United Rentals, Inc. · NYSE:URI
United Rentals — FY2018 Earnings Presentation
53 slides from United Rentals's earnings presentation, January 2019
Slide 1: Fourth Quarter and Full Year 2018 Investor Presentation (Corrected and Supplemented)
Fourth Quarter and Full Year 2018 Investor Presentation (Corrected and Supplemented*) 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. *Supplemented to add new Slide 37 to gi
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 24, 2019. 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) • 2018 total revenue $8.0 billion (+21.2% Y/Y) • 2018 adjusted EBITDA(2) $3.86 billion (+22.1% Y/Y; 48.0% margin) United 1,186 locations across North America(3) (4) Rentals • 1,038 branches in the U.S.; locations in 49 of 50 states Other 13% 77% • 148 branches in
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 5% non-construction • 24/7 customer care • Homeowners • Oil
Slide 8: Branch locations
Branch locations Total branch count: 1,197(1) • General Rentals: 874 locations • Specialty: 323 locations(2) Largest U.S. states by number of locations(1) • Texas: 168 • California: 109 • Florida: 62 • Louisiana: 50 • Georgia: 42 Largest and broadest footprint in North America (1) As of December 31,
Slide 9: Diverse end-market exposure
Diverse end-market exposure Non-Res Construction Infrastructure Residential Upstream O&G Midstream O&G 2018 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) $9,000M $4,500M $18 $8,000M $4,000M $16 CAGR $7,000M $3,500M CAGR $14 9.4% CAGR $6,000M $3,000M 13.7% $12 18.6% $5,000M $2,500M $10 $4,000M $2,000M $8 $3,000M $1,500M $6 $2,000M $1,000M $4 $1,000M $500M $2 $
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… 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 14: Consensus forecast for U.S. construction put-in-place
Consensus forecast for U.S. construction put-in-place Year-over-Year Percent Change 2019 2020 Commercial Total +3.5% +0.6% Office +5.1% +1.2% Retail and Other Commercial +1.9% +0.4% Lodging/Hotel +3.9% -0.7% Industrial Total +4.8% +2.7% Institutional Total +4.8% +2.9% Healthcare +4.0% +3.6% Educatio
Slide 15: Company overview
3 Company overview United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 16: 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 17: 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 18: 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 19: Online Digital Strategy and Results
Online Digital Strategy and Results Attract new customers Accelerate new business Extend service offerings • Convenience • Simplified experience • Telematics • Availability • Full visibility • Training • Flexibility • Audit Trail • Integration • Consumption 31,000 new customers Digital commerce reve
Slide 20: Total Control: Adoption Continues to Grow and Deepen
Total Control: Adoption Continues to Grow and Deepen TC Feature Highlights Customer Growth 2018 User Adoption 2018 • Rental Fleet Management TC CUSTOMERS “Calls for Pick Up” • Find My Fleet Revenue $1.8 billion via TC and +32% YoY Digital Solutions • Invoices and bill pay Total Accounts 9,380 • Repo
Slide 21: 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 22: Investing in Specialty Services
Investing in Specialty Services Trench Safety Power & HVAC Fluid Solutions Tool Solutions Onsite Services • Tool trailers stocked with • Plastic port-a-potties, • Excavation support • Complete solutions for • Full range of equipment luxury restroom trailers, solutions, confined space mobile power an
Slide 23: Specialty provides strong growth opportunities
(1) Specialty provides strong growth opportunities $1,904M $1,719M $184M $1,254M $1,021M $931M $823M $471M $297M 2012 2013 2014 2015 2016 2017 2018 2018 (2) As Reported Pro Forma Specialty as a % Total Revenues 7.2% 9.5% 14.5% 16.0% 17.7% 18.9% 21.4% 21.4% Specialty Represents ~21% of Total Revenue
Slide 24: Capital allocation strategy
Capital allocation strategy Manage Return Excess Leverage Invest in Growth Cash to Stockholders • Target leverage range over • Completed $1 billion share the cycle of 2.5x–3.5x Organic M&A repurchase program in June • Net leverage(1) of 3.1x 2018. • Continued organic • Balance sheet strategy at Dece
Slide 25: M&A strategy: Disciplined and opportunistic
M&A strategy: Disciplined and opportunistic Strategic Financial Cultural • Proactively supports growth in • Invest capital at attractive returns • Safety attractive markets over cycle • Talent • Difficult to replicate organically • Revenue growth • Margin opportunities • Ethics and integrity • Acces
Slide 26: Record of value creation through M&A
Record of value creation through M&A With 20 years of execution experience for 275+ transactions, team has successfully integrated assets in different environments and across the spectrum from bolt-ons to transformational RSC National Pump NES Neff Rentals BakerCorp BlueLine (2012) (2014) (2017) (20
Slide 27: Summary of key financial data
4 Summary of key financial data United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 28: Key financial results snapshot
Key financial results snapshot Total Revenue ($M) Adjusted EBITDA(1) ($M) Adj. Earnings per Share(1,2) 2018 5-Year CAGR: 2019 Implied Growth: 2018 5-Year CAGR: 2019 Implied Growth: 2018 5-Year CAGR: +10.2% +16.2% +11.0% +15.2% 27.1% $10,000 $5,000 $18 $9,000 $4,500 $16 $8,000 $4,000 $14 $7,000 $3,50
Slide 29: 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 ~1,500 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 30: Consistent free cash flow generation
Consistent free cash flow generation $1,600 $1,400 $1,400 $1,334 $1,195 $1,200 $983 $1,000 $924 $800 $600 $574 $421 $400 $367 $335 $227 $200 $23 $(73) $0 (3) -$200 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F $5.0B of free cash flow generated over last 5 years, with a strong outlook(
Slide 31: 4Q Results
4Q Results • $2.306 billion (+20.0% Y/Y as reported; +7.8% Total Revenue Y/Y pro forma*) Adjusted EBITDA** • $1.117 billion (48.4% margin; -90 bps Y/Y) • $1.442 billion, after gross purchases of $2.106 Net Rental Capital Expenditures (Full-Year) billion Net Cash Provided by Operating Activities • $2
Slide 32: 2018 Results
2018 Results • $8.047 billion (+21.2% Y/Y as reported; +10.7% Total Revenue Y/Y pro forma*) Adjusted EBITDA** • $3.863 billion (48.0% margin; +40 bps Y/Y) • $1.442 billion, after gross purchases of $2.106 Net Rental Capital Expenditures billion Net Cash Provided by Operating Activities • $2.853 bill
Slide 33: 2019 Financial outlook
2019 Financial outlook Total Revenue • $9.15 billion to $9.55 billion Adjusted EBITDA* • $4.35 billion to $4.55 billion • $1.40 billion to $1.55 billion, after gross Net Rental Capital Expenditures purchases of $2.15 billion to $2.30 billion Net Cash Provided by Operating Activities • $2.85 billion
Slide 34: Fleet overview: Large and diverse rental fleet
Fleet overview: Large and diverse rental fleet Historical Fleet Size OEC ($bn) 14.2 11.5 8.4 8.7 9.0 7.2 7.7 Booms Earth Trench Total/ Forklifts and Lifts Moving and Other Average 2012 2013 2014 2015 2016 2017 2018 % of 4Q18 Rental Rev. 31.4% 13.5% 19.0% 36.1% Fleet Composition Time Utilization* 72.
Slide 35: Introducing Fleet Productivity
Introducing Fleet Productivity • Fleet Productivity provides greater insight into the interplay and combined impact of key decisions made by our 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 genera
Slide 36: Historical Overview of Fleet Productivity
Historical Overview of Fleet Productivity *** As Reported Historical Results Actual Assumed Combined Impact/ Calculated Reported YoY Change YoY Impact of OEC Contribution on Rental Revenue Revenue Contribution YoY Change in in average OEC Inflation on Rental Revenue Growth from Fleet Productivity**
Slide 37: Fleet Productivity Formula Explained
Fleet Productivity Formula Explained (4) (5) Prior D OER (1) D OEC on Rent (2) D Rate (3) D Mix Inflation Revenue 18.8% 16.8% 2.2% 1.3% (1.5%) Bridge: New D OER (1) D OEC (6) Fleet Productivity Inflation (5) Revenue 18.8% 1.5% 18.8% (1.5%) Bridge: (8) (7) D Time (3) (4) D Time D Rate D Mix D OEC -1.
Slide 38: OEC-on-rent progression
OEC-on-rent progression $11,000 BlueLine acquisition October 31, 2018 Baker acquisition $10,000 July 31, 2018 $9,000 $8,000 Neff acquisition $7,000 NES acquisition October 2, 2017 April 4,2017 $6,000 $5,000 $4,000 $3,000 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 2015 20
Slide 39: Rental rates
Rental rates Monthly Sequential Pricing Year-Over-Year Pricing 2016 2017 2018 2017 2018 2018 Pro Forma* January (0.4%) (0.5%) (0.2%) January (1.8%) +1.5% +2.5% February (0.8%) (0.5%) (0.2%) February (1.5%) +1.8% +2.6% March (0.7%) (0.2%) +0.2% March (0.9%) +2.2% +2.9% (1) April (0.2%) (0.7%) +0.1% A
Slide 40: Time utilization
Time utilization Time Utilization: As Reported Time Utilization: Pro Forma* 2017 2018 YoY 2017 2018 YoY January 64.1% 63.6% (50 bps) January 62.4% 63.3% +90 bps February 65.9% 65.2% (70 bps) February 64.0% 64.9% +90 bps March 68.1% 66.8% (130 bps) March 65.8% 66.4% +60 bps April 68.6% 68.4% (20 bps)
Slide 41: Balance sheet strength continues to improve
Balance sheet strength continues to improve (1) Leverage Ratio Actual Forecast 4.6x (2) (3) 3.6x (5) 3.0x (4) 3.1x 2.9x 2.8x 2.9x 2.8x (6) 2.7x ~2.5x 2011 2012 2013 2014 2015 2016 2017 2018 2018PF 2019F 2.5x – 3.5x targeted leverage range across the cycle (1) Leverage Ratio calculated as total debt
Slide 42: No maturities of long-term debt until 2023 ($M)
No maturities of long-term debt until 2023 ($M) Total Liquidity of $1,432*** $3,000 Fixed vs. Floating Ratio: 70%/30% $1,264 $2,548 ABL Unused $2,100 $998 Term Loan $1,100 $1,673 B 6.5% Senior Unsecured $750 Notes 4.625% $1,736* $975 Senior ABL Used $1,000 Unsecured $1,000 $125 A/R Unused $850 Notes
Slide 43: Appendix
5 Appendix United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2018 United Rentals, Inc. All rights reserved.
Slide 44: 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 rental depreciation related to
Slide 45: EBITDA and Adjusted EBITDA GAAP Reconciliations
EBITDA and Adjusted EBITDA GAAP Reconciliations EBITDA represents the sum of net income, provision (benefit) 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 c
Slide 46: 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, 2018 2017 2018 2017
Slide 47: 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 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 (determined at the time of the historic reporting) described below.
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 impact our operations. The acqu
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) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net cash provided by operating activities (9) $ 438 $ 452 $ 612 $ 721 $ 1,551 $ 1,801 $ 1,987 $ 1,941 $ 2,209 $ 2,853 Adjustments for items included in net cash provided by oper
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 plus excess tax benefits from share-based payment arrangements. The equipment purchases and proceeds are included in ca