The United Rentals Investor Conference call is being recorded and the company's press release, comments, and responses to questions contain forward-looking statements. The company's business and operations are subject to risks and uncertainties. The company has no obligation to update or release revisions to forward-looking statements. Non-GAAP terms such as free cash flow, adjusted EPS, EBITDA, and adjusted EBITDA are referenced and can be found in the Company's recent investor presentations. Matt Flannery, President and CEO, and Ted Grace, CFO, will be speaking on the call. The company had a strong start to 2024 and continued this trend in the latest quarter.

The company is pleased with their second quarter results, which were in line with expectations and demonstrate growth, profitability, and strong free cash flow. The success is attributed to the hard work of their employees and their unwavering focus on being the best partner for their customers. They have a diversified business model that allows them to serve customers and generate shareholder value. The second quarter saw record revenues and productivity, and growth in both general and specialty businesses. The company is confident in their future success and will discuss their 2024 expectations in the call.

The company saw significant growth in Specialty rental and opened 27 new locations this year. They also had multiple new projects in various industries and a healthy used equipment market. Their CapEx spending was in line with expectations and they generated strong free cash flow. The company plans to return $2 billion to shareholders this year and their performance is in line with their expectations for 2024.

The company has narrowed its expectations for revenue and EBITDA, but remains confident in its unique value proposition and ability to win in various industries. They provide an example of a successful data center project and highlight their one-stop-shop offering. The company also continues to grow with new products, such as the recent acquisition of Yak, and is leveraging existing customer relationships for accelerated growth.

The company's partnership with customers is strengthened by their investment in technology and their flexible business model. The second quarter saw record revenue, EBITDA, and EPS, with continued confidence in delivering strong growth and profitability. The company remains focused on allocating capital to drive shareholder value. Rental revenue increased by $234 million, or 7.8%, with growth in fleet size and productivity, partially offset by fleet inflation.

In the second quarter, the company saw an increase in rental, ancillary, and re-rent revenues of $91 million, or 17.5%. Used sales were in line with expectations, with a record amount of OEC sold at a recovery rate of 59%. Adjusted EBITDA was a record $1.77 billion, with rental contributing $127 million. SG&A and other non-rental businesses remained consistent with last year. The adjusted EBITDA margin was 46.9%, with a 10 basis point decrease excluding the impact of used dynamics. Adjusted earnings per share increased 8%, and gross rental CapEx was $1.4 billion. The company's return on invested capital remained strong and free cash flow totaled $1.065 billion. The balance sheet remains strong with a net leverage of 1.8 times and total liquidity of almost $3.3 billion.

In the seventh paragraph, the speaker discusses the company's long-term note maturities, tower distribution, and shareholder returns. They then shift to discussing the company's updated guidance, which includes narrowed ranges for revenue and EBITDA. The speaker notes that used sales guidance remains unchanged and reiterates the company's commitment to returning a record amount to shareholders. The call is then opened for Q&A, with the first question asking about the interplay between GenRent rental revenue growth and Specialty growth, which has increased from 20% to over 30% in the last 5 years.

The speaker discusses the performance of GenRent and Specialty segments in the current quarter and year-to-date. He explains that while GenRent has remained flat, Specialty has shown growth. He also mentions that the company's goal is to not have GenRent go negative, but acknowledges that it is more impacted by local market dynamics. The company has invested more in Specialty, which has contributed to its growth.

The company has identified more room for growth in their specialty division, which is supported by major project work and a decrease in activity in certain local markets. The CEO believes that the softness in the market may impact general projects, but the high visibility and gross margins in specialty may offset this. The company will continue to focus on their specialty division and ensure they have the right fleet to meet customer demand. They see this as a temporary situation.

The company is not concerned about the future and will react to customer demands. They expect a transition year in the local market and believe they are not losing market share. The company is managing well and is pleased with their support for work in all markets. The flexibility of their assets allows them to adjust to market changes.

Tim Thein asked about the components of fleet productivity and the expectation that it would be flat compared to 2023.

The speaker discusses the impact of time, rate, and mix on GenRent's revenues and fleet productivity. They mention that time utilization has been neutral and that rate has been positive. They also mention that the mix component is variable. They then address the M&A pipeline and mention that domestically, there has been discussion about potential changes in tax policy, while internationally, there have been two smaller deals recently. The speaker also mentions that the thought process around international growth may have changed.

The speaker discusses the strength and diversity of the company's pipeline, with a focus on prioritizing new product offerings and expanding their Specialty and GenRent businesses. They also mention recent acquisitions in Europe and Australia, which support the company's growth and potential for future expansion.

Jamie Cook asks about United Rentals' incremental margins for 2024 and what type of environment is needed to get back to the targeted range. William Ted Grace responds that relative growth and the composition of that growth (rate vs volume) are important factors, as well as cost management. This year, they are expecting mid-single digit growth but flat margins due to investments in cold starts and technology. Strong cost discipline is important for driving margin lift in different conditions.

The speaker discusses the company's 18% organic growth in the specialty sector and mentions that this growth is seen across all product offerings. They also mention specific areas that have shown strong growth, such as mobile storage, power, trench, and fluid businesses. The speaker emphasizes the importance of cross-selling and mentions that every business unit is involved in large projects and customers. They also briefly mention the developments that have occurred under the company's ownership of Yak, including the use of advanced pricing and logistics tools.

Matthew Flannery, CEO of United Rentals, discusses the integration of a recently acquired business and the opportunities it presents. He praises the strong team and their product, and believes that United Rentals can bring their network and funding to help grow the business. He also mentions that the business was not broken, but just needed more support. Flannery expects the business to double in the next five years. In response to a question about recent negative data in the nonresidential construction and industrial sectors, Flannery states that United Rentals is not observing any significant weakness and that the year is playing out as expected.

The company is not concerned about the fluctuations in large projects and has a positive outlook for the rest of the year. They have a strong network and fleet to support these projects. The company's customers have a positive outlook as well, which is more important than volatile data points. They are not worried about the potential impact of a rate easing cycle on their pipeline.

The speaker is asked about the potential impact of an easing cycle on the company's business, given the current state of mega projects and customer sentiment. They mention that sentiment is important and that the anticipation of a more constructive rate environment could lead to increased activity. They also note that the market is currently expecting rate cuts and that the company has a good pipeline of work and tailwinds to offset any potential softness in certain verticals.

The speaker is thanking someone for their time and asking about fleet productivity and used equipment margin weakness for the third quarter. The speaker confirms that fleet productivity is expected to remain positive for the year and that the Yak will add to productivity. They also mention that there could be some seasonality to consider. The speaker also clarifies that the margin weakness is not a market issue, but rather a result of ongoing normalization after an extraordinary period. Historically, the company has recovered about $0.50 to $0.55 on the dollar for selling assets, but in 2022, it was as high as $0.74.

The company is confident that the used market will remain strong for the rest of the year, citing high demand and good recovery rates. They also mentioned a record amount of OEC sold in the second quarter, indicating the health of their customers. The mix of Specialty sales as a percentage of new and used sales increased in the quarter, and the company expects this trend to continue into 2025, potentially positively impacting margins for used sales.

Matthew Flannery, CEO of the company, discusses the business confidence and customer activity, stating that there is nothing to suggest a deviation from expectations. He also mentions that the mix of the fleet is constantly changing, but the company has been pleased with the results. Flannery then talks about the current fleet age, which is a little over 51 months, but after adjusting for structural changes, it is around 47-48 months. He explains that the company aims to keep the fleet age at a comfortable level as a risk management strategy, and they are now at a point where they could comfortably age the fleet 12 months in a prospective downturn.

The speaker clarified that there is no goal to age the fleet, but there is an opportunity to do so if needed. The company is keeping CapEx unchanged because they have no expectation of needing to use the dry powder and the team is putting the money to work. The fleet productivity is positive and the demand is as expected, so there is no need to forcefully age the fleet and cut CapEx. The company believes in future growth prospects and the CapEx is warranted due to customer demand. A large portion of the CapEx is for replacing older equipment.

In the paragraph, the speaker discusses the positive impact of large projects on the company's growth and mentions that these projects have a long-term effect. They also mention that the company has a strong pipeline for future projects and expects them to continue to be a source of growth for the company.

The company is not disclosing specific information about its bid pipelines as it is considered competitive information. However, they are confident in the multiyear tailwind that is expected in the industry and believe they are well positioned to take advantage of it. The flow-through in Q2 was lower than in Q1 due to the impact of going from 15 cold starts to 27%, as well as additional logistics costs. The company reaffirmed their guidance for the year and expects similar flow-through in the back half of the year. They are also making investments in cold starts and technology which will continue in the back half of the year.

During a recent conference call, Steven Fisher thanked Matthew Flannery for his response to a question about the cadence of cold starts. Neil Tyler from Redburn then asked a question about the cadence of cold starts and used fleet returns. Flannery explained that the cold starts were a little accelerated due to finding the right real estate, but they do not manage the business by quarter. Ted Grace added that there will be a slightly lower retail mix for used sales this year as they take advantage of other channels and focus on increasing OEC sales.

The speaker discusses the distribution of retail and other sales in 2024, with two-thirds coming from retail. They also mention the growth in infrastructure projects and the potential impact of the Infrastructure Bill on the industry.

The company saw a 2% increase in contribution from ancillary and re-rent in the second quarter, which was an easy comp from last year. This growth was largely due to the impact of the Yak acquisition, which has a different composition of revenue. The company does not focus on dollar utilization, but rather manages rate and time aggressively on a daily basis. The Yak acquisition has also helped increase revenue from high return assets.

The speaker discusses how their company has seen growth in their Specialty division and expects it to continue, with cross-selling and added products and services being key drivers. They also clarify that while they expect GenRent growth to be positive in the second half, it may not be as strong as Specialty growth. The speaker encourages listeners to review the Q2 investor deck for further updates and mentions that their team is available to answer any questions.

The operator ends the call and thanks the participants for their participation, allowing them to disconnect at any time.

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