United Rentals, Inc. · NYSE:URI
United Rentals — Q2 2022 Earnings Presentation
52 slides from United Rentals's earnings presentation, Jul 28, 2022
Slide 1: Second Quarter 2022 Investor Presentation
Second Quarter 2022 Investor Presentation Managing Key Value Drivers to Maximize Full Cycle Returns United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved.
Slide 2: Introductory Information
Introductory Information Unless otherwise specified, the information in this presentation, including forward-looking statements, is as of our most recent earnings call held on July 28, 2022. We make no commitment to update any such information contained in this presentation. Certain statements in th
Slide 3: Contents
Contents 1. Introduction 2. End-Market Overview 3. Company Overview 4. Summary of Key Financial Data 5. Appendix United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved. 3
Slide 4: Introduction
1 Introduction United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved.
Slide 5: Maximizing value creation across the cycle by balancing growth, margins and free cash flow
Maximizing value creation across the cycle by balancing growth, margins and free cash flow to drive returns Aggressive management of key value drivers within our control 5
Slide 6: Company overview
Company overview (1) #1 Market Share • 2021 total revenue $9.72 billion (+13.9% Y/Y) • 2021 adjusted EBITDA(2) $4.41 billion (+12.3% Y/Y; 45.4% margin) 1,331 locations across North America(3) • 1,188 branches in the U.S.; locations in 49 of 50 states United Rentals • 143 branches in Canada; location
Slide 7: Our customers and the benefits of renting vs. owning
Our customers and the benefits of renting vs. owning Customer Mix* Why Customers Rent Instead of Buy Residential construction • Conserve capital / focus on core business • Multi-Family Industrial • The right equipment for any job/availability & Other 4% • Reliability/reduce downtime • Power / Utilit
Slide 8: Branch locations
Branch locations North American branch count 1,331(1) • General Rentals: 861 locations • Specialty: 470 locations(2) Largest U.S. states by number of locations(1) • Texas: 164 • California: 117 • Florida: 80 • Louisiana: 51 • Georgia: 47 Largest, broadest and most diverse footprint in North America
Slide 9: Diverse end-market exposure
Diverse end-market exposure Infrastructure Non-Res Construction Residential Downstream O&G Midstream O&G 2021 Revenue by Vertical Upstream O&G Chemicals Industrial Manufacturing Metals & Minerals Consumer Related Broad customer base helps reduce full-cycle volatility *Note: Based on 2021 rental reve
Slide 10: A decade of continued financial improvement
A decade of continued financial improvement… Total Revenue Adjusted EBITDA(1) Adjusted EPS(1) $11,000M $5,000M $25 $10,000M CAGR $4,500M CAGR CAGR $9,000M 14.0% $4,000M 16.9% $20 28.0% $8,000M $3,500M $7,000M $3,000M $15 $6,000M $2,500M $5,000M $4,000M $2,000M $10 $3,000M $1,500M $2,000M $1,000M $5
Slide 11: …that has ultimately been reflected in free cash flow
…that has ultimately been reflected in free cash flow 2011-2021 Average Free Cash Flow Conversion: 118%(2) Free Cash Flow ($M) $2,600 $2,400 $2,200 Average FCF as % of $2,000 EBITDA(1): 31.1% $1,800 $1,600 $1,400 $1,200 Average FCF as % of $1,000 EBITDA(1): 20.4% $800 $600 $400 $200 $0 ($200) 2002 2
Slide 12: Driving and extending our competitive advantages
Driving and extending our competitive advantages • Company transformed to be considerably more profitable and efficient • Operations, technology and culture differentiate us, and make us far more agile Maximize revenue potential with • Diversified end-market exposure across customers, current & new
Slide 13: End-market overview
2 End-market overview United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved.
Slide 14: U.S. equipment rental industry overview
U.S. equipment rental industry overview Combined U.S. General Rental and Construction Growth of the U.S. equipment rental market has & Industrial Equipment Rental Market Size ($bn) sharply outpaced underlying private non-res activity $55 350% Peak-to- 300% 24-year 10-year $50 Peak 250% CAGR CAGR CAG
Slide 15: Real total U.S. construction spending per capita
Real total U.S. construction spending per capita Real total U.S. construction spend per capita 10-year avg 20-year avg 30-year avg 40-year avg $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982
Slide 16: Company overview
3 Company overview United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved.
Slide 17: Core values provide the foundation of our culture
Core values provide the foundation of our culture Visible Leadership Lead by example in every A Passion for People business decision and action, Customer-Driven Build a diverse workplace that with a sense of humility and Support the best interests of our challenges all employees to responsibility. c
Slide 18: Strategic evolution over 20+ years
Strategic evolution over 20+ years 1997–2008 2009–2013 2014–present Become a market leader Optimize scale, diversify, Building on and transforming and drive profitable growth the Core 2009: Increased focus on customer service and Continued build-up of 1997: Founded / IPO improving returns through Ge
Slide 19: Long-term growth and margin opportunities
Long-term growth and margin opportunities Revenue Related Cost and Margin Related • Capitalize on ongoing secular shift • Further leveraging of LEAN towards rental over ownership • Optimization of operating costs • Leverage cross-selling to capture more • Continual improvement of labor productivity
Slide 20: Competitive positioning aided by structural advantages
Competitive positioning aided by structural advantages Size, Breadth and Benefits of Scale, Investments in Diversity of Fleet Scope & Diversification Technology Strong Balance Strong Culture Focused Proven Sheet + Cash Flow on Employees, Customers & Management Team Shareholders Focus on driving and
Slide 21: Online digital strategy and results: 2021
Online digital strategy and results: 2021 Increase Demand Through Enhance the Customer Digital Marketplace + Experience + Extend Service offerings • Generate awareness and interest • Access real-time account and • Conduct Safety training through equipment GPS information United Academy (UA) • Acquir
Slide 22: Enhance customer experience: Digital Tools
Enhance customer experience: Digital Tools Rental Fleet Management platform which enables: • Open and close rental contracts • View invoices and pay bills Total Control® • Locate GPS enabled equipment • Customize alerts to proactively manage utilization • Customize reports and KPIs On the go functio
Slide 23: Telematics & FAST
Telematics & FAST Field Automation Telematics & Related Technologies Systems & Technologies (FAST) Internal Benefits: Internal Benefits: – Performance monitoring and service alerts – Increased driver and dispatcher productivity – More efficient location and pick-up capabilities – Improved fleet
Slide 24: Investing in Specialty solutions to complement GenRent
Investing in Specialty solutions to complement GenRent Trench Safety Power & HVAC Fluid Solutions Tool Solutions Onsite Services Portable Storage & Modular Space • Excavation • Complete • Full range of • Tool trailers • Plastic port-a- • Portable storage, support solutions for equipment to stocked w
Slide 25: Specialty provides strong growth opportunities
(1) Specialty provides strong growth opportunities millions Specialty Revenue $2,692 $2,750 $2,500 $2,250 2012-2021 CAGR: 27.8% $2,165 $2,089 $2,000 $1,720 $1,750 $1,500 $1,254 $1,250 $1,021 $1,000 $931 $823 $750 $471 $500 $297 $250 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Specialty as %
Slide 26: Long-term capital allocation strategy
Long-term capital allocation strategy Manage Return Excess Leverage Invest in Growth Cash to Investors • Target leverage range over • The 2022 $1 billion repurchase the cycle of 2.0x–3.0x. Organic M&A program commenced in the first • Net leverage(1,2): 2.0x quarter of 2022. Through June 30, • Contin
Slide 27: M&A strategy: Disciplined and opportunistic
M&A strategy: Disciplined and opportunistic Strategic Financial Cultural • Proactively supports growth in • Invest capital at attractive returns • Safety attractive markets over cycle • Talent • Difficult to replicate organically • Revenue growth • Margin opportunities • Ethics and integrity • Acces
Slide 28: Record of value creation through M&A
Record of value creation through M&A RSC National Pump NES Neff Rentals BakerCorp BlueLine General Finance (2012) (2014) (2017) (2017) (2018) (2018) (2021) • Size: $4.2B • Size: $780M • Size: $965M • Size: $1.3B • Size: $720M • Size: $2.1B • Size: $1.0B transaction value transaction value transactio
Slide 29: ESG Highlights: Environmental
ESG Highlights: Environmental Selected Highlights Emissions Progress against existing goal: 9% reduction in greenhouse gas (GHG) emissions intensity in 2021 vs. GHG Emissions Intensity (MT CO2e/$M Revenue) 2018 baseline, toward our goal of 35% reduction by 2030 Continued to invest in low- and ze
Slide 30: ESG Highlights: Social & Employee Related
ESG Highlights: Social & Employee Related TRIR (Safety Measurement) Selected Highlights 1.00 0.95 0.80 0.79 0.78 0.79 Safety 0.70 New goal: On journey to zero injuries, aim to reduce our Total Recordable Incident Rate (TRIR) to 0.40 by 2030 0.60 2021 TRIR of 0.79, a 17% year-over-year reduction,
Slide 31: ESG Highlights: Corporate Governance
ESG Highlights: Corporate Governance Corporate Governance Highlights Board of Directors Overview Board Independence Board Performance The strength of our Board is highlighted by our directors' collective skills and expertise, as illustrated • 8 of 10 Directors are independent • Risk oversight by the
Slide 32: Summary of key financial data
4 Summary of key financial data United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved.
Slide 33: Key financial results snapshot
Key financial results snapshot Adjusted Earnings per Share Total Revenue ($M) Adjusted EBITDA(1) ($M) (EPS)(1,2,3) 2021 5-Year CAGR: 2022 Implied Growth: 2021 5-Year CAGR: 2022 Implied Growth: 2021 5-Year CAGR: +20.6% +11.0% +18.9% +9.9% +24.0% $12,000 $6,000 $25 $11,000 $10,000 $5,000 $20 $9,000 $8
Slide 34: Structural changes are key to increased margins
Structural changes are key to increased margins Adjusted EBITDA Margin(1) (%) Key Drivers of Margin Gains Adjusted EBITDA margin 1,460 bps above prior peak (3) • Strong fixed-cost absorption 60% • Cyclical leverage (e.g., SG&A as % of sales) 50% • M&A cost synergies (e.g., RSC, NES, Neff) 40% • Oper
Slide 35: Consistent free cash flow generation
Consistent free cash flow generation Free Cash Flow ($M) (1) 10-Yr Average (2) 5-Yr Average (3) $2,500 $2,454 $2,100 $1,950 $1,700 $1,592 $1,527 $1,334 $1,300 $1,195 $983 $924 $900 $574 $500 $421 $335 $367 $227 $100 $23 ($73) -$300 (4) (4) (4), (5) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 36: Q2 2022 Results
Q2 2022 Results Total Revenue • $2.771 billion (+21.2% Y/Y) Net Income • $493 million (17.8% margin; +500 bps Y/Y) Adjusted EBITDA* • $1.311 billion (47.3% margin; +360 bps Y/Y) • $979 million, after gross purchases of $1.354 Net Rental Capital Expenditures (Year-to-Date) billion Net Cash Provided b
Slide 37: 2022 Financial Outlook
2022 Financial Outlook Total Revenue • $11.4 billion to $11.7 billion Adjusted EBITDA* • $5.4 billion to $5.55 billion • $1.85 billion to $2.05 billion, after gross Net Rental Capital Expenditures purchases of $2.9 billion to $3.1 billion Net Cash Provided by Operating Activities • $3.85 billion to
Slide 38: Fleet productivity: overview
Fleet productivity: overview • Fleet Productivity provides greater insight into the interplay and combined impact of key decisions made by managers every day across (a) rental rates, (b) time utilization, and (c) changes in mix on our Owned Equipment Rental Revenue (i.e., the revenue we generate wit
Slide 39: Fleet productivity: historical results
Fleet productivity: historical results (1) Actual YoY Change in Assumed YoY Impact of OEC Fleet Contribution from Reported YoY Change Average OEC Inflation on Rent Rev Productivity(2) Ancillary and Re-Rent in Rental Revenue 1Q 2019 23.7% (1.5%) (1.3%) 2.1% 23.0% 2Q 2019 23.2% (1.5%) (3.1%) 1.6% 20.2
Slide 40: Balance sheet strength has improved
Balance sheet strength has improved Leverage Ratio(1) (2) 3.6x (4) 3.0x (3) 3.0x 2.9x 2.8x 2.9x 2.7x 2.6x 2.4x 2.2x(5) 2.0x 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q2 2022 2.0x – 3.0x targeted leverage range across the cycle (1) Leverage Ratio calculated as net debt divided by LTM adjusted
Slide 41: No long-term note maturities until 2027
No long-term note maturities until 2027 Millions Total Liquidity of $2.830B(1) $6,000 $5,500 Fixed vs. Floating Ratio: 65%/35% $5,000 $2,564 Unused ABL $4,000 Facility $3,000 $1,686 Used ABL $2,000 Facility(2) $1,673 $1,500 $1,100 $750 4.00% $1,100 $963 Senior Unsecured $1,000 $198 Unused $750 3.875
Slide 42: Appendix
5 Appendix United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2022 United Rentals, Inc. All rights reserved.
Slide 43: Adjusted Earnings Per Share GAAP Reconciliation
Adjusted Earnings Per Share GAAP Reconciliation We define “earnings per share – adjusted” as the sum of earnings per share – GAAP, as-reported plus the impact of the following special items: merger related costs, merger related intangible asset amortization, impact on depreciation related to acquire
Slide 44: EBITDA and Adjusted EBITDA GAAP Reconciliations
EBITDA and Adjusted EBITDA GAAP Reconciliations EBITDA represents the sum of net income, provision for income taxes, interest expense, net, depreciation of rental equipment, and non-rental depreciation and amortization. Adjusted EBITDA represents EBITDA plus the sum of the merger related costs, rest
Slide 45: Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA
Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Adjusted EBITDA The table below provides a reconciliation between net cash provided by operating activities and EBITDA and adjusted EBITDA. Three Months Ended Six Months Ended June 30, June 30, $ Millions 2022 2021 2022 2021 N
Slide 46: Free Cash Flow GAAP Reconciliation
Free Cash Flow GAAP Reconciliation We define “free cash flow” as net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets. The equipment and intangible asset purchases and proceeds are included in cash flows from investing activities. Manag
Slide 47: Historical Adjusted Earnings Per Share GAAP Reconciliation
Historical Adjusted Earnings Per Share GAAP Reconciliation Adjusted EPS (earnings per share) is a non-GAAP measure that reflects diluted earnings (loss) per share from continuing operations excluding the impact of the special items described below. Management believes that adjusted EPS provides usef
Slide 48: Historical Adjusted Earnings Per Share GAAP Reconciliation (cont'd)
Historical Adjusted Earnings Per Share GAAP Reconciliation (cont’d) (1) We have made a number of acquisitions in the past and may continue to make acquisitions in the future. Merger related costs only include costs associated with major acquisitions that significantly impacted our operations (the "m
Slide 49: Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M)
Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) EBITDA represents the sum of net income (loss), loss on discontinued operations, net of tax, provision (benefit) for income taxes, interest expense, subordinated convertible debentures, net, depreciation of rental equipment, and non-ren
Slide 50: Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) (cont'd)
Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) (cont’d) YTD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net cash provided by operating activities (9) $ 438 $ 452 $ 612 $ 721 $ 1,551 $ 1,801 $ 1,987 $ 1,941 $ 2,209 $ 2,853 $ 3,024 $ 2,658 $ 3,689 $2,040 Adju
Slide 51: Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) (cont'd)
Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) (cont’d) (1) In 2013, we retired all outstanding subordinated convertible debentures. (2) We have made a number of acquisitions in the past and may continue to make acquisitions in the future. Merger related costs only include costs ass
Slide 52: Historical Free Cash Flow GAAP Reconciliation ($M)
Historical Free Cash Flow GAAP Reconciliation ($M) We define “free cash flow” as net cash provided by operating activities less purchases of, and plus proceeds from, equipment and intangible assets, and plus excess tax benefits from share-based payment arrangements. The equipment and intangible asse