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

Okay. And we're live. Thanks, everyone, for coming. We reached the end of the day, but we're going to finish on a really strong note here with the team from United Rentals, who -- I think they've been very good and long-term loyal supporters of this conference. So thank you guys for being here. Matt Flannery, CEO. To his left, Ted Grace, newly appointed CFO, everyone knows doing a great job with IR. So thank you guys for coming.

Maybe, Matt, we'll open it up kind of on a high level. I mean given your exposure and geographic footprint, I always find you guys to be as good of a kind of a real-time read just in terms of overall macro trends in North America. So maybe just from a high level, kind of what you're seeing across the markets.

Certainly. So from a high-level perspective, as we talked about over really the last couple of years, a very broad-based demand for our products, very broad-based growth. And that's by geography, any vertical that you'd want to look at and really just about any segment that we measure has had strong growth over the last 2 years. And we're seeing that momentum continue. And on top of that, we just see a plethora of large opportunities that are coming, whether it be through the infrastructure bill or the IRA or even just some of the onshoring opportunities or, call it, a manufacturing renaissance we see through the chip plants, through the automotive EV work that you're seeing and a lot of other large projects that we really see a great '23 growth year ahead of us.

Got it. Yes. So we'll touch on a few of the -- we'll circle back in a few of those things. But I was at ARA last week and historically, it's catered more to the smaller kind of IRCs, the traffic there. And it's interesting, in reading the -- and hearing from you and seeing results of like a peer that reported this morning, what we see from the big public NRCs relative to what I heard, while still good, they're not capturing as much of the growth. They're not seeing as much of the benefit from these big projects such that there seems to be a kind of a growing -- not divergence, but the big guys are capturing more of the opportunities out there. I'm guessing that's...

We've talked about the biggest getting bigger being a natural evolution in the industry and -- whether it's through consolidation or outweighted organic growth. And I think that probably got exacerbated a little bit in a tight supply environment. I mean shame on us if we're not getting more than our fair share of the assets from the OEMs in a tight supply environment. And I think you saw that manifest in this past 2 years and expect to in '23 as well. But it is -- it's encouraging to hear our other public peers doing well. We see -- we understand the concerns in the macro, but one of the -- most of the tailwinds that we see, we think are agnostic of the macro. And supply seems to be at least as good as it's been last year, and hopefully, it will even get a little bit better in the back half of the year. But we feel really good about it, and I understand for some of the local business, so you're not as -- playing as large a role in big projects, big opportunities. I could see there being a divergence.

Yes. You mentioned consolidation. And I would imagine that likely to continue. But as you think about how that is impacted in that interplay with just the overall -- we're not going to discuss rates, but from a pricing discipline standpoint. And I think about United, right, over the last couple of years, some of those companies that are now part of yours weren't -- didn't have the reputation for being the most disciplined. Rather, that's Franklin or Ahern. So just as you think about the role that consolidation has played, is it -- do you see that as well just in terms of looking at the markets kind of picture today relative to what it has been in history?

Well, when we acquire a business, and I'm glad to see our other large public peers are growing through acquisition as opposed to organic growth as well because we do think consolidating capacity versus adding capacity is a better way for growth. But as we think about that, the question we ask going in is, can we be a better owner of this asset? And that's the only right way that you can pay for it. You can pay a multiple as you have to be a better owner of that asset. And I think that's played out for a lot of reasons, whether it's adding their employees and their fleet into our set of tools where we can help the employees be even more productive, help them grow and expand, or just getting our returns on the assets. There's many ways that we can be a better owner as well as some of the back-office synergies that you get when you consolidate companies into a larger entity and how we can get some synergies from that as well. All of those are reasons why we think you'll continue to see the top players in the industry continue to use consolidation as an opportunity for growth versus simply cold starts or adding capacity organically.

Yes. This is a little bit off the tangent. Listening to one of the largest public truckload operators yesterday, and one of the comments he made was the use -- or the advent of technology in their markets, whereby you have -- you used to get spot rates on a monthly basis. Now certain lanes, they see it almost like daily. And his point was, as technology has evolved, it's become more -- this information is more readily available, that it's going to lead to better industry behavior because their corrective mechanisms likely set in faster. And it seemed a bit analogous to the role that maybe going back to Rouse a few years ago and just in terms of what that's brought to the rental industry. I don't know if you'd agree.

I agree wholeheartedly. I think in '15, coming out of that little bit of oil and gas dislocation, you saw more and more participation with the Rouse data. And now people are selling and making decisions off of information versus fear. And I think that, that's been a huge benefit for the industry. And I think it's carried throughout the industry, not just the large companies. But when I look at the Rouse data, which captures well over 50% of the industry, so certainly more than the top 3 or just the public peers, you're seeing that improvement in all components of fleet productivity continue to grow. So I think kudos to the industry overall, but I think the information was a big part of that. And hopefully, we continue to help lead from the front in that area as well.

Got it. Maybe talk about some of the market drivers more specifically, and non-res construction being the largest. I mean that -- the strength in starts we saw in '22 gives backlogs we haven't seen in some time. Now you start layering in the fact that rates have gone up quite a bit. Some of the lenders are tightening up their standards. So you kind of -- what is it from your lens? I mean I don't imagine you're seeing cancellations, but are you hearing of any kind of consternation amongst project developers about maybe that next project start, or?

No, not at all. As a matter of fact, we're not even hearing about delays, and one of the few delays that we heard about was really regarding solar, and that was more supply issues of the panels, and most of that's been sorted out. But outside of that, we haven't even seen project delays. Ted, I don't -- Ted tracks this as well. I don't know if you have anything to add?

No, that's correct.

So you mentioned -- so these mega projects has been the story of the year in '22 in terms of what a big driver they were to overall starts. Talk about that from a United perspective, going back to the comment earlier about the big versus smaller players. I mean is that -- will that typically be 100%? For example, is URI going to capture, of a $300 million project start, whatever the rental needs for that, is that typically allocated a chunk to United and then you'll have local players that -- or does it tend to be we want it all sourced by you?

Yes. So there's very few projects anymore that are sole sourced by anybody. So -- but you could imagine the top -- when you think about large projects that have broad needs -- broad depth of needs by product categories and volume of categories, you can imagine the larger players operating in the market are going to have the best opportunity to serve that kind of demand. And we would expect to -- especially with our focus on national accounts and large projects and plants around the country, we would expect to outpunch our weight in those areas. That didn't need to be sole source, but I think there's only a handful of players that can do the breadth and depth of some of these large projects. I think we've positioned ourselves very well amongst that group. This has been a focus for us. Coming out of the Great Recession in '09, if you recall, where we really put a focus on national accounts and diversifying our business, and this is going to play out pretty well for us, as well as our investment in growing our infrastructure capabilities. You go far back as the Neff acquisition when we talked about how we needed to bolster our dirt fleet if we're really going to play in some of the spaces, including infrastructure. And it's kind of come into fruition here with these mega projects, the infrastructure bill, a lot of the work that's coming up. We think we've positioned ourselves well for this opportunity.

Across the major categories, again, a lot of the headlines, whether it's a data center or traditional roads and bridges, are there -- does the rental intensity vary a lot across those different verticals? Or is it -- I don't imagine one starts are all the same in terms of how much opportunity there is for United. But do any stand out in terms of being more versus less?

Yes, every [ product ] is unique, but you could think about the broader -- the footprint of a project, the more needs they're going to have, right, as opposed to a high rise, where you can only go so far. So one of the largest chip plants is another huge area right now. As a matter of fact, just in the last week, another $14 billion of chip plants came on board, and that's with excess over $250 million already on the slate. One of the largest ones in Arizona that we're on right now is one of the largest projects in the country. So we think that the projects that are coming up have the attributes and the needs for there to be somewhere from 2% to 3% penetration, but it does vary job to job.

So much that they're spending so much on these tech companies or semi -- one of them just cut their dividend today. So -- but maybe a separate issue. But -- and going back to the public versus private point, that would -- you mentioned Neff, but more broadly, the split between a public infrastructure project in certain -- like a road isn't going to have as much volume for United. Is that fair? I mean...

Yes, until you get to the elevated part of the roadways, right, where they will have enough. But we'll -- even in the road work, we'll have opportunities, whether it be temporary power, whether it be lighting, but we're not going to have -- I think some of the just paving type opportunity is more of a big yellow maybe OEM opportunity. But much of the infrastructure bill has a lot of relevance and opportunity for us. And I know Ted has done a lot of work on this. You want to share some of the color on infrastructure opportunity?

Yes, absolutely. I mean we think it's pretty extensive. If you dissect the bill, it's $550 billion. $110 million of that is road and highway. The portion that's road and highway includes bridges. And within bridges, to Matt's point, we do exceptionally well, and there's opportunity on the other pieces within road and highway. But outside of that, that's really in the middle of our sweet spot of serving those demands. So when you translate that, call it, let's say, $100 billion per year over 5 years, that's in the context of the $900 billion market. So all else equal, it's worth about 12 points of relative demand. So which -- the majority of which is right in our sweet spot.

Yes. Yes, interesting. Going back to the industrial market, Matt, the -- there's a lot within that. But going back to the -- remember the RSC days and really kind of increased the exposure for United. And there's a lot -- you mentioned this notion of potential reindustrialization in North America, nearshoring, all these kind of secular buzzwords we're hearing. But talk about the opportunities as you look at the pipeline. Presumably, you have a little bit more visibility than maybe normal at this time just given the project backlogs. Is that...

Yes. Certainly, in this tight demand environment, you can imagine that our customers are being more forward planning, right, because surety of supply is something they need. We're a relatively small part of the cost of a project. But if they don't get the labor and the material activated through equipment, it's -- it could really hold the project up. So the forward planning has really been helping us. And that's why you hear us talk about the mega projects and the large projects being at a higher level than we had ever seen before because the customers are coming to us. And it's interesting with some of the concern about people thinking about the macro and what's going to happen, we actually almost have the opposite concern, like how are we going to make sure that we could support all these large customers on these projects. And the Ahern acquisition played pretty well for us into that hand because some of the assets that are the tightest, as you all follow the industry know, are more in the aerial reach force side, and that was about 75% of the Ahern fleet. So all this kind of tied together towards the opportunity that we have in '23 and '24 for the next couple of years where these large projects and large customers are going to be looking for supply in what's a tight market.

As part of Acme, I know a much smaller scale, but part of what Acme brought to you.

Oh yes, certainly on the big boom space that acquiring those assets a few -- I guess it's 1.5 years ago now, it was equally targeted towards large projects, large customers.

To your point about the availability, I had a conversation with someone from a really large E&C company. And his point was that they were getting, I think he said, call it, 60% of the iron that they requested from a big OEM. And as a result of this, what he said, they've changed how they're bidding projects. So they're -- one, they're assuming labor content and labor costs are going to be higher. But also, they've told all their salespeople if you used to assume 10% to 15% was going to be fulfilled by third-party rental, we need to assume a higher cost and a higher percentage of that just because of this issue of them not having [ enough ] in the building. I mean,I don't know if in your career, is that -- I think at a time where...

I think at a time where the supply-demand dynamic is outweighted, then this unique time where it's really hard for anybody, even if they didn't understand the math behind how rental could be a much more capital-efficient way to support these projects, just the lack of ability to even buy the equipment if you wanted to, for an individual owner, I think will expose them to a solution that's much more economically feasible. And I think that will help drive secular penetration for the industry overall.

Before we leave, so I mentioned industrial, but maybe just some significant portion of the book. So how are you across industrial categories? Are there some that you're more or less optimistic on in '23?

No. I mean we've got -- the only vertical that we've tracked the entire year that hasn't been up, hasn't been a positive has been midstream. And we feel that's probably as much as a comp that we had in '21. But we feel that midstream, especially the LNG part of it, is going to be a significant opportunity over the next couple of years. And then when we look at the other verticals, if I were going to call out a few that seem to have better momentum, I would say manufacturing, which we've been talking about, explicitly industrial manufacturing. But also power, whether it be traditional or alternative power, has been a big large area of growth for us and one that we're well positioned with.

Oil and gas, well, you mentioned midstream. The downstream piece has always -- has been kind of hit or miss the last couple of years. It sounds like the turnaround schedules are starting to fill in. Is that -- do you expect that to be a better year in '23? Or is it...

Yes. And as you know, we're behind the gates in a lot of these plants where we're doing a lot of [ rather ] maintain, MRO work, and we feel really good about -- it has been a little bit lighter for the last couple of years, but we see that activity picking up. I think you've -- you're hearing some of the same. So we're very well positioned in the markets where this will happen, specifically in the Gulf Coast. So we feel good about that opportunity as well.

Yes. So circling back and jumping around here, but the point on rental penetration, for that example I mentioned earlier, the big E&C company. Is it -- typically, once the kind of -- the ship leaves the port, it's pretty tough for them to turn around. So I would think that when you see rental penetration go one way, it hasn't historically often shifted back the other way.

Agreed. And I think that's because the industry has done a much better job of 2 things. Number one, quality of fleet, and surety of supply would be the second. So they don't have to deal with all the soft costs, first of all, the initial capital cost. But then all the soft costs, especially in this inflationary tight labor market, of the logistics of repairing the equipment, of storing the equipment, unless you're on a large project that's going to have the same task for multiple years at high utilization, something like a mine, right? So think about a big articulated dump in a mine, or a grader on a multiyear road project, it's always going to pencil that rental is going to be a more economical solution with a lot more flexibility.

Yes. I saw this ARA number. I don't know how they calculate it, but the rental penetration was up like 150 basis points, but to 54% in '22. And again, I'm not sure exactly how they compute this. But if you go back and, again, look at other developed markets around the world, I mean some are operated at about 70%, 80%. I mean hard to call where this goes, but...

Yes, it goes very differently by product line, but we would say that there's still tons of penetration opportunity in North America and even more so for the specialty products, which you haven't really even touched on. Some of the specialty businesses we have, like our trench business, is really getting growth from replacing noncompliance and just really building a safer industry so that the excavations are run safely as opposed to either self-performance or noncompliance overall. So we think there's a lot of opportunities within our base gen rent business as well as many of our specialty business.

Yes. But trench protection used to be -- going back many years, it used to be a sale business, then I think kind of morphed into more of a, like a rent to sale. But now it's shifted largely to rent?

Very much so. And some of that's due to some of the advances, whether it be hydraulic bracing or some of the advances in the space, but really awareness. And I give the industry, and specifically our team on the trench safety side a lot of credit for the amount of training hours that they do so that we don't have cave-ins where we have to worry about people.

[indiscernible] verification in that business?

Absolutely.

Yes. All right. Does anyone -- have any question from the audience? We're here. I can repeat it, so.

When you think about 2024 and 2025, a lot of these mega projects and infrastructure funding seem like they give you a lot more visibility in the out years than you maybe you have historically. So curious, just from a business planning perspective, how you're approaching that. And if there's any kind of portion of your fleet or a portion of your business that you can already kind of pencil in for the out years.

Yes. So we're not giving qualitative guidance that far out. But quantitatively, there's a much longer tail than a calendar year for a lot of these works, specifically the publicly funded ones, right, that you had mentioned. But many of these projects we're talking about are going to have a longer than a 1-year tail as well, and there's more coming in the planning process that may not even manifest itself in '23. So we think that we've got a growth trajectory for the next couple of years that we're very comfortable with. We think the supply chain will -- should repair to keep pace with that demand, but we see demand increasing even in a situation where maybe some of the non-res markets don't expand. We really are not relying upon that for the next couple of years. And we think that's the uniqueness of this opportunity and why you don't hear all the public players talking about these unique tailwinds that aren't as macro reliant.

So maybe some of the other things I'd add is there are a lot of benefits of scale, but obviously, the relationships it gives us with the suppliers puts us into a position where we have the flexibility to kind of wait and see exactly how the world unfolds to understand what we think that demand outlook looks like. And then we can kind of scope the CapEx accordingly. And so a lot of -- that's a benefit that will allow us to kind of make those decisions closer to game time. And just the flexibility we've really engineered into the model over the last decade also gives us the ability to not need to make decisions today that are hard to anticipate looking out 18 months.

Yes. That's a great point Ted makes because you've seen us have to flex downward at COVID and then upwards the last couple of years as we pulled forward CapEx in the fourth quarter to help get ready for the next year. So that flexibility is key for us.

Maybe just coming back, Matt, on the specialty business. There's a few different verticals within that. Talk about -- one of them being the portable storage business that you basically built with General Finance. How has that performed? And that was one that stood out from a kind of a revenue synergy standpoint that was larger than most. How has that...

Yes, that's a space we looked at for multiple years until we found the right partner because we knew that our customers have a demand for it, but we needed something that was scalable enough to spread amongst a broad enough of our footprint to really be able to sell as a value prop. We talked about when we acquired General Finance and specifically Pac-Van here in the U.S. that we double the size of the business in 5 years. Well, we're way ahead of schedule. I don't think we've quantified exactly what the growth was, but that was our largest growing business segment. In 2022, in a year of records where all segments had strong double-digit growth, they were our largest. And we expect that to continue. And we haven't even really significantly done the cold starts yet. That's just existing penetration across selling to our customers in the markets where they existed, and now we'll start to fill in the gaps as we're able to get more fleet for them and more product to fill in the gaps in the distribution through cold starts and really help mirror them side by side in every market that we participate in.

Has that been an issue of real estate?

Mostly real estate, yes. Well, real estate, and frankly, they soaked up the assets we got for them in their existing markets like a dry sponge. So the team was able to put it to work. Maybe the real estate would have moved a little faster if they didn't have such capacity to fill the demand in their existing markets. But this year, we think we'll move further on the cold starts and continue to grow this business and well exceed the time line of doubling that business.

Then there's some consolidation recently, right, announced?

Right. In the space, yes. Yes, not by us, yes.

Yes. Speaking of which, I did -- not maybe a function how big the year has gone, but I saw that little old New York City ABLE Rents is now part of United Rentals.

Yes, just another example of a nice, strong business that was built that fits in as a nice tuck-in in a strategic market for us that didn't really have any overlap with the larger Ahern deal. So it was nice for those guys in the Northeast that maybe felt they were left out of the Ahern party. They're getting some more fleet capability.

We talk about the inflationary impacts. I mean the equipment gets a lot of the discussion. But I'm curious about your other lines of business that are subject to inflationary impacts. And if you look just at cost of rent as a percentage of revenue, it really hasn't budged. So you talk to that, Ted, and you've seen inflationary impacts at labor and other -- how you've done just in terms of managing that and what kind of visibility you have in '23 in terms of keeping those costs.

Yes. So we're very fortunate to have this very flexible cost model. And frankly, we've got a culture such that there's a real emphasis on being mindful of any expenditure such that it helps support those targeted flow-through rates we talk about, 50% to 60%. So certainly, in '22, it was a relatively inflationary environment. On a reported basis, we put up very strong flow-through numbers. On an underlying basis, they were still close to 60%, right, so strong any way you cut it. This year, we're looking for something similar. So while it is still an inflationary environment, there's a strong growth to kind of underpin a lot of the productivity and a real kind of sharp eye on being mindful of costs such that when you think about that pro forma flow-through of 55%, that's apples-to-apples pretty similar to what we did last year.

Got it. Got it. Maybe, Ted, staying with you, just on capital allocation. I would assume when returns are ahead of your cost of capital, the internal bias is internal growth just given the dynamics there. But I'm just -- do you have the ability, you think, to increase CapEx this year beyond what you -- should the market develop in your favor, do you even think you could grow CapEx beyond what you've outlined?

So it's a good question. It's one we're trying to get our arms around now. I mean certainly, we've scoped what we think the demand growth is going to be. And then we've kind of measured the CapEx to support that, right? So we've satisfied that need. In terms of upsizing it beyond that, I think certainly, all of our suppliers have talked about pretty tight production schedules and not a lot of slack. I think we've found ways at the margin. Matt, I don't know if you want to touch on kind of...

I would just say we also have the Ahern acquisition, which we think there is some embedded capacity there. We also pulled forward a lot of CapEx into Q4. So we bought almost $1 billion of CapEx in Q4. Normally, that would be somewhere in the 300 to 400 range. So when some folks have said, "Wow, you guys feel very bullish in the year. Year-over-year, your guidance is saying CapEx is going to be about flat." Well, you need to take off some of that pull forward out of the base year and put it into the current year, and I think you'd see more -- what's more resembles what our expectations are for this year.

Those actions speak to the uncertainty on the supply chain side.

Yes.

Right? The decision to spend as much as we did in the fourth quarter, we said we could spend 20% or more of the full year in the first quarter, normally would be maybe 15%. The reason is because we don't know how the supply chain will perform in the busy season, call it, second, third quarter. So we hedge ourselves and ensure that we have the capacity to take care of customers and projects. We've kind of essentially changed the cadence of the margin to ensure. And so there is ongoing uncertainty, which gets to the challenge of confidently saying we could upsize CapEx by x, y or z.

Well, 2 of your more important vendors presented here today. I mean they're both targeting, I think, 6% revenue growth for their product line, which includes some component of price, so.

So -- but we've got this other mechanism, which is controlling used sales. And you really saw us flex that lever in '22. So if we are unable to source more gross CapEx, we can make sure we've got the earning assets to support customers, right? So that's another kind of lever we have in the model that ensures that we can potentially grow even if we're unable to source incremental fleet.

Have you experienced with the supply chain inefficiencies and kind of factory inefficiencies, has there been any cost impact for United whereby these products that were maybe -- they came 80% off of production line or sideline, then finished, are you finding the -- or the mechanics finding, well, they're just -- we're having more warranty issues or quality issues? Or has it not been -- maybe if that hasn't bubbled up to your level?

Yes, well, not anything we'd call out, right? If there's anything that's very repetitive, we have great mechanisms to find out. And sometimes, we'll even let our OEMs know, hey, we're having this problem, so we'll help them. But we haven't had anything that came to that level of scrutiny. Unless -- I think our partners are trying best they can to keep up with the pace of demand. It's in their best interest as well as ours. So I don't want the conversation to quell their efforts. We understand the challenges they're working through. And we're in this partnership for the long term. So we'll get through it.

It's safe to say you've also opened up -- the vendor list is broader than it used to be. I mean, I...

I wouldn't say broader, I would just say some folks that maybe were third-level vendor in that product category, we've always had 3 -- 2 to 3 for each category, they stepped up to the plate and maybe got a little bit more share because they valued getting in line and see the longer-term value of supporting some -- us specifically with larger share.

Yes. Are you -- is the fleet -- do you expect -- or are you diversifying it in more into zero-emission fleet? Is there a big pull from customers for more of that? Or is it not a material...

No, there are. Think about the top end customers, right, the folks that understand the long-term value of investing in it because it is more costly. It's more costly for us. It's more costly for the customer. But we have customers that want to work hand in hand with us for whether it's piloting new products that are coming to market as well as vendors that want us to partner with them. So think about us as a distribution arm between the OEMs that really have to build these more sustainable products and the customers that are going to use them. We're a great access point to getting a new product to market. So we continue to invest in that from both a piloting to as well as trying to grow penetration of our sustainable products. And we think that will continue to grow, and once the scale grows enough that the economics will become a little bit more feasible, then I think you'll see the broader industry adopt it. More legislation will make the broader industry adopt it. One of the two is going to happen.

And Ted, maybe you could -- before I go on, does anyone have any questions? Yes, go ahead.

I guess just 2 questions. With these kind of exceptionally large projects, just any sort of details of how contracting works given the longevity of them, how you protect pricing over those periods? And then I guess the second question was just in terms of rental costs -- sorry, rental price inflation that you expect in the next 12 to 18 months given how tight the markets looks to be.

Meaning the cost to purchase inflation?

[indiscernible]

Yes. No. So as you guys -- some of you may know, we talk about pricing from a fully productivity perspective because what our field really manages is the intersection of time and rate, and then mix would be the third component. We continue to think this is a very constructive environment, to your point, to continue to drive positive fleet productivity. And the first part of this question...

Is on the nature of contracts with some of these long-term...

Yes. So we're very fortunate that many of these customers, we've got long-standing relationships with. You can imagine, as being the largest supplier to national accounts, large contractors in the space, there's very few folks that are going to be doing these works that we don't have a relationship with. So some of it, we have contractual pricing. Some of it will be negotiated on an as-needed basis. But we've got long-standing partnerships with many of these folks. And we think that especially in this tight demand environment, we'll fare well, and that will not be a detriment to fleet productivity.

Certainly, we've built a model that's almost uniquely positioned to serve these kinds of projects, right? When you think about kind of the go-to-market approach we've talked about, if you think about the fleet architecture marrying specialty in that one-stop shopping concept with the technology we bring to bear, certainly, the value proposition we add to these projects, specifically in the E&C companies executing them, put us in a really good position to be there from the beginning of the project through the end.

The larger the plant or project, right? So a plant is just a project that never goes away. So think about the larger that these plants and projects are, the more that safety and security is an issue for them. So consolidating spend, to Ted's point, is a real value prop that we can add to them because they need to secure these sites. They need to make sure the workers are safe, that there are companies in there that have safety, first and foremost, in their mind. And that's another area where we think the large players have a bit of an advantage.

How do you assure the local sales guys aren't losing contact or losing focus with the local account customers that are going after these big...

It's a great question because historically, we've seen that happen. So we actually [ striate ] our go-to-market. So we link different sales reps to the local market versus to the large projects and large customers. So we'll have key account managers, strategic account managers, national account managers. And then underneath that, we'll have what we call the local field rep that's really focused on -- that's how they make their living, making sure that we don't lose that local market penetration.

Ted, maybe you could touch on the balance sheet. With $1.4 billion of the dividend and buybacks, if you hit the midpoint of the EBITDA guidance, you end the year at, call it, 1.5x of leverage.

Yes.

Just is that -- just leaves -- presume that M&A is still a focus for the company, so just how do you think through the opportunities beyond that? And maybe when you came in -- not when you came in, but when Jess -- early days of Jess's 10 years of kind of bringing that leverage target down, is that -- do you bring that down even further now? Or is it -- is that TBD?

So it's conceivable. If you go back to June of '19 when we introduced that updated capital allocation strategy, we lowered it half a turn. But we said that, that could be the first step in a multistep process, and it wasn't inconceivable we could revisit it and take it down. We're not there yet, but certainly, given the trajectory we're on, you're right, we'll end this year at the midpoint of guidance kind of 1.5x, 1.6x, short of other actions. We hope that we find other ways to put the money to work, M&A being the most obvious, right? So -- but if we don't, certainly that's a conversation we'll have internally among the management team and the Board to figure out how to potentially manage that excess capacity. We certainly have been very comfortable, less -- operating in these levels. We think it affords us a lot of flexibility both offensively and defensively. So certainly, we think the feedback from the market has been very supportive of this construct we've been using. But like I said, the hope is we can put that capacity to work and grow the earning assets of the business and generate more value through that mechanism.

I presume that the dividend feedback was also well received there.

Yes. The dividend absolutely is well received. I think people thought it was a powerful statement about our confidence in our ability to both invest in growth aggressively and still generate a lot of excess cash and then return it back to shareholders in an attractive manner. So it complements the buyback. I think they understand the logic of why we did it, certainly, not only beyond kind of like the statement it makes and the signaling, but certainly, it adds another tool to the toolbox of returning excess cash to investors, and it leaves us with a lot of opportunity to grow it over time, which is our intent.

Yes. So you got a minute left here, but you guys met with a number of investors and prospective investors today. Anything stand out in terms of questions you got or feedback that surprised you or stood out?

Actually, less macro-related questions than we've been getting maybe a quarter ago. I think people are seeing the opportunity. I think overall, the general tone has been increasingly positive, which is a great change. There were times where we thought we were screaming into the wind about '23. But I think people are starting to see what the opportunity is there. And I think they're hearing it across multiple businesses, not just United Rentals. Ted?

I'd agree. I think there was a lot of discussion about these tailwinds. We've been talking about just kind of framing them out. And I think people increasingly are hearing it from other companies and understanding, as we've seen more and more examples of the infrastructure funds get spent, IRA evolve, auto industry, semi keep announcing new projects, breaking ground, that these are really powerful tailwinds that run, frankly, a long time, more than a few years.

Good. Think we'll close it there. Thank you, guys.

Great. Thank you.

Thanks for the time.

Appreciate it.