01—Abstract
Summary
Summary of the 10-Q filed October 17, 2018. Cited figures are marked; the original filing is the authoritative source.
United Rentals, Inc. (URI) reported strong financial performance for the nine months ending September 30, 2018, driven by robust growth in equipment rentals and strategic acquisitions.
Total revenues increased significantly year-over-year, with equipment rentals constituting the largest portion at 86%a. The company has continued its strategic focus on profitability, customer service, fleet optimization, and operational efficiencies through Lean management and Project XL initiatives. The company completed several strategic acquisitions during the period, including BakerCorp in July 2018, expanding its footprint into European markets and diversifying its service offerings.
These acquisitions, along with organic growth and improved rental rates, have contributed to increased revenue and gross profit. The company also benefited from the Tax Cuts and Jobs Act, which reduced its effective tax rate and positively impacted net income and earnings per share.
02—Key points
Key Highlights
- Total revenues for the nine months ended September 30, 2018, increased to $5,741 million, up from $4,719 million in the prior year period.
- Equipment rentals, the primary revenue driver, saw a 21.7% increase year-over-year for the nine months, driven by a 19.6% rise in volume and a 2.3% rental rate increase.
- The company completed three significant acquisitions: NES (April 2017), Neff (October 2017), and BakerCorp (July 2018), expanding its fleet and market reach.
- Net income for the nine months ended September 30, 2018, rose to $786 million, compared to $449 million in the same period last year, with diluted EPS increasing to $9.34 from $5.26.
- The effective tax rate decreased significantly due to the Tax Cuts and Jobs Act, contributing positively to net income.
- Cash flow from operations remained strong, totaling $2,123 million for the nine months ended September 30, 2018, though free cash flow saw a slight decrease due to increased capital expenditures.
- The company is actively repurchasing shares under a new $1.25 billion program initiated in July 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, United Rentals, Inc. kept $0.16.
- Revenue$2.12B100.0%
- Cost of revenue−$1.18B55.7%
- Gross profit$938.0M44.3%
- Operating costs−$360.0M17.0%
- Operating income$578.0M27.3%
- Interest, other & tax−$245.0M11.6%
- Net income$333.0M15.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed October 17, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $2.12B$1.77B | +19.8% |
| Cost of Revenue | $1.18B$993.00M | +18.6% |
| Gross Profit | $938.00M$773.00M | +21.3% |
| SG&A Expenses | $265.00M$237.00M | +11.8% |
| Operating Income | $578.00M$448.00M | +29.0% |
| Net Income | $333.00M$199.00M | +67.3% |
| EPS (Basic) | $4.05$2.36 | +71.6% |
| EPS (Diluted) | $4.01$2.33 | +72.1% |
| Shares Outstanding (Basic) | 82.34M84.66M | −2.7% |
| Shares Outstanding (Diluted) | 83.17M85.59M | −2.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the reported period?
Revenue growth was primarily driven by a significant increase in equipment rental revenue, which rose 21.7% year-over-year for the nine months ended September 30, 2018. This was fueled by a 19.6% increase in the volume of equipment on rent and a 2.3% increase in rental rates. Strategic acquisitions, including BakerCorp, NES, and Neff, also contributed significantly to revenue growth by expanding the company's fleet and market presence.
How did the acquisitions impact the company's financial results?
The acquisitions of NES, Neff, and BakerCorp have expanded United Rentals' fleet, geographic reach (including entry into European markets with BakerCorp), and service offerings. These acquisitions contributed to increased rental revenue, a larger asset base (rental equipment, net, increased by 13.9% to $8.91 billion), and goodwill. While they also incurred merger-related costs and increased debt, the overall impact appears to be positive, driving top-line growth and market expansion.
What is the impact of the Tax Cuts and Jobs Act on United Rentals?
The Tax Cuts and Jobs Act, enacted in December 2017, reduced the U.S. federal corporate tax rate from 35% to 21%. This led to a lower effective tax rate for United Rentals in 2018, contributing approximately $0.73 and $1.68 to diluted earnings per share for the three and nine months ended September 30, 2018, respectively. The company recognized a provisional income tax benefit in 2017 related to the Act and is still finalizing certain calculations.
What is the company's liquidity position and outlook?
United Rentals maintains a strong liquidity position, with $65 million in cash and cash equivalents as of September 30, 2018. The company has access to borrowings under its ABL facility and accounts receivable securitization facility. The company expects its existing sources of cash, including operating activities and available credit, to be sufficient to support operations over the next 12 months. They are also planning to fund upcoming needs, including the acquisition of BlueLine, through new debt facilities.
06—Continue