings and integrating acquisitions effectively [92][93] Question: Share buyback strategy - Management reiterated a consistent approach to share buybacks, emphasizing a systematic execution strategy [98]