Okay. And we're live. Thanks everyone for coming. We've reached the end of the day, but we're gonna 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 for this conference. Thank you guys for being here. Matt Flannery, CEO. To his left, Ted Grace, newly appointed CFO, after everyone knows, doing a great job with IR. Thank you guys for coming.
Thank you.
Maybe we'll open it up kind of on a high level. I mean, give 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. Maybe just from a high level, kind of what you're seeing across the markets.
Certainly. From a high level perspective, as we've talked about over really the last couple of years, very broad-based demand for our products, very broad-based growth. That's by geography, any vertical that you'd want to look at. Really just about any segment that we measure has had strong growth over the last two years. We're seeing that momentum continue.
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 it's called 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. Yeah. We'll circle back into a few of those things. I was at ARA last week, and, you know, historically, it's catered more to the smaller kind of IRCs that traffic there. 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 bigs getting bigger, being a natural evolution of the industry and whether it's through consolidation or outweighted organic growth. 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. I think you saw that manifest in this past two years and expect to in 23 as well. It is, it's encouraging to hear our other public peers doing well. We see, you know, we understand the concerns in the macro, but most of the tailwinds that we see, we think are agnostic of the macro.
Supply seems to be at least as good as it's been last year, and hopefully it'll even get a little bit better in the back half of the year. We feel really good about it, and I understand for some of the local businesses, you're not as large a role in big projects, big opportunities. I could see there being a divergence.
Yeah. You mentioned consolidation and, you know, that I would imagine that it's likely to continue. As you think about how that has impacted and the interplay with just the overall... we're not going to discuss rates, but just from a, from a pricing discipline standpoint. I think about United, right? Over the last couple of years, some of those companies that are now part of yours didn't have the reputations for being the most disciplined, whether that's Franklin or Ahern. Just as you think about that, the role that consolidation has played, is it, you know, do you see that as well just in terms of looking at the markets, you know, kind of picture today relative to what has been historical?
Well, when we acquire 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. As we think about that, the question we ask going in is, can we be a better owner of this asset? That's the only real way that you can pay for it. You can pay a multiple, is you have to be a better owner of that asset. 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.
Yeah. This is a little bit off the tangent, I was listening to one of the largest public truckload operators yesterday. One of the comments he made was they're see the use or the advent of technology in their markets whereby you used to get spot rates on a monthly basis. Now, certain lanes, they see it almost like daily. 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 the corrective mechanisms likely set in faster. 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 with that.
I agree wholeheartedly. I think in 2015, coming out of that little bit of oil and gas dislocation, you saw more and more participation with the Rouse data. Now people are selling and making decisions off of information versus fear. I think that's been a huge benefit for the industry. I think it's carried throughout the industry, not just the large companies. When I look at the Rouse data, which captures well over 50% of the industry, so certainly more than the top three or just the public peers, you're seeing that improvement in all components of fleet productivity continue to grow. I think kudos to the industry overall, but I think the information was a big part of that.
You know, 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-residential construction being the largest. I mean, that gives the strength in starts we saw in 2022. It gives a, you know, backlogs we haven't seen in some time. You start layering in the fact that rates have gone up quite a bit. Some of the, you know, lenders are tightening up their standards. What is it from your lens? I mean, I don't imagine you're seeing or cancellations, but are you hearing of any kind of consternation amongst project developers about, you know, maybe that next project start or?
No, not at all. As a matter of fact, we're not even hearing about delays. One of the few delays that we heard about was really regarding solar, and that was more supply issues of the panels. Most of that's been sorted out. Outside of that, we haven't even seen project delays. Ted tracks this as well. I don't know if you have anything to add.
No, that's correct.
You mentioned these mega projects has been the story the year in 2022 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, will that typically be 100%? Is, for example, is you or I going to capture of a, you know, $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 or does it tend to be we want it all sourced by you?
Yeah. There's very few projects anymore that are sole sourced by anybody. But you could imagine 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. We would expect, especially with our focus on national accounts and large projects and plants around the country, we would expect to out-punch our weight in those areas. That didn't need to be sole sourced, 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 2009, if you recall, where we really put a focus on national accounts and diversifying our business. This is going to play out pretty well for us, as well as our investment in growing our infrastructure capabilities.
Mm-hmm.
You go far back as the Neff acquisition, when we talked about how we needed to bolster our dirt fleet if we were really going to play in some of the spaces, including infrastructure.
Yeah.
It's kind of coming to 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.
Yeah. Across the major categories that get a lot of the headlines, whether it's a data center or in your traditional roads and bridges. Are there, is the rental intensity vary a lot across those different verticals or is it I don't imagine a one starts are all the same in terms of how much opportunity there is for United? Do any stand out in terms of being more versus less?
Yeah, every product's unique. 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.
Yeah.
Where you can only go so far. 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. We think that the projects that are coming up have the attributes and the needs for there to be, you know, somewhere from 2%-3% penetration. It does vary job to job.
Yeah. So much that they're spending so much on these tech companies. One of them just cut their dividend today, so maybe.
Oh, really?
Yeah. Maybe a separate issue. Joe, going back to the public versus private point, You mentioned Neff, but more broadly, the split between a public, you know, or infrastructure project, A road isn't going to have as much volume for United. Is that fair? I mean.
Yeah. Until you get to the elevated part of the roadways, right, where they'll have enough. We'll even in the, in the roadwork, we'll have opportunities, whether it be temporary power, whether it be lighting. We're not going to have I think some of the just paving type opportunity is more of a big yellow, maybe OEM opportunity. Much of the infrastructure bill has a lot of relevance and opportunity for us. I know Ted's done a lot of work on this. Do you want to share some of the color on infrastructure opportunity?
Yeah, absolutely. I mean, we think it's pretty extensive. If, if you dissect the bill, it's $550 billion. $110 of that is road and highway.
Mm-hmm.
The portion that's road and highway includes bridges. Within bridges, to Matt's point, we do exceptionally well. There's opportunity on the other.
Pieces within road and highway. Outside of that's really in the middle of our, you know, sweet spot of serving those demands. When you translate that, call it, you know, let's say $100 billion per year over five years, that's in the context of a $900 billion market. All else equal, it's worth about 12 points of relative demand.
Mm-hmm.
You know, which the majority of which is right in our sweet spot.
Yeah. Yeah, interesting. Going back to the industrial market, Matt, the, you know, there's a lot within that, but going back to the, remember the RSC days and really kinda increasing exposure for United. And there's a lot you mentioned, you know, this notion of potential reindustrialization in North America, nearshoring, all these kind of secular buzzwords we're hearing. 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?
Yeah. Certainly in this tight demand environment, you can imagine that our customers are being more forward planning, right? Surety of supply is something they need. We're a relatively small part of the cost of a project.
Yeah.
If they don't get the labor and the material activated through equipment, it could really hold the project up. 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'd ever seen before, because the customers are coming to us. It's interesting with some of the concern about people thinking about the macro and what's gonna happen, you know, we actually almost have the opposite concern. Like, how are we gonna make sure that we can support all these large customers on these projects?
The Ahern acquisition played pretty well for us into that hand because some of the assets that are the tightest, as you all that follow the industry know, are more in the aerial reach port side, and that was about 75% of the Ahern fleet. All this is kind of tied together towards the opportunity that we have in 2023 and 2024 for the next couple of years, where these large projects and large customers are gonna 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, yeah, certainly on the big boom space that acquiring those assets a few, I guess it's a year and a half ago now.
Yeah.
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, his point was that they were getting, I think he said, call it 60% of the iron that they requested from a big OEM. As a result of this, what he said they've changed how they're bidding projects. One, they're assuming labor content and labor costs are gonna be higher, also, they've told all their salespeople, if you used to assume 10%-15% was gonna 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 the.
Yeah.
Availability. I mean, I don't know if in your career is that.
Yeah. I think at a time where the supply-demand dynamic is outweighed and in this unique time where it's really hard for anybody, even if they didn't understand the math behind how rental could be much more capital efficient.
Mm-hmm.
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. I think that'll help drive secular penetration for the industry overall.
Yeah. Before we leave, I mentioned industrial, but maybe just, you know, it's a significant portion of the book. How are you across industrial categories? Are there some that you're more or less optimistic on in 2023?
No, I mean, we've got the only vertical that we've tracked the entire year that hasn't been up, that hasn't been a positive, has been midstream. We feel that's probably as much as a comp that we had in 2021. We feel that midstream, especially the LNG part of it, is gonna be a significant opportunity over the next two years. When we look at the other verticals, if I were gonna call out a few that seem to have better momentum, I would say manufacturing, which we've been talking about.
Yeah.
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. I, the downstream piece has always been kind of hit or miss the last couple of years. It sounds like the turnaround schedules are starting to fill in. Do you expect that to be a better year in 2023, or is it?
Yeah. As you know, we're behind the gates in a lot of these plants where we're doing a lot of run and maintain MRO work, and we feel really good about. It has been a little bit lighter for the last couple of years, we see that activity picking up. I think you're hearing some of the same.
Yeah.
We're very well positioned in the markets where this will happen, specifically, in the Gulf Coast. We feel good about that opportunity as well.
Yeah. Circling back, I'm jumping around here, the point on rental penetration, you know, for that example I mentioned earlier, the big E&C company. Is it typically once the kind of ship leaves the port, it's pretty tough for them to turn around. I would think that when you see rental penetration go one way, it hasn't historically often shifted back the other way. Is that?
Agreed. I think that's 'cause the industry has done a much better job of two things. Number one, quality of fleet, and surety of supply would be the second.
Yeah.
They don't have to deal with all the soft costs. First of all, the initial capital costs, but then all the soft costs, especially in this inflationary, tight labor market, 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. Think about a big articulated dump in a mine or a grader on a, you know, multi-year road project. It's always going to pencil that rental is going to be a more economical solution with a lot more flexibility.
Yeah. 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 2022. 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 what? 70%, 80%. I mean, hard to call where this goes.
Yeah. It goes very differently by product line. 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. You know, some of the, some of the specialty businesses we have, like our trench business, is really getting growth, from replacing non-compliance and just really building a safer industry.
Mm.
That the excavations are run safely as opposed to either self-performance or non-compliance overall. We think there's a lot of opportunities within our base general rent business as well as many of our specialty businesses.
Yeah. Trench protection used to be going back many years, used to be a sale business, then I think kind of morphed into more of a, of a sale like a rent to sale. Now it's shifted largely to rent.
Very much so. 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. 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.
Do you do certification in that?
Absolutely. Yeah.
All right, I'll see. Does anyone have any questions in the audience? We're here. I can repeat it so.
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 maybe you have historically. Curious, just from a business planning perspective, how you're approaching that, and if there's any kind of portion of your fleet or portion of your business that you can already kind of pencil in for the out years.
Yeah. We're not, we're not giving qualitative guidance that that far out. Quantitatively, there's a much longer tail than a calendar year to a lot of these works, specifically the publicly funded ones, right, that you had mentioned. Many of these projects we're talking about are going to have a longer than a one-year tail as well. There's more coming in the planning process that may not even manifest itself in 2023. 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 should repair to keep pace with that demand. We see demand increasing even in a situation where maybe some of the non-residential markets don't expand.
We really are not reliant upon that, for the next couple of years. We think that's the uniqueness of this opportunity and why you'll hear all the public players talking about these unique tailwinds that aren't as macro reliant.
Mm.
Maybe some of the other things I'd add is, you know, there are a lot of benefits of scale. Obviously the relationships it gives us with the suppliers puts us in a good 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. Then we can kind of, you know, scope the CapEx accordingly. A lot of that, you know, that's a benefit that will allow us to kind of make those decisions closer to game time. 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.
Yeah, that's a great point Ted makes because you've seen us have the flex, downward at COVID and then upwards the last couple of years, as we pulled forward CapEx into the fourth quarter to help get ready for the next year. That, that flexibility is key for us.
Maybe just coming back, Matt, on the specialty business, there's a few different verticals within that.
Mm-hmm.
Talk about, well, one of them being the portable storage business that you basically built with General Finance. How has that performed? That was one that stood out from a kind of a revenue synergy standpoint that was larger than most. How is that?
Yeah. That's a space we looked at for multiple years till we found the right partner because we knew that our customers had 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 five 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. We expect that to continue. We haven't even really significantly done the cold starts yet.
That's just existing penetration cross-selling to our customers in the markets where they existed. 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, yeah. Well, real estate and frankly, they soaked up the assets we got for them in their existing markets like a dry sponge.
Mm.
The team was able to put it to work. you know, maybe the real estate would have moved a little faster if they didn't have such capacity to build the demand in their existing markets. This year, we think we'll move further on the cold starts and continue to grow this business and well exceed the timeline of doubling that business.
Yeah. there's some consolidation, recently, right?
In the space.
Yeah.
Yeah. Not by us.
Not by... Yeah, yeah.
Yeah.
Yeah. speaking of which, it didn't happen maybe with Function, how big it's gone, but I saw that little New York City, Able Rents is now part of United Rentals. Now, is...
Yeah, 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.
Yeah.
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.
You talk about the inflationary impacts. I mean, the equipment gets a lot of the discussion, but I'm curious about, you know, your other lines of business that are subject to inflationary impacts. If you look just at cost of rent as a percentage of revenues, it really hasn't budged. Can you talk to that, Ted? You've seen inflationary impacts hit labor and other. How you've done in just in terms of managing that and what, you know, kind of visibility you have into 2023 in terms of keeping those costs?
Yeah. We're very fortunate to have this very flexible cost model. Frankly, we've got a culture such that there's a real emphasis on being mindful of any expenditure, such that, you know, it helps support those targeted flow-through rates we talk about, 50%-60%.
Mm.
you know, certainly in 2022, it was a relatively inflationary environment. You know, on a reported basis, we put up, you know, very strong flow-through numbers. On an underlying basis, they were still close to 60, right? you know, strong any way you cut it. This year, you know, we're looking for something similar. While it is still an inflationary environment, there's a, you know, 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. You know, I would assume when returns are ahead of, your cost of capital, the internal biases, right, internal growth, just given the dynamics there. Do you have the ability, you think, to increase CapEx this year beyond what you? Should the market develop in, you know, in your favor, do you even think you could grow CapEx beyond what you've outlined?
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 gonna be, and then we've, you know, kind of measured the CapEx to support that, right?
Mm.
We've satisfied that need. In terms of upsizing it beyond that, I think, you know, certainly all of our suppliers have talked about, you know, pretty tight production schedules and not a lot of slack. I think, you know, we've found ways at the margin, but I don't know if you want to touch on kind of.
I would just say, you know, we also have the Ahern acquisition, which we think there's some embedded capacity there.
Yeah.
We also pull forward a lot of CapEx into Q4.
Yeah.
We bought almost $1 billion of CapEx in Q4, and normally that would be somewhere in the $300 million-$400 million range.
Yeah.
When some folks had said, "Wow, you guys feel very bullish in the year. Year-over-year, your guidance is saying CapEx is gonna be about flat." Well, you'd 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 it more what's more resembles what our expectations are for this year.
Those actions speak to the uncertainty on the supply chain side.
Yeah.
Right? The decision to spend as much as we did in the fourth quarter, you know, we said we could spend, you know, 20% or more of the full- year in the first quarter. Normally would be maybe 15.
Mm.
The reason is because we don't know how the supply chain will perform, you know, in the, in the busy season called second, third quarter.
Yeah.
To hedge ourselves and ensure that we have the capacity to take care of customers and projects.
Yeah.
We've kind of, you know, essentially changed the cadence at the margin.
Yeah.
To ensure, t here is ongoing uncertainty.
Mm.
Gets to the challenge of, you know, confidently saying we could upsize CapEx by X, Y, or Z.
Yeah. Well, two of your more, you know, important vendors presented here today. I mean, they're both targeting, I think, 6% revenue growth for their product line, I mean, which includes some component of price, so.
We've got this other mechanism which is controlling used sales, and you really saw us flex that lever in 2022. If we are unable to source more gross CapEx.
Mm.
We can make sure we've got the earning assets to support customers, right?
Yeah.
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 a production line, were sidelined, then finished? Are you finding them or are the mechanics finding, well, they're just, you know, we're having more warranty issues or quality issues? Or has it not been... If that hasn't bubbled up to your level?
Yeah. 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." We'll help them. We haven't had anything that came to that level of scrutiny. Yeah. Listen, I think our partners are trying best they can-
Yeah.
-to keep up with the pace of demand. It's in their best interest as well as ours. You know, I don't want the conversation to quell their efforts. We understand the challenges they're working through. You know, we're in this partnership for the long term.
Yeah.
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,
Yeah. 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 three, two to three for each category. They've stepped up to the plate and maybe got a little bit more share.
Mm.
You know, they value getting in line, and see the longer-term value of supporting, you know, some us specifically with larger share.
Yeah.
So.
Is the fleet, do you expect or are you know, 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, because it is more costly. It's more costly for us, it's more costly for the customer. We have customers that wanna work hand in hand with us, for whether it's piloting new products or coming to market, as well as vendors that want us to partner with them. Think about us as a distribution arm-
Mm.
-between the OEMs that really have to build these more sustainable products and the customers that are gonna use them. We're a great access point to getting new product to market. We continue to invest in that from both a piloting to as well as trying to grow penetration-
Mm.
Of our sustainable products. We think that'll continue to grow. 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 gonna happen.
Ted, maybe, before I go on, is anyone, any questions? Go ahead.
Yeah. I guess just two 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? I guess the same question was just on 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?
Spreading.
Yeah. No. As you guys, some of you may know, we talk about pricing from a fleet 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. The first part of his question?
Was on the nature of contracts with, some of these.
We're very fortunate that many of these customers we've got long-standing relationships with. You could imagine as being largest supplier to national accounts, large contractors in the space, there's very few folks that are gonna be doing these works that we don't have a relationship with. Some of it we have contractual pricing, some of it will be negotiated on an as-need basis. 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? We think about kind of the go-to-market approach we've talked about. We think about the fleet architecture marrying specialty and that one-stop shopping concept with the technology we bring to bear. You know, certainly the value proposition we add to these projects, specifically in the E&C companies executing them, puts us in a really good position to be there from the beginning of the project to the end.
The larger the plant or project, right? A plant's just a project that never goes away. Think about the larger that these plants and projects are, the more that safety and security is an issue for them. 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. That's another area where we think the large players have a bit of an advantage.
How do you assure, though, the local sales guys aren't losing contact or losing focus with the local account customers? They're going after these.
It's a great question, 'cause historically, we've seen that happen. We actually striate our go-to-market. We link different sales reps to the local market versus to the large projects and large customers. 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 touch on the balance sheet. $1.4 billion of through the dividend and buybacks. If you hit the midpoint of the EBITDA guidance, that you'd end the year at, call it a turn and a half of leverage.
Yep.
just is that, just leaves presume that M&A is still a focus for the company. Just how you think through the opportunities beyond that and maybe, you know, you when you came in, not when you came in, but when Jeff's early days of Jeff's tenure was kind of bringing that leverage target down, do you bring that down even further now, or is it is that TBD?
It's conceivable. If you go back to June of 2019 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 multi-step 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 1.5, 1.6, short of other actions. You know, we hope that we find other ways to put the money to work, M&A being the most obvious, right? But if we don't, certainly that's a conversation we'll have internally, you know, among the management team and the board to figure out, you know, how to potentially manage that excess capacity.
We certainly have been very comfortable, bless you, operating in these levels. We think it affords us a lot of flexibility, both offensively and defensively. Certainly, we think the feedback from the market has been very supportive of this construct we've been using.
Mm-hmm.
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, you know, through that mechanism.
I presume that the dividend feedback was also well-received or?
Yeah. The dividend absolutely is well-received. I think people thought it was a powerful statement about our confidence and our ability to both invest in growth aggressively and still generate a lot of excess cash and then return it back to shareholders in, you know, an attractive manner. It complements the buyback. I think they understand the logic of why we did it. It certainly not only beyond kind of like the statement it makes and the signaling, but certainly, you know, it adds another tool to the toolbox of returning excess cash to investors. It leaves us with a lot of opportunity to grow it over time, which is our intention.
Yeah. We got a minute left here. 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.
Yeah.
I think overall the general tone's 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. 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. 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, you know, 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. I think we'll close it there. Thank you, guys.
Great.
Thanks for your time.
Appreciate it.