United Rentals Inc

NYSE:URI

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, and welcome to the United Rentals Investor Conference Call. Please be advised that this call is being recorded.

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 filings with the SEC. You can access the 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 and 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 back to the company's recent investor presentation to see the reconciliation for each non-GAAP financial measure to the most comparable GAAP financial measure.

Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer; and Ted Grace, Interim Chief Financial Officer. I will now turn the call over to Mr. Flannery. Mr. Flannery , you may begin.

[Matthew Flannery, President, CEO & Director]

Thanks, operator, and good morning, everyone. Thanks for joining our call.

Well, the team has made my job pretty easy today. We reported another strong quarter in a positive operating environment in a record year. That's a great trifecta. And I know it sounds familiar because that's how the year has been going. This quarter was especially gratifying. We delivered year-over-year increase in rental revenue of 20% with fleet productivity of almost 9%. Our people were definitely on top of that opportunity.

We achieved good operating leverage in our business by working efficiently. And that's not easy to maintain during peak demand, especially in the current cost environment. So I applaud the team for meeting our customers' needs while staying mindful of profitability and most of all, we are doing it safely.

Our recordable rate for both the third quarter and year-to-date were well below 1, and that's with about 10% more headcount in the quarter versus last year. Against this backdrop, we grew our EBITDA margin by 240 basis points year-over-year to 49.9% in the quarter as we grew EBITDA dollars faster than revenue to over $1.5 billion. That's a record for us in any quarter, and flow-through was a very solid 63%. Importantly, we also delivered another improvement in return on invested capital to a record 12.2%.

Given these results and the momentum we're seeing, we raised our full year 2022 guidance for total revenue and adjusted EBITDA as well as rental CapEx. I want to elaborate on the CapEx point before I move to our customers and our end markets. Our industry has continued to show good discipline in terms of supply and demand, which creates a healthy environment for attractive returns.

We have 2 levers we can pull to capitalize on this demand. First, we intentionally held back on used equipment sales this year to make sure we had enough capacity for our customers. And even though we sold less fleet in the quarter on an OEC basis versus our original plan, our revenue from used sales in Q3 was essentially flat year-over-year, supported by very strong pricing. And secondly, we had the opportunity to pull forward some CapEx into the current quarter to ensure that we're set up for a strong start to 2023. Our updated guidance includes an increase of rental CapEx of about $350 million at the midpoint. And we think this is prudent as our OEM partners continue to work through supply chain challenges.

So that's how we're thinking about CapEx at United Rentals. And on a related note, we're continuing to invest some of the CapEx and fleet that lowers carbon emissions on job sites, in line with our ESG initiatives. We recently announced an agreement to purchase all electric ride-on dumpsters from JCB, making us the first equipment rental provider to offer this product in our fleet. And on the innovation front, we just launched a sustainability tool in our total control platform that tracks greenhouse gas emissions data. This technology is an industry-first, and it's a good example of how we differentiate our company as a partner beyond the transaction. And in this case, we're helping customers reach their own sustainability goals. Investments like these continue to add value to our offering and keep us growing faster than the industry.

Now I'll turn to the macro. While there are portions of the economy that are clearly slowing, in our industry, customer activity is still on the upswing and demand for our equipment rental continues to be very strong. Customer sentiment and key industry indicators remain positive. And we know this outlook may seem at odds with some views on the broader economy.

And if we saw a cause for concern in our markets, we'd be standing here talking about it. We'd also be using the flexibility built into our model to pivot to a more conservative stance. Instead, we're investing in the tangible opportunities that we see ahead.

Here are a few of the unique dynamics that should help our industry continue to outpace the macro in virtually any economic cycle. One is a $550 billion of funding in the U.S. infrastructure bill, which will finally put shells in the ground starting in '23. This should trigger at least 5 years of opportunity. There's another $440 billion of federal tax incentives in the Inflation Reduction Act for clean energy and plant upgrades. And we think these will have a 5- to 10-year impact.

And in the manufacturing sector, there are multiple tailwinds that will play out on different time lines. This year alone, hundreds of billions of dollars of new investment in manufacturing have been announced. Investments are already underway in automotive electrification, microchip factories and the broader trend towards onshoring. And there's also more focus on energy production to serve markets in North America and Europe. Many of these tailwinds are new to the construction and industrial sectors. And in combination, they're a major opportunity for our industry.

Looking specifically at our business, the quarter played out even better than we anticipated. Both of our segments in every one of our regions grew rental revenue year-over-year by double digits. Rental revenue from non-resi construction was up 24%, infrastructure was up 11% and industrial was up 13%. And these are all consistent with the trends we've seen in recent quarters. Demand for specialty was strong across the segment with rental revenue up 23% year-over-year as a whole, led by our Mobile Storage and Fluid Solutions businesses.

Our greenfield plans for specialty are moving forward with 25 cold starts opened through September and another 11 planned by year-end. Cold starts continue to be a valuable growth strategy for specialty with a long-term benefit to our company's total performance.

Looking at our markets by vertical, the big multiyear projects in Q3 continue to be data centers, distribution centers and renewables as well as the automotive and ship plants that I mentioned earlier. Now these projects span multiple regions and most of them are mega projects where our customer base, our technology and our position as a one-stop shop give us a major competitive advantage.

Contractors are managing to source the labor and the materials they need, but at the same time, they're dealing with cost inflation. So they need to squeeze more productivity out of every dollar. And we have the digital solutions to help our customers get more utilization from the equipment they rent and own.

Work sites are evolving into connected environments, and we're positioned as a leader in that space, and our customers assign real value to the data that we provide. And lastly, I want to mention the new share repurchase authorization we announced yesterday. This program will return $1.25 billion of excess capital to our investors by the end of 2023. And we're proud to make this additional commitment to supporting shareholder value.

So in conclusion, our 25th year in business is also shaping up to be a record year of financial performance. We've got a great team in place, and we'll continue to explore every avenue for growth and returns. The construction and industrial sectors we serve had their own tailwinds, driving the historic demand for our services. Our customers are building a strong book of business for 2023 and the secular shift towards renting and expanding the market.

In this environment, we'll continue to be good stewards of United Rentals. We'll focus on profitable growth as we have all year, and we'll remain flexible to act in the best interest of our shareholders.

And with that, Ted, it's over to you.

[William Grace, VP, IR & Interim CFO]

Thanks, Matt. Good morning, everybody. As you saw in the results we reported last night, the team did a great job delivering across the board. We continue to take advantage of the market by supporting our customers with the fleet they need, driving healthy productivity and converting that growth to our bottom line. This performance, combined with our updated outlook for the remainder of the year, is reflected in our new guidance, which I'll touch on later.

But first, let's dive into the quarter. Rental revenue was a record $2.73 billion. That's up $455 million or 20% year-over-year, with strong contribution from both general rental and specialty. Within rental revenue, OER increased by $341 million or 18%. Our average fleet size increased by 10.6%, which provided a $201 million benefit to revenue, while fleet productivity increased a healthy 8.9%, adding $168 million. This was partially offset by our usual fleet inflation of about 1.5 points or roughly $28 million.

Also within rental, ancillary revenues were higher by $103 million or 32%. This is due mainly to increased delivery fees and other pass-through charges. And finally, re-rent increased $11 million.

Outside of rental, third quarter used sales were essentially flat at $181 million as we intentionally held on to fleet to ensure we could support stronger-than-expected rental demand in our peak season. The vast majority of these sales were in the high-margin retail channel. This, together with improved pricing, helped deliver a very healthy 64.6% adjusted use margin for the quarter and record proceeds as a percent of OEC of 83%.

Let's move to EBITDA. Adjusted EBITDA for the quarter was $1.52 billion, another record and an increase of $288 million or 23.4% year-on-year. The dollar change includes a $288 million increase from rental, within which OER contributed $245 million, ancillary contributed $37 million and re-rent contributed $6 million. Outside of rental, used sales added about $25 million to adjusted EBITDA, while other non-rental lines of businesses contributed another $3 million.

SG&A increased $28 million, primarily due to higher commissions related to volume and the normalization of certain discretionary costs. As a percent of revenue, however, SG&A showed good leverage declining 90 basis points to 11.7% of sales.

Looking at third quarter profitability. Our adjusted EBITDA margin increased 240 basis points to 49.9%, implying very healthy flow-through of around 63%. Excluding the benefit of used sales, flow-through was a still solid 58% supported by robust rental growth, good fleet productivity and vigilant cost management. And finally, third quarter adjusted EPS was a record at $9.27. That's an increase of $2.69 per share or almost 41% year-on-year.

Turning to CapEx. Third quarter gross rental CapEx of $1.1 billion and net rental CapEx of $921 million were both in line with year-ago levels. Now let's look at return on invested capital and free cash flow. As Matt mentioned, ROIC was another highlight of the quarter at a record 12.2% on a trailing 12-month basis. That's up 70 basis points sequentially and an increase of 270 basis points year-on-year. Free cash flow also continues to be very strong with $176 million generated in the quarter, reflecting normal seasonality and over $1.1 billion generated through the first 9 months of the year, all while continuing to fund growth.

Flipping to the balance sheet. Our leverage ratio declined 10 basis points sequentially and 50 basis points year-on-year to 1.9x its lowest level in our history. Additionally, our liquidity at the end of the quarter was a very robust $2.8 billion with no long-term note maturities until 2027. Combined with our cash generation, this provides us with tremendous strength and flexibility to run the company and support shareholder value in any environment.

Now let's look forward and talk about our updated guidance for the year. Total revenue is now expected in the range of $11.5 billion to $11.7 billion, or an increase of $50 million at midpoint and implying full year growth of better than 19%. This increase is supported by the momentum we've seen across our business, particularly within rental revenue that we expect to carry into next year.

Within total revenue, I'll note that we've reduced our used sales guidance by $50 million to $1 billion. As part of this change, we now expect to sell between $1.3 billion and $1.4 billion of OEC. As evident in our updated guidance, we remain focused on efficiently converting that additional rental revenue to the bottom line.

Our adjusted EBITDA range is now $5.5 billion to $5.6 billion, which at midpoint to $75 million above the midpoint of our prior guidance. This implies a roughly 240 basis point increase in full year adjusted EBITDA margins and flow-through of about 60%.

As Matt highlighted, we have also revised our outlook for gross CapEx by $350 million as we land delayed orders placed earlier in the year in select high-demand cat classes. In total, we now expect gross CapEx of between $3.25 billion and $3.45 billion. With these changes, we still expect to generate a very healthy $1.6 billion to $1.8 billion of free cash flow translating to a free cash margin of around 15%.

Now before we go to Q&A, I'll finish with a few comments on our new share repurchase authorization. We view the $1.25 billion program as an indication of our confidence in our business, the strength of our balance sheet and the durability of our cash generation. And we're proud of the fact that we've already returned $5 billion of excess capital to our investors since 2012 to support shareholder value while simultaneously getting our balance sheet to its strongest position in our 25 years.

So with that, we'll turn to Q&A. Operator, could you please open the line?

[Operator]

[Operator Instructions]. And our first question comes from Timothy Thein from Citigroup.

[Timothy Thein, Citigroup]

Just a bit of an echo, hope it's triggered by me. But Matt, maybe just first one on this notion of these mega projects. We're clearly seeing that show up in the starts data -- the construction starts data and it looks to be an increase in just percentage of just overall spend in these coming years. As we think about here in late October, as looking into next year, is there a way to kind of size up how you sit just from kind of an overall visibility standpoint in terms of what's -- obviously, you don't operate with a backlog, but just from kind of a project visibility or project backlog standpoint, is there a way to kind of size up how United is -- a position is as we go into '23 just from essentially work already in hand or forthcoming, if you can help on that at all?

[Matthew Flannery, President, CEO & Director]

Sure, Tim. So as far as the scale of it, we'll work on is there some way that we can put a numerical value to it. But I could tell you in my 33 years of business, we have never seen this amount of mega projects. And specifically, in the infrastructure and commercial space on the books. The manufacturing is an added bonus that we really didn't expect to see where there's over $250 billion of funds already activated. So this is very tangible to us.

But when I think about our positioning there, as you can imagine, we've been focused on national accounts for many, many years. It's a big part of our strategy. And these are the folks that are going to get the large share of this work. That, alongside with our broader set of services, we think positions us very well in this space. So we certainly expect to outpunch our weight of our overall industry market share with these customers and with these projects.

And this is just another example of us thinking and believing strongly that the bigs will continue to get bigger and taking share. So that's the way I would think about it right now. I don't know if you have any other thoughts.

[Timothy Thein, Citigroup]

Yes. Got it. Okay. And then your point on the leverage range and what a change from, say, a decade or so ago and just in terms of how the balance sheet has evolved. But how are you thinking about the Board thinking about the 2 to 3x target? Obviously, I'm sure you want to preserve some flexibility for M&A or other capital return opportunities. But obviously, with the cash flows continuing to build the potential for that to go even lower. So how are you and the Board thinking about that overall 2 to 3x range?

[Matthew Flannery, President, CEO & Director]

I'll let Ted speak to the leverage. But we don't at all see this as preventive from us being able to continue to invest in growth of the business, which is our fore-first filter of what we'll do from a capital allocation perspective. Ted, please?

[William Grace, VP, IR & Interim CFO]

Yes, Tim, thanks for the question. Certainly, something we talk about frequently both as a management team and with the Board. And I guess if you rewind back to 2019, when we introduced the new balance sheet strategy, obviously, a key rationale was to ensure we had financial strength across the cycle. And where we sit today at 1.9x, as you heard us talk about in the call, we absolutely feel very well positioned from that standpoint.

It gives us a lot of freedom and flexibility to run the business as we see fit. We also said there was nothing religious about that low end of 2x that we were comfortable going below to some degree. So again, kind of stockpile firepower, if you will. I think if we were to decide to live structurally in a lower ZIP code, choose the number you want, 1.5 to 2.5 as an example. At that point, I think we'd absolutely feel obligated to just update the Street. But for the time being, we feel like this range and the flexibility we have around it remain appropriate.

[Operator]

Next question comes from Steven Fisher from UBS.

[Steven Fisher, UBS]

Great. Just, Ted, you mentioned that the CapEx increase is targeted at select cat classes, but it sounds like you guys have a pretty broadly positive view about a lot of end markets. Curious why it's only in select cat classes then, if I heard that correctly?

[Matthew Flannery, President, CEO & Director]

Steve, this is Matt. So let me put this in context, this increase. We had orders similar to last year that because of some of the supply chain challenges, and you can imagine they would happen in more higher demand categories, right, where the OEMs are doing their best to keep up, but there's a lot of demand for these assets. They slipped all the way towards the end of the year here.

As we got to mid-October, we had a decision to make. Do we let this CapEx flow and, therefore, raise our guidance or do we cancel it and hope that we can get these high-demand assets in the spring? We made the decision to let this flow and for 2 reasons. Number one, the surety of supply because these are assets that have slipped quite a bit. And then secondly, we'll get these to 2022 pricing instead of '23 pricing.

We had some questions if people ask, wow, you're able to raise your CapEx, the supply chain must have really loosened up. It's actually quite the opposite. Because the supply chain is tight, we let these orders that have been delayed so long in the year flow through because we really would rather get ahead of the curve here, and we do see 2023 as a growth year. So the selectiveness wasn't really our choice, it was as much because those are the assets that slipped as much as they did because of the high demand. Hopefully, that straightened that out for you, Steve.

[Steven Fisher, UBS]

Yes. That makes perfect sense. And then on the cold starts, I think you said you've done 25 cold starts with another 11 or so in the fourth quarter. I think that's a bit less than the 45 you had mentioned in Q2. I guess, do I have those numbers right? And what's caused the reduction in that cold start number? Is that, again, just equipment availability? And then are you just planning to push those into '23?

[Matthew Flannery, President, CEO & Director]

Yes. Steve, I'll double check those numbers, but I think the goal is 40 to 45 for the full year. I don't know if that's driving some confusion. But in terms of the pace at which we're opening cold starts in specialty, we're on track.

[William Grace, VP, IR & Interim CFO]

Yes. If there's anything that would hold it up, it'd probably be more getting the right facilities and people really than fleet in those sectors, specifically at specialty.

[Operator]

And our next question comes from Jerry Revich from Goldman Sachs.

[Jerry Revich, Goldman Sachs Group]

I'm wondering if you could talk about how you're seeing performance at general finance, just give us an update for those asset classes and how do you view cyclicality considering that's not an asset class that United had in prior cycles? Would love to see how you're thinking about the opportunity for penetration for that category. And similarly, are there any other specialty cross-selling opportunities that could be emerging for additional categories as a result of general finance building out across your footprint?

[Matthew Flannery, President, CEO & Director]

Sure. And as we think about the GFN business and the teams that came with that, we had a thesis, if you recall, we announced the deal that we can double this business in the next 5 years. And I could say that we're ahead of schedule on that. We're really getting robust growth out of this group. We're very, very pleased, not just with the team, but with the cross-sell opportunities, it's really -- our customer base has absorbed this like a dry spun. So it's really been working well for us and even ahead of the lofty plans that we had for it.

And as far as other products in that category, you could just imagine like we did back in the day with pumps and like we did with tanks, any time we see something that's on a site, whether that be a plant or whether it be a project that our customers are running that we don't supply, we're looking for opportunities to add to the portfolio. And this was one that we looked at for quite a few years so we finally found the right partner.

So the tricky part for us is we're a believer that doing this through M&A and buying a big enough platform to make the offering broadly is really important to our national solution strategy towards our customers. So we'll continue to be on the lookout for it, Jerry. And hopefully, we'll find some other great opportunities like we did here with the GFN team.

[Jerry Revich, Goldman Sachs Group]

Super. And just to shift gears, I know you folks look at scenario planning a lot in the COVID recession, margin degradation was really minimal in your business. Can you just talk about your scenarios for the next downturn, given the uncertainty in the market? How do you folks think about the leverage you would pull? And any updated thoughts on whether the level of performance we saw in that very different cycle is repeatable to what extent?

[William Grace, VP, IR & Interim CFO]

Jerry, I'll take that one. As you're right, we do a lot of scenario analysis and COVID certainly had its unique dynamics. I think more than anything, it highlighted the flexibility of the business both on a CapEx and an OpEx standpoint. And you asked about margins. So within OpEx, what you see is a lot of the businesses is -- a lot of the costs, I should say, the cash cost that are really highly correlated to volume. And what that allows us to do is flex pretty rapidly and protect kind of those semi-variable costs that are labor.

That's always going to be the goal in any kind of downside scenarios to take care of our people and retain that capacity, which is the hardest thing to replace if we ever had to. So that would be the play we'd run in virtually any scenario. And obviously, you look at different scenarios with different severity and different durations. But the playbook itself is very consistent across all that kind of modeling.

[Matthew Flannery, President, CEO & Director]

Yes. And I would agree. And the nice thing is when you do that in-sourcing, utilizing our own labor, you're getting your highest cost out of there. So it worked really well in COVID and Ted explained it well. Something that we would definitely wasn't learning from COVID, but both sides of it. The reason we kept that capacity was for the ramp-up and it really gave us a great opportunity to move forward on the other side of whatever kind of cycle you deal.

[Operator]

And our next question comes from David Raso from Evercore ISI.

[David Raso, Evercore ISI]

I was just curious, just trying to think about '23, and I'm not looking for exact guidance, just trying to think through the growth drivers. Where are your fleet is going to end the year? If we just assume the fleet doesn't grow at all, the fleet will be on average about 5% bigger than it was in '22. So when we think of the drivers for '23, nothing inorganic, but when we think about further expansion of the fleet, rate and you, curious, can you just give us some sense of where do you still see room for growth, be it contracts coming due -- that are due for a price increase, kind of where you see rates? Just for a sense, I'm not trying to get exact -- but just trying to get some prioritization here of how do we grow across those 3 major buckets as we sit here today?

[Matthew Flannery, President, CEO & Director]

Sure, David. So to your point, we'll have some natural carryover fleet growth and then add whatever number once we get through our planning process that we'll communicate in January, how much fleet we put on top of that for growth CapEx versus maintenance capital and then think about the carryover we'll have in fleet productivity. Although we don't expect this productivity stay in these very frothy double-digit ranges, mostly due to comps. When we think about that, we'll have some continued fleet productivity well above our hurdle rate.

So we really think that, remember, that's a year-over-year metric. So any time your fleet productivity is over that 1.5% hurdle rate, you're growing the business faster, you're growing revenues faster than you're growing your fleet, which is going to have accretive value to the margins and flow-through. And we foresee both of those continuing to happen. The level -- the wildcard will be how much. And that's what we're working through in the planning process and along with our partners to see what the capital situation could be and all will be meeting the demand environment and be very flexible. But we do see '23 as a growth to your point because some of the natural carryovers that we're bringing into the year.

[David Raso, Evercore ISI]

When it comes to the rate momentum, do we see further rate increases for '23? Again, I know you don't like speaking about exact rates. I'm not looking for a percentage. But just from where we sit today, there's some carryover of course. But how are you thinking about rate -- the ability to raise rates to start '23?

[Matthew Flannery, President, CEO & Director]

So if I think about the last few years, not just this year and the discipline that's been in the industry, we're all having cost of goods increase. So -- and our customers are too. So they understand that. So there's a real focus on everybody understanding that we have to keep it balanced with that inflation from a rate perspective. And we're going to continue to do our part in that as a leader, and I'm very pleased to see that the industry is doing the same. So we would expect that. How much, we'll see, but we do expect the environment for 2023 to continue to be conducive to driving specifically that component of fleet productivity.

[Operator]

And our next question comes from Seth Weber from Wells Fargo.

[Seth Weber, Wells Fargo Securities]

Matt, I just wanted to go back to your pull-forward CapEx comment. I mean, I'm just trying to tie that together. So should -- I'm not looking for '23 guidance, but should we assume or should we think about that as kind of being a governor on 2023 gross CapEx growth if you're "pulling some of that forward"? And then I guess my follow-up question is, should we expect used equipment sales to really pick up next year as well?

[Matthew Flannery, President, CEO & Director]

Sure. So 2 points to that. As far as a governor on growth, would you see it as a net of where we end up in CapEx planning? Absolutely. And we'll flex that as always, with demand. What this really does is let us not have to worry about how quick the supply-and-demand pipeline meet each other by getting a little bit of a headstart on these assets that were tougher to get this year. So that's number one.

So there will be some netting effect once we finish our planning process. But because we'll have it in hand already, hopefully, it will almost be part of the planning process. So we'll give that new number to everybody. As far as the used sales, we would as long as the supply/demand can be an appropriate level as opposed to a little almost 2 in balance this year, and we had to hold on to fleet because we frankly couldn't sell because it was on rent.

We hope to get to more normalized fleet rotation next year. And the kind of used sales that you would have seen pre-COVID and we hope to get that kind of cadence in new sales. And first -- fourth quarter and first quarter usually are the heaviest months and we'd expect that to continue on as we sit here today.

[Seth Weber, Wells Fargo Securities]

Okay. That's perfect. And then just maybe as a follow-up, Matt, in prior periods of rising interest rates and stuff, do you typically see the IRCs being less able to buy a fleet? Are they -- are you hearing anything about the IRCs being more just restricted here? Or do you feel like the CapEx that's coming into the market is pretty much across the board?

[Matthew Flannery, President, CEO & Director]

Well, I think everybody across the board has an opportunity to grow. And I think most strong solid companies that have the financial wherewithal to do that are doing that. As you can imagine, the OEMs are going to sell out their inventory anyway. So they're probably being pretty disciplined by who they sell to. With that being said, I don't want to paint or homogenize the whole independent group, but some are better capitalized than others and those that aren't well capitalized, I've got to imagine the inflationary environment is going to be a challenge for them. For us, and specifically the nationals, this is one of the reasons why we think this environment will continue to drive the bigs getting bigger, so to speak, and put a value on scale to continue to be able to overcome whatever challenges the economy has for you.

[Operator]

And our next question comes from Rob Wertheimer from Melius Research.

[Robert Wertheimer, Melius Research]

So I wanted to ask on a question that Matt touched on earlier. You guys -- on megaprojects. You guys have spent a lot of years focusing on National Accounts and serving big clients. The market is shifting towards big projects in a way that we maybe have never seen before, and I wondered if you'd be willing to give like a 2-minute teaching on what you've done, what market share looks like in a big project serviced by a big national contractor who can provide the capabilities, what the capabilities are. And if you wanted to get tangible, I assume your market share is something like LaGuardia was higher than 15%. Just wonder if you can give us any help on that.

[Matthew Flannery, President, CEO & Director]

Yes. When you think about large projects, right, whether -- wherever you draw the line of mega, but really any kind of project of scale is going to need multiple products. This is one of the reasons why we think the very broad offering is important because one of the things that people don't necessarily think about is the security and safety of a site is very important to construction managers. They're held responsible and held accountable to that security and safety.

And obviously, if you don't have 20 different suppliers running around supporting a project, you have a little bit more consistency. I also think we feel like we lead strongly with safety. But I think this is an area where the larger companies that can invest in tools, invest and have a focus culturally on safety are at a competitive advantage. As far as what share is, it's going to depend on each project, but you can imagine that the players that can serve most of the needs are the ones that are going to be in the best position.

And I wouldn't want to get into market share on that because it varies by project. There's very few sole-sourced projects as opposed to plant work, where you may have a sole source contract that you bid for. So there'll be multiple people on a project and the ones that do a better job are going get a better share once they approve it to the customer.

[Robert Wertheimer, Melius Research]

And if you could just add into that discussion briefly, technology? You touched on it earlier. I know you've invested a lot in tech. Do big projects use it a lot more aggressively? You mentioned a couple of margins with productivity and so forth. What is most attractive to the projects on the tech front? And I will stop there.

[Matthew Flannery, President, CEO & Director]

Sure. Rob. Thanks for the opportunity to mention. The visibility that we can give them through our connected assets. So we have over 250,000 assets that have telematics on it. That in itself is a big investment that reaps rewards for us and for our customers so that we can give them real-time data, whether that's location, utilization, fuel alerts, there's a lot of stuff that's unique to that investment.

And think about a large complex project, that visibility that the people are in charge of leading that project really gives them help in running a more efficient process. And bringing more money to the bottom line, which is their job, right, running the job at the appropriate cost levels and productivity. So rental has always been about driving safety and productivity. And I would say the connected job site and the data that we can bring to it through our tools, just up the ante on driving better productivity.

[Operator]

And our next question comes from Ken Newman from KeyBanc Capital Markets.

[Kenneth Newman, KeyBanc Capital Markets]

Just maybe I missed it, but I think you talked a little bit about strong customer sentiments. Just any color on how your internal customer survey is trending this quarter relative to last quarter?

[Matthew Flannery, President, CEO & Director]

Yes. Kenneth, good question. Simply, it's trying to remarkably in line. There really hasn't been any deviation in our customer optimism looking forward. And as a reminder to everybody else, that's something we do as part of our Net Promoter Scores, and we ask them on a forward 12-month basis how they feel about their revenue prospects.

And I guess the other thing I would add is very -- sorry, also very consistent with the feedback we get from the field. So we're constantly making sure that those 2 data points, if you will, do align. And the good news is they continue to align.

[Kenneth Newman, KeyBanc Capital Markets]

Yes. Makes sense. And then for my follow-up, this might be a bit of a harder question to answer, but just given how tight the fleet is and how tight supply chain has been, is there any idea that just how much revenue opportunities you had to pass on because you didn't have the fleet that you wanted? Or any idea of whether or not you think all of that fleet would have been on rent as soon as it hit?

[Matthew Flannery, President, CEO & Director]

Yes. Certainly, when the market is running as high as it has this year and you have the supply-demand dynamic we had, I got to imagine that peak season, everyone's missing a little bit of business. And it's part of it. Customers learn to plan better. Part of it, customers didn't turn in fleet as quickly. Some even moved a job to job. So with our key accounts and the people that we're strategically aligned with and focused on, we got through it all.

But on the outside of that, the transactional business, we absolutely going to put more fleet to work. We had to stay very focused on prioritizing our key accounts and making sure we took care of our key relationships and supported them in a manner they expect United Rentals. So we should certainly lost some hard to quantify, but net-net, we're very pleased with the 20% growth. So I won't get too far out there on that.

[Operator]

And our next question comes from Stephen Volkmann from Jefferies.

[Stephen Volkmann, Jefferies]

A lot of discussion about these mega projects and some of the tailwinds from infrastructure, et cetera. I'm just trying to kind of get a sense of how you think about sizing that? I mean how much of your business in 2 or 3 years when these things are really ramped up, how much of it comes from those types of projects?

[Matthew Flannery, President, CEO & Director]

Stephen, it's a good question. It's certainly hard to say how much of the total business comes from those opportunities or how much of the total business is driven by those. But certainly, we can dimensionalize what those numbers look like in the absolute. So if you look at infrastructure as an example, it's nominally $550 billion over 5 years. So if you just said it's $110 billion on an annualized basis, that's in the context of a total non-resi construction market, it's about $800 billion.

And within that, the public piece is probably $340 billion. So it's quite meaningful, right? You would say $100 billion in an $800 billion market, is 12% tailwind, all else equal. And then you start thinking about some of the other programs, IRA harder to dimensionalize, you've got $370 billion of tax credits to get levered, right? So the intended spending there is substantially larger than that, probably a longer time frame admittedly, but that same dimensionalization, $800 billion of total non-resi, $340 billion of public non-resi.

If you look at some of the stuff more in the private domain, semis is an example. We're tracking $200 billion to $250 billion of projects or intended spend that companies have announced in the U.S. So again, if you choose the denominator, but if you think it's over 5 or 10 years, that's in the context of a private non-resi market that's about $470 billion. So there, again, it's quite substantial.

Autos would be another one. These numbers are harder to come by, but we think you can pretty confidently underwrite hundreds of billions of dollars of total investment in North America by the OEMs and all their supply chain partners, which again is in that context of $800 billion of total non-resi, call it, $500 billion of private non-resi.

Energy is another one that's tough to dimensionalize, but I think we're all aware of what's going to drive U.S. natural gas exports over the next many years and that will be another one. So when you think about those in the context of what the existing market is, there are going to be really big tailwinds. In terms of what that traction is looking out 3, 5, 10 years, it's much harder to say. But suffice to say, there'll be meaningful contributors. Does that help?

[Stephen Volkmann, Jefferies]

Yes. No, that's great. You guys have definitely thought that through. Appreciate it. Maybe my follow-up a little bit closer term, maybe more of a Ted question. I'm trying to think about how to think about SG&A in 2023. And I'm guessing that there's a fair amount of kind of incentive comp of various types that's in there that probably resets and maybe doesn't recur in '23. Just any way to think about those trends?

[Matthew Flannery, President, CEO & Director]

Yes, too early to get into the details about the headwinds or the tailwinds I should say, from prospectively incentive comp reset. But certainly, you can hear our tone on growth, and we certainly expect to leverage the nature of SG&A again in 2023. That will obviously be embedded within our guidance we give, which is EBITDA, as you know, so it's kind of below the line, if you will. But suffice to say, we would look to get another year of healthy leverage on those costs.

[Stephen Volkmann, Jefferies]

Okay. I'll wait for that then.

[Operator]

And with that, it appears there are no further questions over the line. I'd like to go ahead and turn it back to Matt for any closing remarks.

[Matthew Flannery, President, CEO & Director]

Thank you, operator, and thanks, everyone, for joining the call. We're very proud to deliver such strong profitable growth in our busiest season. But now we got to look forward. We're deep into the planning process for '23. So stay tuned for our new guidance on the January call. And until then, if you have any questions, feel free to reach out to Ted any time, and it will be very helpful. So with that, operator, please end the call.

[Operator]

This does conclude today's program. Thank you for your participation. You may disconnect at any time.