United Rentals(US:URI)2023-01-26 19:44Financial Data and Key Metrics Changes - Fourth quarter rental revenue reached a record $2.74 billion, an increase of $435 million or nearly 19% year-over-year [8] - Adjusted EBITDA for the quarter was $1.65 billion, an increase of $338 million or 25.8% year-over-year, with a margin improvement of 280 basis points to 50% [89][79] - Free cash flow for the full year was $1.76 billion, with a free cash margin of better than 15% [12][25] - Return on invested capital (ROIC) was a record 12.7%, up 50 basis points sequentially and 240 basis points year-over-year [25] Business Line Data and Key Metrics Changes - The specialty segment reported an 18% increase in rental revenue year-over-year, with solid gains across all lines of business [13] - Used sales in the fourth quarter increased by approximately 26% to $409 million, with adjusted use margins rising by 940 basis points year-over-year to 61.6% [9][8] - Ancillary revenues increased by $81 million or 23.1% year-over-year, while re-rent remained flat [75] Market Data and Key Metrics Changes - Total construction activity was up 19% year-over-year, with non-residential construction up 22% and industrial up 11% [85] - Customer sentiment remains strong, with the majority of customers indicating growth over the next 12 months [14] - The company opened 35 new specialty locations in the past 12 months, with plans for at least another 40 in 2023 [5] Company Strategy and Development Direction - The company is focused on optimizing fleet and facilities post-Ahern acquisition, with a strong emphasis on integrating new team members and technology [4][16] - A capital allocation strategy was announced, including a $1.25 billion share repurchase program and quarterly dividends totaling $5.92 per share in 2023, returning approximately $1.4 billion to shareholders [15][20] - The company plans to invest more than $3.4 billion in gross CapEx in 2023, while also taking advantage of a strong used equipment market [18][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operating environment for 2023, citing strong demand and positive feedback from field leaders [6][5] - The company expects total revenue in the range of $13.7 billion to $14.2 billion for 2023, implying full-year growth of about 20% at midpoint [27] - Management noted that while there are supply chain challenges, they are optimistic about the demand for mega projects and infrastructure spending [57][56] Other Important Information - The company reported a leverage ratio of 2.0 times at the end of the quarter, with liquidity at $2.9 billion and no long-term note maturities until 2027 [26] - The integration of the Ahern acquisition is progressing well, with the business contributing approximately $54 million in total revenue and $20 million in EBITDA in the fourth quarter [79][81] Q&A Session Summary Question: Concerns about equipment availability and market share - Management indicated that the market remains tight, with some supply chain challenges expected to persist into 2023, but they are working to mitigate these issues [34][35] Question: Fleet productivity expectations for 2023 - Management stated that fleet productivity in Q4 met expectations, and they will report on both as-reported and pro forma bases moving forward [44] Question: Impact of mega projects and infrastructure spending - Management confirmed that many mega projects are progressing well, and they expect infrastructure spending to accelerate throughout 2023 [57][120] Question: Capital allocation and leverage strategy - Management reiterated their commitment to maintaining a disciplined balance sheet strategy, with no immediate changes planned [31][39] Question: Pricing dynamics in the used equipment market - Management expects a return to a more normalized channel mix for used sales in 2023, with expectations for stable pricing [72][70]