Q4 2021 United Rentals Inc Earnings Call

January 27, 2022

[music].

I'll come to the United Rentals Investor Conference call.

Please be advised that this call is being recorded.

Before we begin note that the company's press release comments made on today's call and responses to your questions contain forward looking statements.

Okay.

The company's business and operations are subject to waiver rider of risks and uncertainties.

All of which are beyond its control and consequently actual results may differ materially from those projected.

Okay.

A summary of these uncertainties is included in the Safe Harbor statement contained in the Companys press release.

A more complete description of these and other possible risks.

Please refer to the company's annual report on Form 10-K for the year ended December 31, 2021, as well as to subsequent filings with the SEC.

Okay.

You can access these filings on the company's website at Ww Dot United Rentals Dot com.

Please note that United Rentals has no obligation and makes 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.

You should also note that accompanies the press release and today's call include references to non-GAAP terms.

Such as a free cash flow adjusted EPS EBITDA and adjusted EBITDA.

Please refer to the back of the company's recent investor presentation.

A reconciliation from each non-GAAP financial measures.

The most comparable GAAP financial measures.

Okay.

Speaking today for United Rentals is Matt Flannery.

<unk> and Chief Executive Officer, and Jessica Graziano, Chief Financial Officer, I will now turn the call over to Mr. Flannery.

Mr. Flannery you may begin.

Okay.

Thank you operator, and good morning, everyone. Thanks for joining our call.

I know theres a lot of interest in 2022, but before I go there I want to take a look back because the foundation for our current outlook can be found in our 2021 performance.

I'll start with our strong finish to the year.

As you saw yesterday, our record results for the quarter solidly outperformed expectations for growth and profitability.

We grew fourth quarter rental revenue by 25% year over year and total revenue by over 21%.

And our adjusted EBITDA was 26% higher than a year ago with a margin improvement of 170 basis points.

This translated to a solid flow through of 55%.

These gains kept our full year performance that was far better than we could have imagined back in January .

Our team is firing on all cylinders with strong execution in the field.

Solid cost control.

Effective investment in the business and thoughtful management of our resources, starting with our account base.

In short.

Our people, who outperformed expectations and our numbers reflected that.

I want to stay with this theme for a minute and summarize some of the accomplishments for the year.

We maintained a strong safety record, finishing with our full year reportable rate of <unk> 79, and that was while integrating multiple acquisitions.

We also grew our net head count by 12% roughly half of that came through M&A.

And the $1 4 billion of capital we allocated to acquisitions is generating attractive returns.

In fact, our 2021 return on invested capital improved by 140 basis points to end the year at 10 three.

We also generated $1 5 billion of free cash flow last year after investing a record $3 billion of rental capex.

And we source that equipment in the midst of a supply chain disruption.

On the ESG front, our company recently earned an upgrade to an a rating by MSCI.

We received similar scores from other ESG rating agencies, reflecting our commitment to our progressive culture.

Environmental social and governance matters have been drivers of value in our business for more than a decade, and it's gratifying to see that recognize.

Now on to 2022.

As you can tell from our guidance, we're very confident in our industry's outlook for strong growth this year.

A number of key indicators have been moving the needle higher for months, including the broad recovery in construction and industrial demand. The continued strength of the used equipment market.

And then economy, that's moving in the right direction. Despite some lingering challenges.

Given these dynamics, it's not surprising that industry sources show a steady increase in confidence among contractors.

NRO customer confidence index improved throughout 2021, ending at its highest point at the end of the year.

And importantly, the same optimism was echoed by our field leaders last month as we work through our annual planning process.

And we heard it again at our virtual meeting we had our annual management meeting virtually two weeks ago and this meeting is always a great opportunity to get everyone aligned on goals and strategies and it is clear that our people are fired up for the opportunity.

They can see the benefits of the countless improvements that we've made over the past decade, both operationally and also with our customer service.

And they know those efficiencies count for a lot as we grow the top line.

The biggest signpost pointing to ongoing growth in 2022 is the diversity of the demand that we're seeing our end markets.

In the fourth quarter, we grew rental revenue by double digits across all of our regions and all vertical showed positive growth as well.

These were solid increases with rental revenues from non res construction verticals up 24% year over year.

And infrastructure up 11%.

Industrial also grew 11% with strong gains in refining metals and minerals and power.

And it's notable that both non res and industrial picked up steam in the back half of 'twenty, one with year over year rental revenue gains in Q4 coming in higher than those of Q3.

Our specialty segment had another strong performance with every line of business growing double digit year over year.

The segment as a whole reported a rental revenue gain of 45%, including a pro forma growth of 28%.

This year, we're planning for around 40 cold starts and specialty following the 30 that we opened this last year.

Specialty is key to our competitive differentiation.

Given the segment's history of high returns expansion will continue to be a priority for us.

I'm sharing these numbers to underscore the point I made at the start of my comments that the building blocks for our current outlook. We're late in 2021.

Our core markets have recovered faster than expected and the underlying construction and industrial forecast are positive.

The broad based acceleration in the last 12 months has become the foundation for a new cycle of growth.

And for the first time since Covid arrived.

Seeing a sustained improvement in long term visibility, which gives us some insight into future market conditions and thats, a huge plus for us after two years of unchartered waters.

I'll mention a couple of <unk> on our radar one of course is the infrastructure Bill, which will add an additional $550 billion of funding for projects directly in our wheelhouse over the next five years.

We've been expanding our infrastructure capabilities for years, and we have a rock solid value proposition with traction in the right verticals for this bill.

We expect to see some benefits as early as 2023.

Another tailwind in our future is the relocation of manufacturing operations back to the U S.

Onshoring initially drives demand for construction followed by the need for our industrial services once they are up and running.

The pandemic has caused manufacturers to rethink how they operate and we are already seeing some funding for new projects tied to this trend.

Along with the increasing customer demand comes the large responsibility to have equipment available for rent.

And I mentioned that we brought in $3 billion of fleet last year when equipment wasn't easy to find and that was a homerun for the company and for our customers.

And we're continuing to work with our strategic partners to land a similar amount of fleet this year.

And finally before just because over the numbers I want to mention an announcement, we made yesterday and the milestone that's coming up later this year.

The announcement is our share repurchase program. We expect this program to return $1 billion to shareholders in 2022.

And the milestone I mentioned is our anniversary.

Rentals will turn 25 years old this year and as you know we've been a growth story from day one.

Even so I.

I don't think Theres been a time in our history, when our strategy culture and financial strength have been more of an advantage than they are right now in this new cycle.

We have a highly engaged team.

So customer service network and industry, leading scale that matches the market opportunity.

We built these levers into the business to create shareholder value.

And they did their job in 2021.

Now, we'll take that to the next level this year and for the foreseeable future.

And with that I'll ask Jess to cover the results and then we'll go to Q&A, Jeff over to you.

Thanks, Matt and good morning, everyone.

Our fourth quarter results exceeded expectations behind better seasonal trends in rental revenue and continued discipline in cost.

We delivered record results with our total revenue rental revenue and adjusted EBITDA, surpassing pre pandemic levels for both the quarter and the full year.

<unk>, we carried out of the quarter is reflected in the growth you see in our 2022 guidance.

And even as we invested record amounts of Capex last year, we generated a significant amount of free cash flow at just over $1 $5 billion and we expect to generate even more this year.

More in 'twenty two guidance in a bit let's dive a little deeper into the results for the fourth quarter.

Rental revenue for the fourth quarter was $2 3 billion, an increase of $458 million or 24, 7% year over year.

Within rental revenue increased.

<unk> increased $345 million or 22, 1%.

Our average fleet size was up 13, 3% or a $207 million tailwind to revenue.

Better fleet productivity provided an additional 10, 3% or $161 million.

And rounding out the change in who we are as the inflation impact of one 5%, which was a drag of $23 million.

Also within rental ancillary revenues in the quarter were up about $92 million or 36%, primarily due to increased delivery fees and other pass through charges, we rent was up $21 million.

<unk> sales for the quarter were $324 million, which was up $49 million or about 18% from the fourth quarter last year.

The used market continues to be very strong, which supported higher pricing and margin in the fourth quarter.

Adjusted used margin was 52, 2%, which represents a sequential improvement of 190 basis points and a year over year improvement of 970 basis points.

Our used proceeds in Q4 recovered a very healthy 60% of the original cost for fleet that averaged over seven years old.

Let's move to EBITDA.

Adjusted EBITDA for the quarter with just over $1 3 billion, an increase of 26% year over year or $272 million.

The dollar change includes a $282 million increase from rental and in that OTR contributed 245 million ancillary was up $33 million and re rent added $4 million.

Used sales helped adjusted EBITDA by $52 million.

SG&A was a headwind to adjusted EBITDA of $58 million in part from the reset of bonus expense that we discussed on our prior earnings calls.

We also had higher commissions on better revenues and higher journey, which continues to normalize.

Other non rental lines of business were also a headwind of $4 million.

Our adjusted EBITDA margin in the quarter was 47, 2%, that's up 170 basis points year over year with a solid flow through of 55%.

This reflects in large part strong underlying cost performance in the fourth quarter, which absorbed costs that continued to normalized inflation headwinds and the fourth quarter impact of our bonus reset.

I'll shift to adjusted EPS, which was $7 39 for the fourth quarter, that's up 47% or $2 35 versus last year, primarily from higher net income.

Looking at Capex gross rental Capex was 690 million the largest fourth quarter. We've ever had we put that fleet to work supporting the demand we saw in the quarter, which will carry into the start of 2022.

Our proceeds from used equipment sales were $324 million, resulting in net capex in the fourth quarter of 366 million, that's up $465 million versus the fourth quarter last year.

Now turning to ROIC, which was a healthy 10, 3% on a trailing 12 month basis, that's up 80 basis points sequentially and 140 basis points year over year.

Importantly, our ROIC continues to run comfortably above our weighted average cost of capital.

Let's turn to free cash flow and the balance sheet.

As I mentioned earlier, we generated over $1 5 billion and free cash flow after investing a record $3 billion in Capex last year.

We deployed that free cash flow to help fund over $1 $4 billion in acquisition activity.

We've also continued to delever the balance sheet, which is in great shape.

Leverage was two two times at the end of the fourth quarter, that's down 20 basis points sequentially and versus the end of 2020.

Liquidity at the end of the year remains robust at over $2 $85 billion.

That's made up of ABL capacity of just over $2 65 billion and availability on our <unk> facility of $57 million. We also had $144 million in cash.

Now, let's look forward now and talk about our guidance for 2022, which we shared in our press release last night.

The headline here is our plan to deliver a year of strong profitable growth servicing our customers in this new cycle.

Our total revenue range is supported by solid demand, we expect to see broadly across our end markets in 2022, equating to almost 12% year over year growth at the midpoint.

That will be supported by a significant investment in growth capital included in the growth Capex guidance.

Our adjusted EBITDA range includes the impact of our remaining diligent on costs as we manage inflation this year at.

At the midpoint, we will generate over $5 billion of adjusted EBITDA growing mid teens year over year implied margins expand over 100 basis points with flow through in the mid fifties.

We expect to generate another year of significant free cash flow getting to $1 6 billion at the midpoint.

The strength of our cash flow continues to provide significant firepower available to invest in growth, while maintaining a healthy balance sheet.

It also provides an opportunity to return cash to shareholders as Matt mentioned this week, our board authorized a new $1 billion share repurchase program, which we intend to complete in 2022.

This leaves us plenty of capacity given our leverage targets for M&A.

Let's get to your questions operator would you. Please open the line.

Thank you we will now take your questions.

To ask a question you will need to press star one on your telephone to us.

Draw your question press the pound key.

Please stand by while we compile the Q&A roster.

Your first question comes from the line of David Raso with Evercore ISI. Please go ahead.

Hi, good morning.

Listening to your comments.

About the demand profile and we know the market is pretty tight out there right now so I mean, it seems like youre pretty comfortable with some near term project visibility even some of the secular trends you mentioned, even outside the infrastructure Bill.

Your cash flow, obviously is kind of proven itself now over the last decade, or so but I'm curious more on the margins.

The last 10 years your EBITDA margins have averaged around 46, 7%. This year, you're guiding 46, five which is a nice incremental margin.

'twenty, one, but I'm just curious when you look at the margin profile and how you run the company.

It's been a little more about returns.

But still I'm just curious when you look at the margin profile and then I know some of the margin issue has been you've bought some businesses.

Lower margins for better return on capital profiles, but I'm just curious how do you think about the margins for the company.

If we were comfortable with the demand profile for the next few years.

Where is the margin potential you think be it cost of rental which was also right now still below the last 10 year average or the EBITDA total.

Total company level, just curious how you think about it and what would be the potential is for the business model.

So David.

Currently touched on the.

<unk> been a little bit of a misnomer to the headlines. So you could look at a headline I think we even have a slide in the deck, where EBIT looks like it may have flattened out since 2014 15, but when you aggregate the acquisitions that we've done since that period of time.

We've acquired almost $3 billion worth of revenue at an average EBITDA of 38%. So I'm actually really pleased that the team was able to keep the high level of margins that we expect while absorbing those now to your question about where future margins can be the.

The honest answer is it depends on what we acquire how we grow like what are the businesses, we grow in but we're much more focused on returns.

And can we better be a better owner, that's why that we could turn that 38% margin into mid forty's, because we felt we could be a better owner for those businesses in our network and that's the way we'll look at it in the future.

22 at the midpoint guide is up margins.

Nicely up so we feel really good about that.

And we wouldn't just look at margins when we're looking at where we're going to get into growth from we're going to look at overall returns is the way I'd answer that.

When you look at the profile for 'twenty, two the buckets from labor costs maintenance could be a pause.

Arts or even delivery cost, where there is some inflationary pressure.

Yes.

Incrementals for next year, maybe a little better than we were thinking you could at least guide to initially what are some of the buckets, you've been able to maybe control those costs or some find some other offsets that we can be comfortable with that got it.

Okay.

Good morning, David just yet.

As we think about 2022, you're right, but it's definitely going to be inflationary environment, but.

There isn't any one area that we would single out that we would say we think that there'll be something that we can't manage through right. So puts and takes as we put the plan together and feel comfortable with the guidance and where that flowed through increase is kind of coming out.

So there's nothing that we would highlight to say.

I think an extraordinary effort one way or the other.

We feel we feel really good that as we think about just starting with the kind of growth that will generate right. That's going to then also continued to give us the opportunity as we stay diligent on cost to be able to deliver that margin benefit and and that flowed through in the fifties and listen we feel really good about that so nothing I would I would point to spin.

Typically I think that.

That's causing us any extraordinary action.

And just to wrap up then I'll leave it at this the fourth quarter just reported.

Abnormal in that help provide.

The EBITDA beat more so even in the revenue beat.

And even the rental level margin before you kind of used equipment sales were also a little bit higher than we were modeling. So just wanted to make sure. There is nothing unique in that number.

No just obviously the revenue come in higher always helps with the fixed cost portion, but just suggest this point just good solid P&L management top to bottom.

Alright, Thank you very much.

Thanks, Dave.

Your next question comes from Ross Gilardi with Bank of America. Please go ahead.

Hey, good morning, guys.

Hey, Ross.

I was interested in your comments that the benefits from federal infrastructure could kick in as early as 2023, I mean, I would think that'd be the latest that would kick in so can you give us a little more flavor on what Youre hearing from Washington to me is it taking longer than you expect for the funds to get appropriated and can you give us a little more sense of how your go to market to make sure.

Or that you are capturing the maximum portion of the project activity that will come out of the bill.

Sure Ross so where.

As you know we've been focused on infrastructure for quite some time.

Because we know how big the latent demand plus long before the before the Bill we're just not seeing that money to be appropriated to shovel ready projects, but we're still CNR infrastructure revenue grow we've talked about it growing 11% in Q4, so we're very.

We're very well positioned and when you think about the type of large customers the largest civil contractors in the U S that will benefit from this it plays right into our.

Our value proposition for large national accounts. So we actually think we're really well positioned from a customer perspective, we think we're very well positioned from a product perspective and to be fair. Most of these products are fungible from our other end markets that we serve but we have gone and bought specific.

Assets to help fortify that infrastructure, whether they'd be message boards traffic continue waiters. So we really like where we're positioned and we think we'll probably be able to out punch R. R.

Our wait when that infrastructure Bill does get turned into shovel ready projects, but we haven't seen <unk> seen a lot of the funding turn into actual rental opportunity. We think that will start happening in 'twenty three if it happened sooner.

Great news will be ready for it.

But I mean does.

Does it feel like the timing is getting pushed out just because like because.

Because if you haven't seen anything yet I mean do you have I get that Youre ready now in your infrastructure.

Business is performing very well now and you're investing but.

Typically on the bill itself.

It does it does it feel like it's just going to.

Most likely be more of a second half 'twenty three type of event or.

Can you give us a flavor of anything youre hearing.

So we've been talking about this bill for three years I think it will manifest into shovel ready projects, maybe as early as the back half of this year, but as I said in the prepared remarks, we're thinking by 'twenty three we will start being able to take advantage of that funding our customers be able to put it to work and therefore need our services do you think about the supply chain needs once the money is appropriate.

Then you have the planning process for the projects you have the materials. So we do come in a little bit on the on the midpoint to latter end of the funding actually being assigned to a specific project but.

We're not terribly worried about that timing one of the things we've learned in the last two years is how quick we can flex up and down depending upon what the needs are.

And Rob just to add a quick comment on the timing aspect.

This is consistent with what we've been expecting right. We've been consistently expecting this was more of a 2023 events as we've been following the communication of the Bill from Washington, So Theres No Theres no change from our perspective, just wanted to cover that as well, yes not at all.

Okay and do you have a capex for federal infrastructure Bill built into your 22 Capex guide at all I mean, I presume youre not going to.

I presume you're going to buy at least some of that a.

2023, and I'm, just wondering does that represent upside to your 2022 Capex outlook, if you get a little bit more visibility.

By the middle of this year.

If everything played out is where we have a range as you know, but if everything played out as we are projecting right now and then we got some over and above that would be a reasonable fall as long as it's not shifting from one end market to the other.

Think.

We feel really good about where we are with capex for this year and even the 3 billion headline number for 'twenty two is a <unk>.

Little bit understated because you saw what we brought in almost $700 million in Q4 and a lot of that is you could call that we pulled it in advance for what we think is going to be a robust growth year in 2002.

Okay. If I can just squeezing one more just on oil and gas can you just comment on what you are seeing I would assume some activity is coming back in any way to think about the mixed tailwind.

As activity in the oil patch picks up again, assuming it does.

Yes, so as I had mentioned in prepared remarks, all vertical that would be.

Dissipate and grew year over year in oil and gas did as well when you think about the upstream downstream midstream combination. They grew by 15% in Q4, and now thats down to about 9% of our total revenues now, but we're pleased for an end market that was.

Singing the blues for a couple of years now we're pleased for our people out there specifically those out in the shale, Texas to get some of this work activate it and drive a little bit more volume there.

Thank you.

Yes, Ralph.

Your next question comes from the line of Steven Fisher with UBS go ahead.

Thanks, Good morning on the <unk>.

Capital allocation side, you pointed out you still have a lot of flexibility even with the $1 billion of <unk>.

<unk> I was curious what's most important to you when you think about the M&A landscape is at.

First adding more specialty.

Getting more access to equipment technicians is it having more branch density or just really being opportunistic regardless of what the value proposition is if it's interesting enough. How would you rate kind of what's most important to you in this M&A front and where youre seeing.

The opportunities come to you at the moment.

Sure Stephen and as you've noted.

The capital allocate the $1 billion share repo does not prevent us at all from M&A. So we're real excited and the pipeline is broad.

It's broad both in scale and has been for the last year and also and end market opportunities. So when we think about how we prioritize first and foremost think about like the GSM deal anytime we can add a new product or service to our customers. So that's a homerun integrations easier we get to put our cross sell engine to work, especially.

If theyre not fully formed so to speak where they have white space and they are not operating in all of our msas that we operate in that makes the growth opportunity really strong and makes us a better owner. So that's priority number one second of specialty partly because specialty has more white space for us even geographically, but even.

<unk> penetration perspective, so we think that would be our secondary.

Prioritization and then on the Gen rent side, you saw US do a couple of tuck in deals. This year that we really liked so where we're going to take the opportunity to get more capacity as you said, whether it's people real estate or fleet whenever the math makes sense it would be.

We feel were really good integrators, where we have a history of doing well with M&A and we Jeff and his team have put together a balance sheet that affords us to do it so.

Still very much on our radar.

Great and then just to continue on with the maintenance technicians Im curious how utilized your folks are there at the moment.

In a lot of fleet and I'm curious how much more fleet. They can handle are you able to hire them.

The pace of your fleet growth to be able to make sure that you maintain the equivalent adequately and get it out on rent back on rent quickly and efficiently.

Yes, I would say that we have won and you see it show up in our fleet productivity, we have run about his heart.

I can remember in this past year and specifically in the back half of 'twenty, one and our team held up really strong did a great job and we didn't have to rely too much on third party or over time, which is why you saw the margin come in well. So we feel good about where we are but recruiting especially in a market. Like this is nonstop we have an internal team a robust internal team that helped.

With this and.

That's why we were able to add 12%, so really say, 6%. If you took out the M&A.

In 2021, and Thats a continued focus for us this year because that as much as technology enables our people that last mile is going to have that human touch for a while for the foreseeable future and it's those people in the field that we need to make sure we have.

Working safely and efficiently and Theyre doing a great job.

Thanks, Matt.

Thank you.

Your next question comes from Rob Wertheimer with Melius Research go ahead.

Yeah, Hey, good morning, everyone I had two questions kind of related.

The fleet I mean, one is just I don't know if there is availability if demand shows up stronger or whether your fleet purchasing is a little bit supply constrained. So is there any flex up there. After the market is strong and then just a second question I know you don't talk time utilization exactly but I'm a little bit curious.

About how you stand on your ability to sort of improve those metrics versus say the last time you were really hot in 2018, roughly if you got a little bit more efficient did you reach your sort of Max you need to add more fleet, maybe maybe just talk through efficiencies. Thank you.

Sure. So I'll answer the last part first and then maybe just to take the first part when I think about time utilization.

We don't like to get to the individual components of fleet productivity, but in the vein of being helpful. Here.

As you've seen we've been driving robust fleet productivity for the past few quarters, and we think we have an opportunity.

Partly due because of how well we're running but also because the comps are a little easier here in Q1 to drive that kind of level, but then once we get into Q2, three and four of 22.

I think the <unk>.

Time utilization part of that fleet productivity opportunities.

We're going to be pretty close to exhausting, we'd be really pleased operationally. If we were able to match the levels of time U that we ran in quarters, two three and four of 21 again in two three and four of 22. So that's just.

I'm not going to tie to historical levels, but it's really really robust timing that we're very pleased with.

Don't mistake that for that we don't still have opportunity to drive fleet productivity.

Comfortably above our threshold of one and a half because we still have two other levers there and fleet productivity that we're going to be managing.

Appropriately and I think the end market supply demand dynamics the discipline in the industry all may have comfort with that number.

Well I'll take a fleet availability and when we think about what we are underwriting in the guidance right. So let's talk $3 billion in at the at the midpoint. There is no doubt we think it will continue to be challenging supply chain.

And we're really proud of what the team has been able to do working closely with our partners our suppliers in sourcing what we were able to source in 2021, we feel good that even with those challenges will be able to source. What we are we're looking for in our guidance in 2022.

And it's going to be.

Definitely comfortable on the amount of fleet. We think we can source now the timing we're expecting the timing look something like kind of a normal seasonal cadence as we've done in the past, but if we have an opportunity to bring in some fleet a little earlier. This year, we will likely do that too so that timing can move around a little bit, but I would say on the <unk>.

So we feel comfortable that we're going to be able to get what we need through the year.

Okay. Thank you.

Thanks, Rob.

Your next question comes from Jerry Revich with Goldman Sachs Go ahead.

Yes, hi, good morning, everyone.

Yes, I'm wondering if just I'm wondering if we start on GFS when you folks were.

Answering the acquisition you spoke about over time getting the margins in dollar utilization of that business closer to industry comps where are we in that journey today as you look at the 'twenty two guidance how far do you think you folks will close the gap there and can you just give us an update on.

The location count.

What you folks so you'll be able to do.

By year end to ramp that up.

Yeah, Thanks, Jason Great question.

<unk>.

I think we had shared when we did the acquisition it will take us some time to get to.

Is that kind of margin profile similar to industry tiers I think that the.

<unk>.

Real opportunities for us and we've been really excited even post acquisition is to look at the kind of growth opportunity that we have with that business. The margins will actually kind of come in line with that growth that we're anticipating as Matt mentioned, we continue to look at growing that business through cross sell and is.

We look at the cold start opportunity that we have to increase the footprint for our mobile storage for United So.

Not there yet but <unk>.

Definitely on the way.

As we really focus on.

Getting the growth that we that we expect with that business and I would just add Gerry with what we thought were going in about that this was the right team to enter this product with and that the.

The end market would be a comfortable cross sell from our customers is working out fine and so that's that's a real important part of what you stated are to reach our growth goals. So we feel good about it.

Got it okay great.

On a separate note when we look at the double digit price increases on new equipment put through by all the industry suppliers. How do you folks think about over what timeframe. Those increases are going to be pass through obviously you folks have.

Locked in pricing given your market position.

Overall, given the sharp increase I'm wondering over what timeframe do you expect the market.

Justin digested pushed through the pricing to keep returns where they need to be.

So I think and not just for us, but for the Oems as well there is a balance between just pushing all youre inefficiency downhill and making sure that your pricing downhill and making sure you do the right thing for your business. So you don't have to pass it on to your customer and Thats, what we focus on so.

Yes.

I think that the industry is in good shape right now I think it's where it's a responsible reaction to the realities of the supply chain right. So I wouldn't go to the double digit.

Area right now I know Theres a lot of a lot of talk out there, but we're not seeing those type of increases, but regardless of that this is still an opportunity for us.

Our team worked real hard out there we do have costs in the business as is everybody and we've got to make sure that we continue to manage the P&L from top to bottom and you'll see us continue to do that.

Okay.

Okay. Thanks.

Thank you.

Your next question comes from Ken Newman with Keybanc capital markets go ahead.

Hey, good morning, guys.

Right.

So I appreciate the earlier comments on fleet productivity and equipment availability.

Obviously, it seems like some of your largest suppliers are expecting deliveries for new equipment to really open up in the back half.

Just talk about a little bit more color about how you view fleet availability in the back half of this year, and just where you see the impact potentially on industry rental rates or utilization.

Yes.

I'm not sure our suppliers all know just what that means right about how fast and how robustly that supply chain will get back to normal, let's say, but I will say that they've been working really well with us and Thats why we were able to get the fleet. We are do I think there is an.

An opportunity to accelerate stuff in the first half that will probably be a bigger challenge.

Ross had asked earlier about the infrastructure Bill.

If the market, which you've come out with our guidance pretty robust feeling about the market right now as that ramps up and the supply chain goes I think there's a little bit more room for FERC for more capital I'm not betting on that which is why we brought in all the capital that we brought on in Q4.

In a normal year, maybe we would've pushed some of that out to the spring and stick with our just in time philosophy, that's not the environment. We're in right now and I think we all got to live that reality.

I really I feel for our partners because I know, they're trying to do the best they can for us and the challenges they have I havent seen clear signs of people getting ahead of the order board yet so.

I think the guide that we gave is aggressive and appropriate.

Got it.

And then for my follow up I may have missed this in your prepared comments I think in the past you've talked a little bit about.

Just your internal customer survey.

On backlogs and I'm curious if you have any color on where that's trending in.

Whether or not you expect it to trend further upwards.

Yes, so we're at the highest levels, we've been since pre pandemic and we closed our latest one in Q4, there at the highest level. So.

That momentum just continues to build.

Throughout 2021, so if we call it our customer confidence index, our CCI as really strong what gives me more comfort is that our managers. When we went through our budgeting process, we're very bullish and they're getting good feedback through their sales teams and their relationships with our customers on the ground that.

Feel really good about 2022, so I think all signs are pointing to a good growth year, which is why we came out with the strong guidance that we did.

Thank you very much thank.

Thank you Ken.

Your next question comes from Mig <unk> with Baird go ahead.

Hey, good morning.

Matt.

Appreciate all the color and comments in terms of.

The customer confidence that youre, seeing and what you're saying about infrastructure in 2023.

Starting to be additive makes a lot of sense to me.

So on that basis, I'm, just sort of trying to interpret.

The gross capex guidance that youre, providing here at $3 billion, because if you're already seeing some inflation. Presumably then the number of units that youre getting is at least modestly lower than what you've gotten in 2021.

And part.

Part of what you were saying earlier the opportunity for time utilization on the fleet is sort of largely exhausted, but demand looks pretty good. So in an environment like this when you'd normally want to see.

Spend more and add to the fleet add units to the fleet to prepare yourself for growth for further growth I should say into 2023 is infrastructure potentially accelerates.

Yes, it's a great point and it's one of the reasons why we brought in $690 million in Q4, because we exactly feel that so that's why I said earlier, the 3 billion call. It the same year over year is a little bit of a misnomer because what would we bring in a normal Q4 250, maybe 300. So we brought in almost double what we would in a normal Q4. So.

I think that's a bit of a hedge towards what youre talking about now.

Excuse me the infrastructure work starts to step up sooner.

Overall, it doesn't have to be infrastructure, and we see the supply chain remedy in the back half of the year, we will do what we did this year, we'll pull it forward, especially as we have even better visibility to 'twenty three at that point.

I still think this is pretty pretty strong guide coming out so I don't want to run away from it but if the dynamics.

Present itself is such that there is the opportunity to grow more profitable growth, we will do it and I think we've proven that this year and thats the great. The great part of the flexibility of the model.

Okay understood but.

You are not encountering any challenges with potentially securing production slots because.

You, obviously have been very successful getting early production slots and I would imagine that there are other months defeat unimportant of your suppliers and if allocation is tight.

I don't know if thats part of the discussion of a part of the challenge that you have to manage through it.

Yes, it's part of what we manage are right. So.

I would like to think that our partners feel equally strong about us as we do that.

And what their actions this past year have proven that so I'm counting on that to continue without partners. It's all different ballgame, but I think that.

We are well positioned in the dialogue.

Very transparent about how quick things move so we're working well together so that we can have the appropriate.

<unk> for the opportunity when it presents itself.

Understood and then one final question kind of a near term question if I may.

I'm kind of curious as to how youre thinking about the first quarter.

Seasonally here I mean normally we are seeing.

A bit of a revenue step down seasonally in Q1, but there's kind of a lot of moving pieces here in terms of where demand is it sounds like things are quite good.

The industry is still pretty tight so can.

Can you can you maybe do a little handholding here as to how we should be thinking about about revenue and maybe even flow through margins in Q1 versus the full year guide. Thanks.

Yes, no Matt Love to help you there.

We're going to stick to our guns and not talk about inter quarter.

<unk> results, but I do.

Q1 is always going to be.

Our lowest seasonal quarter.

<unk>.

We think this momentum will help and we're going to continue to build off that momentum in the real Bill will come in the spring as usual.

I appreciate it good luck.

Thanks.

Your next question comes from Tim Thein with Citigroup go ahead.

Thank you good morning, Matt I, just wanted to come back to the earlier comment about it.

Don't don't expect time to be the.

Real driver as we get past the first quarter. So obviously right in the mix has to do more of that heavy lifting which certainly has implications for <unk>.

For margins and I'm, just thinking back to you.

We look back at historical periods when the rate was expanding.

The average levels and.

There werent distortions from them M&A United was.

Consistently getting to that 60% kind of flow through.

The news is kind of a.

Benchmark do you think does the environment, we're in and obviously there is.

The degree of magnitude of these factors will of course.

Matter, but.

Is the inflationary environment that we're in supply chain.

Choppiness that we're in does that.

Preclude that we're we're not in terms of just thinking about could there be upside here in later quarters. If in fact, you do start to see potentially rate driving more.

Of the fleet productivity.

Yes, and just to be clear.

Don't want anybody to mistake that all of our fleet productivity no. Because you guys can make some mistakes with the math here, but all of our fleet productivity was driven by absorption.

That portion of it is going to go away.

Then getting support from all three components of fleet productivity in.

In 'twenty one so for your question of what 22 looks like in the base year as.

As far as.

The flow through it certainly could be better if we didn't have an inflationary just natural inflation on everything from copy paper to bottles of water. We all live in the World. We know what's going on out there, but we still think no policies for 55% flow through when you are growing the business of 12%, we're very pleased with that.

You make a fair point could it be higher current inflation.

Yes, Mike.

There's a lot of things that could be could be better, but we got to control what we can control and take the opportunities that present themselves and we're really pleased with the with the guide that we gave you.

Yes.

No no no I know.

And then.

Second is just on the revenue guide if we just make our own assumptions on fleet growth base.

Based on the Capex guide.

Assumptions, obviously, theres, a lot of them, but rate and other factors.

And by our math anyway suggest that.

The equipment rental piece.

Could potentially grow maybe in excess of what's implied but.

That's not the entire.

There is other factors that.

Of course added up into that total revenue so are there.

Other lines, obviously, there are a lot smaller but are there other factors that we should be thinking about.

Sales of new equipment, probably arent growing but are there other factors that maybe you can help us just think about in terms of what would potentially goes against equipment rental growth.

The context.

Top line.

Hey, Tim It's Jeff Let me, let me see if I can help with the math a little bit so.

If you think about the total revenue growth rate at let's call it $11 seven at the midpoint.

Based on again kind of midpoint of what we're looking at for used.

You could assume that the growth within that number for us, it's probably something that midpoint in the area of about eight 5%.

So that should that should help a little bit and kind of recalibrating the math on what you might.

Might be using for rental growth within that total.

Total revenue.

Piece so that.

I hope that's helpful right to just sort of recalibrate, where where do you think that rental could shake out.

Got it.

I was thinking other like ancillary and other.

We can we can chat offline on that and then.

Just one quick one Jeff just the.

Operating cash flow guide.

Just getting from from EBITDA.

Almost half a billion dollars a year on year operating cash flows effectively flat.

Working capital potentially or cash taxes, what are the big components of that.

Both actually.

So right now we're looking at cash taxes being up somewhere in the neighborhood of about $200 million and that's largely coming from the increase in the pre tax income that we're expecting and then the rest as you mentioned is working capital and that's really more about kind of the normal payment terms and in margin.

Just timing of payment on the Capex.

Understood. Okay. Thank you very much.

Sure. Thanks, Jeff.

Your next.

<unk> comes from Stanley Elliott with Stifel go ahead.

Hey, Matt Hey, guys. Thank you guys for fitting me in.

Quick question with all the survey work you guys are doing and talking to people on the ground.

Very bullish and excited.

Anybody express any concerned around labor availability not necessarily for you will hire of choice really more for the contractor base.

What risk if any does that present to some of the outlooks that we're thinking about.

So for as long as I've been in the business contracted it.

Getting the labor, but it certainly exacerbated.

In this post Covid world, we're in but.

But we haven't seen project delays or cancellations from it so that's really the important part.

But it's it's topical I think all of us on the supply side and on the on the build side, meaning our customers are all working harder than we ever had before to bring it in.

<unk>.

It's just part of the new the new rules of the game, but but they're getting it done and as I said the.

Very topical, but not any cancellations or delays that we see because of it.

And I guess switching gears I'll ask a quick question about the international business because there is some stimulus and some infrastructure spend and in various other parts of the world where you now have a footprint how is that business performing up to expectations.

Is that going to get as much of the growth Capex, just curious how youre thinking about that.

Yes, so actually.

Our teams both in Europe , and New Zealand, Australia, which as you guys know two totally different businesses with the European part coming from the Baker acquisition and the New Zealand, Australia group coming from the General Finance acquisition with mobile storage are both doing great. They are.

Actually both grown in the high 20% in Q4, there there really.

The European folks who've been with us longer, but they've really taken to being part of the United team and very pleased that we're able to fund that growth.

I would say both exceeded expectations a little bit admittedly.

Team in Europe has had to deal with the severe drop during COVID-19 , but they bounce back from that and got back to pre pandemic levels. So we're very pleased with the results there.

Perfect. Thanks, so much and best of luck.

Okay.

Your next question comes from Scott Schneeberger with Oppenheimer go ahead.

Thanks very much.

The I guess I'll start off on specialty just curious.

An acceleration in the cold start plans for this year, just if you could delve a little bit more into maybe some specificity.

What specialty categories, you're pursuing and and you touched earlier Matt.

On.

GSM and.

It's progressing well, but just curious if you could address maybe just come in on this.

Cost savings and revenue synergies is that where you wanted it to be at this point or are you.

On that point, just curious on that progress.

Yes sure.

Just on that last part is there is.

It wasn't a cost play right. So <unk> was not a cost play in any way shape or form so theres not a lot has to add there because that was grow grow grow play, 100% and we're pleased with what we're seeing on that so as you can imagine they're going to have.

Recent amount of that targeted 40 cold starts that we're going to have this year, but the other area that we'd want to do is our own business right. Our portable sanitation business has a lot of growth goals and we continue to grow parts of our power <unk> HVAC business in specialty overall, but the leading two product lines that we'll be doing.

Cold starts and would certainly be mobile storage and then our reliable on site with the portable sanitation.

Thanks appreciate that and then.

The with regard to to just the purchasing from the Oems. This year, obviously you.

Typically October you go out to them and then obviously they have been supply chain issues. So I'm just curious if you could share with us.

Typically purchased from for each asset classes, one or two vendors we are forced to go broader this year.

Obviously, you sound very confident on your ability to procure equipment. So just curious on some of the behind the scenes of interacting with your partners.

Have you had to go in different directions or add a third per asset class and then what type of fleet age are you are you looking for and how do you weigh that with repair and maintenance expense.

On the on the go forward, what's implied in the guidance and where could that be longer term. Thanks.

Yes, so on the on the brands that we're buying from the partners that with partner if we certainly expanded from just not our top and each one but maybe we had to go to number three we're always dealing with at least two vendors in each product category. So maybe we extended to a couple of other approved suppliers where not to.

No no.

No knockoff brands or anything like that but just people that werent, winning one of the top two spots, but very capable product suppliers. So we definitely expanded into number three an even number four in some areas to achieve the.

The capital growth that you saw us achieve in 'twenty, one and we expect we're going to be doing that we actually found some some pretty good results from some of these folks who are looking to get in with the team in a bigger way than maybe they have historically, so that's an opportunity for us to continue to find new ways to solve problems for customers and.

The Oems and us our teammates we have to communicate with each other regularly it's not just the price negotiation October and then see you next year. So these guys are interacting at the ground level daily on deliveries on slots, whether they are slipping what are there whether there is opportunity to buy more and thats an ongoing relationship.

The customers.

As far as the fleet age.

Yes, I'll take that yeah. So the fleet age really is more of an output for us and is really going to depend on fleet mix, what we buy what we sell there isn't necessarily a target that we're working towards and even on the R&M side for repair and maintenance less of a target per se and definitely not tied to fleet age that's more.

<unk> when we do the calculations of our rental useful life by asset, where we then determine the right time at which to sell the asset right considering what it would end up costing.

Costing us as we think about repair and maintenance as that asset gets older. So that's really where we would consider the impact of repair and maintenance within the.

Kind of that are you all our rental useful life calculation.

Helpful.

It is thanks, Jeff I appreciate it.

Sure.

And the last question comes from Courtney <unk> with Morgan Stanley go ahead.

Hi, Thanks, guys. Just wondering if you can delve back into the infrastructure discussion a bit.

Can you just help us understand.

Where your portfolio is kind of ore which types of projects. Your portfolio is most exposed to when we think about the different components of the bill whether it's.

More traditional roads and bridges or.

And water or the investment in the grid. If you can just help us think about tax I think you had mentioned some there were some.

And the message boards and traffic continue acres that might be a little bit more exposed to the traditional elements.

And then also whether you would expect your specialty portfolio to have a significant impact from some of that spend.

Sure Accordingly, so the infrastructure definition.

It can be quite broad for some and it is for us in the areas that we are able to participate and I think the funding as you saw has been earmarked for a broad array of <unk>.

End markets, so whether it's road and highway whether it's to the electric grid and power infrastructure.

Rail services broadband right, so think about broadband that'd be something that our French team.

Has participated highly and historically, so specialty will get the opportunity specifically power and trench, but even our mobile storage folks have the opportunity. These are all become job site, even if theyre alongside the road or in.

The way to the airport that's all fenced off this is the way the infrastructure projects run, but we think whether it's.

Public transit water infrastructure is another opportunity all of these are opportunities that are going to require our products. So.

Almost all other than if it's.

Literally buying the trains right almost all of this is going to require our needs for the money Thats earmarked an infrastructure bill. So we feel really really good about.

And can you just remind us again how.

What percentage of your rental revenue at this point comes from infrastructure today.

Yeah.

Sure.

Probably yes, I don't know if we had share but it's about mid teens.

Have it in the top of my head test can get back to you with that but it's probably somewhere in the mid teens.

And also it depends how you define it gets.

Getting back to the challenges of.

If you were to say power hours about 10% of our mix.

That's not included in that number Matt referenced so it really gets back to how you define it and how do we kind of define it in our definitions.

Okay, great. Thanks, guys.

Thanks Courtney.

And that is it for the Q&A any closing remarks.

Thank you operator, I want to thank everyone for joining us as we kick off another year of growth we're off to a great start and we look forward to sharing our progress with you in April in the meantime, if you have any questions. Please feel free to reach out to Ted. Thank you operator, you can now in the call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Good morning, and welcome to the United Rentals Investor Conference call.

Please be advised that this call is being recorded.

Before we begin note that the company's press release comments made on today's call and responses to your questions contain forward looking statements.

The company's business and operations are subject to a variety of risks and uncertainties many of which are beyond its control.

Consequently, actual results may differ materially from those projected.

A summary of these uncertainties is included in the Safe Harbor statement contained in the company's press release.

For a more complete description of these and other possible risks please.

Please refer to the company's annual report on Form 10-K for the year ended December 31 2021.

Well as to subsequent filings with the SEC.

You can access these filings on the company's website at Ww Dot.

Rentals Dot com.

You should also note that the company's press release and today's call include references to non-GAAP terms.

Such as free cash flow adjusted EPS, EBITDA and adjusted EBITDA.

Please refer to the back of the company's recent investor presentations.

A reconciliation from each non-GAAP financial measures.

The most comparable GAAP financial measures.

Okay.

Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer.

And Jessica Graziano, Chief Financial Officer.

I will now turn the call over to you Mr. Flannery Mr. Flannery you may begin.

Okay.

Thank you operator, and good morning, everyone. Thanks for joining our call.

I know theres a lot of interest in 2022.

But before I go there I want to take a look back.

Does the foundation for our current outlook can be found in our 2021 performance.

I'll start with our strong finish to the year.

As you saw yesterday, our record results for the quarter solidly outperformed the expectations for growth and profitability.

We grew fourth quarter rental revenue by 25% year over year and total revenue by over 21%.

And our adjusted EBITDA was 26% higher than a year ago with a margin improvement of 170 basis points.

This translated to a solid flow through of 55%.

These gains kept our full year performance that was far better than we could have imagined back in January .

Our team is firing on all cylinders with strong execution in the field.

<unk> cost control.

Effective investment in the business and thoughtful management of our resources, starting with our account base.

In short it is.

Our people, who outperformed expectations and our numbers reflect that.

I want to stay with this theme for a minute and summarize some of the accomplishments for the year.

We maintained a strong safety record, finishing with a full year recordable rate of <unk> 79, and that was while integrating multiple acquisitions.

We also grew our net head count by 12% roughly half of that came through M&A.

And the $1 4 billion of capital we allocated to acquisitions is generating attractive returns.

In fact, our 2021 return on invested capital improved by 140 basis points to end the year at 10 three.

We also generated $1 5 billion of free cash flow last year after investing a record $3 billion of rental capex.

And we source that equipment in the midst of a supply chain disruption.

On the ESG front, our company recently earned an upgrade to an a rating by MSCI.

We have received similar scores from other ESG rating agencies, reflecting our commitment to our progressive culture.

Environmental social and governance matters have been drivers of value in our business for more than a decade, and it's gratifying to see that recognize.

Now on to 2022.

As you can tell from our guidance, we're very confident in our industry's outlook for strong growth this year.

A number of key indicators have been moving the needle higher for months, including the broad recovery in construction and industrial demand. The continued strength of the used equipment market.

And then economy, that's moving in the right direction. Despite some lingering challenges.

Given these dynamics, it's not surprising that industry sources show a steady increase in confidence among contractors.

Our customer confidence index improved throughout 2021, ending at its highest point at the end of the year.

And importantly, the same optimism was echoed by our field leaders last month as we work through our annual planning process.

And we heard it again at our virtual meeting we had our annual management meeting virtually two weeks ago and this meeting is always a great opportunity to get everyone aligned on goals and strategies and it's clear that our people are fired up for the opportunity.

They can see the benefits of the countless improvements that we've made over the past decade, both operationally and also with our customer service.

And they know those efficiencies count for a lot as we grow the top line.

The biggest signpost pointing to ongoing growth in 2022 is the diversity of the demand that we're seeing in our end markets.

In the fourth quarter, we grew rental revenue by double digits across all of our regions and all vertical showed positive growth as well.

These were solid increases with rental revenues from non res construction verticals up 24% year over year.

And infrastructure up 11%.

Industrial also grew 11% with strong gains in refining metals, <unk> minerals and power.

And it is notable that both non res and industrial picked up steam in the back half of 'twenty, one with year over year rental revenue gains in Q4 coming in higher than those of Q3.

Our specialty segment had another strong performance with every line of business growing double digit year over year.

The segment as a whole reported rental revenue gain of 45%, including a pro forma growth of 28%.

This year, we're planning for around 40 cold starts and specialty following the 30 that we opened this last year.

Specialty is key to our competitive differentiation and given the segment's history of high returns expansion will continue to be a priority for us.

I'm sharing these numbers to underscore the point I made at the start of my comments that the building blocks for our current outlook. We're late in 2021.

Our core markets have recovered faster than expected and the underlying construction and industrial forecast are positive.

The broad based acceleration in the last 12 months has become the foundation for a new cycle of growth.

And for the first time since Covid arrived we're seeing a sustained improvement in long term visibility, which gives us some insight into future market conditions and thats, a huge plus for us after two years of unchartered waters.

We've been expanding our infrastructure capabilities for years, and we have a rock solid value proposition with traction in the right verticals for this bill.

We expect to see some benefits as early as 2023.

Another tailwind and our future is the relocation of manufacturing operations back to the U S.

Onshoring initially drives demand for construction followed by the need for our industrial services once they are up and running.

The pandemic has caused manufacturers to rethink how they operate and we are already seeing some funding for new projects tied to this trend.

Along with the increasing customer demand comes a large responsibility to have equipment available for rent.

And I mentioned that we brought in $3 billion of fleet last year when equipment wasn't easy to find and that was a homerun for the company and for our customers.

We're continuing to work with our strategic partners to land a similar amount of fleet this year.

And finally before just because over the numbers I want to mention an announcement, we made yesterday and the milestone that's coming up later this year.

The announcement is our share repurchase program. We expect this program to return $1 billion to shareholders in 2022.

And the milestone I mentioned is our anniversary.

United Rentals will turn 25 years old this year and as you know we've been a growth story from day one.

Even so I.

I don't think Theres been a time in our history, when our strategy culture and financial strength have been more of an advantage than they are right now in this new cycle.

We have a highly engaged team.

So customer service network and industry, leading scale that matches the market opportunity.

When we built these levers into the business to create shareholder value.

And they did their job in 2021.

Now we will take that to the next level this year and for the foreseeable future.

And with that I'll ask Jeff to cover the results and then we'll go to Q&A Jess over to you.

Thanks, Matt and good morning, everyone.

Our fourth quarter results exceeded expectations behind better seasonal trends in rental revenue and continued discipline in cost.

We delivered record results with our total revenue rental revenue and adjusted EBITDA, surpassing pre pandemic levels for both the quarter and the full year.

The momentum we carried out of the quarter is reflected in the growth you see in our 2022 guidance.

And even as we invested record amounts of Capex last year, we generated a significant amount of free cash flow at just over $1 $5 billion and we expect to generate even more this year.

And more in 'twenty two guidance in a bit let's dive a little deeper into the results for the fourth quarter.

Rental revenue for the fourth quarter was $2 3 billion, an increase of $458 million or 24, 7% year over year.

Within rental revenue increased.

<unk> increased $345 million or 22, 1%. Our average fleet size was up 13, 3% or a $207 million tailwind to revenue.

Better fleet productivity provided an additional 10, 3% or $161 million.

And rounding out the change we are as the inflation impact of one 5%, which was a drag of $23 million.

Also within rental ancillary revenues in the quarter were up about $92 million or 36%, that's primarily due to increased delivery fees and other pass through charges.

Re rent was up $21 million.

<unk> sales for the quarter were 324 million, which was up $49 million or about 18% from the fourth quarter last year and.

They used market continues to be very strong, which supported higher pricing and margin in the fourth quarter.

Adjusted used margin was 52, 2%, which represents a sequential improvement of 190 basis points and a year over year improvement of 970 basis points.

Our use of proceeds in Q4 recovered a very healthy 60% of the original cost for fleet that averaged over seven years old.

Let's move to EBITDA.

Adjusted EBITDA for the quarter with just over $1 3 billion, an increase of 26% year over year or $272 million.

The dollar change includes a $282 million increase from rental and in that OTR contributed 245 million ancillary was up $33 million and reruns added $4 million.

Sales helped adjusted EBITDA by $52 million.

SG&A was a headwind to adjusted EBITDA of $58 million in part from the reset of bonus expense that we discussed on our prior earnings calls.

We also had higher commissions on better revenues and higher journey, which continues to normalize.

Other non rental lines of business were also a headwind of $4 million.

Our adjusted EBITDA margin in the quarter was 47, 2%.

170 basis points year over year with a solid flow through of 55%.

This reflects in large part strong underlying cost performance in the fourth quarter, which absorbed costs that continued to normalize inflation headwinds and the fourth quarter impact of our bonus reset.

I'll shift to adjusted EPS, which was $7 39 for the fourth quarter, that's up 47% or $2 35 versus last year, primarily from higher net income.

Looking at Capex gross rental Capex was $690 million the largest fourth quarter, we've ever had.

We put that fleet to work supporting the demand we saw in the quarter, which will carry into the start of 2022.

Our proceeds from used equipment sales were $324 million, resulting in net capex in the fourth quarter of 366 million, that's up $465 million versus the fourth quarter last year.

Now turning to ROIC, which was a healthy 10, 3% on a trailing 12 month basis, that's up 80 basis points sequentially and 140 basis points year over year.

Importantly, our ROIC continues to run comfortably above our weighted average cost of capital.

Let's turn to free cash flow and the balance sheet.

As I mentioned earlier, we generated over $1 5 billion and free cash flow after investing a record $3 billion in Capex last year.

We deployed that free cash flow to help fund over $1 4 billion and acquisition activity.

We've also continued to delever the balance sheet, which is in great shape.

Leverage was two two times at the end of the fourth quarter, that's down 20 basis points sequentially and versus the end of 2020.

Liquidity at the end of the year remains robust at over $2 85 billion.

That's made up of ABL capacity of just over $2 65 billion and availability on our air facility of $57 million.

Also had $144 million in cash.

Now, let's look forward now and talk about our guidance for 2022, which we shared in our press release last night.

The headline here is our plan to deliver a year of strong profitable growth servicing our customers in this new cycle.

Our total revenue range is supported by solid demand, we expect to see broadly across our end markets in 2022, equating to almost 12% year over year growth at the midpoint.

That will be supported by our significant investment in growth capital included in the growth Capex guidance.

Our adjusted EBITDA range includes the impact of our remaining diligent on costs as we manage inflation this year at.

At the midpoint, we will generate over $5 billion of adjusted EBITDA growing mid teens year over year implied margins expand over 100 basis points with flow through in the mid fifties.

We expect to generate another year of significant free cash flow getting to $1 6 billion at the midpoint.

The strength of our cash flow continues to provide significant firepower available to invest in growth, while maintaining a healthy balance sheet.

It also provides an opportunity to return cash to shareholders as Matt mentioned this week, our board authorized a new $1 billion share repurchase program, which we intend to complete in 2022.

This leaves us plenty of capacity given our leverage targets for M&A.

Now, let's get to your questions. Operator would you. Please open the line.

Thank you we will now take your questions too.

To ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Please stand by while we compile the Q&A roster.

Your first question comes from the line of David Raso with Evercore ISI. Please go ahead.

Hi, good morning.

Listening to your comments.

Your cash flow, obviously is kind of proven itself now over the last decade, or so but I'm curious more on the margins.

10 years your EBITDA margins have averaged around 46, 7%. This year, you're guiding 46, five which is a nice incremental margin.

From 'twenty, one, but I'm just curious when you look at the margin profile and how you run the company and I know, it's been a little more about returns.

But still I'm just curious when you look at the margin profile and then I know some of the margin issue has been you've bought some businesses with lower margins, but better return on capital profiles, but I'm just curious how do you think about the margins for the company.

If we were comfortable with the demand profile for the next few years, whereas the margin potential you think be it cost of rental which was also right now still below the last 10 year average or the EBITDA.

Total company level, just curious how you think about it.

As for the business model.

So David you.

Accurately touched on.

The acquisitions being a little bit of a misnomer to the headlines. So you could look at a headline I think we even have a slide in the deck, where EBIT looks like it may have flattened out since 2014 15, but when you aggregate the acquisitions that we've done since that period of time, we've acquired.

<unk> almost $3 billion worth of revenue at an average EBITDA of 38%. So I'm actually really pleased that the team was able to keep the high level of margins that we expect while absorbing notes net of your question about where future margins can be.

The honest answer is it depends on what we acquire how we grow like what are the businesses, we grow in but we're much more focused on returns.

And can we better be a better owner, that's why that we could turn that 38% margin into mid 40, because we felt we could be a better owner for those businesses in our network and Thats. The way, we will look at it in the future.

22 at the midpoint guide is up margins.

Nicely up so we feel really good about that.

And we wouldn't just look at margins when we're looking at where we're going to get growth from we're going to look at overall returns is the way I'd answer that.

When you look at the profile for 'twenty, two the buckets from labor costs maintenance.

Arts or even delivery cost, where there is some inflationary pressure.

I would say the Incrementals for next year, maybe a little better than we were.

We're thinking you could at least guide to initially what are some of the buckets, you've been able to maybe control those costs or some find some other offsets that we can be comfortable with that guide.

Okay.

Good morning, David just yet.

As we think about 2022, you're right, but it's definitely going to be inflationary environment, but.

So there's nothing that we would highlight to say.

I think an extraordinary effort one way or the other.

We feel we feel really good that as we think about just starting with the kind of growth that will generate.

That's going to then also continue to give us the opportunity as we stay diligent on cost to be able to deliver that margin benefit and and that flowed through in the <unk> and we feel really good about that so nothing I would point to specifically I think that.

That's causing us any.

Extraordinary action.

And just to wrap up then I'll leave it at this the fourth quarter just reported anything abnormal in that help provide that.

EBITDA beat more so even in the revenue beat.

And I think even the rental level margin before and the used equipment sales were also a little bit higher than we were modeling. So just want to make sure. There's nothing unique in that number.

No no just obviously the revenue come in higher always helps with the fixed cost portion, but just to get at this point just good solid P&L management top to bottom.

Alright, Thank you very much.

Thanks, Dave.

Your next question comes from Ross Gilardi with Bank of America. Please go ahead.

Hey, good morning, guys.

Hey, Ross.

I was interested in your comments that the benefits from federal infrastructure could kick in as early as 2023, I mean, I would think that'd be the latest that would kick in so can you give us a little more flavor on what Youre hearing from Washington is taking longer than you expect for the funds to get appropriated and can you give us a little more sense of how your go to market to make sure.

Or that you are capturing the maximum portion of the project activity that will come out of the bill.

Sure Ross so.

As you know we've been focused on infrastructure for quite some time.

Because we know how big the latent demand plus long before the before the Bill we're just not seeing that money be appropriated to shovel ready projects, but we're still seeing our infrastructure revenue grow we've talked about it growing 11% in Q4. So we're we're very well positioned and when you think about the type of.

Large customers the largest civil contractors in the U S that will benefit from this it plays right into our.

Assets to help fortify that infrastructure, whether they'd be message boards traffic continue waiters. So we really like where we're positioned and we think we'll probably be able to out punch or our weight. When net infrastructure Bill does get turned into shovel ready projects, but we haven't seen seen a lot of the funding turn into actual rental opportunity.

That will start happening in 'twenty three if it happened sooner.

That's great news will be ready for it.

But I mean does it feel like the timing is getting pushed out just because of that.

Because if you haven't seen anything yet I mean do you have I get that Youre ready now in your infrastructure.

Business is performing very well now and youre investing but.

Typically on the bill itself.

It does it does it feel like it's just going to.

Most likely be more of a second half 'twenty three type of event or.

Can you give us a flavor of anything youre hearing.

So we've been talking about this bill for three years I think it will manifest into shovel ready projects, maybe as early as the back half of this year, but as I said in the prepared remarks, we're thinking by 'twenty three we will start being able to take advantage of that funding our customers be able to put it to work and therefore need our services you think about the supply chain needs once the money is appropriate.

We're not terribly worried about that timing one of the things we've learned in the last two years is how quick we can flex up and down depending upon what the needs are.

And Rob just to add a quick comment on the timing.

Okay and do you have a capex for federal infrastructure Bill built into your 22 Capex guide at all I mean, I presume youre not going to.

I presume you're going to buy at least some of that experience of 2023 and I'm. Just wondering does that represent upside to your 2022 Capex outlook, if you get a little bit more visibility.

By the middle of this year.

<unk>.

We feel really good about where we are with capex for this year and even the 3 billion headline number for 'twenty two is a little bit.

Understated because you saw what we brought in almost $700 million in Q4 and a lot of that is we could call that we've pulled it in advance for what we think is going to be a robust growth year in 2002.

Okay. If I could just squeeze in one more just on oil and gas can you just comment on what you are seeing I would assume some activities coming back in any way to think about the mix tailwind.

As activity in the oil patch picks up again, assuming it does.

Yes, so as I had mentioned in prepared remarks, all verticals that we participate in group year over year in oil and gas did as well when you think about the upstream downstream midstream combination. They grew by 15% in Q4, and now thats down to about 9% of our total revenues now, but we're pleased for an end market.

And the.

Singing the blues for a couple of years now we're pleased for our people out there specifically those out of the shale, Texas to get some of this work activated and drive a little bit more volume there.

Thank you thanks.

Thanks Ralph.

Your next question comes from the line of Steven Fisher with UBS go ahead.

Thanks, Good morning on the.

Capital allocation side as you pointed out you still have a lot of flexibility even with the $1 billion of <unk>.

Buybacks I'm just curious what's most important to you when you think about the M&A landscape is at <unk>.

First adding more specialty is it getting more access to equipment technicians is it having more branch density or just really being opportunistic regardless of what the value proposition is if it's interesting enough.

Would you right kind of what's most important to you in this M&A front and where youre seeing.

The opportunities come to you at the moment.

Sure Stephen as you noted with.

This the capital allocate the $1 billion share repo does not prevent us at all from M&A. So we're real excited and the pipeline is broad it's broad both in scale and has been for the last year and also and end market opportunities. So when we think about how we prioritize first and foremost think about like the GSM deal.

Anytime, we can add a new product or service to our customers.

That is a homerun the integrations easier we get to put our cross sell engine to work, especially if theyre not fully formed so to speak where they have white space and they are not operating in all of our msas that we operate in that makes the growth opportunity really strong and makes us a better owner. So thats priority number one second of specialty slightly bit.

Specialty has more white space for us even geographically, but even through penetration perspective, So we think that would be our secondary <unk>.

<unk>.

We feel were really good integrators, where we have a history of doing well with M&A and we Jeff and his team have put together a balance sheet that affords us to do it so.

Still very much on our radar.

Great and then just to continue on with the maintenance technicians Im curious how utilized your folks are there at the moment.

In a lot of fleet and I'm curious how much more fleet.

Can handle are you able to hire them.

At the pace of your fleet growth to be able to make sure that you maintain your equipment adequately and get it out on rent back on rent quickly.

Quickly and efficiently.

Yes, I would say that we have run and you see it show up in our fleet productivity, we have run about his heart.

I can remember in this past year, particularly in the back half of 'twenty, one and our team held up really strong did a great job and we didn't have to rely too much on third party or over time, which is why you saw the margin come in well. So we feel good about where we are but recruiting especially in a market. Like this is nonstop we have an internal team a robust internal team that helps.

With this and.

That's why we were able to add 12%, so really say, 6%. If you took out the M&A.

In 2021, and that's a continued focus for us this year because that as much as technology enables our people that last mile is going to have that human touch for a while for the foreseeable future and it's those people in the field that we need to make sure we have.

Working safely and efficiently and Theyre doing a great job.

Thanks, Matt.

Thank you.

Your next question comes from Rob <unk>.

Here with me.

<unk> Research go ahead.

Yeah, Hey, good morning, everyone I had two questions kind of related.

Sure. So I'll answer the last part first and then maybe just to take the first part when I think about time utilization.

We don't like to get to the individual components of fleet productivity, but in the vein of being helpful. Here.

As you've seen we've been driving a robust fleet productivity for the past few quarters, and we think we have an opportunity.

Partly due because of how well we're running but also because the comps are little easier here in Q1 to drive that kind of level, but then once we get into Q2, three and four of 22.

I think the time utilization part of that fleet productivity opportunities.

That'd be pretty close to exhausting, we'd be really pleased operationally. If we were able to match the levels of time U that we ran in quarters, two three and four of 21 again in two three and four of 22. So that's just.

Not going to tie to historical levels, but it's really really robust timing that we're very pleased with.

Don't mistake that for that we don't still have opportunity to drive fleet productivity.

Comfortably above our threshold of one and a half because we still have two other levers there and fleet productivity that we're going to be managing.

Appropriately and I think the end market supply demand dynamics the discipline of the industry all may have comfort with that number.

Well I'll take a fleet availability when we think about what we are underwriting in the guidance right. So let's talk of $3 billion in at the at the midpoint. There is no doubt we think it will continue to be challenging supply chain.

And we're really proud of what the team has been able to do working closely with our partners our suppliers in sourcing what we were able to source in 2021, we feel good that even with those challenges will be able to source, what where we're looking for in our guidance in 2022.

And it is going to be.

So we feel comfortable that we're going to be able to get what we need through the year.

Okay. Thank you.

Thanks, Rob.

Okay.

Your next question comes from Jerry Revich from Goldman Sachs Go ahead.

Yes, hi, good morning, everyone.

Yes, yes, I'm wondering if just I'm wondering if we start on GFS when you folks were.

The location count.

What you folks so you'll be able to do.

By year end to ramp that up.

Yeah, Thanks, Gary Great question.

I think we had shared when we did the acquisition it will take us some time to get to.

Is that kind of margin profile similar to industry peers I think that the.

<unk>.

We look at the cold start opportunity that we have to increase the footprint for our mobile storage for United So.

Not there yet but <unk>.

Definitely on the way.

As we really focus on.

Getting the growth that we that we expect with that business and I would just add Gerry with what we thought we were going in about that this was the right team to enter this product with and that the.

The end market would be a comfortable cross sell from our customers is working out fine and so that's that's a real important part of what you have stated are to reach our growth goals. So we feel good about it.

Got it okay great.

Locked in pricing given your market position, but overall given the sharp increase I'm wondering over what timeframe do you expect the market to address.

Justin digested pushed through the pricing to keep returns where they need to be.

So I think and not just for us, but for the Oems as well there is a balance between just pushing all youre inefficiency downhill and making sure that your pricing downhill of making sure you do the right thing for your business. So you don't have to pass it on to your customer and Thats, what we focus on so.

<unk>.

I think that the industry is in good shape right now I think it's where it's a responsible reaction to the realities of the supply chain right. So.

Go to the double digit.

Area right now I know Theres a lot of a lot of talk out there, but we're not seeing those type of increases, but regardless of that this is still an opportunity for us.

Our team worked real hard out there we do have cost creep in the business as is everybody and we've got to make sure that we continue to manage the P&L from top to bottom and you'll see us continue to do that.

Okay. Thanks.

Thank you.

Your next question comes from Ken Newman with Keybanc capital markets go ahead.

Hey, good morning, guys.

Good morning.

So I appreciate the earlier comments on fleet productivity and equipment availability.

Obviously, it seems like some of your larger suppliers are expecting deliveries for new equipment to really open up in the back half can you just talk about a little bit more color about how you view fleet availability in the back half of this year, and just where you see the impact potentially on industry rental rates or utilization.

Yes.

Im not sure our suppliers all know just what that means right about how fast and how robustly that supply chain will get back to normal, let's say, but I will say that <unk> been working really well with us and Thats why we were able to get the fleet. We are do I think there is.

An opportunity to accelerate stuff in the first half that will probably be a bigger challenge, but rosset asked earlier about the infrastructure Bill.

If the market, which is coming out with our guidance pretty robust feeling about the market right now as that ramps up and the supply chain goes I think there's a little bit more room for FERC for more capital I'm not betting on that which is why we brought in all the capital that we brought in in Q4.

Nor in a normal year, maybe we would've pushed some of that out to the spring and stick with our just in time philosophy, that's not the environment. We're in right now and I think we all got to live that reality.

And I really I feel for our partners because I know, they're trying to do the best they can for us and the challenges they have.

Haven't seen clear signs of people getting ahead of the order board yet so.

I think the guide that we gave is aggressive and appropriate.

Got it.

And then for my follow up I may have missed this in your prepared comments I think in the past you've talked a little bit about.

Just your internal customer survey.

On backlog and I'm curious if you have any color on where that's trending in.

Whether or not you expect that to trend further upwards.

Yes, so we're at the highest levels, we've been since pre pandemic and we closed our latest one in Q4, there at the highest level. So.

That momentum just continued to build.

Throughout 2021, so if we call it our customer confidence index, our CCI as really strong what gives me more comfort is that our managers. When we went through our budgeting process, we're very bullish and they're getting good feedback through their sales teams and they are our relationships with our customers on the ground that.

Feel really good about 2022, so I think all signs are pointing to a good growth year, which is why we came out with the strong guidance that we did.

Thank you very much thank.

Thank you Ken.

Your next question comes from Mig <unk> with Baird go ahead.

Hey, good morning.

Matt.

Appreciate all the color and comments in terms of.

The customer confidence that youre, seeing and what you're saying about infrastructure in 2023 starting.

Starting to be additive makes a lot of sense to me.

So on that basis, I'm, just sort of trying to interpret.

The gross capex guidance that youre, providing here at $3 billion. Because if you are seeing some inflation, presumably then the number of units that youre getting is at least modestly lower than what you've gotten in 2021.

And.

What you were saying earlier the opportunity for time utilization on the fleet is sort of largely exhausted, but demand looks pretty good. So in an environment like this when you normally want to see.

Spend more and add to the fleet add units to the fleet to prepare yourself for growth for further growth I should say into 2023 is infrastructure potentially accelerates.

Yes, it's a great point and it's one of the reasons why we brought in $690 million in Q4, because we exactly feel that so that's why I said earlier, the $3 billion call. It the same year over year is a little bit of a misnomer because what would we bring in a normal Q4 250, maybe 300. So we brought it almost double what we would in a normal Q4.

So I think that's a bit of a hedge towards what youre talking about now.

Excuse me if the infrastructure work start to step up sooner.

Activity overall, it doesn't have to be infrastructure, and we see the supply chain remedy in the back half of the year, we'll do what we did this year, we'll pull it forward, especially as we have even better visibility to 'twenty three at that point.

I still think this is pretty pretty strong guide coming out so I don't want to run away from it but if the dynamics.

Our present itself is such that there is the opportunity to grow more profitable growth, we will do it and I think we've proven that this year and thats the great. The great part of the flexibility of the model.

Okay understood.

You are not encountering any challenges with potentially securing production slots because.

You, obviously have been very successful getting early production slots and I would imagine that there are other months defeat unimportant of your suppliers and if allocation is tight.

I don't know if thats part of the discussion of our part of the challenge that you have to manage through it.

Yes, it's part of what we manage are right. So.

I would like to think that our partners feel equally strong about us as we do that and what their actions. This past year have proven that so I'm counting on that to continue without partners. It's all different ball game, but I think that I think we're well positioned in the dialogue.

Very transparent about how quick things move so we're working well together so that we can have the appropriate fleet for the opportunity that when it presents itself.

Understood and then one final question kind of a near term question if I may.

I'm kind of curious as to how youre thinking about the first quarter.

Seasonally here I mean normally we are seeing.

A bit of a revenue step down seasonally in Q1, but there's kind of a lot of moving pieces here in terms of where demand is it sounds like things are quite good.

The industry is still pretty tight so.

Can you can you maybe do a little handholding here as to how we should be thinking about about revenue and maybe even flow through margins in Q1 versus the full year guidance.

Yes, no Matt Love to help you that we're going to stick to our guns and not talk about inter quarter.

Results, but I do.

Q1 is always going to be.

Our lowest seasonal quarter.

<unk>.

We think this momentum will help and we're going to continue to build off that momentum in the real Bill will come in the spring as usual.

Appreciate it good luck.

Thanks.

Your next question comes from Tim Thein with Citigroup go ahead.

Thank you good morning, Matt I, just wanted to come back to the earlier comment about.

Don't don't expect time to be the real driver as we get past the first quarter. So obviously right in the mix has to do more of that heavy lifting which certainly has implications for.

For margins and I'm just thinking back.

You look back at historical periods win rate was expanding.

It was.

The average levels and.

And there werent distortions from an M&A United was.

Pretty consistently getting to that 60% kind of flow through in a minute.

Often use is kind of a bare.

Benchmark do you think does the environment, we're in and obviously there is.

The degree of magnitude of these factors will of course.

Matter, but.

Is the inflationary environment that we're in supply chain.

Choppiness that we're in does that.

Preclude that we're we're not in terms of just thinking about could there be upside here in later quarters. If in fact, you do start to see potentially rate driving more of that.

Of the fleet productivity.

Yes, and just to be clear.

Don't want anybody to mistake that all of our fleet productivity not because you guys can make some mistakes and happier, but all of our fleet productivity was driven by absorption.

That portion of it is going to go away.

They are getting support from all three components of fleet productivity in.

In 'twenty one so for your question of what 22 looks like in the base year as.

As far as.

The flow through it certainly could be better if we didn't have the inflationary just natural inflation on everything from copy paper to bottles of water. We all live in the World. We know what's going on out there, but we still think no policies for 55% flow through when youre growing the business of 12%, we're very pleased with that.

You make a fair point could it be higher current inflation.

Yes, Mike there is a lot of things that could be could be better, but we got to control what we can control and take the opportunities that present themselves and we're really pleased with the with the guide that we gave you.

No it wasn't.

No no no I know.

And then.

Second is just on the revenue guide, if we make our own assumptions on fleet growth.

Based on the Capex guide.

Assumptions, obviously, theres, a lot of them, but rate and other factors.

Good.

By our math anyway suggest that.

The equipment rental piece.

Could potentially grow maybe in excess of what's implied.

That's not the entire theres other factors that.

Of course added up into that total revenue. So are there of the other lines. Obviously there are a lot smaller but are there other factors that we should be thinking about.

I would imagine sales of new equipment, probably arent growing but are there. Other factors that may be you can help us just think about in terms of.

Potentially goes against equipment rental growth.

The context of the top line.

Hey, Tim It's Jeff Let me, let me see if I can help with the math a little bit so.

If you think about the total revenue growth rate at let's call it $11 seven at the midpoint.

Just based on again kind of mid point of what we're looking at for used.

You could assume that the growth within that number for us, it's probably something at midpoint in the area of about eight 5% right. So that should that should help a little bit and kind of recalibrating the math on what you.

Might be using for rental growth within that total that total revenue.

So so that.

I hope that's helpful right to just sort of recalibrate, where where do you think that retrofit shakeout.

Got it.

I was thinking other like ancillary and other.

We can we can chat offline on that and then.

One quick one Jeff.

<unk>.

Operating cash flow guide.

Alright, and then just getting from from EBITDA.

Most have a $1 billion a year on year operating cash flows effectively flat.

Working capital potentially our cash taxes, what are the big comp.

Ponant to that.

Both actually.

So right now we're looking at cash taxes being up somewhere in the neighborhood of about $200 million.

And that is largely coming from the increase in the pre tax income that we're expecting and then the rest as you mentioned is working capital and that's really more about kind of the normal payment terms and largely just timing of payment on the capex.

Understood. Okay. Thank you very much.

Sure. Thanks, Jeff.

Yes.

Your next question comes from Stanley Elliott with Stifel Go ahead.

Hey, Matt Hey, guys. Thank you guys for fitting me in.

Quick question with all the survey work you guys are doing and talking to people on the ground.

Obviously, very bullish and excited as anybody express any concerned around labor availability not necessarily for you will.

Higher of choice really more for the contractor base and what risk if any does that present to some of the outlooks that we're thinking about.

So for as long as I've been in the business contracts.

Getting the labor, but it certainly exacerbated.

In this post post Covid World we're in.

But we haven't seen project delays or cancellations from it so that's really the important part.

But it's topical I think all of us on the supply side and on the on the build side, meaning our customers are all working harder than we ever had before to bring in late.

<unk>.

It's just part of the new the new rules of the game, but but they're getting it done and as I said the more there's a lot very topical but not any cancellations or delays that we see because of it.

Is that going to get as much of the growth Capex, just curious how youre thinking about that.

Yes, so actually our teams both in Europe , and New Zealand, Australia, which as you guys know two totally different businesses with the European part coming from the Baker acquisition and the New Zealand, Australia group coming from the General Finance acquisition with mobile storage are both doing great. They are.

Actually both grown in the high 20% in Q4, there they're really.

The European folks who've been with us longer, but they've really taken to being part of the United team and very pleased that we're able to fund that growth.

I would say both exceeded expectations a little bit admittedly.

And Europe has had to deal with the severe drop during COVID-19 , but they bounce back from that and got back to pre pandemic levels. So we're very pleased with the results there.

Perfect. Thanks, so much and best of luck.

Okay.

Your next question comes from Scott Schneeberger with Oppenheimer go ahead.

Thanks very much.

The I guess I'll start off on specialty just curious.

An acceleration in the cold start plans for this year, just if you could delve a little bit more into maybe some specificity.

What specialty categories, you're pursuing and and you touched earlier Matt.

On.

GFS.

It's progressing well, but just curious if you could address maybe just come in on this the cost savings and revenue synergies.

At where you wanted it to be at this point or are you beyond that point, just curious on that progress. Thanks.

Sure and just on that last part is there is.

It wasn't a cost play right. So <unk> was not a cost play in any way shape or form so there's not a lot.

Just to add there because that was grow grow grow play, 100% and we're pleased with what we're seeing on that so as you can imagine they're going to have a decent amount of that targeted 40 cold starts that we're going to have this year, but the other area that we'd want to do is our own business right. Our portable sanitation business has a lot of growth.

Coles and we continue to grow parts of our power <unk> HVAC business and specialty overall, but the leading two product lines that we'll be doing cold starts and we'll certainly be mobile storage and then our reliable on site with the portable sanitation.

Thanks appreciate that and then.

With regard to just the purchasing from the Oems This year, obviously you.

Typically October you go out to them and then obviously they have been supply chain issues. So I'm just curious if you could share with us.

Typically purchased from for each asset classes, one or two vendors we are forced to go broader this year.

Obviously, you sound very confident on your ability to procure equipment. So just curious on some of the behind the scenes of interacting with your partners.

Have you had to go in different directions or add a third per asset class and then what type of fleet age are you are you looking for and how do you weigh that with repair and maintenance expense.

On the on the go forward, what's implied in the guidance and where could that be longer term. Thanks.

Yes, so on the on the brands that we're buying from the partners that with partner if we certainly expanded from just not our top in each one but maybe we had to go to number three we're always dealing with at least two vendors in each product category. So maybe we extended to a couple of other approved suppliers, we're not talking.

No.

No knock off brands or anything like that but just people that werent, winning one of the top two spots, but very capable product suppliers. So we definitely expanded into number three an even number four in some areas to achieve the.

The capital growth that you saw us achieve in 'twenty, one and we expect we're going to be doing that we actually found some some pretty good results from some of these folks who are looking to get in with the team in a bigger way and maybe they have historically so that's that's an opportunity for us to continue to find new ways to solve problems for customers and.

The Oems and us our teammates we have to communicate with each other regularly it's not just the price negotiation October and then <unk> next year. So these guys are interacting at the ground level daily on deliveries on slots, whether they are slipping what are there whether there is opportunity to buy more and thats an ongoing relationship.

The customers.

As far as the fleet age.

I'll take that yeah. So the fleet age really is more of an output for us and is really going to depend on fleet mix, what we buy what we sell there isn't necessarily a target that we're working towards and even on the R&M side for repair and maintenance less of a target per se and definitely not tied to fleet age that's more.

<unk> when we do the calculations of our rental useful life by asset, where we then determine the right time at which to sell the asset right considering what it would end up costing us as we think about repair and maintenance as that asset gets older. So that's really where we would consider the impact of repair and maintenance.

Within the.

Are you all our rental useful life calculation.

That's helpful.

It is thanks, Jeff I appreciate it.

Sure.

And the last question comes from Courtney <unk> with Morgan Stanley go ahead.

Hi, Thanks, guys. Just wondering if we can delve back into the infrastructure discussion of that.

Can you just help us understand.

Where your portfolio is kind of ore which types of projects. Your portfolio is most exposed to when we think about the different components of the bill whether it's.

More traditional roads and bridges or.

And water or the investment in the grid. If you can just help us think about tax I think you had mentioned some there were some.

And the message board and traffic continue acres that might be a little bit more exposed to the traditional elements.

And then also whether you would expect your specialty portfolio to have a significant impact from some of that spend.

Sure Accordingly, so the infrastructure definition.

It can be quite broad for some and it is for us in the areas that we're able to participate and I think the funding as you saw has been earmarked for a broad array of <unk>.

End markets, so whether it's road and highway whether it's the electric grid and power infrastructure.

Rail services broadband right, so think about broadband that'd be something that our trench team.

But we think whether it's.

Public transit water infrastructure is another opportunity all of these are opportunities that are going to require our products. So.

Almost all other than if it's <unk>.

Literally buying the trains right almost all of this is going to require our needs for the money Thats earmarked an infrastructure bill. So we feel really really good about.

And can you just remind us again how.

What percentage of your rental revenue at this point comes from infrastructure today.

Probably yes, I don't know if we ship it to about mid teens I don't have it in the top of my head test can get back to you with that but it's probably somewhere in the mid teens.

It also depends how you define it gets.

Getting back to the challenges of.

If you were to say power hours about 10% of our mix.

That's not included in the number Matt referenced so it really gets back to how you define it and how do we kind of define it in our our definitions.

Okay, great. Thanks, guys.

Thanks Courtney.

And that is it for the Q&A any closing remarks.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Q4 2021 United Rentals Inc Earnings Call

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