The United Rentals Investor Conference call begins with a reminder that the call is being recorded and a warning that the company's business and operations are subject to risk and uncertainties. The company's press release, comments, and responses to questions contain forward-looking statements. The call also includes references to non-GAAP terms and a reminder to refer to the Company's website for more information. Speaking for the company are the President and CEO and the CFO. The team has set new high watermarks for revenue, adjusted EBITDA, and returns in the third quarter.

The speaker emphasizes the importance of their employees in achieving record results and maintaining a focus on safety. They reaffirm their confidence in the company's strategy and highlight the strong third quarter results, including a 23% increase in total revenue, 18% increase in rental revenue, and 22% increase in adjusted EBITDA. Used equipment sales also doubled, and Rental CapEx was in line with expectations. The speaker also mentions the recovery of the supply chain and the positive outlook for the future.

The integration of the new company remains on track and the team is of high quality. The added capacity and comments on CapEx and supply chains will benefit customers and shareholders in the future. Key verticals, such as industrial and power, saw growth, and there were numerous new projects across various industries. Geographically, all regions saw growth and the specialty business had a successful quarter with double digit gains. $350 million was returned to shareholders and the company remains confident in its outlook, supported by various indicators of construction activity.

The company's Customer Confidence Index reflects optimism and early indications for 2024 are encouraging. The company has been recognized for its success and the team's dedication. The third quarter was strong and the company is well positioned for future growth. The company's strategy and tailwinds point to another year of growth in 2024.

The third quarter performance for the company was strong, with record rental revenue of $3.2 billion, a 18% increase from the previous year. This was supported by growth in various markets and an increase in fleet size. Used proceeds also doubled to $366 million, but the adjusted used margin declined due to changes in channel mix and supply demand dynamics. The company took advantage of the strong used market by increasing retail sales. Additionally, the average fleet age has returned to pre-pandemic levels.

In the third quarter, the company's adjusted EBITDA reached a record high of $1.85 billion, with a 22% increase from the previous year. This was primarily due to strong rental and used sales, as well as cost efficiency. The adjusted EBITDA margin decreased slightly on an as reported basis, but increased on a pro forma basis. The company's adjusted EPS also reached a record high. Gross rental CapEx was $1.3 billion, with a decline in net rental CapEx due to normalized used sales levels. The company's return on invested capital and free cash flow also reached a record high.

In the latest quarter, the company reported strong free cash flow and a net leverage ratio of 1.8 times. They also returned $1.5 billion to shareholders through share repurchases and dividends. The company reaffirmed their guidance for total revenue, EBITDA, and free cash flow, but raised the midpoint of total revenue due to cleanup actions to dispose of older fleet. Adjusted EBITDA guidance remains at the midpoint of $6.825 billion. The company expects to generate over $1.4 billion in free cash flow and return it to investors through share repurchases and dividends, equating to a 5% yield on return of capital. The call was then opened for questions from analysts.

The speaker is responding to a question about how they are thinking about productivity and capex for the upcoming year. They expect positive fleet productivity as they anniversary tough comps and return to a more appropriate level of time utilization. They also anticipate the industry to improve in terms of rate.

The company expects positive fleet productivity and a more normalized cadence for fleet CapEx next year. They aim to sell 11-12% of their fleet to keep it fresh and maintain a pre-pandemic fleet age. The estimated replacement CapEx for next year is $2.83 billion, with potential for growth CapEx in 2024. The company plans to provide better guidance in January. The company's leverage is currently at 1.6 times net debt EBITDA.

The company's main focus for its capital is to use it for organic growth and potential mergers and acquisitions. They have a high threshold for M&A opportunities and are always looking for ways to add new products and increase capacity. After using capital for growth, they plan to continue reducing their leverage and have been successful in improving their equity volatility and valuation. They are still considering their next steps for the use of their capital.

The company expects to update their street as they introduce their 24 guidance and related capital allocation programs in January. The rental gross margin was weaker than the previous quarter, but this was in line with expectations and can be attributed to factors such as depreciation and one-time costs. The company does not see this as a significant issue and considers it to be quarter on quarter noise. Specialty margins remained flat year on year at a record level of 52.2%.

The company had a strong performance in the specialty business, with a 16% growth and 52% margins. There were some mix shifts within the different areas of specialty, but overall the company is pleased with the results. The speaker, Rob, asks about the impact of declining commercial and office construction and the rise of megaprojects on the company's revenue. The response is that there may be a bigger variance in revenue from larger customers and projects, but the company has a go-to-market strategy to efficiently serve these customers and projects.

The company does not expect any major changes in their megaproject pipeline despite recent headlines about delays. The pipeline remains strong and steady, with only a few projects being affected by individual issues such as political or environmental concerns. These issues are not related to macroeconomic factors.

The speaker discusses the company's acquisition strategy and the performance of a recent acquisition, Ahern. They mention that there is a strong pipeline of jobs and that the acquisition will have a neutral impact on the company's performance next year. They also mention that they have met their targeted synergies and will have a clearer view of the acquisition's impact by the end of the year. The speaker also mentions that the acquisition will reach comparable fleet productivity and margins as the base business next year.

The company has recently acquired assets from other companies and expects their performance to match their own by next year. However, it may take up to 18 months for all processes to be implemented. The deals they make tend to be margin dilutive, but they are able to extract value through integration and cost synergies. The company's guidance suggests that margins will be slightly higher in Q4 compared to Q3, which is not the norm for seasonality.

In response to a question about improving versus normal seasonality, Matthew Flannery of United Rentals advises against anchoring to midpoint and mentions the company's consistent range for fourth quarter. He also confirms their goal of positive fleet productivity in 2024, exceeding inflation, and explains that the current inflation rate is above the 1.5% benchmark set by the company.

The company is keeping their fleet productivity metric consistent at 1.5% for simplicity, but they expect to exceed inflation even with the extra mix headwind. The supply chain has improved and the industry is seeing more normalized time utilizations, which will lead to more efficient operations and better reliability for customers. The next big leg of growth for the OEMs will likely be replacement CapEx, rather than adding extra fleet to the system.

The speaker clarifies that the company's cost synergies will be realized, but revenue synergies will take longer. The cross selling is going well and the company has caught up in shedding older assets, but used prices are expected to normalize downwards.

The company is on schedule and expects to see an increase in demand for their full portfolio of products. As the supply chain normalizes, there may be a decrease in demand for used equipment, but fleet inflation will provide support for used pricing. Recovery rates are expected to be above historical levels, but not as high as in 2022. Fleet age will not change significantly.

Matthew Flannery responds to a question about the effects of megaprojects on the rental market and surrounding areas. He mentions that the market will tighten and there will be infrastructure developments in these areas. The next question is about the company's used equipment and Flannery clarifies that they have tweaked their channel mix to get rid of older fleet and mentions that the mix going forward will have more wholesale and less auction.

The speaker discusses the impact of a higher interest rate environment on rental equipment activity. They note that historically, when capital becomes more expensive, customers tend to pay more attention to their spending and may consider renting instead of owning. However, the speaker believes that once customers try rental, they will see that it is a more cost-effective option.

The lack of interest in a flat interest environment is not a concern because the rental experience has improved greatly, leading to higher rental penetration. In the upcoming construction cycle, there are some uncertainties in different sectors, but overall there is strong demand. The only weak area is the oil and gas industry, which has seen a decrease in rig count.

Matt and Mike discuss the business model and fleet management of their company. They have a budget of three to three and a half billion dollars to reposition their fleet as needed. The flexibility of their assets allows them to adapt to different types of projects. They also mention the difficulty in predicting demand intensity by subvertical and prefer to look at it from a top-down perspective.

The speaker discusses the company's performance in various verticals, such as manufacturing, power, infrastructure, transportation, and healthcare. They mention that the dollar value of projects in these areas is greater compared to other areas, such as office and commercial, making them more lucrative opportunities for growth in the upcoming year. The call is then opened up for questions before the speaker concludes the call.

This summary was generated with AI and may contain some inaccuracies.