United Rentals, Inc. · NYSE:URI
United Rentals — FY2019 Earnings Presentation
52 slides from United Rentals's earnings presentation, Jan 29, 2020
Slide 1: Fourth Quarter - Full Year 2019 Investor Presentation
Fourth Quarter - Full Year 2019 Investor Presentation Managing Key Value Drivers to Maximize Full Cycle Returns United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2020 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 January 30, 2020. We make no commitment to update any such information contained in this presentation
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. © 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 Market Share(1) • 2019 total revenue $9.35 billion (+16.2% Y/Y) • 2019 adjusted EBITDA(2) $4.36 billion (+12.7% Y/Y; 46.6% margin) 1,164 locations across North America(3) United • 1,024 branches in the U.S.; locations in 49 of 50 states Rentals 13% • 140 branches in Canada; locat
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 • Control expenses and inventory • Multi-Family • The right equipment for any job • 24/7 customer care / support 5% Industrial • No need for maintenance • Downstream • Save o
Slide 8: Branch locations
Branch locations North American branch count 1,164(1) • General Rentals: 816 locations • Specialty: 348 locations(2) Largest U.S. states by number of locations(1) • Texas: 152 • California: 111 • Florida: 66 • Louisiana: 47 • Georgia: 44 Largest and broadest footprint in North America (1) As of Dece
Slide 9: Diverse end-market exposure
Diverse end-market exposure Infrastructure Non-Res Construction Residential Downstream O&G Upstream O&G 2019 Revenue Mid-stream O&G by Vertical Chemical Processing Consumer-related Industrial Manufacturing Metals & Minerals Power Pulp, Paper & Wood All Other Broad customer base helps reduce full-cyc
Slide 10: A decade of continued financial improvement
A decade of continued financial improvement… Total Revenue Adjusted EBITDA(1) Adjusted EPS(1) $10,000M $5,000M $25 $9,000M CAGR $4,500M CAGR CAGR (2) $8,000M 14.8% $4,000M 21.4% $20 18.7% $7,000M $3,500M $6,000M $3,000M $15 $5,000M $2,500M $4,000M $2,000M $10 $3,000M $1,500M $2,000M $1,000M $5 $1,00
Slide 11: …that has ultimately been reflected in free cash flow
…that has ultimately been reflected in free cash flow Adjusted 2011-2019 Free Cash Flow Conversion: 107%(2) Free Cash Flow ($M) $1,800 FCF/EBITDA(1) 27.9% $1,300 $800 FCF/EBITDA(1) 20.4% $300 -$200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Durable Free
Slide 12: Driving and extending our competitive advantages
Driving and extending our competitive advantages • Company transformed to be considerably more profitable and efficient • Operations, technology and culture differentiate us, and make us far more agile Maximize revenue potential with • Diversified end-market exposure across customers, current & new
Slide 13: End-market overview
2 End-market overview United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 14: U.S. equipment rental industry overview
U.S. equipment rental industry overview Combined U.S. General Rental and Construction & Industrial Equipment The U.S. equipment rental market has outgrown its Rental Market Size ($bn) underlying market by over 50% in the last 20 years 400% Indexed Growth: US Equipment Rental Market Indexed Growth: T
Slide 15: Real total U.S. construction spending climbing…
Real total U.S. construction spending climbing… Real total U.S. construction spend per capita 10-year avg 20-year avg 30-year avg 40-year avg $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 1983 19
Slide 16: Consensus forecast for U.S. construction put-in-place
Consensus forecast for U.S. construction put-in-place Year-over-Year Percent Change 2020 2021 Commercial Total +0.6% -0.2% Office +3.0% +0.5% Retail and Other Commercial -1.3% -0.9% Lodging/Hotel -0.7% -1.0% Industrial Total +0.3% +0.5% Institutional Total +2.9% +2.0% Healthcare +3.4% +3.5% Educatio
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: 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: 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 • Leverage cross-selling to capture more • Continual improvement of labor productivity wallet sha
Slide 20: People & culture as differentiating assets
People & culture as differentiating assets • Highly engaged, committed and diverse workforce • Very strong engagement across all categories inline or better-than Towers Watson US High Performing Company Benchmark • Industry leading low-turnover rate, which helps drive better customer experience via
Slide 21: 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 22: Online digital strategy and results
Online digital strategy and results Customer Acquisition and Customer Retention and Engagement + Growth + Extend Service offerings • Awareness and interest • Enhance the customer experience • Drive customer productivity via Telematics and data • New customer acquisition • Streamline transactions • E
Slide 23: Total Control: Adoption Continues to Grow and Deepen
Total Control®: Adoption Continues to Grow and Deepen TC Feature Highlights Customer Growth 2019 User Adoption 2019 • Rental Fleet Management TC CUSTOMERS “Calls for Pick Up” • Find My Fleet Revenue $2.3 billion via TC and +4% YoY Digital Solutions • Invoices and bill pay Total Accounts 13,000 • Rep
Slide 24: 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 25: Investing in Specialty services
Investing in Specialty services Trench Safety Power & HVAC Fluid Solutions Tool Solutions Onsite Services • Excavation support • Complete solutions for • Full range of equipment • Tool trailers stocked • Plastic port-a-potties, solutions, confined space mobile power and air flow to contain, transfer
Slide 26: Specialty provides strong growth opportunities
(1) Specialty provides strong growth opportunities $2,168M $1,719M $1,254M $1,021M $931M $823M $471M $297M 2012 2013 2014 2015 2016 2017 2018 2019 Specialty as a % Total Revenues 7.2% 9.5% 14.5% 16.0% 17.7% 18.9% 21.4% 23.2% Specialty represented ~23% of total revenue in 2019 with over $2 billion in
Slide 27: Capital allocation strategy
Capital allocation strategy Manage Return Excess Leverage Invest in Growth Cash to Investors • Target leverage range over • $1.25 billion repurchase program the cycle of 2.0x–3.0x. Organic M&A commenced in July 2018 and • Net leverage(1) of 2.6x was completed in December • Continued organic • Balanc
Slide 28: 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 29: Record of value creation through M&A
Record of value creation through M&A RSC National Pump NES Neff Rentals BakerCorp BlueLine (2012) (2014) (2017) (2017) (2018) (2018) • Size: $4.2B • Size: $780M • Size: $965M • Size: $1.3B • Size: $720M • Size: $2.1B transaction value transaction value transaction value transaction value transaction
Slide 30: Summary of key financial data
4 Summary of key financial data United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 31: Key financial results snapshot
Key financial results snapshot Adjusted Earnings per Share Total Revenue ($M) Adjusted EBITDA(1) ($M) (EPS)(1,2) 2019 5-Year CAGR: 2020 Implied Growth: 2019 5-Year CAGR: 2020 Implied Growth: 2019 5-Year CAGR: +10.5% +2.7%(3) +9.9% +2.2%(3) 23.1% $10,000 $5,000 $20 $4,500 $8,000 $4,000 $15 $3,500 $6,
Slide 32: Structural changes are key to increased margins
Structural changes are key to increased margins Adjusted EBITDA Margin (%) Key Drivers of Margin Gains Adjusted EBITDA margins +1,380 bps above prior peak • 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% • Operation
Slide 33: Consistent free cash flow generation
Consistent free cash flow generation $1,700 $1,700 $1,592 $1,500 $1,334 $1,300 $1,195 $1,100 $983 $924 $900 $700 $574 $500 $421 $335 $367 $300 $227 $100 $23 $(73) -$100 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F -$300 $6.0B of free cash flow generated over last 5 years, with a
Slide 34: 4Q Results
4Q Results • $2.456 billion (6.5% Y/Y as reported; +3.7% Y/Y Total Revenue pro forma*) • $1.154 billion (47.0% margin; -140 bps Y/Y as Adjusted EBITDA** reported; -130 bps Y/Y pro forma*) • $1.301 billion, after gross purchases of $2.132 Net Rental Capital Expenditures (YTD) billion Net Cash Provide
Slide 35: 2020 Financial outlook
2020 Financial outlook Total Revenue • $9.4 billion to $9.8 billion Adjusted EBITDA* • $4.35 billion to $4.55 billion • $1.05 billion to $1.35 billion, after gross Net Rental Capital Expenditures purchases of $1.9 billion to $2.2 billion Net Cash Provided by Operating Activities • $2.85 billion to $
Slide 36: 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 37: Fleet productivity: historical results
Fleet productivity: historical results (1) As Reported Historical Results Actual YoY Change in Assumed YoY Impact of Fleet Contribution from Reported YoY Change Average OEC OEC Inflation on Rent Rev Productivity(2) Ancillary and Re-Rent in Rental Revenue 1Q 2016 2.8% (1.5%) (2.3%) 0.3% (0.7%) 2Q 201
Slide 38: Balance sheet strength continues to improve
Balance sheet strength continues to improve (1) Leverage Ratio Actual Forecast 3.6x 3.0x(2) (3) 3.1x(4) 2.9x 2.9x 2.8x 2.7x 2.6x (5) ~2.3x 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2.0x – 3.0x targeted leverage range across the cycle; $1 billion of free cash flow earmarked for debt reduction in
Slide 39: No maturities of long-term debt until 2025
No maturities of long-term debt until 2025 ($M) Total Liquidity of $2.143B*** 5000 Fixed vs. Floating Ratio: 69%/31% 4500 4000 $3,750 3500 3000 $2,045 Unused ABL $2,538 Facility 2500 $988 $2,100 Term 2000 Loan B $1,100 $1,750 $1,673 6.5% Senior $750 1500 $750 Unsecured 3.875% 4.625% Senior Notes Sec
Slide 40: Appendix
5 Appendix United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 41: 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 42: 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 43: 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 Year Ended $ Millions December 31, December 31, 2019 2018 2019 2018
Slide 44: Pro Forma EBITDA and Adjusted EBITDA GAAP Reconciliations
Pro Forma EBITDA and Adjusted EBITDA GAAP Reconciliations The pro forma information below for 2018 reflects the combination of United Rentals, BakerCorp and BlueLine. BakerCorp was acquired in July 2018 and was fully included in United Rentals' results for the three months ended December 31, 2018. P
Slide 45: Pro Forma EBITDA and Adjusted EBITDA GAAP Reconciliations (Cont'd)
Pro Forma EBITDA and Adjusted EBITDA GAAP Reconciliations (Cont’d) The pro forma information below for 2018 reflects the combination of United Rentals, BakerCorp and BlueLine. BakerCorp was acquired in July 2018 and was fully included in United Rentals' results for the three months ended December 31
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. The equipment purchases and proceeds are included in cash flows from investing activities. Management believes that free cash flow provides
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 impact our operations. The acqu
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) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 Adjustments for items included in net cash pro
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 plus excess tax benefits from share-based payment arrangements. The equipment purchases and proceeds are included in ca