The United Rentals Investor Conference call is being recorded and may contain forward-looking statements. The company's operations are subject to risks and uncertainties, and they make no commitment to update any revisions to these statements. The call will be led by President and CEO Matt Flannery and CFO Ted Grace. Non-GAAP terms will be used and can be found in the company's investor presentations.

The company had a successful fourth quarter and full year in 2023, with record revenue, earnings, and returns. They attribute this success to their commitment to operational excellence and safety, as well as their acquisition of Ahern. Highlights from the fourth quarter include a 13% increase in total revenue, a 10% increase in adjusted EBITDA, and a 16% increase in adjusted EPS. For the full year, rental CAPEX was in line with guidance and free cash flow exceeded $2.3 billion. The company also notes their ability to generate strong free cash flow throughout the cycle and their flexibility to create long-term value for shareholders. Customer activity remains strong across geographies, verticals, and customer segments, with industrial markets seeing the most growth.

The construction markets, specifically infrastructure and non-residential, showed strong growth in the past year due to new projects in various markets. The business also saw growth in specialty rental revenue and opened 10 new locations. The company returned over $1.4 billion to shareholders and expects another year of growth in 2024. They have announced plans to return nearly $2 billion to shareholders and have reduced their leverage target. The company recently held their Annual Management Meeting, highlighting their strong team and culture.

The fourth quarter results for the company were record-breaking, with rental revenue reaching $3.12 billion and a year-over-year increase of 13.5%. This was supported by strong performance in various markets and successful large projects. The company's OER also saw a significant increase, with fleet size and productivity contributing to the growth. However, this was partially offset by fleet inflation. The company expects to continue this success in 2024 and is confident in their ability to outpace the industry.

In the fourth quarter, rental revenues increased by $61 million, reflecting a 14.2% growth. This was consistent with the increase in rental revenue. Re-rent declined by $2 million, but on a pro forma basis, rental revenue increased by 7.6%. The used market saw a decline in margin due to normalization, but EBITDA was a record of $1.81 billion, with a $197 million increase from rental. SG&A increased by $29 million, but as a percentage of sales, it declined by 100 basis points. Adjusted EBITDA margin decreased by 150 basis points, but when looked at pro forma, it was only down by 20 basis points with a flow through of 46%.

In the final paragraph, the company reports on their adjusted earnings per share, gross and net rental CAPEX, return on invested capital, free cash flow, and balance sheet. They also mention their return of over $1.4 billion to shareholders in 2023 and their 2024 guidance for total revenues, with expected growth of 4% at the midpoint. They note that used sales are expected to be down mid-single-digits, but see better growth within their core rental revenue.

The company expects to sell $2.5 billion of OEC with a recovery rate of 60%, adjusted EBITDA range of $6.9 to $7.15 billion, and strong free cash flow of $2 billion to $2.2 billion. They plan to allocate excess free cash flow to fund growth and increase shareholder value through a 10% increase in dividend, $1.5 billion in stock repurchases, and a lowered target leverage range of 1.5 to 2.5 times. This follows a similar reduction in 2019.

The company has been working towards building a stronger company and driving shareholder value. Since 2019, their revenue has increased by more than 50%, EBITDA by 60%, and earnings per share by 130%, while their leverage ratio has declined. This has resulted in strong shareholder value creation and the company remains focused on sustaining this. Fleet growth is planned for this year, with a 4-5% increase expected in 2024. The company will also have to account for inflation in fleet replacement.

The company is expecting $2.5 billion in original equipment sales and $3 billion in replacement sales. They also have plans for growth through cold starts and major projects. They expect to have a more normalized CAPEX and a positive fleet productivity in 2024, despite higher inflation costs. This is reflected in their guidance.

The company's free cash flow has been returned to shareholders, and the M&A pipeline remains strong. The company is open to potential acquisitions and has a high bar for selecting assets. The company's lower leverage and increased capacity allow for flexibility in capital allocation and returning excess capital to investors. The incremental margins, excluding used activity, are slightly lower than historical levels, but the company is confident in its position and its ability to augment shareholder value.

The company expects to have flat margins in the 40s due to slower growth compared to previous years. They plan to continue investing in the business, such as cold starts and specialty, despite the potential impact on incrementals. The company is optimistic about their multi-year outlook and wants to make key investments for long-term success. They are aware of the impact on flow through, but still feel confident in their decisions.

The speaker is addressing a question about the company's new leverage range and capital allocation. He explains that the company's goal is to stay within the range, but there is some flexibility and they will not make decisions solely based on staying within the range. They also have plans to live within the range and there is a cyclical overlay to consider.

The speaker explains that at the peak of a cycle, it is best to be at the lower end of the range, and at the trough, it is best to be at the upper end. They also mention the potential for acquisitions and growth initiatives. The speaker then discusses the company's dividend policy, stating that they aim to grow it in line with long-term earnings and aspire to be part of the "dividend aristocrat" list. They clarify that the dividend growth will be directionally aligned with earnings but not mathematically exact. A question is asked and the speaker and another person confirm this information.

The Ahern integration is going well and is expected to continue to improve. The GFN acquisition is also ahead of schedule in terms of doubling the business in five years. Both acquisitions have been positive for the company.

During a recent earnings call, United Rentals executives discussed the company's performance and future plans. When asked about the Ahern margin uplift in 2024, they stated that there would not be a significant difference from 2023 as they were able to realize synergies quickly. They also mentioned that the planned cold starts would involve a mix of different businesses, with the specialty businesses showing the most growth potential. In response to another question, they noted that it took some time for nonresidential construction to recover after the last downturn.

Matthew J. Flannery, the CEO of MRO company Fastenal, does not consider himself an expert in economics or forecasting. However, he believes that the recent easing of financial conditions could lead to slower growth in the local market business, but their five tailwinds strategy allows for future growth. He also mentions that their customers are generally positive about the market. The company delivered $2.3 billion in free cash flow in 2023 and is guiding for another $2 billion in 2024.

The speaker is hesitant to give a specific forecast for the company's future cash flow, but feels confident in the company's ability to sustain its current level of cash generation. The speaker also mentions the company's goal of driving positive free cash flow through the cycle and is not comfortable giving a forecast for the company's fleet age at the end of the year.

The company is pleased with the current age of their fleet, which is back to pre-COVID levels when adjusted for mix. They plan to continue refreshing and turning assets, which will further improve fleet age in 2024. The company expects to outrun inflation in terms of fleet productivity, but does not provide quarterly guidance due to factors such as seasonality.

Flannery explains that the company's goal is to exceed the 1.5 target every quarter, which they achieved on a pro forma basis this past year. They believe the end market is conducive to achieving this goal. Thein asks about the potential impact of a proposed tax bill on cash taxes in 2024 or 2025. Grace responds that if the bill were to pass, it could provide several hundred million dollars in incremental cash flow in 2023, but the $990 million cash tax guidance for 2024 is not representative of future years due to the expensing of the Ahern fleet acquisition.

The speaker explains that the company is prepared to make long-term investments despite the slowing growth. They mention that these investments will have an impact on the company's flow-through, but do not provide specific numbers or details.

The speaker explains that the investments in cold starts and technology will result in a slight drag on EBITDA, but it will not significantly impact the company's overall financials. These investments are necessary for future growth and the company expects them to be a short-term headwind in 2024, with potential for more investments in the future depending on growth.

The speaker believes that the company will continue to run the business as usual and focus on growth, rather than implementing an austerity program. They expect the industrial and manufacturing vertical to remain strong in 2024, with potential growth from projects such as on-shoring and LNG. The only weak spot is the upstream sector in oil and gas.

The speaker, Matthew J. Flannery, is discussing the company's expected performance for the upcoming year. He mentions a decrease in Q4 and anticipates a similar trend for the next year. However, he believes that the industrial end markets will continue to have a strong year. The next question comes from Seth Weber, who asks about the company's CAPEX. Flannery explains that they expect a down year in the first quarter, with CAPEX being around 15-20% of the total. The speaker, William Ted Grace, adds that last year, they had to implement a strategy that reduced their CAPEX by 20% in the first quarter. This year, they expect CAPEX to be slightly higher but with a smaller fraction in the first quarter.

The speaker discusses the impact of supply chain challenges on CAPEX and the progress of mega projects. They express confidence in the company's prospects and state that the projects are ongoing and will provide a multiyear tailwind. They also mention that despite some projects being rescoped or paused, no EV projects have been cancelled.

The company is not experiencing any major project cancellations and expects to see continued growth in the future due to infrastructure projects and other tailwinds. They do not disclose their win rate for projects but feel confident in their position as a leading provider of equipment. They expect used equipment sales to remain elevated for the foreseeable future and the mix of wholesale and auction sales will depend on the context.

The replacement cycle of the fleet is systematically managed which makes it difficult to interpret the question about channel mix. The company expects to return to a normal distribution with two thirds going through retail, 20% through trade packages, low doubles in broker, and mid-single digit in auction. Recovery rates are expected to come down from historical highs but still remain above the mid-50s. The company believes that as new equipment pricing rises, it will act as an umbrella of coverage and the recovery rates will level out between the low 70s and the historical mid-50s. The company has good forward visibility from its customers.

The speaker discusses the growth of the manufacturing industry in 2023 and expects it to continue in 2024, driven by projects in infrastructure, power, healthcare, and education. They also mention the importance of rental rates for predicting fleet productivity.

The speaker, Matthew J. Flannery, responds to a question about the support for rates staying positive for the year, stating that there is still a growth environment and the industry has shown discipline. He also mentions the abundance of information in the current cycle and the rising equipment prices as reasons for feeling good about rates. The speaker also mentions that the company's surveys with their largest customers show a weakness in local markets, but it is not clear if they survey smaller customers as well.

The second part of the demand question is about the Infrastructure Bill and whether funds are flowing as expected. The company's customers in local markets are experiencing slower growth, but the overall survey is still positive. The company plans to focus its fleet on major projects. The survey shows that larger customers are seeing the strongest results, but overall, most customers are still positive. Only a small fraction of customers are expecting a decline.

The company is not seeing any negative effects on customer confidence and is seeing consistent responses in line with their expectations for 2024. They have also observed an increase in infrastructure projects being awarded, with more expected in 2023 and beyond. The company has been focusing on the infrastructure sector since 2017 and has seen growth in this area in recent years.

The speakers on the call expressed confidence in the company's performance and highlighted the potential for growth in infrastructure projects. They also discussed the impact of the used equipment market on revenue and margins, with expectations of a decrease in recovery rates in 2024 but still above historical norms. Overall, the company is focusing on technology investment and expects solid revenue and margin performance in the coming years.

The speaker discusses the strong margins seen in the company's pre-pandemic levels and how they will be impacted as the recovery rate normalizes. They provide a way to quantify the expected EBITDA headwind and mention that margins may remain flat year-on-year. The speaker concludes by directing listeners to the company's website for further updates and thanks them for their time.

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