United Rentals, Inc. · NYSE:URI
United Rentals — Q2 2023 Earnings Presentation
53 slides from United Rentals's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Investor Presentation
Second Quarter 2023 Investor Presentation © 2023 United Rentals, Inc. All rights reserved. I 1
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 27, 2023. 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 I 3
Slide 4: Introduction
1 Introduction I 4
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 I 5
Slide 6: Company overview
Company overview Market Share #1 Market Share (1) • 2022 total revenue $11.64 billion (+19.8% Y/Y) • 2022 adjusted EBITDA(2) $5.62 billion (+27.3% Y/Y; 48.3% margin) 1,487 locations across North America(3) • 1,341 branches in the U.S.; locations in 49 of 50 states • 146 branches in Canada; locations
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 5% • Reliability/reduce downtime • Power / Utilit
Slide 8: Branch locations
Branch locations North American branch count 1,487(1) • General Rentals: 988 locations • Specialty: 499 locations(2) Largest U.S. states by number of locations • Texas: 175 • California: 136 • Florida: 90 • Louisiana: 57 • Georgia: 53 Geographic breadth and flexibility to provide a one-stop shop for
Slide 9: Diverse end-market exposure
Diverse end-market exposure Infrastructure Non-Res Construction Residential Downstream O&G Midstream O&G 2022 Revenue Upstream O&G by Vertical Chemicals Industrial Manufacturing Other Industrial Metals & Minerals Power All Other Broad customer base helps reduce full-cycle volatility *Note: Based on
Slide 10: A decade of continued financial improvement
A decade of continued financial improvement… Total Revenue Adjusted EBITDA(1) Adjusted EPS(1) $12,000M $6,000M $35 $10,000M CAGR $5,000M CAGR $30 CAGR 11.0% 12.2% 24.1% $25 $8,000M $4,000M $20 $6,000M $3,000M $15 $4,000M $2,000M $10 $2,000M $1,000M $5 $0 $0 $0 (4) 2012 2017 2022 2012 2017 2022 2012
Slide 11: …that has ultimately been reflected in free cash flow
…that has ultimately been reflected in free cash flow 2012-2022 Average Cash Conversion: 124%(2) $2,600 $2,400 Average FCF as % of $2,200 EBITDA(1): 31% $2,000 $1,800 $1,600 $1,400 $1,200 Average FCF as % of $1,000 EBITDA(1): 20% $800 $600 $400 $200 $0 ($200) 2002 2003 2004 2005 2006 2007 2008 2009
Slide 12: Driving and extending our competitive advantages
Driving and extending our competitive advantages • Company transformed to be considerably more profitable and efficient • Operations, technology and culture differentiate us, and make us far more agile Maximize revenue potential with • Diversified end-market exposure across customers, current & new
Slide 13: End-market overview
2 End-market overview I 13
Slide 14: U.S. equipment rental industry overview
U.S. equipment rental industry overview Combined U.S. General Rental and Construction Growth of the U.S. equipment rental market has & Industrial Equipment Rental Market Size ($bn) sharply outpaced underlying total non-res activity 400% Indexed growth: US Equipment Rental Market $60 Peak-to- 350% 25
Slide 15: Real total U.S. non-res construction spend per capita
Real total U.S. non-res construction spend per capita $4,000 Real Total U.S. Non-Res Construction per Capita (Public + Private) 40 Yr avg 30 Yr avg 20 Yr avg 10 Yr avg $3,800 $3,600 $3,400 $3,200 $3,000 $2,800 $2,600 $2,400 $2,200 $2,000 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 19
Slide 16: Company overview
3 Company overview I 16
Slide 17: Our purpose and values
Our purpose and values Visible Leadership Lead by example in every business decision and action, Customer-Driven A Passion for People with a sense of humility and Support the best interests of our Build a diverse workplace that responsibility. customers and develop better challenges all employees to
Slide 18: Continuing our strategic journey
Continuing our strategic journey 1997-2008 2009-2013 2014-2022 2023 & BEYOND Become a Transform Grow Leverage and Extend Market Leader the Core the Core Competitive Advantages Executed ~250 Improved returns Continued build-up of acquisitions to strengthen through financial and GenRent platform North
Slide 19: Long-term growth and margin opportunities
Long-term growth and margin opportunities Revenue Related Vision Cost and Margin Related • Capitalize on ongoing secular shift To be the best partner for worksite • Further leveraging of LEAN towards rental over ownership safety, productivity, and sustainability • Optimization of operating costs • L
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: 2022
Online digital strategy and results: 2022 Increase Demand Through Enhance the Customer Digital Marketplace + Experience + Extend Service offerings Rental and used equipment Access real-time account and equipment Conduct Safety training and manage Generate awareness and interest telematics in
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 • Locate GPS enabled equipment Total Control® • Customize alerts to proactively manage utilization • Customize reports and KPIs • Estimate greenh
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
Specialty provides strong growth opportunities (1) millions Specialty Revenue $3,445 $3,500 $3,250 $3,000 $2,692 $2,750 $2,500 2012-2022 CAGR: 27.8% $2,250 $2,165 $2,089 $2,000 $1,720 $1,750 $1,500 $1,254 $1,250 $1,021 $931 $1,000 $823 $750 $471 $500 $297 $250 $0 2012 2013 2014 2015 2016 2017 2018 2
Slide 26: Long-term capital allocation strategy
Long-term capital allocation strategy Manage Invest in Growth Leverage Return Excess Cash to Investors Target leverage range over Organic M&A Began repurchases under $1.25 billion the cycle of 2.0x–3.0x. share repurchase program in the first Continued organic Balance sheet strategy quarter o
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 Ahern (2012) (2014) (2017) (2017) (2018) (2018) Finance (2021) (2022) • Size: $4.2B • Size: $780M • Size: $965M • Size: $1.3B • Size: $720M • Size: $2.1B • Size: $1.0B • Size: $2.0B transaction value t
Slide 29: Differentiation through a focus on sustainability…
Differentiation through a focus on sustainability… Selected Highlights Emissions Goal: Reduce greenhouse gas (GHG) emissions intensity by 35% by 2030 vs. 2018 baseline Progress to date includes a 16.8% reduction in GHG emissions intensity in 2022 vs. 2018 baseline GHG Emissions Intensity (MT CO2
Slide 30: … safety, diversity and culture…
… safety, diversity and culture… Selected Highlights TRIR (Safety Measurement) 1.00 0.95 Safety 0.79 0.78 0.79 0.76 0.80 Goal: On journey to zero injuries, aim to reduce our Total Recordable Incident Rate (TRIR) to 0.40 by 2030 2022 TRIR of 0.76, a 3.8% year-over-year reduction against strong 20
Slide 31: …and corporate governance
…and corporate governance Corporate Governance Highlights Board of Directors Overview Board Independence Board Performance The strength of our Board is highlighted by our directors' skills and expertise, as illustrated by the • 9 of 11 Directors are independent • Risk oversight following matrix pres
Slide 32: Summary of key financial data
Summary of 4 key financial data I 32
Slide 33: Key financial results snapshot
Key financial results snapshot Adjusted Earnings per Share Total Revenue ($M) Adjusted EBITDA(1) ($M) (EPS)(1,2,3) 2022 5-Year CAGR: 2023 Implied Growth: 2022 5-Year CAGR: 2023 Implied Growth: 2022 5-Year CAGR: +25.1% +11.9% +21.5% +12.2% +21.5% $15,000 $8,000 $35 $14,000 $13,000 $7,000 $30 $12,000
Slide 34: Structural changes are key to increased margins
Structural changes are key to increased margins Adjusted EBITDA Margin(1) (%) Key Drivers of Margin Gains Adjusted EBITDA margin ~1,500 bps above prior peak (3) • Strong fixed-cost absorption 60% • Cyclical leverage (e.g., SG&A as % of sales) • M&A cost synergies (e.g., RSC, NES, Neff) 50% • Operati
Slide 35: Consistent free cash flow generation
Consistent free cash flow generation Free Cash Flow ($M) (1) 10-Yr Average (2) 5-Yr Average (3) $2,454 $2,400 $2,500 $2,100 (3) $1,768 $1,592 $1,700 $1,527 $1,334 $1,195 $1,300 $983 $924 $900 $574 $500 $367 $421 $335 $227 $100 $23 ($73) -$300 (4) (4) (4) (4), (5) 2008 2009 2010 2011 2012 2013 2014 2
Slide 36: Q2 2023 Results
Q2 2023 Results • $3.554 billion (+28.3% Y/Y as reported; 18.6% on a Total Revenue pro forma basis*) (3) • $591 million (16.6% margin; -120 bps Y/Y as Net Income reported; flat Y/Y on a pro forma basis*) • $1.695 billion (47.7% margin; +40 bps Y/Y as Adjusted EBITDA** reported; +130 bps Y/Y on a pro
Slide 37: 2023 Financial Outlook
2023 Financial Outlook Total Revenue • $14.0 billion to $14.3 billion (3) Adjusted EBITDA* • $6.75 billion to $6.9 billion • $1.9 billion to $2.1 billion, after gross purchases Net Rental Capital Expenditures of $3.35 billion to $3.55 billion Net Cash Provided by Operating Activities • $4.5 billion
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 (3) (i.e., the revenue we generate w
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 in Average OEC Inflation on Rent Rev Productivity(2) Ancillary and Re-Rent Rental Revenue 1Q 2020 2.2% (1.5%) (1.2%) (0.2%) (0.7%) 2Q 2020 (0.7%) (1.5%) (13.6%)(4) (0
Slide 40: Balance sheet strength has improved
Balance sheet strength has improved Leverage Ratio (1) 3.6x (2) (4) 3.0x 3.0x (3) 2.9x 2.8x 2.9x 2.7x 2.6x 2.4x 2.2x(5) (6) 2.0x 1.8x 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q2 2023 2.0x-3.0x targeted leverage range across the cycle 1) Leverage Ratio calculated as net debt divided by
Slide 41: No long-term note maturities until 2027
No long-term note maturities until 2027 Millions Total Liquidity of $2.706B(1) $6,000 $5,500 Fixed vs. Floating Ratio: 66%/34% $5,000 $2,453 Unused ABL $4,000 Facility $3,000 $1,797 Used ABL $2,000 $1,400 Facility(2) $1,673 $26 unused $1,500 $1,500 $750 $1,100 $1,274 $953 $750 4.875% 4.00% $1,000 Us
Slide 42: Appendix
5 Appendix I 42
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 intangible asset amortization, impact on depreciation related to acquired fleet and property a
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 restructuring charges, sto
Slide 45: EBITDA and Adjusted EBITDA GAAP Reconciliations (cont'd)
EBITDA and Adjusted EBITDA GAAP Reconciliations (cont’d) The table below provides a reconciliation between net cash provided by operating activities and EBITDA and adjusted EBITDA. Three Months Ended Six Months Ended $ millions June 30, June 30, 2023 2022 2023 2022 Net cash provided by operating act
Slide 46: EBITDA and Adjusted EBITDA GAAP Reconciliations (cont'd)
EBITDA and Adjusted EBITDA GAAP Reconciliations (cont’d) The pro forma information below reflects the combination of United Rentals and Ahern Rentals. Prior to the acquisition, Ahern Rentals management used different EBITDA and adjusted EBITDA definitions than those used by United Rentals. The infor
Slide 47: Free Cash Flow GAAP Reconciliation
Free Cash Flow GAAP Reconciliation (In millions, except footnotes) 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
Slide 48: 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 49: 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 50: 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 51: 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 2023 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 $4,433
Slide 52: Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) (cont'd)
Historical EBITDA and Adjusted EBITDA GAAP Reconciliations ($M) (cont’d) (1) In 2013, we retired all outstanding subordinated convertible debentures. (2) We have made a number of acquisitions in the past and may continue to make acquisitions in the future. Merger related costs only include costs ass
Slide 53: Historical Free Cash Flow GAAP Reconciliation ($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