Q2 2024 United Rentals Inc Earnings Call
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Speaker Change: To all sides on hold, we do appreciate your patience and holding. We ask that you please continue to stand by, your conference will begin momentarily.
Operator: All sides on hold; we do appreciate your patience and holding. We ask the two please continue to stand by; your conference will begin momentarily.
[inaudible]
Operator: Good morning and welcome to the United Reynolds Investor Conference Call. Please be advised that this call is being recorded.
Operator: Good morning, and welcome to the United Rentals Investor Conference call. Please be advised that this call is being recorded.
Speaker Change: Good morning and welcome to the United Rentals Investor Conference call. Please be advised that this call is being recorded.
Operator: Before we begin, please 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.
Operator: Before we begin, please note that the company's press release, comments made on today's call, and responses to your questions contain forward-looking statements. Companies are subject to a variety of risks and uncertainties, many of which are beyond their 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. For 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, 2023, as well as to subsequent filings with the SEC. You can access these filings on the company's website at www.unitedrentals.com.
Speaker Change: Before we begin, please note that the company's press release, comments made on today's call, and responses to your questions contain forward-looking statements.
Speaker Change: 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.
Speaker Change: A summary of these uncertainties is included in the Safe Harbor Statement contained in the company's press release.
Operator: For 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, 2023, as well as to subsequent filings with the SEC. You can access these filings on the company's website at www.unitedrenals.com.
Speaker Change: For 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, 2023, as well as to subsequent filings with the SEC.
Speaker Change: You can access these filings on the company's website at www.unitedrentals.com
Operator: Please note that United Reynolds 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.
Operator: 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 to the back of the company's recent investor presentations to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals are Matt Flannery, President and Chief Executive Officer, and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Mr. Flannery, you may begin.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Please refer to the back of the company's recent investor presentations to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure.
Speaker Change: Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer, and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Mr. Flannery, you may begin.
Matthew J. Flannery: Thank you, operator. And good morning, everyone. Thanks for joining our call. As you saw yesterday, we built upon our strong start to 2024 with another solid quarter. We're pleased with the growth, profitability, returns, and free cash flow in the second quarter, as the year continues to unfold in line with our expectations. Our reiterated guidance is further proof. Of course, the key to these results is our team's diligence in providing our full offering across GenRent and Specialized, coupled with a steadfast commitment to safety, operational excellence, and innovation. And without the hard work of our 27,000 plus employees. The results we'll be discussing this morning would not have been.
Matthew J. Flannery: Thank you, operator, and good morning, everyone. Thanks for joining our call.
Speaker Change: As you saw yesterday afternoon, we built upon our strong start to 2024 with another solid quarter.
Speaker Change: We're pleased with the growth, profitability, returns, and free cash flow in the second quarter as the year continues to unfold in line with our expectations.
Speaker Change: Our reiterated guidance is further proof of this.
Speaker Change: And of course, the key to these results is our team's diligence in providing our full offering across GenRent and specialty coupled with a steadfast commitment to safety, operational excellence, and innovation.
Speaker Change: Without the hard work of our 27,000 plus employees, the results we'll be discussing this morning would not have been possible.
Matthew J. Flannery: On our first quarter call, we discussed that we've doubled down on being the best partner for our customers. This unwavering focus on the customer is critical and drives our strategy every day, whether in our go-to-market approach, our value proposition, or in our investment strategy to Generate Shareholder Value. I'm pleased with how far we've come as a company over the last decade and for the opportunities ahead. Today, I'll discuss our second quarter results, our expectations for 2024, and what gives me confidence that United Rentals will continue to win in the market, and then Ted will discuss the financials in detail before we open up the call for Q&A. So let's start with the second quarter.
Speaker Change: On our first quarter call, we discussed that we've doubled down on being the best partner for our customers.
Speaker Change: This unwavering focus on the customer is critical and drives our strategy every day, whether in our go-to-market approach, our value proposition, or in our investment decision.
Speaker Change: We've built a diversified business model that enables us to serve our customers with broadened relationships and generate shareholder value. I'm pleased with how far we've come as a company over the last decade and for the opportunities ahead.
Matthew J. Flannery: Our total revenue grew by 6% year-over-year to $3.8 billion, and within this, rental revenue grew 8% to $3.2 billion, both second quarter rentals. Fleet productivity increased by 4.6%, supported by Continued Industry. Adjusted EBITDA increased to a second quarter record of almost $1.8 billion, translating to a margin of nearly $47 billion, and Adjusted EPS grew by 8% to $10.70, another record. Now let's turn to Customer Act. We saw growth in both our gen rent and specialty. And within specialty, we continue to see growth across all product offers. In fact, even excluding the benefit of YAC, specialty rental grew 18% year-over-year.
Speaker Change: Today I'll discuss our second quarter results, our expectations for 2024, and what gives me confidence that United Rentals will continue to win in the marketplace.
Speaker Change: And then Ted will discuss the financials in detail before we open up the call for Q&A.
Matthew J. Flannery: Additionally, we opened 27 specialty cold starts, which puts us at 42 years old to date, and we remain on track to open at least 50. By vertical, we saw growth across both construction, led by non-res, and our industrial end markets, with particular strength in manufacturing. It'll come as no surprise that we saw multiple new projects in the quarter across data centers, utilities, health care, battery manufacturing, and infrastructure. And if you're a soccer fan, you'll be excited to know that Freedom Park in Miami kicked off.
Matthew J. Flannery: Additionally, the used market remains strong, allowing us to sell a second quarter record amount of OECD. We believe that demand for used equipment will remain strong and still expect to generate around $1.5 billion in proceeds. Turning to CapEx, we spent $1.4 billion in the second quarter, in line with our expectations, as we added fleet to meet the Seasonal Uptick and Customer Act. For the full year, our CapEx guide remains unchanged. Subsequently, the year-to-date free cash flow is nearly $1.1 billion.
Ted Grace: So let's start with the second quarter results.
Ted Grace: Our total revenue grew by 6% year-over-year to $3.8 billion, and within this, rental revenue grew 8% to $3.2 billion, both second quarter records.
Ted Grace: Fleet productivity increased by 4.6 percent, supported by continued industry discipline.
Matthew J. Flannery: We continue to see our strong cash generation as a key differentiator and remain confident in our ability to produce over $2 billion. As you've heard me say before, our flexible business model, coupled with our industry-leading profitability, enables us to drive positive free cash flow throughout. We support long-term value creation for our shareholders. Now, turning to capital allocation. We return $484 million to shareholders in the quarter via share buybacks and our dividends.
Ted Grace: Adjusted EBITDA increased to a second quarter record of almost 1.8 billion dollars, translating to a margin of nearly 47 percent.
Matthew J. Flannery: Our balance sheet is an X. The theme you've heard consistently so far today is that 2024 is playing out as we originally expected. As you saw from our updated guidance, we narrowed the range of expectations for revenue in EBITDA with the midpoint unchanged while keeping CapEx and free cash flow in. But let's step back from the remainder of this year and look at what gives us conviction in our business even further out. Autos, and energy and power all remain positive.
Ted Grace: And Adjusted EPS grew by 8% to $10.70, another second quarter record.
Ted Grace: Now let's turn to customer activity.
Ted Grace: We saw growth in both our gen rent and specialty businesses.
Ted Grace: And within specialty, we continue to see growth across all product offerings.
Ted Grace: In fact, even excluding the benefit of YAC, specialty rental grew 18% year-over-year.
Ted Grace: Additionally, we opened 27 specialty cold starts, which puts us at 42 year to date, and we remain on track to open at least 50 this year.
Ted Grace: By vertical, we saw growth across both construction, led by non-res, and our industrial end markets, with particular strength in manufacturing.
Ted Grace: It'll come as no surprise that we saw multiple new projects in the quarter across data centers, utilities, health care, battery manufacturing, and infrastructure.
Ted Grace: And if you're a soccer fan, you'll be excited to know that Freedom Park in Miami kicked off as well.
Ted Grace: Additionally, the used market remains healthy, allowing us to sell a second quarter record amount of OEC.
Ted Grace: We believe that demand for used equipment will remain strong and still expect to generate around one and a half billion dollars of proceeds this year.
Speaker Change: Turning to CapEx, we spent $1.4 billion in the second quarter, in line with our expectations, as we added fleet to meet the seasonal uptick in customer activity.
Speaker Change: For the full year, our CapEx guide remains unchanged.
Ted Grace: Subsequently, year-to-date free cash flow is nearly 1.1 billion dollars. We continue to see our strong cash generation as a key differentiator and remain confident in our ability to produce over 2 billion dollars this year.
Ted Grace: As you've heard me say before, our flexible business model coupled with our industry-leading profitability enables us to drive positive free cash flow throughout a cycle and support long-term value creation for our shareholders.
Ted Grace: Now, turning to capital allocation, we returned $484 million to shareholders in the quarter via share buybacks and our dividend. Our balance sheet is in excellent shape, and we continue to plan to return nearly $2 billion to shareholders this year.
Ted Grace: The theme you've heard consistently so far today is that 2024 is playing out as we originally expected.
Ted Grace: As you saw from our updated guidance, we narrowed the range of expectations for Revenue and EBITDA with the midpoint unchanged while keeping CapEx and Free Cash Flow intact.
Ted Grace: But let's step back from the remainder of this year and look at what gives us conviction in our business even further out.
Ted Grace: First, we remain diligent in leveraging our unique value proposition as we work through the myriad of tailwinds we've discussed many times.
Ted Grace: In fact, we've been successful in each area.
Ted Grace: The outlook for large infrastructure projects, ship manufacturing, autos, and energy and power all remain positive.
Matthew J. Flannery: Data center construction has also been an area of focus. As an example, last month I visited a large data center project we'd recently won, our experience and ability to help them solve their logistics. Soup to Nuts, Differentiate Us in the Marketplace, and allow us to further strengthen our customer relationship.
Ted Grace: Data center construction has also been an area of focus and we continue to win in this vertical as well.
Ted Grace: All of these type of projects play into our one-stop-shop offering and are great examples of United Rentals having all business units accounted for as we help solve more of our customers problems.
Ted Grace: As an example, last month I visited a large data center project we'd recently won. Beyond providing the core gen rent and space specialty products that might immediately jump to your mind, whether that be dirt, aerial, power, or trench,
Ted Grace: We're also supporting their safety and security requirements.
Ted Grace: We're providing secured access to the site with our advanced turnstiles and access control systems.
Ted Grace: in addition to educating workers with our United Academy safety training.
Ted Grace: Our experience and ability to help them solve their logistics from soup to nuts differentiate us in the marketplace and allow us to further strengthen our customer relationship.
Matthew J. Flannery: Second, we continue to grow with new customers, augmented by the investments we continue to make in technology. Our size and scale allow us to invest, invest aggressively, in both customer-facing technology, such as telematics and total control, as well as internal technology that drives operating efficiencies across logistics, Fleet Management, and Repair and Maintenance when put to the task and working together.
Ted Grace: Second, we continue to grow with new products.
Ted Grace: Our acquisition of YACC, which has now been part of the United Rentals family for over four months, is a perfect example of this.
Ted Grace: The integration is well underway and progressing on track, and this is a textbook example of how we can leverage our existing customer relationships to accelerate growth with a new product.
Ted Grace: And finally, we work with our customers to ensure we are their partner of choice.
Ted Grace: This is enabled by our OneUR culture and is augmented by the investments we continue to make in technology.
Ted Grace: Our size and scale allow us to invest invest aggressively in both customer facing technology, such as telematics and total control, as well as internal technology that drives operating efficiencies across logistics, fleet management, and repair and maintenance.
Matthew J. Flannery: These investments allow us to further entangle ourselves with our So, to wrap things up... Thanking our shareholders. Thanks, Matt. Good morning, everyone.
Ted Grace: And when put to task and working together, these investments allow us to further entangle ourselves with our customers, thus enabling future growth.
Ted Grace: So to wrap things up, we're happy with how 2024 is playing out, and we're confident that our extensive competitive advantages, combined with our flexible and resilient business model, allow us to drive profitable growth, strong free cash flow, and compelling shareholder value.
Ted Grace: And with that, I'll hand the call over to Ted before we take your questions.
Ted Grace: As Matt highlighted, Q2 played out as expected with healthy demand and strong execution driving record second quarter revenue, EBITDA, and EPS. Looking forward, our reaffirmed guidance at the midpoint for total revenue, EBITDA, CapEx, and free cash flow reflects our continued confidence in delivering another year of solid growth, strong profitability, healthy returns, and significant free cash flow. Within rental revenue, OER increased by $143 million, or 5.8%. Growth in our average fleet size contributed 2.7 percent to OER, while fleet productivity added 4.6 percent, partially offset by fleet inflation of 1.5 percent.
Ted Grace: Ted, over to you.
Ted Grace: Thanks, Matt. Good morning, everyone. As Matt highlighted, Q2 played out as expected with healthy demand and strong execution, driving record second quarter revenue, EBITDA, and EPS.
Ted Grace: Looking forward, our reaffirmed guidance at the midpoint for total revenue, EBITDA, CapEx, and free cash flow reflects our continued confidence in delivering another year of solid growth, strong profitability, healthy returns, and significant free cash flow.
Ted Grace: As importantly, we remain focused on prudently allocating capital to drive shareholder value.
Speaker Change: So with that, let's jump into the numbers. Second quarter rental revenue was a record $3.215 billion. That's a year-on-year increase of $234 million, or 7.8%, supported by growth in key verticals and large projects.
Ted Grace: Within rental revenue, OER increased by $143 million, or 5.8%.
Ted Grace: Growth in our average fleet size contributed 2.7% to OER, while fleet productivity added 4.6%, partially offset by soon fleet inflation of 1.5%.
Ted Grace: Also within rental, ancillary and re-rent revenues were up by $91 million or 17.5%. Turning to our used results, second quarter proceeds of $365 million were in line with expectations at a healthy adjusted margin of 51.8%. Within this, rental contributed $127 million year on year.
Ted Grace: Also within rental, ancillary and re-rent revenues were hired by 91 million dollars or 17.5 percent.
Ted Grace: Turning to our used results, second quarter proceeds of $365 million were in line with expectations at a healthy adjusted margin of 51.8 percent.
Ted Grace: The strength and depth of the market were evident in the fact that we sold a second quarter record amount of OEC at a robust recovery rate of 59% in line with first quarter levels.
Ted Grace: Moving to EBITDA, adjusted EBITDA was a second quarter record at 1.77 billion dollars, translating to an increase of 74 million dollars or 4.4 percent.
Ted Grace: Within this, rental contributed $127 million year-on-year.
Ted Grace: Outside of rental, and similar to the first quarter, used sales were a $30 million headwind to adjusted EBITDA driven by the ongoing normalization of the used market that we've discussed over the last several quarters. The 80 basis points of year-on-year compression was almost entirely due to the used market dynamics I just discussed. Excluding the impact of use, our second quarter margin was down just 10 basis points with implied flow-through of 44%. Shifting to CapEx, gross rental CapEx was $1.4 billion, which is in line with our forecast and historical seasonality. Our balance sheet remains very strong, with net leverage of 1.8 times at the end of June and total liquidity of almost $3.3 billion.
Ted Grace: Outside of rental and similar to the first quarter, used sales were a $30 million headwind to adjust the EBITDA driven by the ongoing normalization of the used market that we've discussed over the last several quarters.
Ted Grace: SG&A increased $23 million year-on-year, reflecting a larger business, but was consistent with year-ago levels as a percentage of sales.
Ted Grace: And finally, the EBITDA contribution from other lines of non-rental business were flat year-on-year.
Ted Grace: Looking at second quarter profitability, our adjusted EBITDA margin was in line with expectations at 46.9 percent.
Ted Grace: The 80 basis points of year-on-year compression was almost entirely due to the use dynamics I just discussed. Excluding the impact of use, our second quarter margin was down just 10 basis points with implied flow-through of 44%.
Ted Grace: And finally, our adjusted earnings per share increased 8% to a second quarter record of $10.70.
Ted Grace: Shifting to CapEx, gross rental CapEx was $1.4 billion, which is in line with our forecast and historical seasonality.
Ted Grace: Turning to returns and free cash flow, our return on invested capital of 13.5% remained well above our weighted average cost of capital, while year-to-date free cash flow totaled $1.065 billion.
Ted Grace: Our balance sheet remains very strong with net leverage of 1.8 times at the end of June and total liquidity of almost 3.3 billion dollars.
Ted Grace: I'll add that we continue to have no long-term note maturities until 2027 and a very distributed tower thereafter.
Ted Grace: And all this was after returning a record $969 million to shareholders year-to-date, including $219 million via dividends and $750 million through repurchases. I'll add, this has reduced our share count by over 1.1 million shares since January .
Ted Grace: Now, let's shift to the updated guidance we shared last night, which reflects our confidence in delivering another year of solid results.
Ted Grace: I'll add that this has reduced our share count by over 1.1 million shares since January. As previously mentioned, we are maintaining the midpoints for all metrics while narrowing the ranges for both revenue and EBITDA, as we normally do at this time of the year. On Adjusted EBITDA, we've narrowed the range to $7.09 to $7.24 billion. And importantly, we are still committed to returning a record $1.9 billion to shareholders this year, which translates to almost $30 per share or a current return of capital yield of about 4%. I thank you for your time.
Ted Grace: As previously mentioned, we are maintaining the midpoints for all metrics while narrowing the ranges for both revenue and EBITDA as we normally do at this time of the year.
Ted Grace: In terms of specifics, for total revenue, we've narrowed our guidance to a range of $15.05 to $15.35 billion, implying total revenue full year growth of just over 6% at midpoint.
Ted Grace: Within this, I'll note that our use sales guidance is unchanged at roughly 1.5 billion dollars of proceeds on approximately 2.5 billion dollars FOEC sold.
Ted Grace: On Adjusted EBITDA, we've narrowed the range to $7.09 to $7.24 billion.
Ted Grace: I'll note that our guidance for gross capex, net capex, and pre-cash flow are all unchanged.
Ted Grace: And importantly, we are still committed to returning a record $1.9 billion to shareholders this year, which translates to almost $30 per share, or a current return of capital yield of about 4%.
Speaker Change: So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.
Speaker Change: Thank you. The floor is now open for questions. If you would like to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Once again, if you would like to ask a question, please press star 1 now.
Speaker Change: Our first question will come from David Raso with Evercore ISI. Please go ahead.
Unidentified Analyst: Yeah, the question relates sort of to the interplay between gen rent and rental revenue growth versus specialty. You know, it caught my ear when you said thinking about growth further out, right, kind of beyond this year.
David Michael Raso: I thank you for the time. Yeah, the question relates sort of to the interplay between gen rent, rental revenue growth versus specialty. You know, it caught my ear when you said, you know, thinking about growth.
Speaker Change: You know further out right kind of beyond this year So you just think about specialty has gone just in the last five years from 20% of total rental revenue Revenues to now over 30% right?
Unidentified Analyst: The thing about specialty has gone, just in the last five years, from 20% of Total Rental Revenues to now over and Gen Rent this quarter, even year-to-date, right? It's pretty much flatline, Gen rent can fall 5% as long as specialty is growing 10, flat. Right. So that's sort of the spirit of the question. So I guess directly, Gen Rent, Rental Revenue.
Speaker Change: and GenRent this quarter, even year-to-date, right? It's pretty much flatlining.
Speaker Change: So I'm just trying to think about how much gen rent could fall.
Speaker Change: Specialty can offset it. Write the simple math of if Gen Rent is 70%, Specialty is 30%.
Speaker Change: You know, Jen Rent can fall 5% as long as Specialty is growing 10%.
Speaker Change: We're still flat, right? So that's sort of the spirit of the question. So I guess directly, gen rent, rental revenues
Unidentified Analyst: Do we expect those to go negative in the second half of the year, now that we're sort of flatlining in 2Q? I know Specialty has some yak, but even just kind of think of it organically, right?
Speaker Change: Do we expect those to go negative in the second half of the year now that we're sort of flatlining in 2Q and specialties the offset?
Speaker Change: I know specialty has some yak in it, but even just kind of think of it organically, right? Because you have implied in the second half rental revenues.
Unidentified Analyst: Because you have, probably still growing, you know, call it seven and a half percent, eight percent. Can you speak to the general rent trends? Specialty kind of carries the ship. Just curious. That's what I'm trying to think through, right?
Speaker Change: Probably still growing, call it 7.5%, 8% in the context of the whole company growing 6% revenues in the back half. So can you speak to gen rent trends? Should we expect those to go negative?
Speaker Change: Specialty kind of carries the ship. Just curious how you're thinking about that.
Speaker Change: Thank you. Sure, David. This is Matt. So we certainly...
Matthew J. Flannery: It's not our goal, and we're not going to predict quarters by segment, but it's certainly not our goal.
Speaker Change: for our general rent to go negative.
Ted Grace: That being said...
Ted Grace: Our general rent business is much more impacted by the local market dynamics, right, as opposed to specialty, where we don't have that local market penetration for those products. And think about our specialty business, and we're very pleased with the growth of specialty, both organically and with YAC, with the M&A.
Ted Grace: That they are really tailored to broader needs So when we can sell our one-stop shop to a customer think about that advantage that we have on big jobs and big customers
Ted Grace: which is a much higher profile specialties overall revenue. So I think that's really the dynamic that's playing through.
Ted Grace: And, not unexpected for us, we put most of our growth capex.
Ted Grace: in the specialty this year and you can see our cold starts so we know we have more room for penetration for specialty and it's it's just supported even more so.
Ted Grace: by the major project work and the tailwinds that we've talked about, really backfilling some of the challenges in certain local markets where that local activity is just not as high as it was and certainly impacting general rent more especially.
Unidentified Analyst: Everybody's just trying to figure out, Matt, like how much visibility on specialty, I assume, tethered as well to some of the mega projects, your confidence in your visibility and specialty can kind of carry the show. And at the same time, the gross margins are a lot higher. Thank you. Our next question will come from Rob Wertheimer with Melius Research. Please go ahead. Hey, everybody.
Ted Grace: Well, that's what I'm trying to think through, right? Everybody's just trying to figure out, Matt, like how much does the sort of softness in the underbelly of the market from typical rate impact, lag, now starting to slow some general projects.
Matthew J. Flannery: and how large you are now in specialty, the visibility on specialty, I assume it's also pretty tethered as well to some of the mega projects, your confidence in your visibility and specialty can kind of carry the show. And at the same time, the gross margins are a lot higher in specialty.
Speaker Change: Right? Could we actually see a mix shift that helps your gross margin? So it's sort of a, you know, like you're lined up better to serve the megaproject specialty. It's bigger. So that's how you can kind of offset gen rent being down. And does that actually translate into a better mix, just given the gross margin profile?
Speaker Change: Theoretically, absolutely. Right. And there's one of the reasons why we continue to focus on specialty and why we started this journey almost 15 years ago now. Right. When we first started our first trench business unit. So we're
Speaker Change: You're thinking about it in the right way. The only thing I wanted to clarify is we still need to respond to our customers and what the demand is and make sure we have the right fleet.
Speaker Change: and all of our businesses, Cien Rent as well, for what demand is coming. So we do feel this is a transient year. We'll worry about the future as we get to the tail end of this year.
Speaker Change: If you remember when we gave our guidance in January ...
Speaker Change: We expected this local market challenge to be there until there was a bit of a transition year that we were feeling that was going to be coming in the local market. And, you know, we'll react to the demands that our customers have and specialty can certainly be a boon to not just margins but more customer entanglement.
Speaker Change: All right, I appreciate the conversation, thank you.
David Michael Raso: Thanks, David.
Speaker Change: Thank you. Our next question will come from Rob Wertheimer with Melius Research. Please go ahead.
Rob Wertheimer: And thanks for the comments, Matt, on GenRent. I guess you sort of saw it was coming, and it's coming. I had a couple questions around that as well. One is just the big picture. What's your strategy around? Are you still gaining share? Are you looking to gain share in a market that's a little bit flattening? Is the smaller end of the market actually down? You guys are flattish.
Rob Wertheimer: You know, is the smaller end of the market down? So just sort of thinking about historically outgrown flat markets. Is that kind of what's going on now? And is that the desire?
Rob Wertheimer: Hey, everybody, and thanks for the comments, Matt, on GenRent. I guess you sort of saw it was coming, and it's coming. I had a couple questions around that as well, and one is just big picture.
Rob Wertheimer: What's your strategy around? Are you still gaining share? Are you looking to gain share in a market that's a little bit flattening? Is the smaller end of the market actually down? You guys are flattish. You know, is the smaller end of the market down? So just sort of thinking about historically outgrown, flat markets. Is that kind of what's going on now and is that the desire?
Speaker Change: Yeah, we certainly don't believe that we're giving up any market share, but frankly we don't set market share goals, but but just by definition You'd have to believe that we think there are certainly some markets that are down in the local market business fortunately
Rob Wertheimer: We, because we saw this in advance, we didn't burden those branches with extra fleet. And I actually think the industry is doing a good job managing through this, and I think you see that in the metrics that are playing through. So we're really pleased.
Rob Wertheimer: with our level of support for the for the work that is there in every market including some local markets that are growing the fungibility of our assets
Rob Wertheimer: Allows us to flex that which is which has really been good. So, you know, we're we we don't set market share goals but we certainly don't think we're seeding any market share and The most important thing is with the targeted customers that that we focus on we do feel we're gaining share
Speaker Change: Perfect. And then if I could just follow up, I mean, the local market's part of GenRent, but I guess it includes some megas and everything else as well. So, is the curve of megaprojects still within that segment and, you know, the lull that you kind of talked about this year, does that get offset?
Timothy W. Thein: by the wave that's still flowing in from those megas or by the normal interest rate dynamic. Thank you. Our next question will come from Tim Fine with Raymond James. Please go ahead.
Speaker Change: by the wave that's still flowing in from those megas or by normal interest rate dynamics, you know, lower rates and more project starts and so forth.
Speaker Change: I'll stop there. Yeah, so when we think about local market growth, we're not including the megaprojects in that, right? So as we're talking about that dynamic.
Speaker Change: But as you can imagine...
Ted Grace: where there's a lot of activity going on.
Ted Grace: There's going to be feeder plants, there's going to be other work going on around there which supports it. And then the opposite, if you're in an oil and gas market right now, there's probably not a lot of activity, extra activity going around the local market because we all know oil and gas.
Ted Grace: is one of the examples of an area that continues to struggle. So it ties, Rob, but the way we look at it, we look at our large projects and large customers in a different segmentation than we do the local market.
Ted Grace: Yeah, sure, Tim. So your memory is correct, right? We did talk about trying to match last year's time utilization with this year, which would make the time component of the fleet productivity neutral, and that's what we've been able to do. And that expectation is embedded in our guidance as we look forward. So, when you think about qualitatively, we won't give them quantitatively, but qualitatively, the other components are, we said in January that this rate would be a good one, it would be positive, and we continue to see that, and we continue to see that through our peers, which is great news. It shows that there is industry discipline. And then there is the variability being in the mix. So, that's an output of a lot of different things.
Ted Grace: Thanks.
Ted Grace: Thanks.
Speaker Change: Thank you. Our next question will come from Tim Thein with Raymond James. Please go ahead.
Timothy W. Thein: Thank you. Good morning. Matt, maybe I'll start with with the
Speaker Change: Kind of thinking about the components of fleet productivity and specifically the
Timothy W. Thein: The expectation coming into the year that maybe you could hold time flat, and I don't remember if that was on a proforma or an as-reported comp versus 23, but just going back to those comments on gen rent.
Speaker Change: And, you know, if gen revenues were up, you know, just under one percent, but the fleet grew in total, you know, closer to three percent, obviously that suggests some component of, you know,
Speaker Change: you know, time, rate and or inflation acting as a headwind. So maybe just your any change to the expectation for the full year. Again, just given these these little bit of softness on the on the local market dynamics that we've discussed.
Speaker Change: Yes, sure, Tim. So, your memory is correct, right? We did talk about trying to match last year's time utilization with this year, which would make the time component
Speaker Change: of the Fleet Productivity Neutral, and that's what we've been able to do. And that's kind of, that expectation's embedded in our guidance as we look forward.
Speaker Change: So, when you think about qualitatively, we won't give them quantitatively, but qualitatively, the other components are, we said in January , that rate would be a good guy, would be positive, and we continue to see that, and we continue to see that through our peers, which is great news.
Ted Grace: that shows that industry discipline, and then the variability being in mix.
Ted Grace: So, that's an output of a lot of different things, so we don't forecast it, but I would call time neutral, meaning we were able to achieve last year's level of time utilization, which we are pleased about. Rate a good guy, and the variability to where we end up with fleet productivity will be more in the mixed component.
Ted Grace: So, we don't forecast it, but I would call it time neutral, meaning we were able to achieve last year's level of time utilization, which we are pleased about. Rate a good guy, and the variability to where we end up in fleet productivity will be more in the mix. Okay.
Ted Grace: And then maybe just a comment on the M&A pipeline. And, you know, given the prospects of some potential change in tax policy on the horizon, I'm just curious, A, domestically, what you've seen in terms of just discussions and how the M&A pipeline is shaping up here. And then, you know, the international story has never been one of significance.
Speaker Change: Okay, got it. And then maybe just a comment on the M&A pipeline.
Ted Grace: And, you know, just given the prospects of some potential...
Speaker Change: Change in tax policy on the horizon. I'm just curious, A, domestically, what you've seen in terms of just discussions and how the M&A pipeline is shaping up here.
Speaker Change: The international story has never been one of significance, but I've noticed two smaller deals in the last couple of months. Has the thought process changed around international growth more broadly?
Matthew J. Flannery: But I've noticed two smaller deals. In the last couple of months, has the thought process changed around international growth more broadly? Yeah, so I'll take the first part first. You know, the pipeline remains robust, right? I mean, we have been and have been for a couple of years; there's plenty of activity, both for specialty and gen rent businesses. And you guys know what our prioritization is; if we get to see a new product offering like we did with Yak, right, that's in our sweet spot, that's primary. We think we can really be a better owner of businesses like that and sell them through our network.
Speaker Change: Yeah, so I'll take the first part first. You know, the pipeline remains robust.
Speaker Change: Right? I mean, we've been and has been for a couple of years. There's plenty of activity.
Speaker Change: both for specialty and general rent businesses.
Speaker Change: And you guys know what our prioritization is. If we get to see a new product offering like we did with Yak, right, that's...
Speaker Change: That's in our sweet spot, that's primary. We think we can really be a better owner of businesses like that.
Matthew J. Flannery: And then specialty overall, we continue to look for more growth, more penetration there because we do have more opportunity to build density there. And then, but even in our gen rent, if we need capacity in a certain market, and there's a good deal to be had, we've shown in the past that that will strike there. So that pipeline continues to be broad and robust. Thinking about international, we did recently close a deal in Australia. We have an international toehold right now. We have a business in Europe that we added a small tool business to at the end of last year.
Speaker Change: and selling it through our network.
Speaker Change: And then specialty overall, we continue to look for more growth, more penetration there because we do have...
Speaker Change: More opportunity to build density there. But even in our gen rent, if we need capacity in a certain market and there's a good deal to be had, we've shown in the past that we'll strike there. So that pipeline continues to be broad and robust.
Speaker Change: And thinking about the international, we did recently close a deal in Australia, you know, we have an international...
Speaker Change: Toehold right now right we have we have a business in Europe that we added a small tool business to at the end of last year.
Matthew J. Flannery: That dynamic was just strictly a tuck into the existing business we had there, selling into the same niche industrial markets and customers that we were selling into. Our team there earned that right to get some of the support for their growth, and that was great. Australia was a little bit of a different story.
Speaker Change: That dynamic was just strictly...
Speaker Change: I'll tuck into the existing business we had there, selling into the same niche industrial markets and customers that we were selling into. And our team there earned that, right?
Speaker Change: to get some of the support for their growth, and that was great. Australia's a little bit of a different story. I was able to spend some time there earlier this year, and the team there is doing a great job, and we saw some opportunity to broaden our product offering there.
Matthew J. Flannery: I was able to spend some time there earlier this year, and the team there is doing a great job. We saw some opportunities to broaden our product offering there. There may be the opportunity one day to run more of the United Rentals business in Australia.
Speaker Change: And there may be the opportunity one day to run more of the United Rentals play in Australia. We're not all the way there yet, but this is definitely a jump into supporting the growth of that business there with some M&A and with a target that we think is a really good fit for the organization.
Jamie Lyn Cook: We're not all the way there yet, but this is definitely a jump into supporting the growth of that business there through some M&A and with a target that we think is a really good fit for the organization. Got it. Thank you, Matt. Thanks. Our next question will come from Jamie Cook with Truist Securities. Please go ahead.
Speaker Change: Got it. Thank you, Matt.
Timothy W. Thein: Thanks, Tim. Thanks.
Speaker Change: Thank you. Thank you. Our next question will come from Jamie Cook with Truist Securities. Please go ahead.
Jamie Lyn Cook: I guess my first question, Ted, just sort of longer term, your incremental margins for 2024 are below your targeted range, which we understand why with some of the spend and used headwinds. But what type of environment do we need to see for United Rentals to get back to its targeted incrementals? I mean, do we need a double-digit top line?
Jamie Lyn Cook: Hi, good morning. I guess my first question, Ted,
Jamie Lyn Cook: Just sort of longer term, your incremental margins for 2024 are below your targeted range, which we understand why with some of the spend and youth headwinds.
Speaker Change: But what...
Jamie Lyn Cook: What type of environment do we need to see for United Rentals to get back to its targeted incrementals? I mean, do we need the double-digit top line, or I'm wondering if we have...
Ted Grace: Or I'm wondering if we have, you know, single-digit growth next year with sort of used headwinds easing, you know, to the point that specialty becomes larger versus the gen rent. That's a positive. And with some of these acquisitions getting integrated, I'm just wondering what we need to see there to get the, you know, a more normalized, can we get back to the targeted incremental? Thanks.
Speaker Change: you know, single-digit growth next year with sort of used headwinds easing, you know, to the point of specialty becomes a larger versus the gen rent. That's a positive, and with some of these acquisitions getting integrated. I'm just wondering, you know, what we need to see there to get the.
Speaker Change: you know, a more normalized. Can we get back to the targeted incremental? Thanks.
Ted Grace: Sure. Thanks for the question, Jamie. So there's obviously a lot that goes into incrementals. So without stating the obvious or stating the obvious, obviously, relative growth does matter, right?
Speaker Change: Sure, thanks for the question, Jamie. So, there's obviously a lot that goes into incrementals. So, without stating the obvious, or stating the obvious, obviously relative growth does matter, right? Growing
Speaker Change: Whether you want to say 5, 10, or 15 drives, different levels of fixed cost absorption. But obviously the composition of that growth matters a lot if you think about rate versus volume. And so it's hard to say what kind of...
Jamie Lyn Cook: Growth you need to kind of drive lift in flow through and there's obviously
Ted Grace: Growth, you need to kind of drive lift and flow through, and there's obviously the consideration of cost on top of that. If you think about this year, you know, we're looking at what we think is healthy growth that's single digits overall. You'd point to flat margins in a year where, frankly, we're making some important investments that we've talked about both on the cold start side and technology. So that kind of illustrates the importance of, you know, how you think about cost.
Jamie Lyn Cook: the consideration of cost on top of that.
Speaker Change: If you think about this year, you know, we're looking at what we think is healthy growth.
Speaker Change: with single digits overall.
Speaker Change: You'd point to flat margins in a year where, frankly, we were making some important investments that we've talked about, both on the cold start side and technology. So, that kind of illustrates the importance of how you think about cost.
Speaker Change: We absolutely task ourselves as driving kind of
Speaker Change: Strong Cost Discipline, Margin Lift
Speaker Change: In some environments and under some conditions, depending on where you're making investments.
Speaker Change: That can be easier or not as easy.
Speaker Change: I don't know that we'd want to get pinned down on what kind of top-line growth you need to see for all the reasons.
Ted Grace: So we absolutely task ourselves with driving kind of a strong cost discipline margin lift in some environments and under some conditions, depending on where you're making investments, that can be easier or not as easy. So I don't know that we'd want to get pinned down on what kind of top-line growth you need to see for all the reasons I just went through, but what I can say is, you know, we have and we'll always have an incredible focus on driving the most efficient operations as possible to drive, you know, attractive profitability. Yes, hi. Good morning, everyone.
Speaker Change: I just went through, but what I can say is, you know, we have and will always have, you know, an incredible focus on driving as efficient operations as possible to drive, you know, attractive profitability.
Speaker Change: Okay, thank you very much.
Speaker Change: Thank you. Our next question will come from Jerry Revich with Goldman Sachs. Please go ahead.
Jerry David Revich: Yes, hi, good morning, everyone.
Jerry David Revich: Hey, morning, Jerry.
Jerry David Revich: Hi. I'm wondering if you can talk about the 18% organic growth and specialty, Matt and Ted. How broad-based is that and, you know, what are the stronger...
Jerry David Revich: Parts of the portfolio that's above that average, if you're willing to comment, and, you know, is it fair to assume that specialty as a mix of the CapEx plan has moved up over the course of the year?
Speaker Change: Yes, sure, Jerry. We're pleased, and I said in my opening remarks, we saw growth across all the product offerings and specialty, right? You can imagine the couple that have been the largest growers, let's leave YACC aside for now, right? But even in the 18%, you know, standalone growth without the YACC influence.
Speaker Change: You know we mobile storage
Speaker Change: where we talked about our commitment to doubling the size of that business within five years is growing strong. Power continues to be strong growth, but we're seeing it in our trench and fluid businesses as well. So it's across the board, and I think that's really important.
Speaker Change: And I think it also points to the cross-sell opportunities that we have on large projects and large customers. You know, like I said in the opening remarks, every business unit's accounted for on these big jobs. And we do a really good job making sure we're selling that full-value prop. And I think that's helped drive a lot of this growth.
Anjani: Super, and Anjani, can you just talk about what the developments have been under your ownership? Obviously you folks have the advanced pricing tools and logistics tools. Can you just talk about how that integration has gone and any surprises and opportunities as you've owned the business for a number of months now?
Unidentified Speaker: Yeah, so the first surprise, and not really surprised, but great to acknowledge that this was a really strong team. We understand why they were a leader in the space of this product, and we believe what we really bring to the table is, Thanks a lot. Thanks, Jerry.
Anjani: Yeah, so the first surprise, and not really a surprise, but great, pleased to acknowledge that this was a really strong team. We understand why they were a leader in the space of this product, and we believe what we really bring to the table is...
Anjani: our network, right, our ability.
Anjani: to fund their growth, distribute their growth across our network and our customer base. So they were, you know, they're a little bit capital constrained for their growth and frankly, really good. Have a lot of technology built in to support the customer already in that business, in logistics.
Anjani: and we think bringing in some of our tools and our network can help grow that business so but I don't want to this was not a broken business actually they were they're quite good at what they do they just need more support and we're looking forward to the double in this business over the next five years as well
Matthew J. Flannery: Thanks, Matt.
Michael J. Feniger: Thank you. Our next question comes from Michael Feniger with Bank of America. Please go ahead. Yeah, hey, good morning, everyone.
Jerry: Thanks, Jerry.
Speaker Change: Thank you. Our next question comes from Michael Finnegar with Bank of America. Please go ahead.
Michael J. Feniger: Thanks for taking my question. Just, Matt, obviously, in the last few weeks, there's been some incremental negative data points around non-risk construction in the industrial economy. You guys have kept the midpoint of your guide, and some of your peers had to revise our outlook. Are you guys observing that incremental weakness?
Michael Feniger: Yeah, hey, good morning everyone. Thanks for taking my question just
Michael Feniger: Matt, obviously the last few weeks there's been some incremental negative data points around non-risk construction in the industrial economy.
Speaker Change: You guys have kept the midpoint of your guide, some of your peers had to revise their outlook.
Speaker Change: Are you guys observing that incremental weakness, or are you guys just being more nimble, kind of moving fleet from weak areas to stronger areas? Is that fleet movement, you know, higher than normal that you guys have seen in the past?
Michael J. Feniger: Or are you guys just being more nimble, kind of moving the fleet from weak areas to stronger areas? Is that fleet movement, you know, higher than normal that you guys have seen in the past?
Matthew J. Flannery: You know, as we said, we're seeing the year play out as expected, so we're not really seeing any concerns, and I know there have been concerns and questions we've been getting about the megaproject flow. Large projects come and go. You heard me talk about the Miami Soccer Stadium in my open remarks.
Speaker Change: You know, we're seeing, as we said, we're seeing the year play out as expected, so we're not really seeing...
Speaker Change: Any concerns and I know there's been concerns and questions we've been getting about the mega project flow large projects Come and go you heard me talk about the Miami Soccer Stadium my open remarks remember last year We talked about that was one of the quote-unquote cancellations or holds
Matthew J. Flannery: Remember last year we were talking about that it was one of the quote-unquote cancellations or holds. So, there's an ebb and flow to these projects that is normal for us. We've been doing major projects for a long time, so maybe we already had a little bit of that expectation built in, but we're very pleased with the pipeline, and we think the back half of the year is going to look very similar to what we had here in Q2.
Speaker Change: So, there's an ebb and flow to these projects that is normal for us. We've been doing major projects for a long time.
Matthew J. Flannery: The other part of the fleet movement, once again, we've been supporting projects like this for a while, but this is an area where I think our density actually helps. The fact that we have a lot of fungible assets and a broadly distributed network means we've probably got most of the fleet we're going to need for any project somewhere within a reasonable distance of the area.
Ted Grace: So, I do think that helps us with logistics, and it's a great part of the business model and why scale matters. Hey, Mike, the one thing I might add is, obviously, there are data points that everybody's looking at, and, you know, I know people struggle to make heads or tails of them.
Ted Grace: But when we think about what our customers are telling us, they continue to be positive, right? And to us, that's much more telling than a given data point that tends to have a lot of volatility. So when we talk to our customers, and we talk to the field, you know, that's really what underpins kind of our outlook. And maybe just to follow up on that, Ted, just when you speak to your customers, I'm curious, you know, as we're potentially going into a rate easing cycle, there have been some downturns where an easing cycle takes quite, quite a, takes time to really see that pipeline fill.
Speaker Change: You know, I know people struggle to make heads or tails of them, but when we think about what our customers are telling us, they continue to be positive, right? To us, that's much more telling than a given data point that tends to have a lot of volatility. So when we talk to our customers and we talk to the field, you know, that's really what underpins kind of our outlook.
Speaker Change: Quite, quite a few.
Ted Grace: I'm curious with this backdrop right now with some of these megaprojects, with what you're seeing already with meeting your customers, what do you think an easing cycle starts to look like in terms of really seeing that sensitivity to filling that pipeline up in the local markets or continuing that momentum on the megaproject side? Thank you. I think our thought is sentiment matters as much as anything, and so the anticipation of a more constructive rate environment likely helps spur activity. In terms of trying to calculate lag, I'm not sure anybody's got a model that does that effectively.
Speaker Change: with what you're seeing already with accomplishing your customers.
Speaker Change: What do you think an easing cycle starts to look like in terms of really seeing that sensitivity to filling that pipeline up in the local markets or continuing that momentum on the megaproject side?
Speaker Change: I think, you know, our thought is sentiment matters as much as anything, and so the anticipation of...
Speaker Change: [inaudible]
Ted Grace: But certainly, if you look at how equity and credit markets have traded in the last month or so, there's certainly the expectation that the Fed is going to start easing. If you think about how the market started to discount rate cuts in the US, you're looking at about 2.7 cuts between now and year end. That number was probably 1.6 even a month and a half ago. And if you look at next year, the expectation is that you're going to get north of a point of cuts in Fed funds. And obviously, in Canada, I'm sure everybody has seen this, but Canada has now started to cut.
Speaker Change: And if you look at next year, the expectation is you're going to get north of a point of...
Ted Grace: They've cut half a point in the last two months. So I think when you think about customers thinking about the cost of capital and the direction of the economy, they're becoming more encouraged. And that, to us, is a positive thing. Yeah. And I would add that these tailwinds that we've talked about that we always expected would backfill any softness in some of the verticals within non-RETs are multi-year tailwinds. So you could see this type of...
Speaker Change: cuts in fed funds and obviously in Canada I'm sure everybody's seen
Speaker Change: But Canada has now started to cut. They've cut half a point in the last two months.
Speaker Change: You know, I think when you think about customers thinking about cost of capital and the direction of the economy, they're becoming more encouraged, and that to us is a positive.
Speaker Change: Yeah, and I would add that, remember these tailwinds that we've talked about that we always expected would backfill any softness in some of the verticals within non-res? Um, are multi-year tailwinds. So, you could see this type of...
Matthew J. Flannery: Regardless of how long it takes for the local business to start building up and showing more green shoots again, and we do think that FedCuts will assist that, we've got a good pipeline of work in the tailwinds that we've talked about. Thank you.
Speaker Change: regardless of how long it takes for the local business to start building up and showing more green shoots again, and we do think that FedCuts will assist that, you know, we've got a good pipeline of work in the tailwinds that we've talked about.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question will come from Tammy Zaccario with J.P. Morgan. Please go ahead.
Matthew J. Flannery: Hi, good morning, Tim URI. Great to be on the call. And thanks for your time. So I just wanted to confirm, I know you discussed time utilization, rate, and mix with Tim's question earlier. But overall fleet productivity, do you still expect that to remain positive for the year? And related to that, should we expect YAC to be adding about 160 basis points to productivity for the rest of the year, or is there seasonality to think about? Yes, Tammy, this is Matt.
Tammy Zaccario: Hi, good morning, Team URI. Great to be on the call and thanks for the time. So I just wanted to confirm, I know you discussed time utilization, rate, and mix to Tim's question earlier, but overall fleet productivity, do you still expect that to remain positive for the year? And related to that, should we expect YAC to be adding about
Tammy Zaccario: 160 basis points to productivity for the rest of the year, or is there seasonality to think about?
Matthew J. Flannery: So we, To the latter part of your question, there could be some seasonality there. It could be a little more. We're going to you don't have to do a lot of work on that. We're going to call that out separately each quarter until we've lapped yak. So we'll let you know what it is with or without yak.
Tammy Zaccario: Yeah, Tammy, this is Matt. So we...
Matthew J. Flannery: To the latter part of your question, there could be some seasonality there, it could be a little more. We're going to, you're not going to have to do a lot of work on that, we're going to call that out separately each quarter until we lap yak, so we'll let you know what it is.
Matthew J. Flannery: And as far as to your first question, we do expect fleet productivity to be positive in every quarter this year. That was something we committed to in January. And I'm really pleased to see the team executing on that. And we still have that expectation. And that's what's embedded in our guide. Okay.
Tammy Zaccario: with or without YAC. And as far as to your to your first question, we do expect fleet productivity to be positive in every quarter this year. That was something we committed to in January and I'm really pleased to see the team executing on that and and we still have that expectation and that's what's embedded in our guide.
Ted Grace: One more question. Thank you for the answer. For used equipment margin weakness this quarter, can you speak to what you're seeing in the third quarter, the date of this quarter? Have things stabilized or remained sort of under pressure? And how much headwind should we think about from this in the second half versus the $30 million you called out in 2Q? Yeah, so I don't think we've characterized the margin weakness as a function of the market.
Speaker Change: Got it. One more question. Thank you for the answer. For used equipment margin weakness this quarter, can you speak to what you're seeing in the third quarter, quarter to date? Have things stabilized or remain sort of under pressure? And how much headwind should we...
Speaker Change: Think about from this in the second half versus the $30 million you called out in 2Q.
Speaker Change: Yeah, so I don't think we've characterized the margin weakness as a function of the market. This is this ongoing normalization coming out of the really extraordinary period, 22, that started to normalize in 23 and is continuing in 24. So Jamie, just as a reminder, historically, we've recovered about 50 to 55 cents on the dollar selling assets.
Ted Grace: This is this ongoing normalization coming out of the really extraordinary period, 22, that started to normalize in 23 and is continuing in 24. So, Jamie, just as a reminder, historically, we've recovered about 50 to 55 cents on the dollar selling assets. In 2022, that got as high as 74 cents. At the time, we said that that was unsustainable and really a function of a perfect storm of much better than expected demand and, obviously, supply chain challenges.
Jamie Lyn Cook: In 2022, that got as high as $0.74.
Jamie Lyn Cook: At the time, we said that that was unsustainable and really a function of the perfect storm of extreme poverty.
Ted Grace: We then said we thought that would start the process of normalizing in 23. You saw that kind of mean revert a little bit. We got 66 cents on the dollar last year, and this year, we think we'll get something around 60 cents. That's where we've kind of been in the last two quarters. So, we don't think it's rate pressure per se. We think it's this ongoing normalization. However, those margins also remain well above historical norms.
Speaker Change: Much better than expected demand and obviously supply chain challenges
Jamie Lyn Cook: We then said we thought that would start the process of normalizing in 2023.
Speaker Change: You saw that kind of, you know, mean revert a little bit. We got 66 cents on the dollar last year.
Speaker Change: And this year we think we'll get something around $0.60.
Speaker Change: That's where we've kind of been in the last two quarters.
Speaker Change: We don't think it's rate pressure per se. We think it's this ongoing normalization. Those margins also remain well above historical norms.
Ted Grace: So, we feel very good about that. We don't comment intra-quarter, but certainly, you can see in our guidance, in my prepared remarks, we talked about about a billion and a half of proceeds and about two and a half billion of OEC, which would underpin that 60 cents on the dollar. So, demand has been very strong there, and frankly, we'd say those recovery rates have held in very well and reflect the strength of that demand. And I think that's another sign of the health of our customer. We had a second quarter record amount of OEC we sold into the market. I got it.
Speaker Change: We feel very good about that. We don't comment intra-quarter, but certainly...
Speaker Change: You can see in our guidance, in my prepared remarks.
Speaker Change: You know, we talked about about a billion and a half of proceeds.
Speaker Change: and about $2.5 billion of OEC, which would underpin that $0.60 on the dollar.
Speaker Change: So, demand has been very strong there, and frankly, we'd say those recovery rates have held in very well and reflect the strength of that demand, and I think that's another sign of the health of our customer. We had a second-quarter record amount of OEC we sold into the market.
Ted Grace: That's very helpful. Thank you. Thank you, Kami.
Kami: Got it. That's very helpful. Thank you. Thank you, Kami.
Kyle David Menges: Thank you. Our next question will come from Kyle Mingus with Citigroup. Please go ahead.
Speaker Change: Thank you. Our next question will come from Kyle Mingus with Citigroup. Please go ahead.
Kyle David Menges: Following up on Tammy's question on the used market, just what's giving you confidence that the used market will remain strong for the remainder of this year? And then, on the second part of the question, I noticed that the mix of specialty as a percentage of new and used sales ticked up in this quarter. So should we expect that to continue for the remainder of the year and maybe even into 2025?
Kyle Mingus: Thank you. Following up on Tammy's question on the used market, just what's giving you confidence that the used market will remain strong for the remainder of this year?
Kyle Mingus: Second part of the question, I noticed that the mix of specialty as a percentage of the new and used sales ticked up in this quarter, so should we expect that to continue for the remainder of the year, maybe even into 2025, and should we assume that that's a positive mix impact to the used and new sales margins?
Kyle David Menges: And should we assume that that's a positive mix impact on the used and new sales margins? So taking the first question, Kyle, I think a big part of business confidence is obviously that year-to-date result being in line with our expectations, knowing kind of what customer activity is. And so, you know, there's nothing that would suggest we're kind of deviating from our expectations.
Kyle Mingus: So taking the first question, Kyle, I think a big part of it is confidence is obviously that year-to-date resulting in line with our expectations.
Kyle Mingus: knowing kind of what customer activity is and so you know there's nothing that
Speaker Change: would suggest, you know, we're kind of deviating from our expectations. And you come back to customer confidence and their own expectations, looking out, you know,
Ted Grace: And you come back to customer confidence and their own expectations, looking out, you know, as we ask them. So, certainly, if we saw a deviation there, we'd start to ask questions why we're not. And so, I think those things come together to support our views of the used market. In terms of the mix, there's just a natural ebb and flow.
Kyle Mingus: as we asked them. So certainly, if we saw a deviation there, you know, we start to ask questions why we're not. And so I think those things come together.
Kyle Mingus: to support our views of the used market. In terms of the mix, there's just a natural ebb and flow. I don't know that we want to get into kind of trying to forecast one variable or another, but obviously, we've been very pleased with the results.
Ted Grace: I don't know that we want to get into kind of trying to forecast one variable or another, but obviously, we've been very pleased with the results. Makes sense.
Ted Grace: Thanks. And then could you just talk a little bit about where your fleet fleet age is at the end of the quarter? And if you'd still like to bring that down a little bit, like, like, what's a comfortable target range for the fleet age?
Speaker Change: Makes sense, thanks. And then could you just talk a little bit about where your fleet age is at the end of the quarter, and if you'd still like to bring that down a little bit, like what's a comfortable target range for the fleet age?
Ted Grace: Sure. So I think we're a little over 51 months in the quarter. So that's from the peak during COVID, probably down four months. I'll remind people that when you look at that 51, there are a couple structural changes there versus pre-COVID levels.
Speaker Change: from the peak during COVID, it's probably down four months.
Ted Grace: One was the acquisition of General Finance, which added about two months. And the other was the acquisition of Baker right ahead of the COVID period, which added about a month, a month and a half. So if you were to adjust for structural changes to product mix, that average age is probably something in the 47 or 48 months, which is very comfortable.
Speaker Change: I'll remind people that when you look at that 51, there are a couple structural changes there versus pre-COVID levels.
Speaker Change: That average age is probably something in the 47-48 months, which is very comfortable.
Ted Grace: We've long talked about fleet age as really more of a risk management strategy. In a prospective downturn, we'd want to be able to age the fleet for 12 months, right? It's just kind of a way to hedge ourselves and protect cash flow. So, we are now at the point where we feel like we could very comfortably age the fleet for 12 months in that kind of scenario. Not the plan, but we're not trying to engineer for a given fleet age. It's really the output of decisions we make. So, I don't know if that helps.
Speaker Change: We've long talked about fleet age as really more of a risk...
Angel Castillo: Kyle, we can dig in deeper there if you'd like. That's helpful, thank you. Thank you. Our next question will come from Angel Castillo with Morgan Stanley. Please go ahead.
Angel Castillo: Thanks for taking my question. Matt, I just wanted to kind of follow up on that and also on some comments you made earlier about just your fleet, I guess, that you have and their ability to kind of move product around, maybe away from some of the local markets. You left your CapEx unchanged.
Matthew J. Flannery: And as you think about, you know, having the fleet in a fleet age at a place where you can essentially, you know, kind of age it a little bit or in a good spot, plus the fact that you have the ability to move product from other areas, I guess, can you talk about the decision to perhaps keep CapEx unchanged versus perhaps kind of lowering that and utilizing what's maybe being impacted by the local market? Yeah, so first, let me clarify. We have no goal to age our fleet.
Speaker Change: You know kind of age at a little bit or in a good spot plus the fact that you have the ability to move product from other areas. I guess can you talk about the decision to perhaps keep capex unchanged.
Speaker Change: Versus perhaps kind of lowering that and utilizing was maybe be an impact on the local markets.
Speaker Change: Yes. So first let me clarify we have no goal to age our fleet what Ted was pointing to is we have that opportunity when thinking about as your fleet age at the right place, we always like to leave that dry powder, we have no expectation of needing to use that dry powder anytime soon.
Matthew J. Flannery: What Ted was pointing to is we have that opportunity when thinking about your fleet age at the right place. We always like to leave that dry powder behind because we have no expectation of needing to use that dry powder anytime soon.
Matthew J. Flannery: And the reason that we're continuing on with our CapEx is because the team's putting it to work. As we've stated earlier, you know, our fleet productivity is positive. The demand, as you can see from our guide, we expect to be as expected. So there's really not a reason why we would try to age our fleet forcefully and cut CapEx because we believe in the future growth prospects of the business.
Speaker Change: The reason that we're continuing on with our Capex just because the team is putting it to work as we've stated earlier our fleet productivity is positive.
Speaker Change: The demand as you can see from our guide we expect to be as expected. So there's really not a reason why we would then try to age our fleet.
Speaker Change: Forcefully and cut Capex, because we believe in the future growth prospects of the business and.
Speaker Change: The capex as is warranted because thats what the customers demand is as you can imagine a big portion of that is replacement Capex right. We talked about that about $3 billion of the Capex is inflation adjusted to replace a $2 five we expect to sell and then on top of that you can imagine that within the growth Capex, that's really feeding.
Matthew J. Flannery: And, you know, the CapEx is warranted because that's what the customer's demand is. As you can imagine, a big portion of that is replacing CapEx, right? We talked about that, about 3 billion of the CapEx inflation adjusted to replace a 2.5 we expect to sell. And then on top of that, you can imagine within the growth capex, that's really feeding the cold starts in the growth of specialty primarily, which is, you know, continues to be a good story. Very helpful; thank you.
Speaker Change: The cold starts and the growth of specialty primarily which is continues to be a good story for us.
Angel Castillo: And maybe just to kind of clarify, there was a discussion around the neutral utilization for the year. Could you just talk about that on a second half versus first half basis, and also kind of put it in context of kind of longer term? I believe you've kind of essentially normalized to where you think it'll kind of remain. So just, again, that dynamic of where we were in the first half versus the second half.
Speaker Change: Very helpful. Thank you and maybe just to kind of clarify if there was a discussion around the neutral utilization for the year.
Speaker Change #107: Could you just talk about that on our second half versus the first half basis, and also kind of putting it in context of kind of a longer term, particularly when you've kind of essentially normalized two to where you think it'll it'll kind of remains so just that dynamic of where we were in the first half versus second half.
Angel Castillo: Yeah, I we accept what we said in January maintains, we expect, you know, time utilization. Our goal is to match last year's time utilization, which got to a good, strong rate and at a healthy level. And that will remain our goal. We don't really see, we're not going to forecast it numerically by half, but we don't, we don't see any need to, to adjust our thoughts. And therefore, that's why we were able to reiterate our guide: Thank you. Thanks, Angel.
Speaker Change: Yes.
Speaker Change: We had said what we said in January maintained we expect.
Speaker Change: Time utilization our goal is to match last year's time utilization, which got to a good strong rate and at a healthy level and that will remain our goal. We don't really see we're not going to forecast it numerically by half, but we don't we don't see any need to to.
Speaker Change: To adjust our thoughts and therefore, that's why we were able to reiterate our guidance.
Speaker Change: Understood. Thank you.
Angela: Thanks Angela.
Steven Fisher: Thank you. Our next question will come from Steven Fisher with UBS. Please go ahead. Thanks. Good morning.
Speaker Change: Thank you. Our next question will come from Steven Fisher with UBS. Please go ahead.
Steven Fisher: So, your positioning on large projects is clearly providing a variety of benefits this year. I'm just curious, how active is the bid pipeline for the next round of large projects? I'm wondering how much visibility you have on those projects for the next year or so at this point, and how do you think those next projects are going to be different from what we've seen so far, you know, in terms of maybe the verticals or the size or duration or anything like that. Yes, Steve.
Steven Fisher: Thanks, Good morning, So your positioning on large projects is clearly providing a variety of benefits. This year I'm. Just curious how active is the bid pipeline for the next round of large projects.
Speaker Change: How much visibility you have on on those projects for the next year or so at this point in and how do you think those next projects are going to be different.
Speaker Change: From what we've seen so far in terms of maybe the verticals or the size or duration or anything like that thanks.
Matthew J. Flannery: So I think one of the key things is to remind people that these large projects, we have equipment on projects right now that started in 2022. So, these are long-lived projects, these are the megaprojects that are going on. So we expect these to be a multi-year tailwind. We're not really getting into bid pipelines or all that, although we've used some of that as competitive information.
Angela: Yes, Steve So I think one of the key things just to remind people as.
Angela: These large crop we have equipment on projects right now that started in 2022.
Angela: So these are long lived projects.
Speaker Change: The Mega projects that are going on so we expect this to be a multiyear tailwind, we're not really getting into bid pipelines, where all of that we view some of that is competitive information, but I think you guys all see in here.
Matthew J. Flannery: But I think you guys all see and hear, you know, what's coming out of the ground and what's expected. And we feel good that this is a multi-year tailwind. That's probably the way that I would characterize that.
Speaker Change: What's coming out of the ground and what's expected and we feel good that this is a multiyear tailwind that's probably the way that I would characterize that.
Steven Fisher: You know, and I think we're well positioned with the history of our relationships with the customers that are doing this type of work and the broad product offering to take advantage of this. And once again, I see this as a multi-year tailwind. Okay, that's helpful.
Speaker Change: And I think we're well positioned with the history of our relationships with customers that are doing this type of work and the broad product offering to take advantage of this and once again see this as a multiyear tailwind.
Ted Grace: And then the 44% flow-through ex-used, I think, compared to about 54% in Q1. Just curious what drove the reduction in that flow-through in Q2 versus Q1. Was it the impact of going from 15 cold starts in Q1 to 27? Or are there extra logistics costs to redirect the fleet around?
Speaker Change #104: Okay. That's helpful and then.
Speaker Change: 44% flow through ex us.
Speaker Change #109: I think compared to about 54% in Q1, just curious what drove the reduction in that flow through in Q2 versus Q1 was it the impact of going from 15 cold starts in Q1 to 27 million or are there.
Speaker Change: Just cause costs to redirect fleet around and how should we think about the kind of the flow through that you have implied is embedded in the second half of the year relative to the 44% in Q2.
Ted Grace: And how should we think about the kind of flow-through that you have implied embedded in the second half of the year relative to the 44% in Q2? Sure, Steve, I'll take that one. So, one more thing to remind you, quarter to quarter, there's a lot of sensitivity to these calculations, and certainly in this kind of growth environment, that's, you know, very true. You saw we delivered kind of in-line profitability this quarter and the first quarter.
Speaker Change: Sure, Steve I'll take that one so.
Speaker Change #101: I'll, just remind you a quarter to quarter. There is a lot of sensitivity to these calculations and certainly in this kind of growth environment.
Speaker Change: Very true.
Speaker Change: You saw we delivered kind of in line profitability. This quarter in the first quarter, we reaffirmed guidance. So all of this is playing out as expected I think it's important to start there. If you look at what's implied in the back half it's kind of a.
Ted Grace: We reaffirmed guidance. So all this is playing out as expected. I think it's important to start there. If you look at what's implied in the back half, it's kind of not dissimilar to what we did in the second quarter, right? You're going to have flow through in that mid-40s, ex-used.
Speaker Change: Not dissimilar to what we did.
Speaker Change: In the second quarter right Youre going to have flow through in that mid Forty's ex us we've talked about <unk> having.
Steven Fisher: We've talked about ex-used having, you know, targeting flat margins for the year. That was the expectation. That remains the expectation. In terms of sequentially, you know, cold starts are part of it. We talked about those investments we're making. We talked about the technology investments we're making. And so it is that kind of progress on those two programs specifically that continues in the back half. Perfect. Thank you. Thanks, Steve.
Speaker Change: Targeting flat margins for the year that was the expectation that remains the expectations in terms of sequentially.
Speaker Change: Cold starts are part of it we talked about those investments we're making.
Speaker Change: We talked about technology investments, we're making.
Speaker Change: And so it is that kind of.
Speaker Change: And making progress on those on those two programs specifically.
Speaker Change: It continues in.
Speaker Change: In the back half.
Speaker Change #105: Perfect. Thank you.
Steve: Thanks, Steve.
Steve: Thank you. Our next question will come from Neil Tyler with Redburn. Please go ahead.
Neil Christopher Tyler: Thank you. Our next question will come from Neil Tyler with Redburn. Please go ahead. Thank you. Good morning. There are a couple left, please.
Steve: Okay.
Neil Christopher Tyler: Yes. Thank you good morning.
Speaker Change #108: A couple please just I.
Neil Christopher Tyler: Just, I suppose, touching on the previous question around the cadence of cold starts, was it always the intention to, you know, to front load those or, you know, has that altered slightly? And then the second question, just coming back to the used comments you made, Ted. Is there anything to be done or being done in terms of channel shift that you've been able to achieve or intend to achieve to maximize the return on that use, please?
Speaker Change #100: I was supposed to talk to you on the on the on the previous question around the.
Neil Christopher Tyler: The cadence of Cold starts was it always the intention to.
Speaker Change #103: The low dose or.
Speaker Change #103: Has that altered slightly.
Speaker Change #106: And then the second question just coming back to the to the used car.
Ted Grace: Comments you made Ted.
Speaker Change #106: Is there anything to.
Ted Grace: To be done all being done in terms of.
Ted Grace: Channel shift.
Speaker Change #114: But you've.
Speaker Change #112: <unk> been able to achieve or intend to achieve.
Speaker Change #112: To maximize.
Ted Grace: The return on that on that useful thank you.
Neil Christopher Tyler: Thank you. Neil, I'll take the cold start question, and Ted can talk to you about sales some more, but a little bit accelerated, right? So, whether they fell in Q3 or Q2 was probably more a function of whether they were able to find the right real estate.
Unidentified Analyst: Neil I'll take a cold start question and let and Ted can talk to you sell some more but.
Speaker Change #116: A little bit accelerated right. So whether they fell in Q3 or Q2 is probably more a function of where they will find the right real estate.
Matthew J. Flannery: So, we were pleased. We were able to co-locate a couple in existing real estate that helped accelerate that. So, we had some real estate capacity that probably accelerated that a little bit. Not tremendously so, but certainly a little bit more, and that's not something we really try to manage by quarter. We don't really manage the business by quarter. It's not the way we look at it.
Speaker Change #111: So we were we were pleased we were able to co latest co locate a couple in.
Ted Grace: An existing real estate that helped accelerate that so we are.
Ted Grace: We had some real estate capacity that probably accelerated that a little bit not not tremendously, so, but certainly a little bit a little bit more and thats not something we really try to manage by quarter. We don't manage the business really by quarter. It's not the way we look at it. So we are pleased that the teams a little bit ahead of schedule and on cold starts and.
Ted Grace: So, we are pleased that the team's a little bit ahead of schedule on cold starts and feel good about our target for the year. Yeah, on the channel mix for used sales, there's probably a little less retail this year than last year. I think last year we averaged about 70 percent, thereabouts.
Speaker Change: Good about our target for the year.
Speaker Change #110: Yeah on the.
Speaker Change #115: Channel mix for used sales.
Speaker Change #110: Probably a little less retail this year than last year I think last year, we averaged about 70% thereabouts. This year will probably be closer to two thirds. That's really just take advantage of the capacity in other channels as we ramp.
Ted Grace: This year will probably be closer to two-thirds. That's really just taking advantage of capacity in other channels as we ramp up the amount of OEC we're selling. I think last year we sold something on the order of 2.3 billion OEC. This year we'll be, you know, call it in that 2.5 billion vicinity.
Speaker Change: Out of OFC were selling I think last year, we sold something on the order of $2 3 billion of always see this year will be call. It in that $2 5 billion vicinity. So.
Neil Christopher Tyler: So, you know, we'll take advantage of some other channels that we'd held back on in prior years. But ultimately, what you're seeing in 2024 is really getting back to that normal distribution of about two-thirds coming through retail. Got it. That's helpful. Thank you very much.
Speaker Change #110: We'll take advantage of some other channels that we had held back on in prior years.
But ultimately what youre seeing in 2024 is really getting back to that normal distribution of about two thirds coming through retail.
Speaker Change #113: Got it that's helpful. Thank you very much thank.
Scott Andrew Schneeberger: Thanks, Neil. Thank you. Our next question will come from Scott Schneeberger with Oppenheimer. Please go ahead. Thanks very much.
Neil Christopher Tyler: Thanks Neil.
Scott Andrew Schneeberger: Thank you. Our next question will come from Scott Schneeberger with Oppenheimer. Please go ahead.
Scott Andrew Schneeberger: Thanks, very much good morning, guys.
Matthew J. Flannery: Good morning, guys. I guess, Matt, for you on, you know, we've talked about megaprojects, that's obviously a nice tailwind for you, interest rate sensitive, you know, kind of smaller project, end of the market, a little bit more challenging. We haven't really discussed the infrastructure bill and the funds flowing from that. Have you, are you seeing a pick-up year over year from that to the degree you can sense that from your customers? And how is that affecting large and small projects?
Matt: I guess, Matt Matt for you on.
Speaker Change: We've talked about our Mega projects, that's obviously, a nice tailwind for you on the interest rate sensitive.
Matthew J. Flannery: Kind of smaller project and in the market a little bit more challenging we.
Speaker Change: We haven't really discussed the infrastructure bill and the funds flowing from that have you are you seeing a pick up year over year from that.
Matthew J. Flannery: To the to the degree you can sense that from your customers and and how is that influencing large and small projects and how.
Matthew J. Flannery: And how, you know, do you anticipate that improving in 25 or kind of a status quo flow year over year? Yeah, so our infrastructure business has been growing for a while, right? I think the first time we started talking about it was the NEPA acquisition in 2016.
Speaker Change: Do you anticipate that improving in 'twenty, five or or kind of a status quo flow year over year.
Matthew J. Flannery: Yes, so our infrastructure business has been growing for a while right I think the first time, we started talking about was the neff acquisition in 2016, we talked about we needed to bolster our fleet to start to serve the infrastructure needs. So we are long on this we do think that there is more work to becoming some of the funding is hard to track about when it's coming out and I think it's almost more poe.
Matthew J. Flannery: We talked about needing to bolster our fleet to start to serve the infrastructure needs. So we are long on this. We do think that there's more work to be done. Some of the funding is hard to track when it's coming out, and I think it's almost more postmortem than predictable, in my opinion.
Matthew J. Flannery: More of them than predictable and in my opinion, but we are seeing continuing to see green shoots in infrastructure opportunities.
Scott Andrew Schneeberger: But we are continuing to see green shoots in infrastructure and opportunities. You know, I drove around this weekend and was pleased to see a lot of our gear around on road and bridge projects. And I think we all see the airport work that's been going on as you travel. So we do feel good about infrastructure. But I'd still say we're in the early innings of this.
Scott Andrew Schneeberger: I drove around this weekend and was pleased to see a lot of our gear around on road and bridge projects. So and I think we all see about the airport work that's been going on as you travel. So we do feel good about infrastructure I'd still say we're in the early innings of this I do think there's more opportunity ahead than funding that's been that's gone on up to date.
Ted Grace: Thanks, I appreciate that and then Ted real quick maybe a real simple question, but the contribution from ancillary and re rent, 2% a year over year nice in the second quarter had a real easy comp from last year. It might be just as simple that might just be the answer but is there anything special going on or is it more of a comp. Thanks.
Ted Grace: I do think there's more opportunity ahead than funding that's gone on up to date. I appreciate that. And then, Ted, real quick, this may be a real simple question, but a contribution from ancillary and re-rent 2% a year over year, nice, in the second quarter, had a real easy comp from last year. It might be just as simple, that might just be the answer, but is there anything special going on, or is it more of a comp?
Scott Andrew Schneeberger: in terms of the growth from ancillary and rerun. Yeah, the biggest thing is YAC. Right. So when we bought YAC, we talked about how they've got a slightly different kind of composition of revenue. They've got, you know, the OER piece, which is the more traditional rental revenue, and then a bigger portion of the revenue coming from ancillary and re-rent, and ancillary
Ted Grace: In terms of the growth from ancillary and re rent it.
Scott Andrew Schneeberger: The biggest thing is yack right. So when we bought <unk>, we talked about <unk> got a slightly different kind of composition of revenue they've got the OE Rps, which is the more traditional rental revenue and then a bigger portion of the revenue coming from ancillary and re rent.
Ted Grace: You heard that in my prepared remarks, being up 17.5%. That substantially reflects the impact of YAC. Okay, thanks.
Scott Andrew Schneeberger: And ancillary more specifically you heard that in my prepared remarks.
Ted Grace: Being up 17, 5% that substantially reflects the impact of Yak.
Speaker Change: Got it okay. Thanks.
Scott Andrew Schneeberger: Thanks, Scott. Our last question will come from Ken Newman with KeyBank Capital Markets. Please go ahead.
Scott: Thanks Scott.
Ted Grace: Thank you our last question will come from Ken Newman with Keybanc capital markets. Please go ahead.
Ken Newman: Hey, good morning, guys. Thanks for... Maybe just real quickly, I mean, I know you don't give time on the mute, but we can back into dollar utilization. I think the maintain guide implies we're getting back to dollar mute highs in the back half that we haven't seen since 2014. And obviously, I know that mixed from specialties has been a positive driver here for the last, call it, decade now. But I am curious just how much more headroom you think there is for dollar utilization expansion from here.
Ken Newman: Hey, good morning, guys. Thanks for squeezing me in.
Ken Newman: Maybe just real quickly I mean, I know you don't give time Ute, but.
Ken Newman: We can back into dollar utilization.
Ken Newman: I think that maintaining guide implies we're getting back to dollar you've hired in the back half and we haven't seen since 2014, and obviously I know that mix from specialty has been a positive driver here for the last call a decade now, but I am curious just on how much more headroom you think there is for dollar utilization expansion from here.
Ken Newman: To be honest with you, Ken, we don't really focus on dollar utilization, right? So it's the combination of rate and time, which we do manage very aggressively on a daily basis. So we don't really look at it that way, but we do think volatility certainly is a component.
Speaker Change: To be honest with you can we don't really focus on dollar utilization right. So it's the combination of of rate and time, which we do manage very aggressively on a daily basis. So we don't really look at it that way, but we do think mix certainly is a component both.
Matthew J. Flannery: Both ways, by the way. You know, we have summer assets that are high return, but not necessarily as high dollar use. The YAC acquisition, the revenue we got from that, would certainly help dollar use as well, so similar to how it helped fleet productivity. So that's been a lift. But it's really not the way we manage the business as opposed to the individual components of it.
Speaker Change: Both ways by the way, we have summer assets at our high return, but not necessarily as high a value the yak.
Matthew J. Flannery: Acquisition the revenue, we got from that would certainly help as well so similar to how it helpfully productivity. So that's been a lift but it's really not the way we manage the business as opposed to the individual components of it but we certainly think there is there is opportunity to continue to drive.
Ken Newman: But we certainly think there's opportunity to continue to drive returns, and that should help value. Maybe, as my follow-up question, I just want to clarify a question that was asked at the beginning of the Q&A session. Yeah, the gen rent growth for the second half of kind of expected it. To clarify, I mean, I know you're not expecting that growth to be necessarily negative year over year, but is it?
Ken Newman: Returns and that should help out here.
Speaker Change: Got it.
Ken Newman: Maybe just as my follow up I just wanted to clarify a question that was at the beginning of the Q&A session.
Speaker Change: The the Gen rent growth.
Ken Newman: For the second half of kind of expected it to.
Speaker Change: To clarify I mean, I know, you're not expecting that growth to be necessarily negative year over year, but is it.
Ken Newman: The expectation that the decoupling that we've seen between Specialty and Gen Rent is probably going to be similar that we see in the second half versus the first half. It has been for a while, right? So our specialty has been growing faster than the overall business for a while. Part of that is added products and services, and the other part of it is the maturation of many of these businesses and our ability to continue to improve and cross-sell to our existing customer base.
Speaker Change: Is it the expectation that the decoupling that we've seen between specialty and Gen rent, it's probably going to be similar that we see in the second half versus the first half.
Matthew J. Flannery: So I would say that's been the driver of it, and we would expect specialty to continue to outpace overall company growth. And even if you look out to our long-term goals, we state that. So we feel really good about our ability to serve customers broadly and cross-sell, and we'd expect that to continue to show these types of results. Thank you. Thanks, Ken. Thank you. Thank you. At this time, I would like to turn the call back to Matt Flannery for any additional or closing remarks. Great
Ken Newman: It has been for a while right. So our specialty has been growing faster than the overall business for a while part of that is added products and services and the other part of it is the maturation of many of these businesses, so and our ability to continue to improve and cross sell to our existing customer base. So I would say that's been the driver of it.
Matthew J. Flannery: And we would expect specialty to continue to outpace the overall company growth and even if you look out to our long term goals. We state that so we feel really good about our ability to serve customers broadly and cross sell and we'd expect that to continue to show these type of results.
Speaker Change: Understood. Thank you.
Ken Newman: Thanks, Ken.
Matthew J. Flannery: Thank you at this time I would like to turn the call back to Matt Flannery for any additional or closing remarks.
Matthew J. Flannery: Thank you, operator. And to everyone on the call; we appreciate your time. I'm glad you could join us today. Our Q2 Investor Deck has the latest updates. So please take a look at it. And, as always, Elizabeth is available to answer any questions you have. So until we talk again in October, stay safe and take care. This does conclude today's call. We thank you for your participation. You may disconnect at any time.
Matthew J. Flannery: Great. Thank you operator and to everyone on the call. We appreciate your time I'm glad you could join US today, our Q2 investor deck has the latest updates. So please take a look at it and as always Elizabeth is available to answer any questions. You have so until we talk again in October stay safe and take care.
Matthew J. Flannery: Okay.
Matthew J. Flannery: This does conclude today's call. We thank you for your participation you may disconnect at any time.
Matthew J. Flannery: Okay.
Matthew J. Flannery: Hum.
Matthew J. Flannery: [music].
Operator: BF-WATCH TV 2021, The Ultimate Parody Site! [inaudible] The Ultimate Parody Site! [inaudible] The Ultimate Parody Site!
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