United Rentals, Inc. (NYSE: URI) today announced financial
results for the third quarter of 2023 and reaffirmed its full-year
2023 guidance.
Third Quarter 2023 Highlights
- Total revenue of $3.765 billion, including rental revenue1 of
$3.224 billion.
- Net income of $703 million, at a margin2 of 18.7%. GAAP diluted
earnings per share of $10.29, and adjusted EPS3 of $11.73.
- Adjusted EBITDA3 of $1.850 billion, at a margin2 of 49.1%.
- Year-over-year, fleet productivity4 decreased 2.2% as reported
and increased 1.5% on a pro forma4 basis.
- Year-to-date net cash provided by operating activities of
$3.290 billion; free cash flow3 of $1.157 billion, including gross
rental capital spending of $3.078 billion.
- Returned $1.055 billion to shareholders year-to-date, comprised
of $750 million via share repurchases and $305 million via
dividends paid.
- Net leverage ratio5 of 1.8x, with total liquidity5 of $2.685
billion, at September 30, 2023.
CEO Comment
Matthew Flannery, chief executive officer of United Rentals,
said, “I’m very pleased with our third-quarter results across
growth, profitability and returns, which were underpinned by
broad-based activity. Our ability to provide our customers with a
highly-differentiated value proposition, led by safety and
productivity, is enabling us to outpace the broader industry and
create value for our investors.”
Flannery continued, “Our full-year guidance speaks to the
continued strength of our markets. Looking beyond 2023, we believe
that our strategy positions us well to support our customers as
they execute on the tailwinds we see across infrastructure,
industrial manufacturing, and energy and power. Combined, these
support our goals for profitable growth, strong cash flow, and
attractive returns for our shareholders.”
_______________
1.
Rental revenue includes owned equipment
rental revenue, re-rent revenue and ancillary revenue.
2.
Net income margin and adjusted EBITDA
margin represent net income or adjusted EBITDA divided by total
revenue.
3.
Adjusted EBITDA (earnings before interest,
taxes, depreciation and amortization), adjusted EPS (earnings per
share) and free cash flow are non-GAAP measures as defined in the
tables below. See the tables below for reconciliations to the most
comparable GAAP measures.
4.
Fleet productivity reflects the combined
impact of changes in rental rates, time utilization and mix on
owned equipment rental revenue. The company acquired Ahern Rentals,
Inc. ("Ahern Rentals") in December 2022. Pro forma results reflect
the combination of United Rentals and Ahern Rentals for all periods
presented. See the table below for more information.
5.
The net leverage ratio reflects net debt
(total debt less cash and cash equivalents) divided by adjusted
EBITDA for the trailing 12 months. Total liquidity reflects cash
and cash equivalents plus availability under the asset-based
revolving credit facility (“ABL facility”) and the accounts
receivable securitization facility.
2023 Outlook
The company has reaffirmed its 2023 outlook. Certain ranges have
narrowed, as shown below.
Current Outlook
Prior Outlook
Total revenue
$14.1 billion to $14.3
billion
$14.0 billion to $14.3
billion
Adjusted EBITDA6
$6.775 billion to $6.875
billion
$6.75 billion to $6.9 billion
Net rental capital expenditures after
gross purchases
$1.9 billion to $2.05 billion,
after gross purchases of $3.4 billion to $3.55 billion
$1.9 billion to $2.1 billion,
after gross purchases of $3.35 billion to $3.55 billion
Net cash provided by operating
activities
$4.5 billion to $4.8 billion
$4.5 billion to $4.8 billion
Free cash flow (excluding merger and
restructuring related payments)
$2.3 billion to $2.5 billion
$2.3 billion to $2.5 billion
Summary of Third Quarter 2023 Financial Results
- Rental revenue increased 18.0% year-over-year to a third
quarter record of $3.224 billion, reflecting broad-based strength
of demand across the company's end-markets and the impact of the
Ahern Rentals acquisition. Consistent with the second quarter,
fleet productivity declined 2.2% year-over-year, while average
original equipment at cost (“OEC”) increased 22.2%. On a pro forma
basis, rental revenue increased 9.8% year-over-year, supported by a
10.2% increase in average OEC and a 1.5% increase in fleet
productivity, which was also consistent with last quarter.
- Used equipment sales in the quarter increased 102.2%
year-over-year, primarily reflecting the normalization of volumes
and the impact of the Ahern Rentals acquisition. Used equipment
sales generated $366 million of proceeds at a GAAP gross margin of
49.5% and an adjusted gross margin7 of 55.2% compared to $181
million at a GAAP gross margin of 61.9% and an adjusted gross
margin of 64.6% for the same period last year. The year-over-year
declines in the GAAP and adjusted gross margins primarily reflect
the expected normalization of channel mix, including the expanded
use of wholesale channels, and the impact of sales of equipment
acquired in the Ahern Rentals acquisition. Average fleet age
declined to 51.6 months as of September 30, 2023.
- Net income for the quarter increased 16.0%
year-over-year to a third quarter record of $703 million, while net
income margin declined 120 basis points to 18.7%. On a pro forma
basis, third quarter net income margin expanded 20 basis points.
The decrease in the company's reported net income margin was
primarily driven by the impact of the Ahern Rentals acquisition on
rental and used equipment gross margins, and higher interest
expense, partially offset by reductions in selling, general and
administrative ("SG&A") and income tax expenses as a percentage
of revenue.
- Adjusted EBITDA for the quarter increased 21.6%
year-over-year to a third quarter record of $1.850 billion, while
adjusted EBITDA margin decreased 80 basis points to 49.1%. On a pro
forma basis, third quarter adjusted EBITDA margin increased 20
basis points year-over-year, including the impact of ongoing
integration costs. The decrease in the company's reported adjusted
EBITDA margin primarily reflected the impact of Ahern Rentals on
gross margin from rental revenue (excluding depreciation and stock
compensation expense) and adjusted gross margin from used equipment
sales, partially offset by reduced SG&A expense as a percentage
of revenue.
_______________
6.
Information reconciling forward-looking
adjusted EBITDA to the comparable GAAP financial measures is
unavailable to the company without unreasonable effort, as
discussed below.
7.
Used equipment sales adjusted gross margin
excludes the impact of the fair value mark-up of fleet acquired in
certain major acquisitions that was subsequently sold, as explained
further in the tables below.
- General rentals segment rental revenue increased 18.8%
year-over-year, including the impact of the Ahern Rentals
acquisition, to a third quarter record of $2.307 billion. On a pro
forma basis, third quarter rental revenue for general rentals
increased 7.6% year-over-year. Rental gross margin decreased by 320
basis points year-over-year to 37.8%, primarily due to the impact
of the Ahern Rentals acquisition. On a pro forma basis, third
quarter rental gross margin declined 140 basis points
year-over-year due primarily to the impact of higher depreciation
expense related to the Ahern Rentals acquisition.
- Specialty rentals segment rental revenue increased 16.1%
year-over-year to a third quarter record of $917 million. Rental
gross margin of 52.1% was largely flat year-over-year.
- Cash flow from operating activities increased 3.4%
year-over-year to $3.290 billion for the first nine months of 2023,
and free cash flow, including merger and restructuring related
payments, increased 1.5%, from $1.140 billion to $1.157 billion.
Net rental capital expenditures increased $42 million
year-over-year.
- Capital management. The company's net leverage ratio was
1.8x at September 30, 2023, as compared to 2.0x at December 31,
2022. Year-to-date through September 30, 2023, the company
repurchased $750 million8 of common stock under its $1.25 billion8
share repurchase program and paid dividends totaling $305 million.
It remains the company's intention to repurchase $1.0 billion8 of
common stock during 2023. Additionally, the company's Board of
Directors has declared a quarterly dividend of $1.48 per share,
payable on November 22, 2023 to stockholders of record on November
8, 2023.
- Total liquidity was $2.685 billion as of September 30,
2023, including $284 million of cash and cash equivalents.
- Return on invested capital (ROIC)9 increased 150 basis
points year-over-year, and 30 basis points sequentially, to a
record 13.7% for the 12 months ended September 30, 2023. The
year-over-year and sequential improvements primarily reflect
increased after-tax operating income.
Conference Call
United Rentals will hold a conference call tomorrow, Thursday,
October 26, 2023, at 8:30 a.m. Eastern Time. The conference call
number is 800-420-1271 (international: 785-424-1222). The replay
number for the call is 402-220-2572. The passcode for both the
conference call and replay is 70041. The conference call will also
be available live by audio webcast at unitedrentals.com, where it
will be archived until the next earnings call.
_______________
8.
A 1% excise tax is imposed on “net
repurchases” (certain purchases minus certain issuances) of common
stock. The repurchases noted above (as well as the total program
size and expected 2023 repurchases) do not include the excise tax,
which totaled $6 million year-to-date through September 30,
2023.
9.
The company’s ROIC metric uses after-tax
operating income for the trailing 12 months divided by average
stockholders’ equity, debt and deferred taxes, net of average cash.
To mitigate the volatility related to fluctuations in the company’s
tax rate from period to period, the U.S. federal corporate
statutory tax rate of 21% was used to calculate after-tax operating
income.
Non-GAAP Measures
Free cash flow, earnings before interest, taxes, depreciation
and amortization (EBITDA), adjusted EBITDA, and adjusted earnings
per share (adjusted EPS) are non-GAAP financial measures as defined
under the rules of the SEC. Free cash flow represents net cash
provided by operating activities less purchases of, and plus
proceeds from, equipment and intangible assets. The equipment and
intangible asset purchases and proceeds represent cash flows from
investing activities. 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 restructuring
charges, stock compensation expense, net, and the impact of the
fair value mark-up of acquired fleet. Adjusted EPS represents EPS
plus the sum of the restructuring charges, the impact on
depreciation related to acquired fleet and property and equipment,
the impact of the fair value mark-up of acquired fleet, merger
related intangible asset amortization, asset impairment charge and
loss on repurchase/redemption of debt securities. The company
believes that: (i) free cash flow provides useful additional
information concerning cash flow available to meet future debt
service obligations and working capital requirements; (ii) EBITDA
and adjusted EBITDA provide useful information about operating
performance and period-over-period growth, and help investors gain
an understanding of the factors and trends affecting our ongoing
cash earnings, from which capital investments are made and debt is
serviced; and (iii) adjusted EPS provides useful information
concerning future profitability. However, none of these measures
should be considered as alternatives to net income, cash flows from
operating activities or earnings per share under GAAP as indicators
of operating performance or liquidity. See the tables below for
further discussion of these non-GAAP measures.
Information reconciling forward-looking adjusted EBITDA to GAAP
financial measures is unavailable to the company without
unreasonable effort. The company is not able to provide
reconciliations of adjusted EBITDA to GAAP financial measures
because certain items required for such reconciliations are outside
of the company’s control and/or cannot be reasonably predicted,
such as the provision for income taxes. Preparation of such
reconciliations would require a forward-looking balance sheet,
statement of income and statement of cash flow, prepared in
accordance with GAAP, and such forward-looking financial statements
are unavailable to the company without unreasonable effort (as
specified in the exception provided by Item 10(e)(1)(i)(B) of
Regulation S-K). The company provides a range for its adjusted
EBITDA forecast that it believes will be achieved, however it
cannot accurately predict all the components of the adjusted EBITDA
calculation. The company provides an adjusted EBITDA forecast
because it believes that adjusted EBITDA, when viewed with the
company’s results under GAAP, provides useful information for the
reasons noted above. However, adjusted EBITDA is not a measure of
financial performance or liquidity under GAAP and, accordingly,
should not be considered as an alternative to net income or cash
flow from operating activities as an indicator of operating
performance or liquidity.
About United Rentals
United Rentals, Inc. is the largest equipment rental company in
the world. The company has an integrated network of 1,500 rental
locations in North America, 15 in Europe, 23 in Australia and 19 in
New Zealand. In North America, the company operates in 49 states
and every Canadian province. The company’s approximately 25,900
employees serve construction and industrial customers, utilities,
municipalities, homeowners and others. The company offers
approximately 4,800 classes of equipment for rent with a total
original cost of $20.98 billion. United Rentals is a member of the
Standard & Poor’s 500 Index, the Barron’s 400 Index and the
Russell 3000 Index® and is headquartered in Stamford, Conn.
Additional information about United Rentals is available at
unitedrentals.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995, known as the PSLRA. These statements can generally be
identified by the use of forward-looking terminology such as
“believe,” “expect,” “may,” “will,” “should,” “seek,” “on-track,”
“plan,” “project,” “forecast,” “intend” or “anticipate,” or the
negative thereof or comparable terminology, or by discussions of
vision, strategy or outlook. These statements are based on current
plans, estimates and projections, and, therefore, you should not
place undue reliance on them. No forward-looking statement can be
guaranteed, and actual results may differ materially from those
projected. Factors that could cause actual results to differ
materially from those projected include, but are not limited to,
the following: (1) the impact of global economic conditions
(including inflation, increased interest rates, supply chain
constraints, potential trade wars and sanctions and other measures
imposed in response to international conflicts) and public health
crises and epidemics on us, our customers and our suppliers, in the
United States and the rest of the world; (2) declines in
construction or industrial activity, which can adversely impact our
revenues and, because many of our costs are fixed, our
profitability; (3) rates we charge and time utilization we achieve
being less than anticipated; (4) changes in customer, fleet,
geographic and segment mix; (5) excess fleet in the equipment
rental industry; (6) inability to benefit from government spending,
including spending associated with infrastructure projects; (7)
trends in oil and natural gas, including significant increases in
the prices of oil or natural gas, could adversely affect the demand
for our services and products; (8) competition from existing and
new competitors; (9) the cyclical nature of the industry in which
we operate and the industries of our customers, such as those in
the construction industry; (10) costs we incur being more than
anticipated, including as a result of inflation, and the inability
to realize expected savings in the amounts or time frames planned;
(11) our significant indebtedness, which requires us to use a
substantial portion of our cash flow for debt service and can
constrain our flexibility in responding to unanticipated or adverse
business conditions; (12) inability to refinance our indebtedness
on terms that are favorable to us, including as a result of
volatility and uncertainty in capital or credit markets or
increases in interest rates, or at all; (13) incurrence of
additional debt, which could exacerbate the risks associated with
our current level of indebtedness; (14) noncompliance with
financial or other covenants in our debt agreements, which could
result in our lenders terminating the agreements and requiring us
to repay outstanding borrowings; (15) restrictive covenants and the
amount of borrowings permitted under our debt instruments, which
can limit our financial and operational flexibility; (16) inability
to access the capital that our businesses or growth plans may
require, including as a result of uncertainty in capital or credit
markets; (17) the possibility that companies that we have acquired
or may acquire could have undiscovered liabilities, or that
companies or assets that we have acquired or may acquire could
involve other unexpected costs, may strain our management
capabilities, or may be difficult to integrate, and that we may not
realize the expected benefits from an acquisition over the
timeframe we expect, or at all; (18) incurrence of impairment
charges; (19) fluctuations in the price of our common stock and
inability to complete stock repurchases or pay dividends in the
time frames and/or on the terms anticipated; (20) our charter
provisions as well as provisions of certain debt agreements and our
significant indebtedness may have the effect of making more
difficult or otherwise discouraging, delaying or deterring a
takeover or other change of control of us; (21) inability to manage
credit risk adequately or to collect on contracts with a large
number of customers; (22) turnover in our management team and
inability to attract and retain key personnel, as well as loss,
absenteeism or the inability of employees to work or perform key
functions in light of public health crises or epidemics; (23)
inability to obtain equipment and other supplies for our business
from our key suppliers on acceptable terms or at all, as a result
of supply chain disruptions, insolvency, financial difficulties or
other factors; (24) increases in our maintenance and replacement
costs and/or decreases in the residual value of our equipment; (25)
inability to sell our new or used fleet in the amounts, or at the
prices, we expect; (26) risks related to security breaches,
cybersecurity attacks, failure to protect personal information,
compliance with data protection and cyber incident reporting laws
and regulations, and other significant disruptions in our
information technology systems; (27) risks related to climate
change and climate change regulation; (28) risks related to our
ability to meet our environmental and social goals, including our
greenhouse gas intensity reduction goal; (29) the fact that our
holding company structure requires us to depend in part on
distributions from subsidiaries and such distributions could be
limited by contractual or legal restrictions; (30) shortfalls in
our insurance coverage; (31) increases in our loss reserves to
address business operations or other claims and any claims that
exceed our established levels of reserves; (32) incurrence of
additional expenses (including indemnification obligations) and
other costs in connection with litigation, regulatory and
investigatory matters; (33) the costs of complying with
environmental, safety and foreign laws and regulations, as well as
other risks associated with non-U.S. operations, including currency
exchange risk, and tariffs; (34) the outcome or other potential
consequences of regulatory matters and commercial litigation; (35)
labor shortages and/or disputes, work stoppages or other labor
difficulties, which may impact our productivity and increase our
costs, and changes in law that could affect our labor relations or
operations generally; and (36) the effect of changes in tax
law.
For a more complete description of these and other possible
risks and uncertainties, please refer to our Annual Report on Form
10-K for the year ended December 31, 2022, as well as to our
subsequent filings with the SEC. The forward-looking statements
contained herein speak only as of the date hereof, and we make no
commitment to update or publicly release any revisions to
forward-looking statements in order to reflect new information or
subsequent events, circumstances or changes in expectations.
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
(In millions, except per share
amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Revenues:
Equipment rentals
$
3,224
$
2,732
$
8,945
$
7,369
Sales of rental equipment
366
181
1,136
556
Sales of new equipment
52
32
166
115
Contractor supplies sales
39
32
110
94
Service and other revenues
84
74
247
212
Total revenues
3,765
3,051
10,604
8,346
Cost of revenues:
Cost of equipment rentals, excluding
depreciation
1,286
1,053
3,664
2,961
Depreciation of rental equipment
588
470
1,755
1,362
Cost of rental equipment sales
185
69
569
231
Cost of new equipment sales
43
25
137
93
Cost of contractor supplies sales
28
23
78
66
Cost of service and other revenues
50
45
150
125
Total cost of revenues
2,180
1,685
6,353
4,838
Gross profit
1,585
1,366
4,251
3,508
Selling, general and administrative
expenses
374
356
1,134
1,022
Restructuring charge
5
(1
)
24
—
Non-rental depreciation and
amortization
107
90
329
278
Operating income
1,099
921
2,764
2,208
Interest expense, net
163
106
474
313
Other income, net
(7
)
(1
)
(19
)
(12
)
Income before provision for income
taxes
943
816
2,309
1,907
Provision for income taxes
240
210
564
441
Net income
$
703
$
606
$
1,745
$
1,466
Diluted earnings per share
$
10.29
$
8.66
$
25.30
$
20.56
Dividends declared per share
(1)
$
1.48
$
—
$
4.44
$
—
(1)
In January 2023, our Board of Directors
approved our first-ever quarterly dividend program (accordingly,
there were no dividends declared during 2022).
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(In millions)
September 30, 2023
December 31, 2022
ASSETS
Cash and cash equivalents
$
284
$
106
Accounts receivable, net
2,277
2,004
Inventory
201
232
Prepaid expenses and other assets
216
381
Total current assets
2,978
2,723
Rental equipment, net
14,314
13,277
Property and equipment, net
881
839
Goodwill
5,792
6,026
Other intangible assets, net
728
452
Operating lease right-of-use assets
1,091
819
Other long-term assets
48
47
Total assets
$
25,832
$
24,183
LIABILITIES AND STOCKHOLDERS’
EQUITY
Short-term debt and current maturities of
long-term debt
$
1,448
$
161
Accounts payable
1,121
1,139
Accrued expenses and other liabilities
1,104
1,145
Total current liabilities
3,673
2,445
Long-term debt
10,580
11,209
Deferred taxes
2,757
2,671
Operating lease liabilities
890
642
Other long-term liabilities
176
154
Total liabilities
18,076
17,121
Common stock
1
1
Additional paid-in capital
2,642
2,626
Retained earnings
11,094
9,656
Treasury stock
(5,713
)
(4,957
)
Accumulated other comprehensive loss
(268
)
(264
)
Total stockholders’ equity
7,756
7,062
Total liabilities and stockholders’
equity
$
25,832
$
24,183
UNITED RENTALS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Cash Flows From Operating
Activities:
Net income
$
703
$
606
$
1,745
$
1,466
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
695
560
2,084
1,640
Amortization of deferred financing costs
and original issue discounts
4
3
11
9
Gain on sales of rental equipment
(181
)
(112
)
(567
)
(325
)
Gain on sales of non-rental equipment
(6
)
(2
)
(16
)
(6
)
Insurance proceeds from damaged
equipment
(11
)
(8
)
(30
)
(25
)
Stock compensation expense, net
23
35
72
95
Restructuring charge
5
(1
)
24
—
Loss on repurchase/redemption of debt
securities
—
—
—
17
Increase in deferred taxes
35
66
88
130
Changes in operating assets and
liabilities, net of amounts acquired:
Increase in accounts receivable
(139
)
(202
)
(254
)
(261
)
Decrease (increase) in inventory
17
3
22
(33
)
Decrease in prepaid expenses and other
assets
49
31
183
70
(Decrease) increase in accounts
payable
(220
)
81
(15
)
332
Increase (decrease) in accrued expenses
and other liabilities
88
82
(57
)
73
Net cash provided by operating
activities
1,062
1,142
3,290
3,182
Cash Flows From Investing
Activities:
Purchases of rental equipment
(1,030
)
(1,102
)
(3,078
)
(2,456
)
Purchases of non-rental equipment and
intangible assets
(88
)
(59
)
(267
)
(182
)
Proceeds from sales of rental
equipment
366
181
1,136
556
Proceeds from sales of non-rental
equipment
18
6
46
15
Insurance proceeds from damaged
equipment
11
8
30
25
Purchases of other companies, net of cash
acquired
12
(11
)
(406
)
(323
)
Purchases of investments
—
(1
)
—
(5
)
Net cash used in investing
activities
(711
)
(978
)
(2,539
)
(2,370
)
Cash Flows From Financing
Activities:
Proceeds from debt
2,230
1,980
6,718
5,219
Payments of debt
(2,168
)
(1,893
)
(6,175
)
(5,026
)
Payments of financing costs
—
—
—
(9
)
Common stock repurchased, including tax
withholdings for share based compensation (1)
(252
)
(239
)
(806
)
(1,058
)
Dividends paid
(100
)
—
(305
)
—
Net cash used in financing
activities
(290
)
(152
)
(568
)
(874
)
Effect of foreign exchange rates
(4
)
(4
)
(5
)
(6
)
Net increase (decrease) in cash and
cash equivalents
57
8
178
(68
)
Cash and cash equivalents at beginning of
period
227
68
106
144
Cash and cash equivalents at end of
period
$
284
$
76
$
284
$
76
Supplemental disclosure of cash flow
information:
Cash paid for income taxes, net
$
177
$
143
$
389
$
295
Cash paid for interest
190
151
495
339
(1)
See above for a discussion of our share
repurchase program. The common stock repurchases include i) shares
repurchased pursuant to the share repurchase program and ii) shares
withheld to satisfy tax withholding obligations upon the vesting of
restricted stock unit awards.
UNITED RENTALS, INC. RENTAL
REVENUE
Fleet productivity is a comprehensive metric that provides
greater insight into the decisions made by our managers in support
of growth and returns. Specifically, we seek to optimize the
interplay of rental rates, time utilization and mix in driving
rental revenue. Fleet productivity aggregates, in one metric, the
impact of changes in rates, utilization and mix on owned equipment
rental revenue.
We believe that this metric is useful in assessing the
effectiveness of our decisions on rates, time utilization and mix,
particularly as they support the creation of shareholder value. The
table below shows the components of the year-over-year change in
rental revenue using the fleet productivity methodology:
Year-over-year change in
average OEC
Assumed year-over-year
inflation impact (1)
Fleet productivity (2)
Contribution from ancillary
and re-rent revenue (3)
Total change in rental
revenue
Three Months Ended September 30,
2023
Actual
22.2%
(1.5)%
(2.2)%
(0.5)%
18.0%
Pro forma (4)
10.2%
(1.5)%
1.5%
(0.4)%
9.8%
Nine Months Ended September
30, 2023
Actual
24.4%
(1.5)%
(1.0)%
(0.5)%
21.4%
Pro forma (4)
11.6%
(1.5)%
3.0%
(0.4)%
12.7%
Please refer to our Third Quarter 2023 Investor Presentation for
additional detail on fleet productivity.
(1)
Reflects the estimated impact of inflation on the revenue
productivity of fleet based on OEC, which is recorded at cost.
(2)
Reflects the combined impact of changes in
rental rates, time utilization and mix on owned equipment rental
revenue. Changes in customers, fleet, geographies and segments all
contribute to changes in mix.
(3)
Reflects the combined impact of changes in
other types of equipment rental revenue: ancillary and re-rent
(excludes owned equipment rental revenue).
(4)
We completed the acquisition of Ahern
Rentals in December 2022. The pro forma information includes the
standalone, pre-acquisition results of Ahern Rentals.
UNITED RENTALS, INC. SEGMENT
PERFORMANCE ($ in millions)
Segment equipment rentals revenue, gross profit and gross margin
are presented in the tables below. We completed the acquisition of
Ahern Rentals in December 2022. The pro forma information includes
the standalone, pre-acquisition results of Ahern Rentals.
Three Months Ended
September 30,
2023
2022
2022
2022
Change
Change
As reported
As reported
Ahern Rentals
Pro forma
As reported
Pro forma
General Rentals
Reportable segment equipment rentals
revenue
$2,307
$1,942
$203
$2,145
18.8%
7.6%
Reportable segment equipment rentals gross
profit
872
797
44
841
9.4%
3.7%
Reportable segment equipment rentals gross
margin
37.8%
41.0%
21.7%
39.2%
(320) bps
(140) bps
Specialty
Reportable segment equipment rentals
revenue
$917
$790
$—
$790
16.1%
16.1%
Reportable segment equipment rentals gross
profit
478
412
—
412
16.0%
16.0%
Reportable segment equipment rentals gross
margin
52.1%
52.2%
—%
52.2%
(10) bps
(10) bps
Total United Rentals
Total equipment rentals revenue
$3,224
$2,732
$203
$2,935
18.0%
9.8%
Total equipment rentals gross profit
1,350
1,209
44
1,253
11.7%
7.7%
Total equipment rentals gross margin
41.9%
44.3%
21.7%
42.7%
(240) bps
(80) bps
Nine Months Ended
September 30,
2023
2022
2022
2022
Change
Change
As reported
As reported
Ahern Rentals
Pro forma
As reported
Pro forma
General Rentals
Reportable segment equipment rentals
revenue
$6,514
$5,322
$569
$5,891
22.4%
10.6%
Reportable segment equipment rentals gross
profit
2,323
2,063
102
2,165
12.6%
7.3%
Reportable segment equipment rentals gross
margin
35.7%
38.8%
17.9%
36.8%
(310) bps
(110) bps
Specialty
Reportable segment equipment rentals
revenue
$2,431
$2,047
$—
$2,047
18.8%
18.8%
Reportable segment equipment rentals gross
profit
1,203
983
—
983
22.4%
22.4%
Reportable segment equipment rentals gross
margin
49.5%
48.0%
—%
48.0%
150 bps
150 bps
Total United Rentals
Total equipment rentals revenue
$8,945
$7,369
$569
$7,938
21.4%
12.7%
Total equipment rentals gross profit
3,526
3,046
102
3,148
15.8%
12.0%
Total equipment rentals gross margin
39.4%
41.3%
17.9%
39.7%
(190) bps
(30) bps
UNITED RENTALS, INC.
DILUTED EARNINGS PER SHARE
CALCULATION
(In millions, except per share
data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Numerator:
Net income available to common
stockholders
$
703
$
606
$
1,745
$
1,466
Denominator:
Denominator for basic earnings per
share—weighted-average common shares
68.2
69.9
68.8
71.1
Effect of dilutive securities:
Employee stock options
—
—
—
—
Restricted stock units
0.1
0.2
0.1
0.2
Denominator for diluted earnings per
share—adjusted weighted-average common shares
68.3
70.1
68.9
71.3
Diluted earnings per share
$
10.29
$
8.66
$
25.30
$
20.56
UNITED RENTALS, INC. 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 intangible asset amortization, impact
on depreciation related to acquired fleet and property and
equipment, impact of the fair value mark-up of acquired fleet,
restructuring charge, asset impairment charge and loss on
repurchase/redemption of debt securities. See below for further
detail on each special item. Management believes that earnings per
share - adjusted provides useful information concerning future
profitability. However, earnings per share - adjusted is not a
measure of financial performance under GAAP. Accordingly, earnings
per share - adjusted should not be considered an alternative to
GAAP earnings per share. The table below provides a reconciliation
between earnings per share – GAAP, as-reported, and earnings per
share – adjusted.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Earnings per share - GAAP,
as-reported
$10.29
$8.66
$25.30
$20.56
After-tax (1) impact of:
Merger related intangible asset
amortization (2)
0.57
0.44
1.83
1.39
Impact on depreciation related to acquired
fleet and property and equipment (3)
0.59
0.12
1.21
0.48
Impact of the fair value mark-up of
acquired fleet (4)
0.23
0.05
0.92
0.17
Restructuring charge (5)
0.05
(0.01)
0.26
—
Asset impairment charge (6)
—
0.01
—
0.03
Loss on repurchase/redemption of debt
securities (7)
—
—
—
0.18
Earnings per share - adjusted
$11.73
$9.27
$29.52
$22.81
Tax rate applied to above adjustments
(1)
25.3%
25.4%
25.3%
25.3%
(1)
The tax rates applied to the adjustments
reflect the statutory rates in the applicable entities.
(2)
Reflects the amortization of the
intangible assets acquired in the major acquisitions completed
since 2012 that significantly impact our operations (the "major
acquisitions," each of which had annual revenues of over $200
million prior to acquisition). The increase in 2023 primarily
reflects the impact of the Ahern Rentals acquisition.
(3)
Reflects the impact of extending the
useful lives of equipment acquired in certain major acquisitions,
net of the impact of additional depreciation associated with the
fair value mark-up of such equipment. The increase in 2023
primarily reflects the impact of the Ahern Rentals acquisition.
(4)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major acquisitions and
subsequently sold. The increase in 2023 primarily reflects the
impact of the Ahern Rentals acquisition.
(5)
Primarily reflects severance and branch
closure charges associated with our restructuring programs. We only
include such costs that are part of a restructuring program as
restructuring charges. The designated restructuring programs
generally involve the closure of a large number of branches over a
short period of time, often in periods following a major
acquisition, and result in significant costs that we would not
normally incur absent a major acquisition or other triggering event
that results in the initiation of a restructuring program. Since
the first such restructuring program was initiated in 2008, we have
completed six restructuring programs. In the first quarter of 2023,
we initiated a restructuring program following the closing of the
Ahern Rentals acquisition, which is our only open restructuring
program as of September 30, 2023. The increase in 2023 reflects
charges associated with the restructuring program initiated
following the closing of the Ahern Rentals acquisition. We have
cumulatively incurred total restructuring charges of $376 million
under our restructuring programs.
(6)
Reflects write-offs of leasehold
improvements and other fixed assets.
(7)
Primarily reflects the difference between
the net carrying amount and the total purchase price of the
redeemed notes.
UNITED RENTALS, INC. EBITDA AND
ADJUSTED EBITDA GAAP RECONCILIATIONS ($ in millions, except
footnotes)
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 restructuring charges, stock
compensation expense, net, and the impact of the fair value mark-up
of acquired fleet. See below for further detail on each adjusting
item. These items are excluded from adjusted EBITDA internally when
evaluating our operating performance and for strategic planning and
forecasting purposes, and allow investors to make a more meaningful
comparison between our core business operating results over
different periods of time, as well as with those of other similar
companies. The net income and adjusted EBITDA margins represent net
income or adjusted EBITDA divided by total revenue. Management
believes that EBITDA and adjusted EBITDA, when viewed with the
company’s results under GAAP and the accompanying reconciliation,
provide useful information about operating performance and
period-over-period growth, and provide additional information that
is useful for evaluating the operating performance of our core
business without regard to potential distortions. Additionally,
management believes that EBITDA and adjusted EBITDA help investors
gain an understanding of the factors and trends affecting our
ongoing cash earnings, from which capital investments are made and
debt is serviced.
The table below provides a reconciliation between net income and
EBITDA and adjusted EBITDA.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income
$
703
$
606
$
1,745
$
1,466
Provision for income taxes
240
210
564
441
Interest expense, net
163
106
474
313
Depreciation of rental equipment
588
470
1,755
1,362
Non-rental depreciation and
amortization
107
90
329
278
EBITDA
$
1,801
$
1,482
$
4,867
$
3,860
Restructuring charge (1)
5
(1
)
24
—
Stock compensation expense, net (2)
23
35
72
95
Impact of the fair value mark-up of
acquired fleet (3)
21
5
85
16
Adjusted EBITDA
$
1,850
$
1,521
$
5,048
$
3,971
Net income margin
18.7
%
19.9
%
16.5
%
17.6
%
Adjusted EBITDA margin
49.1
%
49.9
%
47.6
%
47.6
%
(1)
Primarily reflects severance and branch
closure charges associated with our restructuring programs. We only
include such costs that are part of a restructuring program as
restructuring charges. The designated restructuring programs
generally involve the closure of a large number of branches over a
short period of time, often in periods following a major
acquisition, and result in significant costs that we would not
normally incur absent a major acquisition or other triggering event
that results in the initiation of a restructuring program. Since
the first such restructuring program was initiated in 2008, we have
completed six restructuring programs. In the first quarter of 2023,
we initiated a restructuring program following the closing of the
Ahern Rentals acquisition, which is our only open restructuring
program as of September 30, 2023. The increase in 2023 reflects
charges associated with the restructuring program initiated
following the closing of the Ahern Rentals acquisition. We have
cumulatively incurred total restructuring charges of $376 million
under our restructuring programs.
(2)
Represents non-cash, share-based payments
associated with the granting of equity instruments.
(3)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major acquisitions and
subsequently sold. The increase in 2023 primarily reflects the
impact of the Ahern Rentals acquisition.
UNITED RENTALS, INC. EBITDA AND
ADJUSTED EBITDA GAAP RECONCILIATIONS (continued) (In
millions, except footnotes)
The table below provides a reconciliation between net cash
provided by operating activities and EBITDA and adjusted
EBITDA.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net cash provided by operating
activities
$
1,062
$
1,142
$
3,290
$
3,182
Adjustments for items included in net cash
provided by operating activities but excluded from the calculation
of EBITDA:
Amortization of deferred financing costs
and original issue discounts
(4
)
(3
)
(11
)
(9
)
Gain on sales of rental equipment
181
112
567
325
Gain on sales of non-rental equipment
6
2
16
6
Insurance proceeds from damaged
equipment
11
8
30
25
Restructuring charge (1)
(5
)
1
(24
)
—
Stock compensation expense, net (2)
(23
)
(35
)
(72
)
(95
)
Loss on repurchase/redemption of debt
securities (4)
—
—
—
(17
)
Changes in assets and liabilities
206
(39
)
187
(191
)
Cash paid for interest
190
151
495
339
Cash paid for income taxes, net
177
143
389
295
EBITDA
$
1,801
$
1,482
$
4,867
$
3,860
Add back:
Restructuring charge (1)
5
(1
)
24
—
Stock compensation expense, net (2)
23
35
72
95
Impact of the fair value mark-up of
acquired fleet (3)
21
5
85
16
Adjusted EBITDA
$
1,850
$
1,521
$
5,048
$
3,971
(1)
Primarily reflects severance and branch
closure charges associated with our restructuring programs. We only
include such costs that are part of a restructuring program as
restructuring charges. The designated restructuring programs
generally involve the closure of a large number of branches over a
short period of time, often in periods following a major
acquisition, and result in significant costs that we would not
normally incur absent a major acquisition or other triggering event
that results in the initiation of a restructuring program. Since
the first such restructuring program was initiated in 2008, we have
completed six restructuring programs. In the first quarter of 2023,
we initiated a restructuring program following the closing of the
Ahern Rentals acquisition, which is our only open restructuring
program as of September 30, 2023. The increase in 2023 reflects
charges associated with the restructuring program initiated
following the closing of the Ahern Rentals acquisition. We have
cumulatively incurred total restructuring charges of $376 million
under our restructuring programs.
(2)
Represents non-cash, share-based payments
associated with the granting of equity instruments.
(3)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major acquisitions and
subsequently sold. The increase in 2023 primarily reflects the
impact of the Ahern Rentals acquisition.
(4)
Primarily reflects the difference between
the net carrying amount and the total purchase price of the
redeemed notes.
UNITED RENTALS, INC. EBITDA AND
ADJUSTED EBITDA GAAP RECONCILIATIONS (continued) ($ in
millions, except footnotes)
The pro forma information below reflects the combination of
United Rentals and Ahern Rentals. Prior to the acquisition, Ahern
Rentals management used different EBITDA and adjusted EBITDA
definitions than those used by United Rentals. The information
below reflects the historical information for Ahern Rentals
presented in accordance with United Rentals’ definitions of EBITDA
and adjusted EBITDA. See below for further detail on each adjusting
item. The management of Ahern Rentals historically did not view
EBITDA and adjusted EBITDA as liquidity measures, and accordingly
the information required to reconcile these measures to the
statement of cash flows is unavailable to the company. The table
below provides a calculation of as-reported and pro forma net
income and EBITDA and adjusted EBITDA.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2022
2022
2023
2022
2022
2022
As reported
As reported
Ahern Rentals
Pro forma
As reported
As reported
Ahern Rentals
Pro forma
Net income (loss)
$
703
$
606
$
1
$
607
$
1,745
$
1,466
$
(5
)
$
1,461
Provision for income taxes
240
210
—
210
564
441
—
441
Interest expense, net
163
106
15
121
474
313
42
355
Depreciation of rental equipment
588
470
24
494
1,755
1,362
69
1,431
Non-rental depreciation and
amortization
107
90
6
96
329
278
18
296
EBITDA
$
1,801
$
1,482
$
46
$
1,528
$
4,867
$
3,860
$
124
$
3,984
Restructuring charge (1)
5
(1
)
—
(1
)
24
—
—
—
Stock compensation expense, net (2)
23
35
—
35
72
95
—
95
Impact of the fair value mark-up of
acquired fleet (3)
21
5
—
5
85
16
—
16
Ahern Rentals adjustments (4)
—
—
36
36
—
—
105
105
Adjusted EBITDA
$
1,850
$
1,521
$
82
$
1,603
$
5,048
$
3,971
$
229
$
4,200
Net income (loss) margin
18.7
%
19.9
%
0.4
%
18.5
%
16.5
%
17.6
%
(0.8
)%
16.2
%
Adjusted EBITDA margin
49.1
%
49.9
%
36.3
%
48.9
%
47.6
%
47.6
%
35.0
%
46.7
%
(1)
Primarily reflects severance and branch
closure charges associated with our restructuring programs. We only
include such costs that are part of a restructuring program as
restructuring charges. The designated restructuring programs
generally involve the closure of a large number of branches over a
short period of time, often in periods following a major
acquisition, and result in significant costs that we would not
normally incur absent a major acquisition or other triggering event
that results in the initiation of a restructuring program. Since
the first such restructuring program was initiated in 2008, we have
completed six restructuring programs. In the first quarter of 2023,
we initiated a restructuring program following the closing of the
Ahern Rentals acquisition, which is our only open restructuring
program as of September 30, 2023. The increase in 2023 reflects
charges associated with the restructuring program initiated
following the closing of the Ahern Rentals acquisition. We have
cumulatively incurred total restructuring charges of $376 million
under our restructuring programs.
(2)
Represents non-cash, share-based payments
associated with the granting of equity instruments.
(3)
Reflects additional costs recorded in cost
of rental equipment sales associated with the fair value mark-up of
rental equipment acquired in certain major acquisitions and
subsequently sold. The increase in 2023 primarily reflects the
impact of the Ahern Rentals acquisition.
(4)
Includes various adjustments reflected in
historic adjusted EBITDA for Ahern Rentals, primarily representing
(1) lease costs associated with equipment that has been purchased
by United Rentals (after purchase, the associated expense would be
recognized as depreciation which is excluded in the EBITDA
calculation) and (2) costs that do not relate to the combined
entity (such as legal costs incurred by Ahern Rentals related to a
particular lawsuit, certain freight costs to move equipment from
closed locations in excess of normal operating movement, costs
related to an attempted financing, and exit costs on lease
terminations).
UNITED RENTALS, INC. FREE CASH FLOW
GAAP RECONCILIATION (In millions, except footnotes)
We define “free cash flow” as net cash provided by operating
activities less purchases of, and plus proceeds from, equipment and
intangible assets. The equipment and intangible asset purchases and
proceeds are included in cash flows from investing activities.
Management believes that free cash flow provides useful additional
information concerning cash flow available to meet future debt
service obligations and working capital requirements. However, free
cash flow is not a measure of financial performance or liquidity
under GAAP. Accordingly, free cash flow should not be considered an
alternative to net income or cash flow from operating activities as
an indicator of operating performance or liquidity. The table below
provides a reconciliation between net cash provided by operating
activities and free cash flow.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net cash provided by operating
activities
$
1,062
$
1,142
$
3,290
$
3,182
Purchases of rental equipment
(1,030
)
(1,102
)
(3,078
)
(2,456
)
Purchases of non-rental equipment and
intangible assets
(88
)
(59
)
(267
)
(182
)
Proceeds from sales of rental
equipment
366
181
1,136
556
Proceeds from sales of non-rental
equipment
18
6
46
15
Insurance proceeds from damaged
equipment
11
8
30
25
Free cash flow (1)
$
339
$
176
$
1,157
$
1,140
(1)
Free cash flow included aggregate merger
and restructuring related payments of $1 million for the three
months ended September 30, 2023, and $6 million and $3 million for
the nine months ended September 30, 2023 and 2022,
respectively.
The table below provides a reconciliation between 2023
forecasted net cash provided by operating activities and free cash
flow.
Net cash provided by operating
activities
$4,500-$4,800
Purchases of rental equipment
$(3,400)-$(3,550)
Proceeds from sales of rental
equipment
$1,450-$1,550
Purchases of non-rental equipment and
intangible assets, net of proceeds from sales and insurance
proceeds from damaged equipment
$(250)-$(300)
Free cash flow (excluding the impact of
merger and restructuring related payments)
$2,300- $2,500
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025571293/en/
Elizabeth Grenfell Vice President, Investor Relations O: (203)
618-7125 egrenfell@ur.com
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