United Rentals announces record Fourth Quarter results and gives 2022 Outlook
United Rentals posted $2.312 billion in equipment rental revenue in the fourth quarter of 2021, compared to $1.854 billion in the fourth quarter of 2020, a 24.7-percent jump. Total revenue climbed 21.8 percent year over year, from $2.279 billion in the fourth quarter of 2020 to $2.776 billion in the same period of 2021.
The increase reflects the continuing recovery of activity broadly across the end markets served by the company relative to the impact of COVID-19 in the fourth quarter of 2020. Fleet productivity increased 10.3 percent year over year, in large part because of better fleet absorption.
Used equipment sales in the quarter increased 17.8 percent year over year. These sales generated $324 million of proceeds at a GAAP gross margin of 49.4 percent and an adjusted gross margin of 52.2 percent; this compares with $275 million at a GAAP gross margin of 37.1 percent and an adjusted gross margin of 42.5 percent for the same period last year. The gross margin increases were primarily the result of stronger pricing, which rose sequentially for the fifth consecutive quarter. Used equipment proceeds in the quarter were 60.4 percent of original equipment.
“Our strong fourth quarter, which included record revenue, adjusted EBITDA, and operating earnings, completes a year of significant achievements and provides solid momentum as we enter the new year,” said Matthew Flannery, CEO of United Rentals. “Our team provided exceptional customer service, which supported better than expected organic growth in 2021, and successfully integrated over $1.4 billion of acquisitions while maintaining their focus on operating safely and managing costs.
“Our 2022 guidance reflects the optimism of our customers, as well as our confidence in leveraging our competitive advantages over the longer term. Our larger, more diverse value proposition should both benefit the top line and strengthen our levers for delivering strong margins, cash generation and returns in this new upcycle.”
Net income jumps 62 percent in Q4
Net income for the quarter increased 62 percent year over year to $481 million, while net income margin increased 430 basis points to 17.3 percent, primarily reflecting improved gross margins from rental revenue and used equipment sales. The increase also included the impact of lower non-rental depreciation and amortization as a percentage of revenue, and lower net interest expense, which reflected a reduction in the average cost of debt and the impact of a debt redemption loss recorded in the fourth quarter of 2020. The effect of these items was partially offset by higher income tax expenses. Income tax expense increased $73 million, or 81 percent, and the effective income tax rate of 25.3 percent reflects a year-over-year increase of 200 basis points.
Adjusted EBITDA for the quarter increased 26.2 percent year-over-year to $1.309 billion, while adjusted EBITDA margin increased 170 basis points to 47.2 percent. The increase in adjusted EBITDA margin primarily reflected improved gross margins from rental revenue and used equipment sales, and a larger proportion of revenue from higher-margin (excluding depreciation) rental revenue, partially offset by higher bonus and travel and entertainment expenses within selling, general and administrative expense.
For the full year, equipment rental totaled $8.207 billion compared to $7.140 billion in 2020, a 14.9-percent increase. Total revenue for the full year was $9.716 billion compared to $8.530- billion in 2020, a 13.9-percent hike.
Specialty rentals segment rental revenue increased 45.3 percent year-over-year, including the impact of the recent acquisition of General Finance Corp. to $613 million for the quarter. On a pro forma basis, including the standalone, pre-acquisition revenues of General Finance, specialty rental revenue increased 28 percent. Rental gross margin increased by 70 basis points to 45.2 percent, due primarily to reductions in depreciation and labor expenses as a percentage of revenue, partially offset by a higher proportion of revenue from certain lower margin ancillary fees in 2021.