Q3 2022 United Rentals Inc Earnings Call
[music].
Okay.
Good morning, and welcome to the United Rentals Investor Conference call. Please.
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 and 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.
Framework 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.
You can access the filings on the company's website at Www Dot United Rentals Dotcom.
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 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 back to the company's recent investor presentations to see the reconciliation for each non-GAAP financial measures to the most comparable GAAP financial measure.
Speaking today for Eni differentials is Matt Flannery, President and Chief Executive Officer, and Ted Grace interim Chief Financial Officer.
I will now turn the call over to Mr. Flannery, Mr. Flannery you may begin.
Thanks, operator, and good morning, everyone. Thanks for joining our call.
Well the team has made my job pretty easy today.
We reported another strong quarter, and a positive operating environment and a record year.
That's a great trifecta.
And I know it sounds familiar because thats, how the year has been going.
This quarter was especially gratifying.
We delivered year over year increase in rental revenue up 20% with fleet productivity of almost 9% are people, we're definitely on top of that opportunity.
We achieved good operating leverage in our business by working efficiently.
And that's not easy to maintain during peak demand, especially in the current cost environment. So.
So I applaud the team for meeting our customers needs, while staying mindful of profitability and most of all for doing it safely.
Our recordable rate for both the third quarter and year to date, we're well below one and thats with about 10% more head count in the quarter versus last year.
Against this backdrop, we grew our EBITDA margin by 240 basis points year over year to 49, 9% in the quarter as we grew EBITDA faster than revenue to over $1 5 billion.
That's a record for us in any quarter and flow through was a very solid 63%.
Importantly, we also delivered another improvement in return on invested capital to a record 12, 2%.
Given these results and the momentum we're seeing we raised our full year 2022 guidance for total revenue and adjusted EBITDA as well as rental capex.
I wanted to elaborate on the Capex point before I move to our customers and our end markets.
Our industry has continued to show good discipline in terms of supply and demand, which creates a healthy environment for attractive returns.
We have two levers we can pull to capitalize on this demand.
First we intentionally held back on used equipment sales this year to make sure we had enough capacity for our customers.
And even though we sold less fleet in the quarter on I know, we see basis versus our original plan our revenue from new sales in Q3 was essentially flat year over year supported by very strong pricing.
Secondly, we have the opportunity to pull forward some capex into the current quarter to ensure that we're set up for a strong start to 2023.
Our updated guidance includes an increase of rental capex of about $350 million at the midpoint.
And we think this is prudent as our OEM partners continue to work through supply chain challenges.
So that's how we're thinking about capex at United Rentals and on a related note, we're continuing to invest some of the Capex and fleet that lowest carbon emissions on job sites in line with our ESG initiatives.
We recently announced an agreement to purchase all electric ride on dumpsters from JCB, making us the first equipment rental provider to offer this product in our fleet.
And on the innovation front, we just launched a sustainability tool and our total control platform attracts greenhouse gas emissions data.
This technology is an industry first and it's a good example of how we differentiate our company as a partner beyond the transaction and in this case, we're helping customers reached their own sustainability goals.
Investments like these to continue to add value to our offering and keep us growing faster than the industry.
Now I'll turn to the macro.
While there are portions of the economy that are clearly slowing.
Our industry customer activity is still on the upswing in demand for our equipment rental continues to be very strong customer.
Sentiment in key industry indicators remain positive.
And we know this outlook may seem at odds with some views on the broader economy and.
And if we saw a cause for concern in our markets, we'd be standing here talking about it we'd also be using the flexibility built into our model to pivot to a more conservative stance.
Instead, we are investing in the tangible opportunities that we see ahead.
Here are a few of the unique dynamics that should help our industry continue to outpace the macro in virtually any economic cycle.
One is a $550 billion of funding in the U S infrastructure, Bill, which will finally put shovels in the ground starting in 'twenty three this should trigger at least five years of opportunity.
There is another $440 billion of federal tax incentives and the inflation reduction act for clean energy and plant upgrades and we think these will have a five to 10 year impact.
And in the manufacturing sector. There are multiple tailwind is that will play out on different timelines.
This year alone hundreds of billions of dollars of new investment and manufacturing had been announced.
Investments are already underway and automotive electrification micro chip factories, and the broader trend towards onshoring.
And there is also more focus on energy production to serve markets in North America and Europe .
Many of these <unk> are new to the construction and industrial sectors and in combination, they're a major opportunity for our industry.
Looking specifically at our business the quarter played out even better than we anticipated.
Both of our segments and every one of our regions grew rental revenue year over year by double digits.
Rental revenue from non res construction was up 24% infrastructure was up 11% and industrial was up 13% and these are all consistent with the trends we've seen in recent quarters.
Demand for specialty was strong across the segment with rental revenue up 23% year over year as a whole led by our mobile storage and fluid solutions businesses.
Our Greenfield plans for specialty are moving forward with 25 Cold starts opened through September and another 11 planned by year end.
Cold starts continue to be a valuable growth strategy for specialty with a long term benefit to our company's total performance.
Looking at our markets by vertical the big multi year projects in Q3 continued to be data centers distribution centers and renewables as well as the automotive and chip plants that I mentioned earlier.
These projects span multiple regions and most of them are mega projects, where our customer base, our technology and our position as a one stop shop gives us a major competitive advantage.
Contractors are managing to source labor in the materials they need but at the same time they are dealing with cost inflation. So they need to squeeze more productivity out of every dollar.
And we have the digital solutions to help our customers get more utilization from the equipment they rent <unk>.
Worksite sort of evolving into connected environments, and we're positioned as a leader in that space are customers assigned real value to the data that we provide.
Lastly, I want to mention the new share repurchase authorization, we announced yesterday.
This program will returned $1 $2 5 billion of excess capital to our investors by the end of 2023.
And we're proud to make this additional commitment to supporting shareholder value.
So in conclusion.
Our 2015 year end business is also shaping up to be a record year of financial performance. We've got a great team in place and we will continue to explore every avenue for growth and returns.
The construction and industrial sectors, we serve has their own tail winds driving the historic demand for our services.
Our customers are building a strong book of business for 2023 and.
And the secular shift towards renting it's expanding the market.
In this environment, we will continue to be good stewards of United rentals, We will focus on profitable growth as we have all year.
And we will remain flexible to act in the best interests of our shareholders.
With that Ted it's over to you.
Thanks, Matt Good morning, everybody.
As you saw in our results we reported last night the team did a great job delivering across the board.
We continue to take advantage of the market by supporting our customers with the fleet, they need driving healthy productivity and converting that growth through our bottom line.
This performance combined with our updated outlook for the remainder of the year as reflected in our new guidance, which I'll touch on later, but first let's dive into the quarter.
Rental revenue was a record $2 73 billion.
That's up $455 million or 20% year over year with strong contribution from both general rental and specialty.
Within rental revenue increased.
<unk> increased by $341 million or 18%.
Our average fleet size increased by 10, 6%, which provided a $201 million benefit to revenue while fleet productivity increased a healthy eight 9%, adding $168 million.
It was partially offset by our usual fleet inflation of about a point and a half or roughly $28 million.
Also within rental ancillary revenues were higher by $103 million or 32%.
This was due mainly to increased delivery fees and other pass through charges and finally, we ran increased $11 million.
Outside of rental third quarter us sales were essentially flat at $181 million as we intentionally held onto fleet to ensure we could support stronger than expected rental demand in our peak season.
The majority of these sales were in the high margin retail channel. This together with improved pricing helped deliver a very healthy 64, 6% adjusted use margin for the quarter and record proceeds as a percent of what we see of 83%.
Let's move to EBITDA.
Adjusted EBITDA for the quarter was $1 five 2 billion.
Another record and an increase of $288 million or.
Or 23, 4% year on year.
The dollar change includes a $288 million increase from rental within which <unk> contributed $245 million ancillary contributed $37 million and re rent contributed $6 million.
Outside of rental used sales added about $25 million to adjusted EBITDA, while other non rental lines of businesses contributed another $3 million.
SG&A increased $28 million, primarily due to higher commissions related to volume and the normalization of certain discretionary costs as a percentage of revenue. However, SG&A showed good leverage declining 90 basis points to 11, 7% of sales.
Looking at third quarter profitability, our adjusted EBITDA margin increased 240 basis points to 49, 9%, implying very healthy flow through of around 63%.
Excluding the benefit of new sales flow through was a still solid 58% supported by robust rental growth good fleet productivity and vigilant cost management.
And finally third quarter adjusted EPS was a record at $9 27.
That's an increase of $2 69 per share were almost 41% year on year.
Turning to Capex third quarter gross rental capex of $1 1 billion and net rental capex of $921 million were both in line with year ago levels.
Now, let's look at return on invested capital and free cash flow.
Matt mentioned ROIC was another highlight in the quarter at a record 12, 2% on a trailing 12 month basis.
That's up 70 basis points sequentially, and an increase of 270 basis points year on year.
Free cash flow also continues to be very strong with $176 million generated in the quarter, reflecting normal seasonality and over $1 $1 billion generated through the first nine months of the year, all while continuing to fund growth.
Pivoting to the balance sheet.
Our leverage ratio declined 10 basis points sequentially, and 50 basis points year on year to one nine times its lowest level in our history.
Additionally, our liquidity at the end of the quarter. It was a very robust $2 8 billion with.
With no long term note maturities until 2027.
Combined with our cash generation this provides us with tremendous strength and flexibility to run the company and support shareholder value.
Any environment.
Now, let's look forward and talk about our updated guidance for the year.
Total revenue is now expected in the range of 11, 5% to 11 7 billion.
Or an increase of $50 million at midpoint, and implying full year growth of better than 19%.
This increase is supported by the momentum we've seen across our business, particularly within rental revenue that we expect to carry into next year.
Within total revenue I'll note that we've reduced our used sales guidance by $50 million to $1 billion as.
As part of this change we now expect to sell between one three and $1 4 billion of OCC.
As evident in our updated guidance, we remain focused on efficiently converting that additional rental revenue to the bottom line.
Our adjusted EBITDA range is now five five to $5 6 billion.
Which had mid point to $75 million above the midpoint of our prior guidance.
This implies a roughly 240 basis point increase in full year, adjusted EBITDA margins and flow through of about 60%.
As Matt highlighted we have also revised our outlook for gross capex by $350 million as we land delayed orders placed earlier in the year and select high demand cat classes.
In total we now expect gross capex of between $3 25, and 345 billion.
With these changes we still expect to generate a very healthy one six to $1 $8 billion of free cash flow translating to a free cash margin of around 15%.
Now.
Before we go to Q&A I will finish with a few comments on our new share repurchase authorization we.
We view the $1 $25 billion program is an indication of our confidence in our business the strength of our balance sheet and the durability of our cash generation.
And we're proud of the fact that we've already returned 5 billion of excess capital to our investors since 2012 to support shareholder value, while simultaneously getting our balance sheet to its strong position in our 25 years.
So with that we'll turn to Q&A operator could you. Please open the line.
Certainly Simon if you will.
I'd like to ask a question. Please press star one on your Touchtone phone you may withdraw yourself in the question queue.
Time by pressing star and <unk>.
Okay.
Okay, everyone that everyone of our Android headlines.
And our first question or questions.
Yes.
Your line is open.
Hi, Thanks.
Just a bit of an echo.
It's not.
Triggered by me, but Matt maybe just.
The first one on this notion of these mega projects.
You are clearly seeing that show up in the starts data.
Construction starts data and.
It looks to be an increasing percentage of of just overall spend in the coming years.
As we think about here in late October is looking into next year is there a way to kind of size up.
How you sit from just from kind of an overall visibility standpoint in terms of.
Obviously, you don't operate with a backlog, but just from kind of a project.
Visibility of project backlog standpoint is there a way to kind of size up how United is.
Our position as we go into 'twenty three just from from essentially work already in hand or.
Forthcoming as it is.
Okay.
Help on that at all.
Sure Tim so as far as the scale of it.
Well, we're kind of is there some way that we can we can put a numerical value to it but I can just tell you in my 32 years of business. We have never seen this amount of mega projects and specifically in the infrastructure and commercial space on the books. The manufacturing is an added bonus that we really didn't expect to see where there is over 200.
$50 billion.
Funds already activated so.
This is very tangible to us when I think about our positioning there as you can imagine we've been focused on national accounts for many many years is a big part of our strategy and these are the folks that are going to get the large share of this work that alongside with our broader set of services, we think positions us very well on this.
So we certainly expect to our country, our weight of our overall industry market share with these customers and with these projects and this is just another example of us thinking and believing strongly that the bigs will continue to get bigger and taking share. So.
That's the way I would think about it right now I don't know if you had any other thoughts.
Got it okay. Thanks, and then.
Your point on the leverage range.
What changed from say, a decade or so ago and just in terms of how the balance sheet has evolved but how are you thinking about the board thinking.
Thinking about the.
The two to three times target.
Obviously, you sure you want to preserve some flexibility for M&A or other capital return opportunities but.
Obviously with the cash flows continuing to build that potential for that to go even lower so how are you and the board thinking about that overall two to three times range.
Let Ted speak to the leverage but we don't at all see this has prevented us from us being able to continue to invest in growth of the business, which is up for first filter of what we'll do from a capital allocation perspective, Jeff. Please yes, Tim Thanks for the question.
Certainly something we talk about frequently both as a management team and with the board and I guess, if you rewind back to 2019, when we introduced the new balance sheet strategy.
The key rationale was to ensure we had financial strength across the cycle and where we sit today at $1 nine as you've heard us talk about in the call. We absolutely feel very well positioned from that standpoint. It gives us a lot of a lot of freedom and flexibility to run the business as we see fit. We also said there was nothing religious about that low end of two times that we were comfortable going below that.
Some degree.
So again kind of stockpile firepower, if you will.
If we were to decide to live structurally in a lower Zip code.
She was the number 115% to an app as an example at that point I think we'd absolutely feel obligated to update the street, but for the time being we feel like this range and the flexibility we have around it.
We remain appropriate.
Okay very good. Thank you thanks, Tim.
Question comes from Steven Fisher from UBS. Your line is open.
Great. Thanks. Good morning, just Ted you mentioned that the Capex increase is targeted at select cat classes, but it sounds like you guys have a pretty broadly positive view about or.
A lot of end markets I'm curious why it's only in select cat classes, and then if I heard that correctly.
Hey, Steve This is Matt so.
Let me put this in context.
This increase we had orders similar to last year that because of some of the supply chain challenges and you could imagine they would happen and more higher demand categories right, where the Oems are doing their best to keep up but theres a lot of demand for these assets. They slipped all away towards the end of the year here as we got to mid October we had a decision to make do we let.
This capex flow and therefore raised our guidance or do we cancel it and hope that we can get these high demand assets in the spring we made the decision to let this flow and for two reasons number one the surety of supply because these are assets that have slipped quite a bit and then secondly, we will get these 2022 pricing.
Instead of 'twenty three pricing, we'd had some questions that people ask why you're able to raise your capex. The supply chain must have really loosened up it's actually quite the opposite because the supply chain as tight we let these orders that have been delayed so long in the year flow through because we really would rather get ahead of the curve here and we do.
You see 2023 as a growth year.
<unk>.
Selective and this wasn't really our choice. It was it was as much because those are the assets it slipped them as much as they did because of the high demand hopefully that straightened that out Steve.
Yes that makes perfect sense.
Then on the Cold starts I think you said you've done 25 cold starts.
With another 11% or so in the fourth quarter I think that's a bit less than the 45, you had mentioned in Q2, I guess do I have those numbers right in.
What's caused the reduction in that cold certain numbers is that again just equipment availability and then are you just planning to push those into 'twenty three.
Steve ill double check those numbers, but I think the goal is 40% to 45% for the full year I don't know if thats driving some confusion, but in terms of the pace at which we're opening cold starts and specialty we're on track yes.
If there is anything that would hold it up it would probably be more.
Getting the right facilities and people really then fleet in those sectors specifically in specialty.
Okay. Thanks very much.
Okay.
And our next question comes from Jerry Revich from Goldman Sachs. Your line is open.
Great. Thanks, Good morning, everyone. Good.
Morning, Jerry.
I'm wondering if you could talk about.
How youre seeing performance.
General.
Finance, just give us an update for those asset classes.
How does how do you view cyclicality, considering thats not an asset class that United.
It had in prior cycles would love to see how youre thinking about the opportunity for penetration for for that category and similarly are there any other specialty cross selling opportunities that could be emerging for additional categories.
As a result.
Journal Finance building out across your footprint.
Sure.
As we think about the GSM business and the teams that came with that.
A thesis if you recall when we announced the deal that we could double this business in the next five years and I can say that we're ahead of schedule on that we're really getting robust growth out of this group. We're very very pleased not just with the team, but with the cross sell opportunities are really are.
Our customer base has absorbed this like it's like a dry sponge. So it's really been working.
Well for us and even ahead of the Lockheed plans that we had for it and as far as other products in that category. You can just imagine like we did back in the day with pumps and like we did with tanks anytime we see something that's on our site whether that be a plant or whether it would be a project that our customers are running that we don't supply we're looking for opportunities.
To add to the portfolio and this was one that we've looked at for quite a few years and we finally found the right partner. So the tricky part for US is we're a believer that doing this through M&A and buying a big enough platform to make the offering broadly is real important to our national solution strategy towards towards our customers.
So we will continue to be able to look out for Jerry and hopefully.
We'll find some other great opportunities like we did here with the <unk>.
Okay Super and just to shift gears I know you folks look at scenario planning a lot.
The Covid recession.
<unk> degradation was really minimal in your business can you just talk about your scenarios for the next downturn given the uncertainty in the market.
Do you folks think about the levers you would.
Paul and any updated thoughts on.
Whether the level of performance we saw in.
In that very different cycle.
As repeatable to what extent.
Jerry I'll take that one.
As you are right, we do a lot of scenario analysis.
Because it certainly has its unique dynamics.
More than anything it highlighted the flexibility of the business both on the Capex and an opex standpoint.
Do you see is a lot of the businesses a lot of the cost I should say the cash costs that are really highly correlated to volume and what that allows us to do is flex pretty rapidly.
And protect kind of those semi variable costs that are labor.
As always going to be the goal.
And any kind of downside scenarios to take care of our people and retain that capacity, which is the hardest thing to replace if you ever had to so that would be the play we'd run in virtually any.
Scenario and obviously you look at different Saverio is different scenarios of different.
Severity and different durations, but the playbook itself is very consistent across the across.
All of that kind of modeling, yes, I would agree and the nice thing is when you do that in sourcing utilizing our own labor you are hitting your highest cost out of there. So it worked really well on COVID-19 and Ted explained it well.
Thing that we definitely it was a learning from Covid.
Both sides of it the reason we kept that capacity was for the ramp up and it really gave US gave us a great opportunity to move forward on the other side of whatever kind of cycle your deal.
Yes.
I appreciate the discussion thanks.
Thanks.
And our next question comes from David Raso from Evercore ISI. Your line is open.
Hi, Thank you very much I was just curious just trying to think about 'twenty three and I'm not looking for exact guidance just trying to think through the growth drivers.
Where are your fleet is going to end the year. If we just assume the fleet doesn't grow at all.
Fleet will be on average about 5% bigger.
Then it was in 'twenty two.
So when we think of the drivers for twenty-three nothing inorganic, but when we think about further expansion of the fleet.
Right and you.
Curious can you just give us some sense of where do you still see room for growth be it.
Contracts coming.
Two that are due for a price increase.
Where you see rates just just for a sense I'm trying to get exact Tony I was just trying to get some prioritization here of how do we grow across those three major buckets as we sit here today.
Sure David So to your point.
We'll have some natural carryover fleet growth and then add whatever number once we get through our planning process that will communicate in January .
How much how much fleet, we put on top of that for growth Capex versus maintenance capital and then think about the carrier will have on fleet productivity. Although we don't expect fleet productivity stay in these very frothy double digit ranges, mostly due to comps when we think about that we will have some continued.
Fleet productivity well above our hurdle rate. So we really think that remember that's a year over year metrics or any kind of your fleet productivity is over that one 5% hurdle rate youre growing the business faster you're growing revenues faster than youre growing your fleet, which is going to have accretive value to the margins and flow through and we.
<unk> both of those continuing to happen the level the wildcard will be how much and thats what were working through in the planning process and along with our partners to see what the capital situation could be and all will be meeting the demand environment and be very flexible, but we do see 'twenty three is to grow through to your point because some of the some of the natural carryover is that we're bringing into the.
Into the year.
When it comes to the rate momentum do we see further rate increases for 'twenty, three or again I know you don't like speaking about exact rates I'm not looking for a percentage, but just from where we sit today. There is some carryover of course.
But how are you thinking about rate.
The ability to raise rates to start 'twenty three.
So if I think about the last few years not just this year and the discipline that's been in the industry.
All having cost of goods increase so and our customers are too so they understand that so there's a real focus on everybody understanding that we have to keep in balance with that inflation from a rate perspective.
We're going to continue to do our part in that as a leader and I'm very pleased to see that the industry is doing the same so we would expect that.
How much we'll see but we do expect the <unk>.
Environment 2023 to continue to be conducive to driving.
Specifically that component of fleet productivity.
Alright, Thank you very much.
Thank you Dave.
And our next question comes from Seth Weber from Wells Fargo. Your line is open.
Hey, guys good morning.
Hey, Matt I just wanted to go back to your pulled forward Capex comment I mean, I'm just trying to tie that together.
I'm not looking for 'twenty three guidance, but should we assume or should we think about that as kind of.
Being a governor on 2023.
Gross capex growth.
Your quote unquote pulling some of that forward and then I guess my follow up question is should we expect used equipment sales to really pick up.
Next year as well thanks.
Sure so two points to that.
As far as a governor on growth would you see it as a net of where we ended up in Capex planning, absolutely and we'll flex that as always with demand. What this really does is let us not have to worry about how quick the supply and demand pipeline meet each other by getting a little bit of a head start on these assets that were comfort again.
This year. So that's number one so there'll be some netting effect once we finish our planning process, but because we will have it in hand already hopefully it will almost be part of the planning process. So we'll give that new number to everybody as far as the new sales, we would as long as the supply demand can be at appropriate level as opposed to a little.
Two imbalance this year and we had to hold onto fleet.
Because we frankly couldn't sell because it was on rent.
We hope to get some more normalized fleet rotation next year and the kind of used sales that you would've seen pre COVID-19.
Hope to get to that kind of cadence of new sales and first fourth quarter and first quarter, usually are the heaviest months and we'd expect that to continue on as we sit here today.
Okay. That's perfect. Thank you.
And then just maybe as a follow up Matt prior in prior periods of <unk>.
Rising interest rates and stuff do.
Do you typically see the IRC is being.
Less able to two by fleet or are they are you hearing anything about the IRC is being more.
Just restricted here or do you feel like.
The Capex thats coming into the market is pretty much across the board.
So I think everybody across the board has an opportunity to grow and I think most strong solid companies that have the financial wherewithal to do that are doing that as you can imagine the Oems are going to sell out their inventory anyway, so, they're probably being pretty disciplined about who they sell to with that being said I don't want to paint homogenize the whole independent.
But some are better capitalized than others and those that arent well capitalized I got to imagine inflationary environment is going to be a challenge for them.
For us and specifically the nationals. This is one of the reasons why we think this environment will continue to drive the bigs getting bigger so to speak and put a value on on scale.
To continue to be able to overcome whatever challenges the economy.
Makes sense, okay. Thank you I appreciate it.
Thanks, Ed.
And our next question comes from Rob with Meyer from the line of research. Your line is open.
Hey, Thanks, good morning, everybody Hey.
Hey, Rob.
So I wanted to ask on the question that Matt touched on earlier you guys on Mega projects. You guys have spent a lot of years, focusing on national accounts and serving clients.
Clients the market shifting towards big projects in a way that we maybe have never seen before and I wondered if you'd be willing to give like a two minute teaching on what you've done what market share looks like in a big project serviced by a big national contractor, who can provide the capabilities what the capabilities are and if you wanted to get tangible I assume your market share.
Something like <unk> was higher than 15% just wondering if you can give us any help on that thank you.
Yes, well when you think about large projects right weather wherever you draw the line of Mega, but really any kind of projects of scale is going to need multiple products. This is one of the reasons why we think a very broad offering is important because one of the things that people don't necessarily think about is the security and safety of.
Our site is very important to construction managers theyre held responsible and held accountable to so that security and safety and obviously if you don't have 20 different suppliers running around supporting a project you have a little bit more consistency I also think.
We feel like we lead strongly with safety, but I think this is an area where the larger companies that can invest in tools invest and have a focused culturally on safety alright, a competitive advantage as far as what share is it's going to depend on each project, but you can imagine that.
The players that can serve most of the need or the ones that are going to be in the best position.
I wouldn't want to get into market share on that because it varies by project Theres very few sole source projects as opposed to plant work, but you may have a sole source contract that you have been for so there'll be multiple people on a project.
And the ones that do the better job, we're going to get a get a better share once they once they prove it to the customer.
Thank you and if you could just add into that discussion briefly technology you touched on it earlier I know you've invested a lot in taxi big projects use it a lot more aggressively as you mentioned.
Couple of margins with productivity and so forth.
As most attractive projects on we'll talk about and I will stop there.
Sure Rob Thanks for the opportunity to dimension the visibility that we can get them through our connected assets. So we have over 250000 assets that have telematics on it and that in itself is a big investments that reached rewards for us and for our customers. So that we can give them real time data, whether that's location utilization fueled alerts.
There is a lot of stuff that's unique to that vessel and think about a large complex project that visibility that the people who are in charge of leading that project really gives them help in running a more efficient process in bringing more money to the bottom line, which is their job right one running the job at the appropriate cost levels and <unk>.
Road activity so.
Rental has always been about driving safety and productivity and I would say the connected job site and the data that we can bring to it through our tools just upped the ante on driving better productivity.
Great. Thank you.
Thanks.
And our next question comes from Ken Newman from Keybanc capital markets.
Your line is open.
Yes.
Hey, good morning, guys.
Good morning Curt.
Just maybe I missed it but I think you talked a little bit about strong customer sentiments just any color on how your internal customer survey is trending this quarter relative to last quarter.
Yeah, Kevin Good question.
Simply its trying to remarkably in line really hasnt been any deviation in our customer optimism looking forward.
As a reminder to everybody else, that's something we do as part of our net promoter scores and we asked them on a forward 12 month basis, how they feel about their revenue prospects.
Got it and I guess the thing I would add is very good alright also very consistent with the feedback we get from the field. So we're constantly making sure that those two data points. If you will do align.
The good news is they continue to align.
Yes.
It makes sense.
And then for my follow up.
This might be a bit of a harder question to answer, but just given how tight the fleet is and how tight supply chain has been is there any idea of just how much revenue.
Opportunities you had to pass on because you didn't have a fleet that you wanted or any.
Any any idea of whether or not you think.
All of that fleet would've been on rent as soon as it hits.
Yes, it's certainly when the market is running as hard as it has this year and you have the supply demand dynamic we had I got to imagine that peak season, everyone's missing a little bit of business.
Part of it customers learn to plant better quite a bit customers didn't turn in fleet as quickly somebody even move to job to job. So with our key accounts and the people that we are strategically aligned with and focused on we got through it all but on the.
On the outside of that the transactional business, we absolutely could have put more fleet to work.
It had to stay very focused on prioritizing our key accounts and making sure. We took care of our our key relationships and supported them in a manner. They expect to United rentals. So we should certainly lost some hard to quantify but but.
Net net we're very pleased with 20% growth so I won't get will get too far out there on that.
I appreciate it thanks.
Thanks, Ken.
And our next question comes from Stephen Volkmann from Jefferies. Your line is open.
Great. Good morning, guys. Thank you for taking my question.
A lot of discussion about these mega projects and some of the tailwind from infrastructure et cetera, I'm, just trying to kind of get a sense of how you think about sizing that I mean, how much of your business in two or three years. When these things are really ramped up how much of it comes from those types of projects.
Steve It's a good question, it's certainly hard to say how much of the total business comes from those opportunities are how much of the total business is driven by those but certainly we can dimensionalize what those numbers look like and the absolute so you look at infrastructure as an example.
It's nominally $550 billion over five years. So if you could just add to the $110 billion on an annualized basis. That's in the context of a total non res construction market, but thats 800 billion.
But within that the public piece is probably 340, so it's quite meaningful price you would say $100 billion.
$800 billion market is 12% tailwind all else equal and then you start thinking about some of the other programs IRR harder to Dimensionalize, you've got $370 billion of tax credits to get Levered.
Intended spending theyre substantially larger than that probably longer timeframe admittedly, but that same dimensionalize <unk> $800 billion of total private of total non res 340.
Public non res if you.
Look at some of the stuff more on the private domain.
As an example, we're tracking $2 billion to $250 billion of projects are intended spend the companies have announced in the U S. So again.
The denominator, but if you think it's over five or 10 years, that's in the context of a private non res market. That's about $470 billion. So there again, it's quite substantial autos would be another one.
These numbers are harder to come by but we think you can pretty confidently underwrite hundreds of billions of dollars of total investment in North America by the Oems and other supply chain partners, which again is in that context of 800 billion of total non res call. It $500 billion of private non res energy is another one that's tough to dimensionalize, but I think we're all aware.
What's going to drive U S natural gas exports over the next many years and that'll be another one so when you think about those in the context of what the existing market is there going to be really big tailwind in terms of what that fraction is looking at three 510 years, it's much harder to say, but suffice to say there will be meaningful contributors.
Does that help.
Yes, no. That's great you guys are definitely thought that through I appreciate it.
Maybe follow up a little bit closer term, maybe more of a Ted question I'm trying to think about how to think about SG&A in 2023, and I'm guessing that there is a fair amount of.
Kind of incentive comp of various types that thats in there that probably resets and maybe it doesn't recur in 'twenty three just any any way to think about those trends.
Yes, too early to get into details about the headwinds or the tailwind I should say from prospectively incentive comp reset, but certainly you can hear our tone on growth and we'd certainly expect to leverage.
The nature of SG&A again in 2023 that will obviously be embedded within our guidance, we give which is EBITDA as you know so it's kind of below the line. If you will but suffice to say, we would look to get another year of healthy leverage on those costs.
Okay, well wait for that then thank you.
Thanks, Steve.
Yeah.
And with that it appears there are no further questions over the line I'd like to go ahead and turn it back to Matt for any closing remarks.
Thank you operator, and thanks to everyone for joining the call.
We're very proud to deliver such strong profitable growth in our busiest season, but now we've got to look forward, we're deep into the planning process for 'twenty three so stay tuned for our new guidance on the January call and until then if you have any questions feel free to reach out to Ted any time and it will be very helpful. So with that operator, please end the call.
Sure.
This does conclude today's program. Thank you for your participation you may disconnect at anytime.
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