United Rentals posted $1.989 billion in rental revenue for the fourth quarter of 2018, a company record, compared to $1.646 billion in the fourth quarter of 2017, a 20.8-percent increase year over year. In total revenue for the fourth quarter, United Rentals recorded $2.306 billion, compared to $1.922 billion in the fourth quarter of 2017, a 20-percent hike. For the full year, United Rentals posted $6.940 billion in rental revenue, compared with $5.715 billion in full year 2017, a 21.4-percent jump. Total revenues totaled $8.047 billion, compared to $6.641 billion in 2017, a 21.2-percent year-over-year leap.
For the quarter, year-over-year, adjusted EBITDA increased 18.0 percent to a company record $1.117 billion and adjusted EBITDA margin decreased 90 basis point to 48.4 percent. The decline in adjusted EBITDA margin primarily reflected the impact of the acquisitions completed in 2018. For the year, Return on Invested Capital (ROIC) increased to a company record of 11 percent, while net cash provided by operating activities was $2.853 billion and free cash flow, excluding merger and restructuring related payments, set a company record at $1.334 billion.
Owned equipment rental revenue in the fourth quarter increased 18.8 percent, reflecting increases of 16.8 percent in the volume of equipment on rent and 2.2 percent in rental rates.
Pro forma rental revenue increased 8.5 percent year over year, reflecting growth of 4.3 percent in the volume of equipment on rent and a 2.4-percent increase in rental rates.
Time utilization decreased 120 basis points year-over-year in the fourth quarter to 68.8 percent, primarily reflecting the impact of the BakerCorp and BlueLine acquisitions. On a pro forma basis, time utilization decreased 60 basis points year over year to 69.0 percent.
Total gross margin of 43.3 percent increased 30 basis points year-over-year, while SG&A expense as a percentage of revenue declined 20 basis points to 13.1 percent. The company’s pre-tax margin increased 90 basis points to 18.4 percent.
For the company’s specialty segment, Trench, Power and Fluid Solutions, rental revenue increased by 50.7 percent year over year, including an 18.8-percent increase on a same store basis. Rental gross margin decreased by 230 basis points to 45.2 percent. The decrease in rental gross margin was primarily because of the impact of the BakerCorp acquisition and an increase in lower-margin fuel and re-rent revenues primarily within the Power and HVAC region.
The company generated $186 million of proceeds from used equipment sales at a GAAP gross margin of 44.1 percent and an adjusted gross margin of 51.1 percent, compared with $172 million of proceeds at a GAAP gross margin of 39 percent and an adjusted gross margin of 57.6 percent for the prior year. The year-over-year decrease in adjusted gross margin was primarily caused by the impact of selling more fully depreciated fleet acquired in the NES acquisition in the fourth quarter 2017.
For the full year, rental revenue increased 21.4 percent year-over-year. Owned equipment rental revenue increased 20.7 percent, reflecting increases of 18.8 percent in the volume of equipment on rent and 2.2 percent in rental rates.
Pro forma rental revenue increased 10.5 percent year-over-year, reflecting growth of 6.9 percent in the volume of equipment on rent and a 2.6-percent increase in rental rates. Time utilization decreased 90 basis points year-over-year to 68.6 percent, primarily reflecting the impact of the NES, Neff, BakerCorp and BlueLine acquisitions. On a pro forma basis, time utilization increased 20 basis points year-over-year to 68.4 percent. Total gross margin of 41.8 percent increased 10 basis points year over year, while SG&A expense as a percentage of revenue declined 70 basis points to 12.9 percent. The company’s pre-tax margin increased 250 basis points to 18.3 percent.
For the company’s specialty segment, Trench, Power and Fluid Solutions, rental revenue increased by 40.7 percent year-over-year, including a 19-percent increase on a same-store basis. Rental gross margin decreased by 140 basis points to 48.2 percent. The decrease in rental gross margin was primarily due to the impact of the BakerCorp acquisition. The company generated $664 million of proceeds from used equipment sales at a GAAP gross margin of 41.9 percent and an adjusted gross margin of 51.8 percent, compared with $550 million of proceeds at a GAAP gross margin of 40 percent and an adjusted gross margin of 54.9 percent for the prior year. The year-over-year increase in used equipment sales primarily reflects increased volume, driven by a significantly larger fleet size, in a strong used equipment market.
"We delivered strong fourth quarter results, including broad volume growth and rental rate improvement, in a year that leveraged our numerous competitive advantages,” said CEO Michael Kneeland. “Our integration of major acquisitions expanded our service offering, and we gained traction from investments in fleet and technology. For the full year, we grew pro forma rental revenue by 10.5 percent, improved our adjusted EBITDA margin, and increased ROIC to a record 11 percent. Our momentum in the quarter gave us a strong start to 2019, when we expect to once again outpace the industry. By reaffirming our guidance, we’re underscoring our confidence in the cycle and our differentiation in the marketplace. Customer feedback, as well as key internal and external indicators, continue to point to healthy end-market activity. We remain focused on balancing growth, margins, returns and free cash flow to maximize shareholder value."
The size of the rental fleet was $14.18 billion of original equipment cost on December 31, 2018, compared with $11.51 billion at December 31, 2017. The age of the rental fleet was 47.9 months on an OEC-weighted basis on December 31, 2018, compared with 47.0 months on December 31, 2017.
United Rentals re-affirmed its guidance for 2019. The company expects total revenue in the range of $9.15 to $9.55 billion. It expects net capital expenditures after gross purchases of $1.4 billion to $1.55 billion after gross purchases of $2.15 billion to $2.3 billion. Headquartered in Stamford, Conn., United Rentals is No. 1 on the RER 100.
