01—Abstract
Summary
Summary of the 10-Q filed July 17, 2019. Cited figures are marked; the original filing is the authoritative source.
United Rentals, Inc. reported solid financial results for the second quarter and first half of 2019, demonstrating continued revenue growth and operational performance.
Total revenues increased by 21.1%a for the quarter and 21.6% for the first half compared to the prior year, driven primarily by a significant increase in equipment rentals, bolstered by strategic acquisitions like BakerCorp and BlueLine. The company's focus on fleet optimization, customer segmentation, and operational efficiencies through 'Lean' management techniques and Project XL continues to yield positive results. Despite a slight decrease in gross margin percentages due to acquisition impacts and accounting standard adoption, profitability metrics like Adjusted EBITDA showed strong growth, increasing by 18.3% for the quarter and 18.2% for the first half.
The company maintained a strong liquidity position and managed its debt effectively, with ample capacity under its credit facilities. United Rentals' strategic initiatives, including continued investment in its fleet and pursuing accretive acquisitions, position it well for sustained growth and enhanced shareholder value.
02—Key points
Key Highlights
- Total revenues grew significantly, up 21.1% for Q2 2019 and 21.6% for the first half of 2019 compared to the prior year.
- Equipment rentals, the company's largest revenue driver, increased by 20.2% for the quarter and 21.5% for the first half, boosted by a 23.2% and 23.4% increase in average Original Equipment Cost (OEC), respectively, largely due to recent acquisitions.
- Adjusted EBITDA demonstrated strong operational performance, increasing by 18.3% for the quarter and 18.2% for the first half, indicating effective cost management and profitability.
- The company maintained a robust liquidity position with $2.151 billion in available liquidity as of June 30, 2019, and $75 million in cash and cash equivalents.
- United Rentals successfully integrated the BakerCorp and BlueLine acquisitions, with these acquisitions contributing to revenue growth and expanding the company's operational footprint.
- The adoption of the new lease accounting standard (ASC Topic 842) resulted in the recognition of right-of-use assets and lease liabilities on the balance sheet, impacting certain financial ratios but not significantly altering the company's operational cash flows.
- Strategic capital allocation included $1.226 billion in purchases of rental equipment and $454 million in share repurchases during the first half of 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2019, United Rentals, Inc. kept $0.12.
- Revenue$2.29B100.0%
- Cost of revenue−$1.38B60.2%
- Gross profit$911.0M39.8%
- Operating costs−$382.0M16.7%
- Operating income$529.0M23.1%
- Interest, other & tax−$259.0M11.3%
- Net income$270.0M11.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed July 17, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $2.29B$1.89B | +21.1% |
| Cost of Revenue | $1.38B$1.11B | +24.3% |
| Gross Profit | $911.00M$782.00M | +16.5% |
| SG&A Expenses | $271.00M$239.00M | +13.4% |
| Operating Income | $529.00M$470.00M | +12.6% |
| Net Income | $270.00M$270.00M | 0.0% |
| EPS (Basic) | $3.45$3.22 | +7.1% |
| EPS (Diluted) | $3.44$3.20 | +7.5% |
| Shares Outstanding (Basic) | 78.26M83.46M | −6.2% |
| Shares Outstanding (Diluted) | 78.47M84.20M | −6.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of United Rentals' revenue growth in the second quarter of 2019?
The primary driver of United Rentals' revenue growth was a significant increase in equipment rentals, which rose by 20.2% in the second quarter of 2019 compared to the prior year. This growth was largely fueled by a substantial increase in the company's fleet size (average OEC) due to strategic acquisitions such as BakerCorp and BlueLine.
How did the recent acquisitions of BakerCorp and BlueLine impact the company's financial performance?
The acquisitions of BakerCorp and BlueLine significantly contributed to revenue growth by expanding the company's fleet size and operational footprint. While these acquisitions also led to increased depreciation and amortization expenses and slightly impacted gross margins due to integration and accounting standard adoption, they have positively contributed to overall revenue and Adjusted EBITDA growth.
What is the company's liquidity situation, and how is it managing its debt?
United Rentals maintained a strong liquidity position with $2.151 billion in available liquidity as of June 30, 2019. The company actively manages its debt through various credit facilities, including an ABL facility and an accounts receivable securitization facility. They were in compliance with all loan covenants and had sufficient capacity to support operations and capital expenditures.
What impact did the adoption of the new lease accounting standard (ASC Topic 842) have on the financial statements?
The adoption of ASC Topic 842 in 2019 required the recognition of operating lease right-of-use assets and lease liabilities on the balance sheet. While this had a material impact on the balance sheet, it did not materially affect the income statement or cash flow statement, as the revenue recognition for leases largely remained consistent with prior periods. It did, however, lead to a reduction in equipment rentals revenue due to the accounting for doubtful accounts associated with lease revenues.
06—Continue