01—Abstract
Summary
Summary of the 10-Q filed July 18, 2018. Cited figures are marked; the original filing is the authoritative source.
United Rentals, Inc. (URI) reported strong financial performance for the second quarter and first six months of 2018, demonstrating robust revenue growth and improved profitability.
Total revenues increased significantly year-over-year, driven primarily by a substantial rise in equipment rentals, fueled by both increased rental volume and favorable rental rates. The company's strategic acquisitions, notably NES and Neff, are contributing positively to fleet size and market penetration, with management expecting further synergies and growth. Profitability also saw a healthy uptick, with net income and diluted earnings per share showing considerable improvement.
This was supported by effective cost management, including reductions in SG&A as a percentage of revenue, and the benefits of the Tax Cuts and Jobs Act, which lowered the effective tax rate. The company's liquidity remains strong, with ample borrowing capacity and positive free cash flow generation, enabling continued investment in fleet, strategic acquisitions, and shareholder returns through ongoing share repurchases. Overall, URI presents a picture of a company successfully executing its growth strategy and delivering value to its shareholders.
02—Key points
Key Highlights
- Total revenues for the six months ended June 30, 2018, increased by 22.5% to $3.625 billion, compared to $2.953 billion in the prior year period.
- Equipment rental revenue, the primary revenue driver, saw a significant increase of 22.0% for the six months ended June 30, 2018, to $3.090 billion, driven by a 20.6% increase in rental volume and a 2.4% increase in rental rates.
- Net income for the six months ended June 30, 2018, more than doubled to $453 million, from $250 million in the same period of 2017.
- Diluted earnings per share (EPS) for the six months ended June 30, 2018, rose to $5.34, a substantial increase from $2.92 in the prior year period, benefiting from lower effective tax rates due to the Tax Cuts and Jobs Act.
- The company's balance sheet shows total assets of $15.108 billion at June 30, 2018, a slight increase from $15.030 billion at December 31, 2017, with rental equipment, net, growing to $8.213 billion.
- Total liabilities were $11.944 billion at June 30, 2018, largely stable from $11.924 billion at December 31, 2017, with long-term debt at $8.086 billion.
- Free cash flow for the first six months of 2018 was $703 million, an increase from $614 million in the same period of 2017, reflecting operational improvements and capital management.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2018, United Rentals, Inc. kept $0.14.
- Revenue$1.89B100.0%
- Cost of revenue−$1.11B58.6%
- Gross profit$782.0M41.4%
- Operating costs−$312.0M16.5%
- Operating income$470.0M24.9%
- Interest, other & tax−$200.0M10.6%
- Net income$270.0M14.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed July 18, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $1.89B$1.60B | +18.4% |
| Cost of Revenue | $1.11B$942.00M | +17.7% |
| Gross Profit | $782.00M$655.00M | +19.4% |
| SG&A Expenses | $239.00M$218.00M | +9.6% |
| Operating Income | $470.00M$340.00M | +38.2% |
| Net Income | $270.00M$141.00M | +91.5% |
| EPS (Basic) | $3.22$1.67 | +92.8% |
| EPS (Diluted) | $3.20$1.65 | +93.9% |
| Shares Outstanding (Basic) | 83.46M84.64M | −1.4% |
| Shares Outstanding (Diluted) | 84.20M85.41M | −1.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the reported period?
Revenue growth was primarily driven by the equipment rentals segment, which saw a substantial increase in both rental volume (20.6% for the six months) and rental rates (2.4% for the six months). This was supported by the company's strategic acquisitions, NES and Neff, which expanded the rental fleet and market presence.
How did the company's profitability change, and what factors contributed to this?
Profitability significantly improved, with net income more than doubling and diluted EPS rising substantially. Key factors contributing to this were the strong revenue growth from equipment rentals, effective cost management leading to a decrease in SG&A as a percentage of revenue, and a lower effective tax rate resulting from the Tax Cuts and Jobs Act, which provided a material benefit to earnings per share.
What is the company's current financial position regarding debt and liquidity?
As of June 30, 2018, United Rentals had total debt of $8.986 billion, with long-term debt at $8.086 billion. The company maintained strong liquidity, with $117 million in cash and cash equivalents and significant borrowing capacity available under its ABL facility and accounts receivable securitization facility, totaling approximately $1.9 billion and $5 million respectively. Free cash flow generation remained robust.
What is the impact of the company's recent acquisitions (NES and Neff) on its financial results?
The acquisitions of NES and Neff have contributed to an increased fleet size and expanded market reach, directly impacting equipment rental revenue growth through higher rental volume. Management noted that these acquisitions were significant drivers for the increase in the volume of OEC (Original Equipment Cost) on rent. While also adding to depreciation expenses, the overall impact on revenue and market position appears positive.
06—Continue