United Rentals, Inc. (URI) Earnings Call Transcript & Summary

Welcome to the United Rentals 2021 Stockholder Meeting. Speaking for the company is Michael Kneeland, Chairman of the Board. Please go ahead.

Good morning. I'm Michael Kneeland, Chairman of the Board of Directors of United Rentals, and I hereby call this meeting to order. Welcome to our 2021 Annual Meeting of Stockholders. Given the need for ongoing safety measures during COVID-19, we're using a virtual format again for this year's annual meeting. The agenda will follow the same format as in the past with our in-person meetings. Before I begin, I want to acknowledge the more than 18,000 employees who are the lifeblood of United Rentals. Throughout 2020 and now in 2021, our employees have continued to provide critical support to our customers and communities. They work productively and they work safely and they make a great care of each other -- take great care of each other. And so on behalf of our leadership and Board, I want to thank team United for doing an exceptional job under difficult circumstances. You have our deep appreciation. Now moving onto the agenda. First, we'll conduct the formal business portion of the meeting. Next, our President and CEO, Matt Flannery, will provide a brief business update, followed by a general question-and-answer session. I will chair the meeting; and Joli Gross, the company's General Counsel and Corporate Secretary, will serve as secretary. You'll find the agenda on the portal welcome screen and the rules of conduct that are at the bottom right under Meeting Materials. The polls for each matter will be voted on at the 2021 United Rentals Annual Meeting of Stockholders, and we are now open as of 9:02 AM Eastern Standard Time on May 6, 2021. Now to place your vote, click on the voting button on the web portal and follow the instructions. You can vote until the polls are officially closed later in the meeting. At this time, I would like to acknowledge the Board members who are joining us virtually today. In addition to Matt Flannery, our directors are José Alvarez, Marc Bruno, Bobby Griffin, Kim Harris Jones, Terri Kelly, Gracia Martore, Filippo Passerini, Don Roof, and Shiv Singh. I also want to acknowledge Carey Marshall and [ Steve Kohutek ] who are with us today from Ernst & Young, our independent auditors. And finally, we have [ Catherine Reedon ], a representative of Broadridge Financial Solutions, who has been designated to act as inspector of elections. Thank you [ Catherine ] for joining us. As of March 9, 2021, the record of date, the total number of issued and outstanding shares of common stock of the company entitled to vote at this meeting was 72,330,146 shares. Now under our bylaws, the holders of the majority of shares entitled to vote constitutes a quorum. The inspector has determined that based on the number of shares represented at this meeting, a quorum is present. Therefore this meeting is duly constituted. As you will see from our proxy statement, there are 4 proposals to be voted on by stockholders. These will also appear on the meeting agenda. They are: proposal #1, the election of 11 directors; proposal #2, ratification of the appointment of Ernst & Young, our independent registered public accounting firm; and proposal #3, an advisory vote on executive compensation; and proposal #4, the stockholder proposal to improve shareholder written consent if such a proposal is properly presented at this meeting. A question-and-comment period limited to these proposals will follow the presentation of the agenda items. After the question-and-comment period ends, there will be a voting on all agenda matters. If there are any questions that are unrelated to the agenda, please hold them for the general question and answer session later on. The first proposal of the election of the Board of 11 directors as more fully described in proposal 1, the nominees named on the proxy are José Alvarez, Marc Bruno, Matthew Flannery, Bobby Griffin, Kim Harris Jones, Terri Kelly, Michael Kneeland, Gracia Martore, Filippo Passerini, Don Roof and Shiv Singh. Any other nominations for directors were required to have been submitted in proper written form on a timely basis to the Secretary as more fully described in our bylaws. And having received no other nominations, the nomination process is closed. Now under our bylaws, all of our directors are elected for a period of 1 year by a majority of votes cast. The next proposal is to ratify the appointment of Ernst & Young, our independent registered public accounting firm, for the fiscal year ending December 31, 2021. Our Audit Committee, which is comprised of independent directors, is charged with the responsibility under its charter has reappointed Ernst & Young subject to stockholder ratification. Our Board, upon the recommendation of the Audit Committee, recommends that you vote for this proposal. The next proposal is an advisory vote on the executive compensation. At our 2017 annual meeting, our stockholders voted in favor of holding an advisory vote on executive compensation every year. Accordingly, we are holding an advisory vote on the compensation of the company's named executive officers this year. Our Board recommends that you vote for this proposal. The final proposal is to consider a stockholder proposal to improve shareholder written consent if properly presented. Our Board recommends you vote against this proposal. Now pursuant to the rules of conduct, the shareholder proponent or his qualified representative will have 3 minutes to present proposal 4. Operator, if the stockholder proponent or his qualified representative has dialed in to present the proposal, will you please open that line now?

Can I be heard?

You can.

Proposal #4, improve shareholder written consent. Shareholders request that our Board of directors take the steps necessary to enable 10% of shares to request a record date to initiate written consent. If you have voted against this proposal, please consider changing your vote before the polls close in a few minutes. Currently, it takes the formal backing of 1/3 of all shares that normally cast ballots at the annual meeting to do so, little ask for a record date for written consent. Plus any action taken by written consent would still need 65% approval from the shares that normally cast ballots at the annual meeting. This 65% vote requirement gives overwhelmingly supermajority protection to management that will remain unchanged. Enabling 10% of shares to apply for a record date for written consent is reasonable because scores of companies do not even require [ 0.1 ]% of stock ownership to do so little as request a record date. This proposal topic just won majority support at BorgWarner. Our current version of written consent is useless and would not be used by any group of shareholders in their right minds. Why would any group owning 25% of shares decide to do so little as to ask management to look at a calendar and name a date for written consent when the same group of shareholders could compel management to hold a special meeting on a topic of their choosing? This proposal will convert our current useless right to act by written consent into a useful right to help us hold management accountable. Taking action by written consent is a means shareholders can use to raise important matters outside the normal annual meeting cycle like the election of a new director. For instance, shareholders might determine that a poorly performing director is in need of replacement. Mr. Bobby Griffin, lead director, received the most negative votes at our 2020 annual meeting. Mr. Griffin received more negative votes than even the executive pay of United Rentals' management. Now more than ever, shareholders need a more viable option to take action outside of a shareholder meeting since online shareholder meetings are a shareholder engagement and a management transparency wasteland. With the near universal use of online annual shareholder meetings, which can be only 10 minutes of stilted formalities, shareholders no longer have the right for engagement with other shareholders, management and directors at a shareholder meeting. Management promotes the fallacy that shareholders should be distracted from improving our corporate governance with this proposal simply because we are some good existing governance practices -- we have some good existing governance practices similar to most other companies. Please vote yes, proposal 4, improve shareholder written consent, John Chevedden. Thank you very much for your time.

Well, that completes the presentation of the agenda items. The floor is now open for questions related to the proposals. [Operator Instructions] Joli will read any question aloud and ask the appropriate company representative to answer it. I will pause for a moment as the team reviews any questions that may have come in. Joli, are there any...

Michael, we have not -- sorry. Go ahead.

I was going to say, are there any stockholder questions for the 4 proposals?

No, we have not received any questions related to the proposals.

If there are no additional questions on the proposals, we will proceed with voting. Please vote, and you must have signed in as a stockholder with a valid control number to vote during the meeting. Any person signed in as a stockholder who hasn't yet voted or who wishes to change their vote may do so now. Click on the voting button on the web portal and follow the instructions on the screen. Stockholders who have sent in proxies or voted via telephone or online and do not want to change their vote do not need to take any further action. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2021 United Rentals Annual Meeting of Stockholders closed as of 9:13 Eastern Standard Time, May 6, 2021. I will now ask Joli to report the preliminary voting results. Joli?

Thank you Michael. Based on the preliminary results reported by the inspector of elections, it appears that the stockholders have voted to elect by a majority of votes cast each of the 11 director nominees named in the proxy statement to hold office until the 2022 annual meeting and until his or her successor is duly elected and qualified. It appears that the stockholders have voted to ratify the appointment of Ernst & Young as the company's independent registered public accounting firm. It appears that the stockholders have voted to approve the executive compensation of the company's named executive officers. And finally, it appears that the stockholders have voted against the stockholder proposal to improve shareholder written consent.

Thank you, Joli. The results reported today are preliminary. The final tally remains subject to verification and will be provided by the company in a form 8-K that will be filed with the SEC within 4 business days. With the formal portion of our annual meeting concluded, I declare the meeting adjourned. And we would like to now proceed with an update from Matt, followed by a general question and answer. Matt?

Thank you Michael, and good morning everyone. Nothing about 2020 was business as usual, but we executed well in a difficult year, drawing on the disciplines we've engineered into our business for more than a decade. We managed through the turmoil by taking a balanced short-term and long-term view. Each time we committed to a course of action, we considered all the implications of that decision. We wanted to avoid acting in ways that could impact our long-term earnings power or slow us down in a recovery. Now we're in the up cycle, and our strategy of keeping the key in the ignition on service capacity has turned out to be the right decision. Demand is continuing to recover. And while visibility is still imperfect, the current trends in our end markets are decidedly encouraging. Earlier, Michael expressed how much we appreciate our employees. I'd like to add that we deeply admire them as well. The silver lining to 2020 was that it showed us how resilient we are as a company and how purposeful our people can be in the face of challenges. I'm very proud of the team for that. Now, I'll hand the meeting back to Michael, and we'll take your questions.

Well, thank you Matt. We will now proceed to the general question-and-answer session. [Operator Instructions] Joli will read any question aloud, and ask the appropriate company representative to answer it. Please note that we will attempt to answer as many questions as time allows and only questions that are germane to today's meeting. So I'll pause for a moment as the team reviews any questions that may have come in. Joli, are there any general stockholder questions?

Yes, Michael. We received the following questions. The first question is, will profit margins be flat in the year ahead? And Matt Flannery will answer that.

Yes. Our current guidance contemplates a wide range of outcomes. I would largely say we expect margins to hold in line, but we will find out once we update everybody as we go through each quarter. I would also add that with the General Finance deal still in a regulatory approval situation, once we close that deal, we'll update our guidance in regards to the General Finance impact on the business as well.

Thank you. The second question is, who are some of the largest customers? And Matt Flannery will answer that as well.

Without getting into specific competitive details, I would just say think about the largest companies and civil contractors out there, and those would be the people that would obviously have the largest need and be towards the largest customers that we have.

Thank you. The next question is, Mr. Chairman, the Carpenter Pension Funds holds a total of 184,200 shares of the company's stock. As long-term investors, we strongly believe that the company's executive compensation plan should be designed primarily to drive the successful execution of the Board's long-term strategic business plan. Today's public company executive compensation plans are largely formulaic, peer-related plans, with simplistic annual say-on-pay voting reinforcing plan homogeny. Would you or the Chair of the compensation committee speak to whether United Rentals might be better served by an executive compensation plan tailored specifically to the company's particular circumstances and its unique long-term strategic business plan? Thank you. Craig Pintoff, would you please answer that?

Yeah. Thank you Joli, and thank you for the question. We also firmly agree that our compensation plans for our executives should be very closely tied to the company's strategy and one of the key leading indicators and actions we can take to be successful in our strategy and be aligned with shareholder interests. With that in mind, our programs are not peer related as described in the question. We focus on key drivers of success, in particular drivers such as growth, profitability and returns, given our capital-focused business. And in addition, when the Compensation Committee of the Board was reviewing our programs at the beginning of last year, we put in place additional scorecards that specifically tie to our strategy, things like our human capital scorecard that focuses on diversity and employee safety and employee engagement, our digital growth and transformation scorecard that focuses on digital success as well as our customer service scorecard. Each of which we believe firmly tie to our strategy and are components of our annual bonus plan. So I hope that answers the question, and we agree with the spirit of the question. Thank you.

Thank you. The final question is as follows, Mr. Chairman, the topic of the stakeholder capitalism as an alternative to shareholder capitalism has received considerable attention recently. As long-term pension fund investors, the Carpenter Funds appreciate the sentiments embodied in the stakeholder capitalism perspective, but feel that execution could be complicated. Could you discuss the Board's perspective on the concept of stakeholder capitalism and what principles the Board would use to balance the interests of varied stakeholders as it develops and implements the company's long-term business strategy? Thank you. Jessica Graziano will answer this question.

This is Jessica Graziano, Chief Financial Officer of United Rentals. Thank you for the question. We believe our short- and long-term strategies are aligned with increasing value for all of our primary stakeholders. And that includes not only our investors, but also our customers and our employees as well as the broader communities in which we do business. These strategies manifest through our operational execution and our disciplined approach to capital allocation to serve all of these stakeholders and deliver both profitable growth and accretive returns.

Thank you Jessica. Mr. Chairman, there are no additional questions.

Okay. So if there are no additional questions, we will now close the meeting. I want to thank everybody for your support and for attending the 2021 Annual Meeting of Stockholders. And the person who actually spoke on behalf of proposal number 4, thank you for your representation. And this concludes the meeting. Thank you.

Thank you. The United Rentals 2021 Stockholder Meeting has now come to an end. Thank you for attending. You may now disconnect.