United Rentals, Inc. · NYSE:URI
United Rentals — Q1 2018 Earnings Presentation
51 slides from United Rentals's earnings presentation, Apr 19, 2018
Slide 1: First Quarter 2018 Investor Presentation
First Quarter 2018 Investor Presentation Managing Key Value Drivers to Maximize Full Cycle Returns United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 2: Introductory Information
Introductory Information Unless otherwise specified, the information in this presentation, including forward-looking statements related to our outlook, is as of our most recent earnings call held on April 19, 2018. We make no commitment to update any such information contained in this presentation.
Slide 3: Table of contents
Table of contents • Introduction • End-Market Overview • Company Overview • Summary of Key Financial Data • Appendix United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved. 3
Slide 4: Introduction
1 Introduction United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 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 U.S. Market Share(1) • 2017 total revenue $6.6 billion (+15.3% Y/Y) • 2017 adjusted EBITDA(2) $3.16 billion (+14.7% Y/Y; 47.6% margin) United 1,002 locations across North America(3) Other Rentals 79% • 876 branches in the U.S.; locations in 49 of 50 states 11% • 126 branches in C
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 Other • Manage risk • Municipalities • Control expenses and inventory • Government Industrial / • The right equipment for any job Agencies 4% non-construction • 24/7 customer care • Homeowners • Oil &
Slide 8: Branch locations
Branch locations Total branch count: 1,002(1) • General Rentals: 759 locations • Specialty: 243 locations(2) Largest U.S. states by number of locations(1) • Texas: 138 • California: 89 • Florida: 54 • Louisiana: 41 • Georgia: 38 Largest and broadest footprint in North America (1) As of March 31, 201
Slide 9: Diverse end-market exposure
Diverse end-market exposure Non-Res Construction Infrastructure Residential Upstream O&G Midstream O&G 2017 Revenue Downstream O&G by Vertical Chemical Processing Power Industrial Manufacturing Metals & Minerals Consumer-related All Other Broad customer base helps reduce volatility United Rentals, I
Slide 10: A decade of continued financial improvement
A decade of continued financial improvement Total Revenue Adjusted EBITDA(1) Adjusted EPS(1) $7,000M $3,500M $12 CAGR $6,000M 6.0% $3,000M CAGR $10 10.4% CAGR $5,000M $2,500M $8 14.8% $4,000M $2,000M $6 $3,000M $1,500M $4 $2,000M $1,000M $1,000M $500M $2 $0 $0 $0 (2) 2007 2012 2017 2007 2012 2017 20
Slide 11: End-market overview
2 End-market overview United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 12: U.S. equipment rental industry overview
U.S. equipment rental industry overview Combined U.S. General Rental and Construction & Industrial Equipment The U.S. equipment rental market has outgrown its Rental Market Size ($bn) underlying market by over 50% in the last 20 years 400% Indexed Growth: US Equipment Rental Market Indexed Growth: T
Slide 13: Real total U.S. construction spending climbing
Real total U.S. construction spending climbing $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 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 14: Consensus forecast for U.S. construction put-in-place
Consensus forecast for U.S. construction put-in-place Year-over-Year Percent Change 2018 2019 Commercial Total 4.4% 2.9% Office 4.6% 3.0% Retail and Other Commercial 4.4% 3.5% Lodging/Hotel 4.1% 0.8% Industrial Total 2.8% 5.2% Institutional Total 3.8% 4.3% Healthcare 4.0% 4.0% Education 4.0% 4.9% No
Slide 15: U.S. industrial spending forecast
U.S. industrial spending forecast 2017 to 2018 Change Industrial Spend Forecast WA MT ND ME $350B $334B $325B VT $311B $309B OR MN NH $299B ID SD WI NY MA $300B RI WY MI CT NE IA PA NJ $250B NV OH MD DE IL IN UT CA CO WV VA $200B KS MO KY NC TN $150B AZ OK NM AR SC AL GA $100B MS TX LA $50B 2% or mo
Slide 16: Canadian industrial spending forecast
Canadian industrial spending forecast 2017 to 2018 Change Industrial Spend Forecast (USD) $100B $96B $91B $91B $87B $87B YT $80B NU NT $60B BC NF AB SK MB $40B PEI QC ON NB $20B NS 2% or more decline 2% or more growth $0 Between -2% and +2% 2016 2017 2018F 2019F 2020F Canadian industrial spending ex
Slide 17: Company overview
3 Company overview United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 18: Growth and margin opportunities
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 (COR & SG&A) • Leverage cross-selling to capture more • Continual improvement of labor productivi
Slide 19: 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 Customers & Shareholders Management Team Focus on driving and extending o
Slide 20: Project XL: Growth and margin improvement initiatives
Project XL: Growth and margin improvement initiatives Revenue Related Projects Cost/Efficiency-Related Projects Targeted vertical strategies Labor productivity Cross-sell Fleet efficiency Sales optimization Branch productivity / fixed cost leverage Customer owned equipment SG&A $200M of annualized b
Slide 21: Online digital strategy
Online digital strategy Attract new customers Accelerate new business Extend service offerings • Convenience • Simplified experience • Telematics • Availability • Full visibility • Training • Flexibility • Audit Trail • Integration • Consumption 11,000 new online $180 million of 200+ customer benchm
Slide 22: Total Control®: Consumption management technology
Total Control®: Consumption management technology TC user aggregated annual rental revenue 2017 Total Revenue $1,400M 35% $1.27 billion from TC Customers $1,200M 30% $1,000M 25% $800M 20% 2017 TC Customers Organic Revenue +10% $600M 15% Growth $400M 10% $200M 5% 2017 % TC Customer $0 0% Online Order
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: Specialty offers high margins and attractive returns
Specialty offers high margins and attractive returns Trench Safety Power & HVAC Pump Solutions Tool Solutions • Excavation support • Complete solutions for mobile • Full range of pumps, hoses, • Tool trailers stocked with solutions, confined space power and air flow and fittings for fluid transfer h
Slide 25: Specialty provides strong growth opportunities
(3) Specialty provides strong growth opportunities Revenues $1,500M CAGR $1,254M 33% $1,021M $1,000M $931M $823M $500M $471M $297M $0 (1) (2) 2012 2013 2014 2015 2016 2017 Specialty as a 7.2% 9.5% 14.5% 16.0% 17.7% 18.9% % total revenues Specialty now represents almost 20% of total revenue with a ta
Slide 26: Capital allocation strategy
Capital allocation strategy Manage Return Excess Leverage Invest in Growth Cash to Stockholders • Target leverage range over • As of March 31, 2018, the cycle of 2.5x–3.5x Organic M&A completed $832 million of • Net leverage(1) of 2.7x current $1 billion share • Continued organic • Balance sheet str
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: 2017 key M&A transactions review
2017 key M&A transactions review NES Neff Cummins Rentals Rentals (Power Gen Assets) • Transaction value: ~$960M (cash) • Transaction value: ~$1.3B (cash) • Transaction value: Not disclosed (cash) • Purchase multiple: 4.3X 2016E adjusted • Purchase multiple: 4.5X 2017E adjusted • Purchase multiple:
Slide 29: Summary of key financial data
4 Summary of key financial data United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 30: Key financial results snapshot
Key financial results snapshot Total Revenue ($M) Adjusted EBITDA(1) ($M) Adj. Earnings per Share(1,2) 2012-2017 CAGR: 2018 Implied Growth: 2012-2017 CAGR: 2018 Implied Growth: 2012-2017 CAGR: 23.0% +10.0% +12.2% +12.3% +16.2% $8,000 $4,000 $12 $7,000 $3,500 $10 $6,000 $3,000 $8 $5,000 $2,500 $4,000
Slide 31: Structural changes are key to increased margins
Structural changes are key to increased margins Adjusted EBITDA Margin (%) Key Drivers of Margin Gains 60% Adjusted EBITDA margins ~1,650 bps above prior peak • Strong fixed-cost absorption 50% • Cyclical leverage (e.g., SG&A as % of sales) 40% • M&A cost synergies (e.g., RSC, NES, Neff) • Operation
Slide 32: Consistent free cash flow generation
Consistent free cash flow generation (1) Free Cash Flow($M) 10-Yr Average 5-Yr Average $1,600 $1,400 $1,350 $1,195 $1,200 $983 $1,000 $924 $800 $574 $600 $421 $400 $335 $367 $227 $200 $23 $- $(73) $(200) (2) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F (3) $4.1B of free cash flow generate
Slide 33: Summary of 1Q Results
Summary of 1Q Results • $1.734 billion (27.9% Y/Y as reported; +13.1% Total Revenue Y/Y pro forma*) Adjusted EBITDA** • $780 million (45.0% margin; +140 bps Y/Y) Net Rental Capital Expenditures • $99 million, after gross purchases of $280 million Net Cash Provided by Operating Activities • $642 mill
Slide 34: 2018 Financial outlook
2018 Financial outlook Total Revenue • $7.3B to $7.6B Adjusted EBITDA* • $3.60B to $3.75B • $1.20B to $1.35B, after gross purchases Net Rental Capital Expenditures of $1.80B to $1.95B Net Cash Provided by Operating Activities • $2.625B to $2.825B Free Cash Flow* • $1.3B to $1.4B** *Adjusted EBITDA a
Slide 35: Fleet overview: Large and diverse rental fleet
Fleet overview: Large and diverse rental fleet Historical Fleet Size OEC ($bn) $12 11.5 11.4 $10 8.4 8.7 9.0 $8 7.2 7.7 $6 $4 Booms Earth Trench Total/ Forklifts $2 and Lifts Moving and Other Average $0 1Q18 2012 2013 2014 2015 2016 2017 % of 1Q18 Rental Rev. 32.7% 13.4% 19.2% 34.7% Fleet Compositio
Slide 36: OEC-on-rent progression
OEC-on-rent progression $9,000 Neff acquisition October 2 $8,000 NES acquisition April 4 $7,000 $6,000 $5,000 $4,000 $3,000 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 2015 2016 2017 2018 Solid OEC-on-rent growth of 6.8% in 1Q 2018(1) (1) Pro forma reflecting the combinat
Slide 37: Rental rates
Rental rates Monthly Sequential Pricing Year-Over-Year Pricing 2016 2017 2018 2017 2018 2018 Pro Forma* January (0.4%) (0.5%) (0.2%) January (1.8%) +1.5% +2.4% February (0.8%) (0.5%) (0.2%) February (1.5%) +1.8% +2.6% March (0.7%) (0.2%) 0.2% March (0.9%) +2.2% +2.9% (1) April (0.2%) (0.7%) April (1
Slide 38: Time utilization
Time utilization Time Utilization: As Reported Time Utilization: Pro Forma* 2016 2017 2018 YoY 2016 2017 2018 YoY January 62.2% 64.1% 63.6% (50 bps) January 62.1% 63.8% 63.6% (20 bps) February 64.3% 65.9% 65.2% (70 bps) February 64.0% 65.3% 65.2% (10 bps) March 65.9% 68.1% 66.8% (130 bps) March 65.7
Slide 39: Balance sheet strength continues to improve
Balance sheet strength continues to improve (1) Leverage Ratio Actual Forecast (2) 4.6x (3) 3.6x (4) 3.0x 2.9x 2.9x 2.8x 2.7x “Dry Powder” 2011 2012 2013 2014 2015 2016 2017 2018F 2.5x – 3.5x targeted leverage range across the cycle (1) Leverage Ratio calculated as total debt and QUIPs, net of cash,
Slide 40: No maturities of long-term debt until 2023 ($M)
No maturities of long-term debt until 2023 ($M) $3,000 Total Liquidity of $1.9B*** Fixed vs. Floating Ratio: 77%/23% $1,590 ABL Unused $1,673 $1,550 $750 4.625% $1,000 Senior $1,000 $1,000 $850 Unsecured 4.875%** $775 $1,410* Notes Senior $76 A/R Unused ABL Used Unsecured 5.75% $800 5.875% 5.5% Note
Slide 41: Appendix
5 Appendix United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 42: 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 43: 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 44: 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 $ Millions March 31, 2018 2017 Net cash provided by operating activ
Slide 45: 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. The equipment purchases and proceeds are included in cash flows from investing activities. Management believes that free cash flow provides
Slide 46: 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 (determined at the time of the historic reporting) described below.
Slide 47: 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 impact our operations. The acqu
Slide 48: 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 49: 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 Net cash provided by operating activities (11) $ 438 $ 452 $ 612 $ 721 $ 1,551 $ 1,801 $ 1,995 $ 1,941 $ 2,209 $ 642 Adjustments for items included in net cash provided by o
Slide 50: 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) Relates to a break-up fee, net of related transaction costs, we received following the termination of a merger agreement we had entered into. (3)
Slide 51: 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 plus excess tax benefits from share-based payment arrangements. The equipment purchases and proceeds are included in ca