United Rentals, Inc. (URI) Q4 2021 Earnings Call Transcript

United Rentals, Inc.  (NYSE: URI) Q4 2021 earnings call dated Jan. 27, 2022

Corporate Participants:

Matthew J. Flannery — President and Chief Executive Officer

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Analysts:

David Raso — Evercore Group LLC — Analyst

Ross Gilardi — BofA Securities, Inc. — Analyst

Steven Fisher — UBS Warburg LLC (US) — Analyst

Rob Wertheimer — Melius Research LLC — Analyst

Jerry Revich — Goldman Sachs & Co. LLC — Analyst

Kenneth Newman — KeyBanc Capital Markets, Inc. — Analyst

Mircea Dobre — Robert W. Baird & Co., Inc. — Analyst

Timothy Thein — Citigroup Inc. — Analyst

Stanley Elliott — Stifel, Nicolaus & Company, Inc. — Analyst

Scott Schneeberger — Oppenheimer & Co., Inc. — Analyst

Courtney Yakavonis — Morgan Stanley & Co. LLC — Analyst

Presentation:

Operator

Good morning and welcome to the United Rentals Investor Conference Call. [Operator Instructions].

Before we begin note that the company’s press release, comments made on today’s call, and responses to your questions contain forward-looking statements. The company’s business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control and consequently actual results may differ materially from those projected. A summary of these uncertainties is included in the Safe Harbor statement contained in the company’s press release. For a more complete description of these and other possible risks, please refer to the company’s Annual Report on Form 10-K for the year ended December 31, 2021, as well as to subsequent filing with the SEC. You can access these filings on the company’s website at www.unitedrentals.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.

You should also note that the company’s press release and today’s call include references to non-GAAP terms, such as free cash flow, adjusted EPS, EBITDA, and adjusted EBITDA. Please refer to the back of the company’s recent investor presentations to see the reconciliation from each non-GAAP financial measures to the most comparable GAAP financial measures.

Speaking today for United Rentals is Matt Flannery President and Chief Executive Officer; and Jessica Graziano, Chief Financial Officer.

I will now turn the call over to Mr. Flannery. Mr. Flannery, you may begin.

Matthew J. Flannery — President and Chief Executive Officer

Thank you, operator, and good morning, everyone. Thanks for joining our call. I know there’s a lot of interest in 2022, but before I go there, I want to take a look back because the foundation for our current outlook can be found in our 2021 performance. I’ll start with our strong finish to the year. As you saw yesterday, our record results for the quarter solidly outperformed expectations for growth and profitability. We grew fourth quarter rental revenue by 25% year over year and total revenue by over 21%, and our adjusted EBITDA was 26% higher than a year ago with a margin improvement of 170 basis points. This translated to a solid flow through of 55%. These gains capped a full-year performance that was far better than we could have imagined back in January our team is firing on all cylinders with strong execution in the field, solid cost control, effective investment in the business, and thoughtful management of our resources, starting with our talent base. In short, it’s our people who outperformed expectations and our numbers reflected that.

I want to stay with this theme for a minute and summarize some of the accomplishments for the year. We maintained a strong safety record, finishing with a full year recordable rate of 0.79 and that was while integrating multiple acquisitions. We also grew our net headcount by 12%. Roughly half of that came through M&A. And the $1.4 billion of capital we allocated to acquisitions is generating attractive returns. In fact, our 2021 return on invested capital improved by 140 basis points to end the year at 10.3.

We also generated $1.5 billion of free cash flow last year after investing a record $3 billion of rental capex, and we sourced that equipment in the midst of a supply chain disruption. On the ESG front, our company recently earned an upgrade to an A rating by MSCI. We’ve received similar scores from other ESG rating agencies, reflecting our commitment to our progressive culture. Environmental, Social, and Governance matters have been drivers of value in our business for more than a decade, and it’s gratifying to see that recognized.

Now on to 2022. As you can tell from our guidance, we’re very confident in our industry’s outlook for strong growth this year. A number of key indicators have been moving the needle higher for months, including the broad recovery in construction and industrial demand, the continued strength of the used equipment market, and an economy that’s moving in the right direction despite some lingering challenges. Given these dynamics, it’s not surprising that industry sources show a steady increase in confidence among contractors, and our own customer confidence index improved throughout 2021, ending at its highest point at the end of the year. And importantly, the same optimism was echoed by our field leaders last month as we work through our annual planning process. And we heard it again at our virtual meeting. We had our annual management [Phonetic] meeting virtually two weeks ago, and this meeting is always a great opportunity to get everyone aligned on goals and strategies. And it’s clear that our people are fired up for the opportunity. They can see the benefits of the countless improvements that we’ve made over the past decade, both operationally and also with our customer service and they know those efficiencies count for a lot as we grow the top line.

The biggest signpost pointing to ongoing growth in 2022 is the diversity of the demand that we’re seeing in our end markets. In the fourth quarter, we grew rental revenue by double digits across all of our regions and all verticals showed positive growth as well, and these were solid increases with rental revenues from non-res construction verticals up 24% year-over-year and infrastructure up 11%. Industrial also grew 11% with strong gains in refining, metals and minerals, and power. And it’s notable that both non-res and industrial picked up steam in the back half of ’21 with year-over-year rental revenue gains in Q4 coming in higher than those of Q3.

Our specialty segment had another strong performance with every line of business growing double-digit year-over-year. The segment as a whole reported a rental revenue gain of 45%, including a pro forma growth of 28%. This year we’re planning for around 40 cold starts in specialty following the 30 that we opened this last year. Specialty is key to our competitive differentiation. And given the segment’s history of high returns, expansion will continue to be a priority for us.

I’m sharing these numbers to underscore the point I made at the start of my comments that the building blocks for our current outlook were laid in 2021. Our core markets have recovered faster than expected and the underlying construction and industrial forecasts are positive. The broad-based acceleration over the last 12 months has become the foundation for a new cycle of growth. And for the first time since COVID arrived, we’re seeing a sustained improvement in long-term visibility, which gives us some insight into future market conditions. That’s a huge plus for us after two years of uncharted waters.

I’ll mention a couple tailwinds on our radar. One, of course, is the infrastructure bill, which will add an additional $550 billion of funding for projects directly in our wheelhouse over the next five years. We’ve been expanding our infrastructure capabilities for years. We have a rock-solid value proposition with traction in the right articles for this bill. We expect to see some benefits as early as 2023. Another tailwind in our future is the relocation of manufacturing operations back to the U.S. Onshoring initially drives demand for construction, followed by the need for our industrial services once they’re up and running. The pandemic has caused manufacturers to rethink how they operate, and we’ve already seen some funding for new projects tied to this trend.

Along with the increase in customer demand, comes a large responsibility to have equipment available for rent. And I mentioned that we brought in $3 billion of fleet last year when equipment wasn’t easy to find, and that was a home run for the company and for our customers. We’re continuing to work with our strategic partners to land a similar amount of fleet this year.

And finally, before Jess goes over the numbers, I want to mention an announcement we made yesterday and a milestone that’s coming up later this year. The announcement is our share repurchase program. We expect this program to return $1 billion to shareholders in 2022. And the milestone I mentioned is our anniversary. United Rentals will turn 25 years old this year, and as you know, we’ve been a growth story from day one. Even so, I don’t think there’s been a time in our history when our strategy, culture, and financial strength have been more of an advantage than they are right now in this new cycle.

We have a highly-engaged team, a cohesive customer service network, and industry-leading scale that matches the market opportunity. We’ve built these levers into the business to create shareholder value, and they did their job in 2021. Now we’ll take that to the next level this year and for the foreseeable future.

And with that, I’ll ask Jess to cover the results, and then we’ll go to Q&A. So Jess, over to you.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Thanks, Matt. and good morning, everyone. Our fourth quarter results exceeded expectations behind better seasonal trends in rental revenue and continued discipline in costs. We delivered record results with our total revenue, rental revenue, and adjusted EBITDA surpassing pre-pandemic levels for both the quarter and the full year. The momentum we carried out in the quarter is reflected in the growth you see in our 2022 guidance. And even as we invested record amounts in capex last year, we generated a significant amount of free cash flow at just over $1.5 billion, and we expect to generate even more this year.

More on ’22 guidance in a bit. Let’s dive a little deeper, first, into the results for the fourth quarter. Rental revenue for the fourth quarter was $2.3 billion, an increase of $458 million or 24.7% year over year. Within rental revenue, OER increased $345 million or 22.1%. Our average fleet size was up 13.3% or $207 million tailwind to revenue. Better fleet productivity provided an additional 10.3% or $161 million. And rounding out the change in OER is the inflation impact of 1.5% which was a drag of $23 million.

Also, within rental, ancillary revenues in the quarter were up about $92 million or 36%. That’s primarily due to increased delivery fees and other pass-through charges. Re-rent was up $21 million. Used sales for the quarter were $324 million, which was up $49 million or about 18% from the fourth quarter last year. The used market continues to be very strong, which supported higher pricing and margin in the fourth quarter. Adjusted used margin was 52.2%, which represents a sequential improvement of 190 basis points and a year-over-year improvement of 970 basis points. Our used proceeds in Q4 recovered a very healthy 60% of the original cost for fleet that averaged over seven years old.

Let’s move to EBITDA. Adjusted EBITDA for the quarter was just over $1.3 billion, an increase of 26% year-over-year or $272 million. The dollar change includes a $282 million increase from rental, and in that, OER contributed $245 million. Ancillary was up $33 million and re-rent added $4 million. Used sales helped adjusted EBITDA by $52 million. SG&A was a headwind to adjusted EBITDA of $58 million, in part from the reset of bonus expense that we’ve discussed on our prior earnings calls. We also had higher commissions on better revenues and higher T&E, which continues to normalize. Other non-rental lines of business were also a headwind of $4 million. Our adjusted EBITDA margin in the quarter was 47.2%. That’s up 170 basis points year over year with a solid flow through of 55%. This reflects in large part the strong underlying cost performance in the fourth quarter which absorbed costs that continue to normalize, inflation headwinds, and the fourth quarter impact of our bonus reset.

I’ll shift to adjusted EPS, which was $7.39 for the fourth quarter. That’s up 47% or $2.35 versus last year, primarily from higher net income. Looking at capex, gross rental capex was $690 million, the largest fourth quarter we’ve ever had. We put that fleet to work supporting the demand we saw in the quarter, which will carry into the start of 2022. Our proceeds from used equipment sales were $324 million, resulting in net capex in the fourth quarter of $366 million. That’s up $465 million versus the fourth quarter last year.

Now turning to ROIC, which was a healthy 10.3% on a trailing 12-month basis. That’s up 80 basis points sequentially and 140 basis points year over year. Importantly, our ROIC continues to run comfortably above our weighted average cost of capital.

Let’s turn to free cash flow and the balance sheet. As I mentioned earlier, we generated over $1.5 billion in free cash flow after investing a record $3 billion in capex last year. We deployed that free cash flow to help fund over $1.4 billion in acquisition activity. We’ve also continued to de-lever the balance sheet which is in great shape. Leverage was 2.2 times at the end of the fourth quarter. That’s down 20 basis points sequentially and versus the end of 2020. Liquidity at the end of the year remains robust at over $2.85 billion. That’s made up of ABL capacity of just over $2.65 billion and availability on our A/R facility of $57 million. We also had $144 million in cash.

Now let’s look forward now and talk about our guidance for 2022, which we shared in our press release last night. The headline here is our plan to deliver a year of strong, profitable growth, servicing our customers in this new cycle. Our total revenue range is supported by solid demand we expect to see broadly across our end markets in 2022, equating to almost 12% year-over-year growth at the midpoint. That will be supported by a significant investment in growth capital included in the growth capex guidance. Our adjusted EBITDA range includes the impact of our remaining diligent on costs as we manage inflation this year. At the midpoint, we’ll generate over $5 billion of adjusted EBITDA, growing mid-teens year over year. Implied margins expand over 100 basis points with flow through in the mid-50s. We expect to generate another year of significant free cash flow getting to $1.6 billion at the midpoint. The strength of our cash flow continues to provide significant firepower available to invest in growth, while maintaining a healthy balance sheet. It also provides an opportunity to return cash to shareholders. And as Matt mentioned, this week our board authorized a new $1 billion share repurchase program, which we intend to complete in 2022. This leaves us plenty of capacity given our leverage targets for M&A.

Now let’s get to your questions. Operator, would you please open the line?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of David Raso with Evercore ISI. Please go ahead.

David Raso — Evercore Group LLC — Analyst

Hi, good morning. Listening to your comments and about the demand profile, and we know the market’s pretty tight out there right now. So it seems like you’re pretty comfortable with some near-term project visibility. Even some of the secular trends you mentioned even outside the infrastructure bill. Your cash flow obviously has proven itself now over the last decade or so. But I’m curious more on the margins. The last 10 years your EBITDA margins have averaged around 46.7%. This year you’re guiding 46.5%, which was nice incremental margin from ’21. But I’m just curious, when you look at the margin profile and how you run the company, I know it’s been a little more about returns, but still, I’m just curious, when you look at the margin profile. And I know some of the margin issue has been you bought some businesses with lower margins but better return on capital profiles, but I’m just curious how do you think about the margins for the company if we were comfortable with the demand profile for the next few years. Where is the margin potential you think, be it cost of rental, which is also right now still below the last 10-year average, or the EBITDA total company level. Just curious how you think about it and what do you think the potential is for the business model?

Matthew J. Flannery — President and Chief Executive Officer

So, David, you accurately touched on the acquisitions being a little bit of a misnomer to the headline. So you could look at our headline, and I think we even have a slide in the deck, where even it looks like it may have flattened out since ’14, ’15. But when you aggregate the acquisitions that we’ve done from that — since that period of time, we’ve acquired almost $3 billion worth of revenue at an average EBITDA of 38%. So I’m actually really pleased that the team was able to keep the high level of margins that we expect while absorbing those.

Now to your question about where future margins could be. The honest answer is, it depends on what we acquire and how we grow, and what are the businesses we grow in. But we’re much more focused on returns and can we be a better owner. That’s why we could turn that 38% margin into mid-40s because we felt we could be a better owner for those businesses in our network, and that’s the way we’ll look at it in the future. ’22 at the midpoint guide is up margins, nicely up. So we feel really good about that and we wouldn’t just look at margins when we’re looking at where we’re going to get our growth from. We’re going to look at overall returns is the way I’d answer that.

David Raso — Evercore Group LLC — Analyst

When you look at the profile for ’22, the buckets from labor cost, maintenance, be it parts or even delivery costs where there is some inflationary pressure. Yeah, I would say the incrementals for next year are maybe a little better than we were thinking you could at least guide to initially. What are some of the buckets you’ve been able to maybe control those costs or find some other offsets that we can be comfortable with that guide?

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Morning, David. It’s Jess. As we think about 2022, you’re right. Listen, it’s definitely going to be an inflationary environment, but there isn’t any one area that we would single out that we would say we think that there will be something that we can’t manage through, right. So puts and takes, as we’ve put the plan together and feel comfortable with the guidance and where that flow through increase is coming out, so there’s nothing that we would highlight to say it’s going to take an extraordinary effort one way or the other. We feel really good that as we think about just starting with the growth that will generate, right, that’s going to then also continue to give us the opportunity as we stay diligent on costs to be able to deliver that margin benefit and that flow through in the 50s. And we feel really good about that. So nothing I would point to specifically I think that’s causing us any extraordinary action.

David Raso — Evercore Group LLC — Analyst

And just to wrap up, and I’ll leave it at this, the fourth quarter just reported, anything abnormal in it that helped provide the EBITDA beat more so even than the revenue beat. At even the rental level margin before any used equipment sales were also a little bit higher than we were modeling. So just want to make sure there’s nothing unique in that number.

Matthew J. Flannery — President and Chief Executive Officer

No, no, just obviously the revenue coming in higher always helps with the fixed cost portion, but just to Jess’s point, just good solid P&L management top to bottom.

David Raso — Evercore Group LLC — Analyst

All right. Thank you very much.

Matthew J. Flannery — President and Chief Executive Officer

Thanks, David.

Operator

Your next question comes from Ross Gilardi with Bank Of America. Please go ahead.

Ross Gilardi — BofA Securities, Inc. — Analyst

Hey. Good morning, guys.

Matthew J. Flannery — President and Chief Executive Officer

Hey, Ross.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Good morning, Ross.

Ross Gilardi — BofA Securities, Inc. — Analyst

I was interested in your comments that the benefits from federal infrastructure could kick in as early as 2023. I would think that’d be the latest that would kick in. So can you give us a little more flavor of what you’re hearing from Washington? Is it taking longer than you expect for the funds to get appropriated? And can you give us a little more sense of how you go to market to make sure that you are capturing the maximum portion of the project activity that will come out of the bill?

Matthew J. Flannery — President and Chief Executive Officer

Sure, Ross. So as you know, we’ve been focused on infrastructure for quite some time, because we know how big the latent demand was long before the bill. We’re just not seeing that money be appropriated to shovel-ready projects. But we’re still seeing our infrastructure revenue grow. We’ve talked about it growing 11% in Q4. So we’re very well positioned. And when you think about the type of large customers, the largest civil contractors in the U.S. that will benefit from this, it plays right into our value proposition for large national accounts. So we actually think we’re real well positioned from a customer perspective we think we’re very well positioned from a product perspective. And to be fair, most of these products are fungible from our other end markets that we serve, but we have gone and bought specific assets to help fortify that infrastructure whether they be message boards, traffic attenuators. So we really like where we’re positioned, and we think we’ll probably be able to out-punch our weight when that infrastructure bill does get turned into shovel-ready projects, but we haven’t seen a lot of the funding turn into actual rental opportunity. We think that’ll start happening in ’23. If it happens sooner, that’s great news. We’ll be ready for it.

Ross Gilardi — BofA Securities, Inc. — Analyst

But does it feel like the timing is getting pushed out just because of the — because you haven’t seen anything yet. Do you have — I get that you’re ready now and your infrastructure business is performing very well now and you’re investing. But specifically on the bill itself, does it feel like it’s just going to most likely be more of a second half ’23-type event or can you give us a favor of anything you’re hearing?

Matthew J. Flannery — President and Chief Executive Officer

So we’ve been talking about this bill for three years. I think it will manifest into shovel-ready projects maybe as early as the back half of this year. But as I said in the prepared remarks, we’re thinking by ’23 we’ll start being able to take advantage of that funding, our customers being able to put it to work and therefore need our services. If you think about the supply chain needs once the money is appropriated, then you have the planning process for the projects, you have the materials. So we do come in a little bit on the midpoint to latter end of the funding actually being assigned to a specific project, but we’re not terribly worried about that timing. One of the things we’ve learned in the last two years is how quick we can flex up and down depending upon what the needs are.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

And Ross, just to add a quick comment on the timing aspect. This is consistent with what we’ve been expecting, right? We’ve been consistently expecting this was more of a 2023 event as we’ve been following the communication of the bill from Washington, so there’s no there’s no change from our perspective, right. Just wanted to cover that as well.

Matthew J. Flannery — President and Chief Executive Officer

Yeah, not at all.

Ross Gilardi — BofA Securities, Inc. — Analyst

Okay. And do you have capex for federal infrastructure bill built into your ’22 capex guide at all? I presume you’re going to buy I presume you’re going to buy at least some of that in advance of 2023, and I’m just wondering does that represent upside to your 2022 capex outlook if you get a little bit more visibility by the middle of this year.

Matthew J. Flannery — President and Chief Executive Officer

If everything played out as we’re — and we have a range, as you know, but if everything played out as we’re projecting right now, and then we got some over and above, that would be a reasonable thought, as long as it’s not shifting from one end market to the other. But I think we feel really good about where we are with capex for this year and even the $3 billion headline number for ’22 is a little bit understated because you saw what we brought in almost $700 million in Q4 and a lot of that is — we could call that we pulled it in advance for what we think is going to be a robust growth year in 22.

Ross Gilardi — BofA Securities, Inc. — Analyst

Okay. If I could just squeeze in one more. On oil and gas, can you just comment on what you’re seeing? I would assume some activity is coming back. And any way to think about the mix tailwind you might get as activity in the oil patch picks up again, assuming it does?

Matthew J. Flannery — President and Chief Executive Officer

Yeah. So as I had mentioned in the prepared remarks, all verticals that we participated in grew year over year, and oil and gas did as well. When you think about the upstream, downstream, midstream combination, they grew by 15% in Q4 and now that’s down to about 9% of our total revenues now. But we’re pleased for an end market that was in the singing the blues for a couple of years now. We’re pleased for our people out there, specifically those out in the shale of Texas, to get some of this work activated and drive a little bit of more volume there.

Ross Gilardi — BofA Securities, Inc. — Analyst

Thank you.

Matthew J. Flannery — President and Chief Executive Officer

Thanks, Ross.

Operator

Your next question comes from the line of Steven Fisher with UBS. Go ahead.

Steven Fisher — UBS Warburg LLC (US) — Analyst

Thanks. Good morning. On the capital allocation side, as you pointed out, you still have a lot of flexibility even with the $1 billion of buybacks. I’m just curious, what’s most important to you when you think about the M&A landscape. Is it first adding more specialty? Is it getting more access to equipment technicians? Is it having more branch density or just really being opportunistic regardless of what the value proposition is, if it’s interesting enough? How would you rate what’s most important to you on this M&A front and where you’re seeing the opportunities come to you at the moment?

Matthew J. Flannery — President and Chief Executive Officer

Sure, Steven. And as you noted, the capital allocated — the $1 billion share repo does not prevent us at all from M&A. So we’re real excited. And the pipeline’s broad. It’s broad both in scale and has been for the last year, and also in end-market opportunities. So when we think about how we prioritize, first and foremost, think about like the GFN deal. Anytime we can add a new product or service to our customers, that’s a homerun. The integration is easier, we get to put our cross cell engine to work, especially if they’re not fully formed, so to speak, where they have white space and they’re not operating in all of our MSAs that we operate in, that makes the growth opportunity really strong and makes us a better owner. So that’s priority number one.

Second is specialty, partly because specialty has more white space for us, even geographically, but even through a penetration perspective. So we think that would be our secondary prioritization. And then on the gen rent side, you saw us do a couple of tuck-in deals this year that we really liked. So we’re going to take the opportunity to get more capacity, as you said, whether it’s people, real estate, or fleet, whenever the math makes sense. It’d be — we feel we’re really good integrators. We have a history of doing well with M&A. And Jess and her team have put together a balance sheet that affords us to do it. So it’s still very much on our radar.

Steven Fisher — UBS Warburg LLC (US) — Analyst

Great. And then just to continue on with the maintenance technicians. I’m curious how utilized your folks are there at the moment. You’ve been taking in a lot of fleet, and I’m curious, how much more fleet they can handle. Are you able to hire them at the pace of your fleet growth to be able to make sure that you maintain the equipment adequately and get it out on rent, back on rent quickly and efficiently?

Matthew J. Flannery — President and Chief Executive Officer

Yeah. I would say that we have run, and you see it show up in our fleet productivity, we have run about as hot as I can remember in this past year, specifically in the back half of ’21. And our team held up really strong, did a great job, and we didn’t have to rely too much on third-party or overtime, which is why you saw the margin come in well. So we feel good about where we are, but recruiting, especially in a market like this, is non-stop. We have an internal team — a robust internal team that helps with this. And that’s why we were able to add 12%, or so really say 6% if you took out the M&A in 2021. And that’s a continued focus for us this year because as much as technology enables our people, that last mile is going to have that human touch for a while for the foreseeable future. And it’s those people in the field that we need to make sure we have working safely and efficiently and they’re doing a great job.

Steven Fisher — UBS Warburg LLC (US) — Analyst

Thanks, Matt.

Matthew J. Flannery — President and Chief Executive Officer

Thank you.

Operator

Your next question comes from Rob Wertheimer with Melius Research. Go ahead.

Rob Wertheimer — Melius Research LLC — Analyst

Yeah, hey. Good morning, everyone.

Matthew J. Flannery — President and Chief Executive Officer

Hey, Rob.

Rob Wertheimer — Melius Research LLC — Analyst

I had two questions related to fleet. One is just I don’t know if there’s availability if demand shows up stronger or whether your fleet purchasing is a little bit supply constrained. So is there any flex-up there if the market is strong? And then just a second question, I know you don’t talk time utilization exactly, but I’m a little bit curious about how you stand on your ability to improve those metrics versus say the last time you were really hot in 2018 roughly. If you got a little bit more efficient, could you reach your max no [Phonetic] need to add more fleet, maybe just talk through efficiencies. Thank you.

Matthew J. Flannery — President and Chief Executive Officer

Sure, Rob. So I’ll answer the last part first and then maybe Jess could take the first part. When I think about time utilization, you know that we don’t like to get to the individual components of fleet productivity. But in the vein of being helpful here, as you’ve seen, we’ve been driving robust fleet productivity for the past few quarters. And we think we have an opportunity partly due because of how well we’re running but also because the comp’s a little easier here in Q1 to drive that kind of level. But then once we get into Q2, Q3, and Q4 of ’22, I think the time utilization part of that fleet productivity opportunity is going to be pretty close to exhausted. We’d be really pleased operationally if we were able to match the levels of time use that we ran in quarters two, Q3, and Q4 of ’21 again in Q2, Q3 and Q4 of ’22.

So that’s just not going to tie to historical levels, but it’s really, really robust time use that we’re very pleased with. Don’t mistake that for that we don’t still have opportunity to drive fleet productivity comfortably above our threshold of 1.5 because we still have two other levers there in fleet productivity that we’re going to be managing appropriately. And I think the end market supply-demand dynamics, the discipline of the industry, all may have comfort with that number.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

So I’ll take fleet availability. When we think about what we are underwriting in the guidance, right. So let’s talk $3 billion at the midpoint. There’s no doubt we think it’ll continue to be a challenging supply chain, and we’re really proud of what the team has been able to do working closely with our partners, right, our suppliers in sourcing what we were able to source in 2021. We feel good that even with those challenges, we’ll be able to source what we’re looking for in our guidance in 2022, and it’s going to be definitely comfortable on the amount of fleet we think we can source. Now the timing, we’re expecting the timing will look something like a normal seasonal cadence as we’ve done in the past. But if we have an opportunity to bring in some fleet a little earlier this year, we will likely do that, too. So that timing can move around a little bit, but I would say, on the whole, we feel comfortable that we’re going to be able to get what we need through the year.

Rob Wertheimer — Melius Research LLC — Analyst

Okay. Thank you.

Matthew J. Flannery — President and Chief Executive Officer

Thanks, Rob.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Thanks, Rob.

Operator

Your next question comes from Jerry Revich with Goldman Sachs. Go ahead.

Jerry Revich — Goldman Sachs & Co. LLC — Analyst

Yes, hi. Good morning, everyone.

Matthew J. Flannery — President and Chief Executive Officer

Hi, Jerry.

Jerry Revich — Goldman Sachs & Co. LLC — Analyst

Hi. Jess, I’m wondering if we could start on GFN when you folks were announcing the acquisition, you spoke about over time getting the margins and dollar utilization of that business closer to industry comps. Where are we in that journey today as you look at the ’22 guidance? How far do you think you folks will close the gap there? And can you just give us an update on the location count and what you folks think you’ll be able to do by year-end to ramp that up?

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Yeah. Thanks, Jerry. Great questions. It’ll — I think we had shared when we did the acquisition, it will take us some time to get to that kind of margin profile similar to industry peers. I think the real opportunities for us, and we’ve been really excited even post acquisition, is to look at the growth opportunity that we have with that business. The margins will actually come in line with that growth that we’re anticipating. As Matt mentioned, we continue to look at growing that business through cross-sell, and as we look at the cold start opportunity that we have to increase the footprint for mobile storage for United. So not there yet, but definitely on the way as we really focus on getting the growth that we expect with that business.

Matthew J. Flannery — President and Chief Executive Officer

And I would just add, Jerry, with what we thought while going in about that, this was the right team to enter this product with and that the end market would be a comfortable cross-sell for our customers, is working out fine. And so that’s a real important part of what Jess stated to reach our growth goals. So we’re feeling good about it.

Jerry Revich — Goldman Sachs & Co. LLC — Analyst

Got it. Okay. Great. And on a separate note, when we look at the double-digit price increases on new equipment put through by all the industry suppliers, how do you folks think about over what timeframe those increases are going to be passed through? Obviously, you folks have locked-in pricing given your market position. But overall, given the sharp increase, I’m wondering over what timeframe do you expect the market to adjust and digest and push through the pricing to keep returns where they need to be?

Matthew J. Flannery — President and Chief Executive Officer

So I think — and not just for us but for the OEMs as well, there’s a balance between just pushing all your inefficiency downhill and making sure that you’re pricing downhill and making sure you do the right thing for your business, so you don’t have to pass it all on to your customer, and that’s what we focus on. So I think that the industry is in good shape right now. I think it’s a responsible reaction to the realities of the supply chain, right? So I wouldn’t go to the double-digit area right now. I know there’s a lot of talk out there, but we’re not seeing those type of increases. But regardless of that, this is still an opportunity for us. Our team works real hard out there. We do have cost creep in the business as does everybody. And we’re going to make sure that we continue to manage P&L from top to bottom and you’ll see us continue to do that.

Jerry Revich — Goldman Sachs & Co. LLC — Analyst

Okay, thanks.

Matthew J. Flannery — President and Chief Executive Officer

Thank you.

Operator

Your next question comes from Ken Newman with KeyBanc Capital Markets. Go ahead.

Kenneth Newman — KeyBanc Capital Markets, Inc. — Analyst

Hey. Good morning, guys.

Matthew J. Flannery — President and Chief Executive Officer

Morning.

Kenneth Newman — KeyBanc Capital Markets, Inc. — Analyst

So I appreciate the earlier comments on fleet productivity and equipment availability. Obviously, it seems like some of your larger suppliers are expecting deliveries for new equipment to really open up in the back half. Can you just talk about a little bit more in color about how you view fleet availability in the back half of this year, and just where you see the impact potentially on industry rental rates utilization?

Matthew J. Flannery — President and Chief Executive Officer

Yeah. I’m not sure our suppliers all know just what that means, right, about how fast and how robustly the supply chain will get back to normal, let’s say. But I will say that they’ve been working really well with us, and that’s why we’re able to get the fleet we are. Do I think there’s an opportunity to accelerate stuff in the first half? That will probably be a bigger challenge. But Ross had asked earlier about the infrastructure bill. If the market, which is coming out with our guidance, a pretty robust feeling about the market right now. As that ramps up and the supply chain goes, I think there’s a little bit more room for more capital. I’m not betting on that, which is why we brought in all the capital that we brought in, in Q4. In a normal year, maybe we would have pushed some of that out into the spring and stick with our just-in-time philosophy. That’s not the environment we’re in right now, and I think we all got to live that reality. And I really — I feel for our partners because I know they’re trying to do the best they can for us and the challenges they have, I haven’t seen clear signs of people getting ahead of the order board yet. So I think the guide that we gave is aggressive and appropriate.

Kenneth Newman — KeyBanc Capital Markets, Inc. — Analyst

Got it. And then for my follow-up, I may have missed this in your prepared comments, but I think in the past, you’ve talked a little bit about just your internal customer survey on backlogs. I’m curious if you just have any color on where that’s trending and whether or not you expect it to trend further upwards?

Matthew J. Flannery — President and Chief Executive Officer

Yeah. So we’re at the highest levels we’ve been since pre-pandemic, and we closed our latest one in Q4 there at the highest level. So that momentum just continued to build throughout 2021. And we call it our Customer Confidence Index, our CCI, is really strong. What gives me more comfort is that our managers, when we went through our budgeting process, were very bullish. They’re getting good feedback through their sales teams and their relationships with our customers on the ground that all feel really good about 2022. So I think all signs are pointing to a good growth year, which is why we came out with the strong guidance that we did.

Kenneth Newman — KeyBanc Capital Markets, Inc. — Analyst

Thank you very much.

Matthew J. Flannery — President and Chief Executive Officer

Thank you, Ken.

Operator

Your next question comes from Mig Dobre with Baird. Go ahead.

Mircea Dobre — Robert W. Baird & Co., Inc. — Analyst

Hey, good morning. Matt, I appreciate all the color and comments in terms of customer confidence that you’re seeing and what you’re saying about infrastructure in 2023 starting to be additive makes a lot of sense to me. So on that basis, I’m just trying to interpret the growth capex guidance that you’re providing here at $3 billion, because if you are seeing some inflation, presumably then the number of units that you’re getting is at least modestly lower than what you’ve gotten in 2021. And from what you were saying earlier, the opportunity for time utilization on the fleet is largely exhausted, but demand looks pretty good. So in an environment like this, wouldn’t you normally want to spend more and add to the fleet, add units to the fleet to prepare yourself for growth — for further growth, I should say, into 2023 as infrastructure potentially accelerates?

Matthew J. Flannery — President and Chief Executive Officer

Yeah, it’s a great point, and it’s one of the reasons why we brought in $690 million in Q4 because we exactly feel that. So that’s why I said earlier, the $3 billion, calling it the same year-over-year is a little bit of a misnomer because what would we bring in a normal Q4? $250 million? Maybe $300 million? So we brought in almost double what we would in a normal Q4. So I think that’s a bit of a hedge towards what you’re talking about.

Now if the infrastructure work starts to step up sooner or just activity overall, doesn’t have to be infrastructure, and we see the supply chain remedy in the back half of the year, we’ll do what we did this year. We’ll pull it forward, especially as we have even better visibility to ’23 at that point. I still think this is a pretty strong guide coming out, so I don’t want to run away from it. But if the dynamics present itself as such that there’s the opportunity to grow more profitable growth, we will do it. And I think we’ve proven that this year, and that’s the great part of the flexibility in the model.

Mircea Dobre — Robert W. Baird & Co., Inc. — Analyst

Okay. Understood. But you’re not encountering any challenges with potentially securing production slots because you obviously have been very successful getting early production slots. And I would imagine that there are other mouths to feed on the part of your suppliers. And if allocation is tight, I don’t know if that’s part of the discussion or part of the challenge that you have to manage through?

Matthew J. Flannery — President and Chief Executive Officer

Yeah. It’s part of what we manage through, right? So we’re — I would like to think that our partners feel equally strong about us as we do them and, you know what, their actions this past year have proven that. So I’m planning on that to continue. Without the partners, it’s a whole different ballgame. But I think that — I think we’re well positioned and the dialog’s very transparent about how quick things move. So we’re working well together so that we can have the appropriate fleet for the opportunity that when it presents itself.

Mircea Dobre — Robert W. Baird & Co., Inc. — Analyst

Understood. And then one final question, a near-term question, if I may. I’m curious as to how you’re thinking about the first quarter. Seasonally here normally, we are seeing a bit of a revenue step-down seasonally in Q1. But there’s a lot of moving pieces here in terms of where demand is. It sounds like things are quite good, and the industry is still pretty tight. So can you maybe do a little handholding here as to how we should be thinking about revenue and maybe even flow-through margins in Q1 versus the full year guide? Thanks.

Matthew J. Flannery — President and Chief Executive Officer

Yeah. No, I’d love to help you there, but we’re going to stick to our guns and not talk about inter-quarter results. But I do — Q1 is always going to be our lowest seasonal quarter. But we think this momentum will help. And we’re going to continue to build off that momentum and the real build will come in the spring as usual.

Mircea Dobre — Robert W. Baird & Co., Inc. — Analyst

Appreciate it. Good luck.

Matthew J. Flannery — President and Chief Executive Officer

Thanks.

Operator

Your next question comes from Tim Thein with Citigroup. Go ahead.

Timothy Thein — Citigroup Inc. — Analyst

Thank you. Good morning. Matt, I just wanted to come back to the earlier comment about don’t expect time to be a real driver as we get past the first quarter. So obviously, the rate and the mix have to do more of the heavy lifting, which certainly has implications for margins. And I’m just thinking back, if you look back at historical periods when rate was expanding at, let’s call it, above-average levels, and there weren’t distortions from M&A, United was pretty consistently getting to that 60% flow-through number that we often use as a benchmark. Do you think does the environment we’re in, obviously, there’s the degree and magnitude of these factors will, of course, matter. But is the inflationary environment that we’re — and the supply chain choppiness that we’re in, does that preclude that or not in terms of just thinking about could there be upside here in later quarters if, in fact, you do start to see potentially rate driving more of the fleet productivity?

Matthew J. Flannery — President and Chief Executive Officer

Yeah. And just to be clear, I don’t want anybody to mistake that all of our fleet productivity, not because you guys can make some mistakes with the math there, but all of our fleet productivity was driven by absorption. It’s just that portion of it is going to go away. We’ve been getting support from all three components of fleet productivity in ’21. So for your question of what ’22 looks like, in the base year. As far as the flow-through, it certainly could be better if we didn’t have the inflationary — just natural inflation on everything from copy paper to bottles of water. We all live in the world. We know what’s going on out there. But we still think no apologies for 55% flow-through. When you’re growing the business at 12%, we are very pleased with that. You make a fair point. Could it be higher if we’re in an inflation? Yeah, there’s a lot of things that could be better, but we’re going to control what we can control and take the opportunities that present themselves. And we’re really pleased with the guide that we gave here.

Timothy Thein — Citigroup Inc. — Analyst

Yeah. No, it wasn’t meant as a knock.

Matthew J. Flannery — President and Chief Executive Officer

No, no, I know.

Timothy Thein — Citigroup Inc. — Analyst

Yeah. And then the second is just on the revenue guide. If we just make our own assumptions on fleet growth based on the capex guide and assumption is, obviously, there’s a lot of them, but rate and other factors, it would, by our math, anyway, suggest that equipment — the equipment rental piece could potentially grow maybe in excess of what’s implied. But that’s not the entire — there’s other factors that, of course, get added up into that total revenue. So are there — of the other lines, obviously, they’re a lot smaller, but are there other factors that we should be thinking about? I would imagine the sales of new equipment probably aren’t growing. But are there other factors that maybe you can help us just think about in terms of what potentially goes against equipment rental growth in the context of the top line?

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Hey, Tim, it’s Jess. Let me see if I can help with the math a little bit. So if you think about the total revenue growth right at, let’s call it, 11.7% at the midpoint, just based on, again, midpoints of what we’re looking at for used, you could assume that the growth within that number for used is probably something at midpoint in the area of about 8.5%, right? So that should help a little bit in recalibrating the math on what you might be using for rental growth within that total revenue piece. So that’s — I hope that’s helpful, right, to just recalibrate where you think that rental could shake out.

Timothy Thein — Citigroup Inc. — Analyst

Got it. Yeah. I was thinking other like ancillary and other factors. But we can chat offline on that. And then just one quick one, Jess. Just the operating cash flow guide or just getting from EBITDA of almost $0.5 billion year-on-year, and operating cash flow is effectively flat, just working capital, potentially your cash taxes, what are the big components of that?

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Both actually, Tim. So right now, we’re looking at cash taxes being up somewhere in the neighborhood of about $200 million. And that’s largely coming from the increase in the pre-tax income that we’re expecting. And then the rest, as you mentioned, is working capital. And that’s really more about the normal payment terms and largely just timing of payment on the capex.

Timothy Thein — Citigroup Inc. — Analyst

Understood. Okay. Thank you very much.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Sure.

Matthew J. Flannery — President and Chief Executive Officer

Thanks, Tim.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Thanks, Tim.

Operator

Your next question comes from Stanley Elliott with Stifel. Go ahead.

Stanley Elliott — Stifel, Nicolaus & Company, Inc. — Analyst

Hey, Matt. Hey, Jess. Thank you guys for fitting me in.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Hey, Stan.

Stanley Elliott — Stifel, Nicolaus & Company, Inc. — Analyst

A quick question. With all the survey work you guys are doing and talking to people on the ground are, obviously, very bullish and excited. Has anybody expressed any concerns around labor availability? Not necessarily for you all. You’re a hirer of choice. Really more for the contractor base. And what risk, if any, does that present to some of the outlooks that we’re thinking about?

Matthew J. Flannery — President and Chief Executive Officer

So, for as long as I’ve been in the business, contractors are complaining against getting the labor, but it’s certainly exacerbated in this post-COVID world we’re in. But we haven’t seen project delays or cancellations from it. So that’s really the important part. But it’s topical. I think all of us on the supply side and on the build side, meaning our customers, are all working harder than we ever had before to bring in labor. And it’s just part of the new rules of the game. But they’re getting it done. And as I said, the more — there’s a lot very topical, but not any cancellations or delays that we see because of it.

Stanley Elliott — Stifel, Nicolaus & Company, Inc. — Analyst

And I guess switching gears, I’ll ask a quick question about the international business because there is some stimulus and some infrastructure spend in various other parts of the world where you all now have a footprint. How is that business performing? Up to expectations? Is that going to get much of the growth capex? Just curious how you’re thinking about that.

Matthew J. Flannery — President and Chief Executive Officer

Yeah. So actually, our teams, both in Europe and New Zealand, Australia, which as you guys know, two totally different businesses with the European part coming from the Baker acquisition and the New Zealand, Australia Group coming from the General Finance acquisition with mobile storage are both doing great. They’ve actually both grown in the high 20% in Q4. They’re really — the European folks have been with us longer, but they’ve really taken to be a part of the United team, and we’re very pleased that we’re able to fund their growth. So I would say both exceeded expectations a little bit. Admittedly, the team in Europe had to deal with the severe drop during COVID, but they bounced back from that and got back to pre-pandemic levels. So we’re very pleased with the results there.

Stanley Elliott — Stifel, Nicolaus & Company, Inc. — Analyst

Perfect. Thanks so much and best of luck.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Thanks, Stanley.

Operator

Your next question comes from Scott Schneeberger with Oppenheimer. Go ahead.

Scott Schneeberger — Oppenheimer & Co., Inc. — Analyst

Thanks very much. I guess I’ll start off on specialty. Just curious, an acceleration in the cold start plans for this year. Just if you could delve a little bit more into maybe some specificity of what specialty categories you’re pursuing. And you touched earlier, Matt, on GFN, and it’s progressing well. But just curious if you could address, or maybe Jess come in on this, the cost savings and revenue synergies. Is that where you wanted it to be at this point, or are you beyond that point? Just curious on that progress. Thanks.

Matthew J. Flannery — President and Chief Executive Officer

Yeah, sure. And just on that last part, there’s — it wasn’t a cost play, right? So GFN was not a cost play in any way, shape, or form. There’s not a lot [Indecipherable] to add there because that was a grow, grow, grow play, 100%, and we’re pleased with what we’re seeing on that. So as you can imagine, they’re going to have a decent amount of that targeted 40 cold starts that we’re going to have this year. But the other area that we want to do is ROS business, right, our portable sanitation business, has a lot of growth goals, and we continue to grow parts of our Power and HVAC business. And it’s specialty overall, but the leading two product lines that we’ll be doing cold starts in would certainly be mobile storage, and then our Reliable Onsite with the portable sanitation.

Scott Schneeberger — Oppenheimer & Co., Inc. — Analyst

Thanks. Appreciate that. And then with regard to just the purchasing from the OEMs this year, obviously, typically October, you go out to them. And then obviously, there have been supply chain issues. So I’m just curious if you could share with us, you typically purchase for each asset class just one or two vendors. Were you forced to go broader this year? You obviously sound very confident on your ability to procure equipment. So just curious on some of the behind the scenes of interacting with your partners. Have you had to go in different directions or add a third per asset class? And then what type of fleet age are you looking for? And how do you weigh that with repair and maintenance expense just on the go forward, what’s implied in the guidance and where could that be longer term? Thanks.

Matthew J. Flannery — President and Chief Executive Officer

Yeah. So on the brands that we’re buying from the partners — our partners. We certainly expanded from just not our top in each one but maybe we had to go to number three. We’re always dealing with at least two vendors in each product category. So maybe we extended to a couple of other approved suppliers. We’re not talking — so no knockoff brands or anything like that, but just people that weren’t winning one of the top two spots but very capable product suppliers. So we definitely expanded into number three and even number four in some areas to achieve the capital growth that you saw us achieve in ’21. And we expect we’re going to be doing that. We actually found some pretty good results from some of these folks who are looking to get in with the team in a bigger way than maybe they have historically. So that’s an opportunity for us to continue to find new ways to solve problems for customers. And the OEMs and us are teammates. We have to communicate with each other regularly. It’s not just the price negotiation in October and then see you next year. So these guys are interacting at the ground level daily on deliveries, on slots, whether they’re slipping, whether they’re — whether there’s opportunity to buy more. And that’s an ongoing relationship with the customers. As far as the fleet age, Jess?

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

I’ll have to take that. Yeah. So the fleet age really is more of an output for us and it’s really going to depend on fleet mix, what we buy, what we sell. There isn’t necessarily a target that we’re working towards. And even on the R&M side for repair and maintenance, less of a target per se and definitely not tied to fleet age. That’s more considered when we do the calculations of our rental useful life by asset where we then determine the right time at which to sell the asset, right, considering what it would end up costing us as we think about repair and maintenance as that asset gets older. So that’s really where we would consider the impact of repair and maintenance within that RUL or rental useful life calculation. So I hope that’s helpful.

Scott Schneeberger — Oppenheimer & Co., Inc. — Analyst

It is. Thanks, Jess. Appreciate it. Thanks a lot.

Jessica T. Graziano — Executive Vice President and Chief Financial Officer

Great. Sure.

Operator

And the last question comes from Courtney Yakavonis with Morgan Stanley. Go ahead.

Courtney Yakavonis — Morgan Stanley & Co. LLC — Analyst

Hi. Thanks, guys. Just wondering if we can delve back into the infrastructure discussion a bit. Can you just help us understand where your portfolio is — or which types of projects your portfolio is most exposed to when we think about the different components of the bill, whether it’s more traditional roads and bridges or air and water or the investment in the grid? If you can just help us think about that. Because I think you had mentioned some message boards and traffic attenuators that might be a little bit more exposed to the traditional elements. And then also whether you would expect your specialty portfolio to have a significant impact from some of that spend?

Matthew J. Flannery — President and Chief Executive Officer

Sure, Courtney. So the infrastructure definition can be quite broad for some and it is for us in the areas that we’re able to participate. And I think the funding, as you saw, has been earmarked for a broad array of end markets. So whether it’s road and highways, whether it’s the electric grid and power infrastructure, rail services, broadband, right? So think about broadband. That would be something that our trench team has participated highly and historically. So specialty will get the opportunity, specifically power and trench, but even our mobile storage folks have the opportunity. These all become job sites. Even if they’re alongside a road or in a wing of the airport, that’s all fenced off, this is the way the infrastructure projects run. But we think whether it’s public transit, water infrastructure is another opportunity, all these are opportunities that are going to require our products. So almost all, other than if it’s literally buying the trains, right, almost all of this is going to require our needs for the money that’s earmarked in the infrastructure bill. So we feel really good about it.

Courtney Yakavonis — Morgan Stanley & Co. LLC — Analyst

And can you just remind us again how — what percentage of your rental revenue at this point comes from infrastructure today?

Matthew J. Flannery — President and Chief Executive Officer

Probably — yes, I don’t know if we’d share, but it’s about mid-teens. I don’t have it on the top of my head. I can get back to you with that, but it’s probably somewhere in the mid-teens.

Courtney Yakavonis — Morgan Stanley & Co. LLC — Analyst

Okay, great.

Unidentified Speaker —

It also depends how you define it, right.

Matthew J. Flannery — President and Chief Executive Officer

Yeah.

Unidentified Speaker —

And this gets back to the challenges of if you were to say power, power is about 10% of our mix, right. That’s not included in the number Matt referenced. So it really gets back to how you define it and how do we define it in our definitions.

Courtney Yakavonis — Morgan Stanley & Co. LLC — Analyst

Okay, great. Thanks, guys.

Matthew J. Flannery — President and Chief Executive Officer

Thanks, Courtney.

Operator

And that is it for the Q&A. Any closing remarks?

Matthew J. Flannery — President and Chief Executive Officer

Thank you, operator. I want to thank everyone for joining us as we kick off another year of growth. We’re off to a great start, and we look forward to sharing our progress with you in April. In the meantime, if you have any questions, please feel free to reach out to Ted. Thank you. Operator, you can now end the call.

Operator

[Operator Closing Remarks]