United Rentals - Earnings Call - Q4 2024

Executive Summary

• United Rentals delivered fourth-quarter records in total revenue ($4.095B), rental revenue ($3.422B), adjusted EBITDA ($1.900B), and adjusted EPS ($11.59), while GAAP diluted EPS was $10.47; adjusted EBITDA margin compressed 210 bps YoY to 46.4% due to used normalization and lower-margin mix.
• Specialty rental revenue grew 30.5% YoY (18% organic excluding Yak), while General Rentals rose 2.2%; management emphasized strong demand across data centers, manufacturing, power, and large projects.
• 2025 standalone guidance introduced: total revenue $15.6–$16.1B, adjusted EBITDA $7.2–$7.45B, free cash flow $2.0–$2.2B; implied low-50s recovery rate on ~$2.8B OEC sold and ~50 bps adjusted EBITDA margin compression midpoint as reported, flat ex-used.
• Board raised the quarterly dividend by 10% to $1.79 per share; buybacks paused ahead of H&E acquisition closing, with free cash flow earmarked to delever pro forma net leverage from ~2.3x to ~2.0x within 12 months post-close.

What Went Well and What Went Wrong

What Went Well

• Fourth-quarter records across revenue, EBITDA, and EPS demonstrated resilient execution; CEO: “our unique value proposition…provides the foundation…to drive sustainable long-term value”.
• Specialty strength: rental revenue +30.5% YoY; organic +17.8% ex Yak; management plans ~50+ 2025 cold-starts to sustain growth.
• Strong used demand: record OEC sold in Q4 with $452M proceeds at 48.9% adjusted margin and 53% recovery rate, enabling fleet rotation and capital efficiency.

What Went Wrong

• Margin compression: adjusted EBITDA margin down 210 bps YoY to 46.4% driven by used pricing normalization, lower-margin ancillary/re-rent and new equipment mix; net income margin down 140 bps YoY to 16.8%.
• Rental gross margin pressures in both segments: General Rentals -170 bps to 37.4%; Specialty -170 bps to 45.5% largely from depreciation (Yak) and cost variability.
• Free cash flow declined 10.8% YoY to $2.058B on higher cash taxes and working capital, despite higher net income.

Transcript

Operator (participant)

Good morning and welcome to the United Rentals Investor Conference call. Please be advised that this call is being recorded. Before we begin, please 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 31st, 2024, as well as to subsequent filings 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 measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer, and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Mr. Flannery, you may begin.

Matthew Flannery (President and CEO)

Thank you, Operator, and good morning, everyone. Thanks for joining our call. We were pleased to report our solid fourth-quarter results yesterday as the year culminated with record revenue, EBITDA, and EPS. We again saw growth across our construction and industrial end markets, as well as continued strong demand for used equipment. Our team doubled down on being the best partner of choice for our customers. Our diligence on safety, coupled with unmatched service, technology, and operational excellence, translated into the results we reported. Importantly, all of this sets the foundation for our future growth. Today, I'll discuss our fourth-quarter results, followed by our expectations for 2025, and finally, recap why we are excited about the H&E acquisition we announced a few weeks ago.

Then Ted will discuss the financials in detail before we open up the call for Q&A, which we will keep focused on United Rentals as a standalone company. Our plan remains to update the investment community on the combined companies after the transaction closes, which is still expected by the end of our first quarter. So with that, let's start with the fourth-quarter results. Our total revenue grew 9.8% year-over-year to almost $4.1 billion, and within this, rental revenue grew by 9.7% to $3.4 billion, both fourth-quarter records. Fleet productivity increased by 4.3% as reported and 2% ex-Yak. Adjusted EBITDA increased to a fourth-quarter record of $1.9 billion, translating to a margin of over 46%. And finally, adjusted EPS grew year-over-year to $11.59, another fourth-quarter record. Now, let's turn to customer activity. We saw growth in both our gen rent and specialty businesses.

Specialty Rental revenue impressively grew more than 30% year-over-year, and even without Yak, a strong 18%. These results were driven by rental revenue across all businesses, with a combination of solid same-store sales growth and an additional 15 cold starts, putting us at 72 for the full year. As a reminder, these specialty cold starts are a key element to accelerating our growth in this high-return segment. By vertical, we continue to see similar trends to the rest of last year, with non-residential growth helping to fuel construction and industrial growth driven by manufacturing and power. We saw new projects across data centers, chip manufacturing, sports stadiums, and power, to name a few. Now, turning to the used market, which continues to exhibit strong demand. We sold over $850 million of OEC in the quarter, which was a record for any quarter in our history.

The depth and health of demand in the used market is allowing us to rotate our existing fleet to ensure we could serve our customers' needs efficiently. This is evident through our full-year CapEx of over $3.7 billion. And as a result, we drove free cash flow of nearly $2.1 billion, which translated to a very healthy free cash flow margin of over 13%. The combination of our industry-leading profitability, capital efficiency, and the flexibility of our business model enables us to generate meaningful free cash flow throughout the cycle and, in turn, create long-term shareholder value. To that end, we returned over $1.9 billion to shareholders last year through a combination of share buybacks and our dividend. And while we've paused our share repurchase plan ahead of the H&E closing, I'm pleased to announce we'll be raising our quarterly dividend by 10% year-over-year to $1.79 per share.

Now, let's turn to 2025, which we expect to be another year of growth, again led by large project growth. Customer optimism, backlogs, and feedback from our field team, combined with the demand we're carrying into the new year, all support our guidance. This was reinforced at our annual management meeting, which we held earlier this month in Houston, Texas. We've discussed how a key element of our culture is the quality people who work for United Rentals. And this was on full display in Houston as over 2,600 team members came together to focus and engage on being the partners of choice for our customers through our differentiated value proposition. Finally, I'd like to reiterate what I said two weeks ago when we announced our intent to acquire H&E. We're very excited to combine two complementary businesses.

The transaction checks all three boxes we require when evaluating M&A: strategic, financial, and cultural. Growing the core is a key component of our strategy, and I'm really thrilled to have the opportunity to add high-quality capacity, meaning people, fleet, and real estate, to the United Rentals team. This will allow us to better serve customer demand over the long term. It'll also accelerate our growth, all while generating compelling returns for our shareholders. It's really a win-win outcome. Things remain on track for a first-quarter close, and there are no further updates to provide you today. In closing and building upon what I just discussed with our latest acquisition announcement, we remain focused on being the best rental company in the industry.

Our unique value offering, industry-leading technology, and our go-to-market approach, combined with our capital discipline, give me confidence that we're well-positioned for both customers and shareholders for the long term. We continue to progress towards our 2028 aspirational financial goals, which we laid out in May of 2023, and look forward to delivering on these results as we continue to execute our strategy. With that, I'll hand the call over to Ted, and then we'll take your questions. Ted, over to you.

Ted Grace (CFO)

Thanks, Matt, and good morning, everyone. As Matt just shared, we had a strong finish to the year, setting both fourth-quarter and full-year records for total revenue, rental revenue, EBITDA, and EPS, which supported the attractive returns and significant free cash flow we also generated in 2024. So with that said, let's jump into the numbers. Fourth-quarter rental revenue was a record at $3.42 billion. That's a year-on-year increase of $303 million, or 9.7%, supported again by growth from large projects and key verticals. Within rental revenue, OER increased by $177 million, or 6.9%. Breaking this down, growth in our average fleet size contributed 4.1% to OER, while fleet productivity added another 4.3%, partially offset by assumed fleet inflation of 1.5%.

Also, within rental, ancillary and re-rent grew by 22% and 30%, respectively, adding a combined $126 million to revenue, driven primarily by strong growth in specialty and hurricane-related work in the quarter. Turning to our used results, as Matt mentioned, we took advantage of a strong market to sell a record amount of fleet in the fourth quarter, generating proceeds of $452 million, had an adjusted margin of 48.9%, and a recovery rate of 53% on assets that were almost eight years old on average. Moving to EBITDA, as I mentioned, adjusted EBITDA was a fourth-quarter record at $1.9 billion, translating to an increase of $91 million, or 5%. Within this, rental gross profit increased 7%, contributing an additional $136 million year-on-year.

This was partially offset by used, where the ongoing normalization of the market drove a 9% decline in used gross profit dollars, translating to a $21 million headwind to adjusted EBITDA in the quarter. SG&A increased by $36 million year-over-year, which was in line with revenue growth, so good efficiency there. And finally, the EBITDA contribution from other non-rental lines of businesses increased $12 million, driven largely by strong new equipment sales. Looking at profitability, our fourth-quarter adjusted EBITDA margin was 46.4%, implying 210 basis points of compression. I'm sure we'll dig into this during Q&A, so I thought it might be helpful to frame some of the key factors here. The combination of used and stronger-than-expected new equipment sales were together about 80 basis points of year-on-year headwind.

Said another way, excluding these two factors, our Adjusted EBITDA margin would have been down about 130 basis points, with flow-through a little better than 33%. Closer to the core, and as you just heard me highlight, we had higher growth in ancillary and re-rent revenue that, as you know, come with lower margins. If we also adjust for these, our EBITDA margin would have been down about 60 basis points, with implied flow-through of roughly 40%. While this is modestly below our long-term goal, it reflects our continued investment in key aspects of our strategy, including specialty, technology, and capacity to support the long-term growth of our business during what we view as a slower phase of the cycle, and lastly, our adjusted earnings per share was a fourth-quarter record at $11.59. Shifting to CapEx, fourth-quarter gross rental CapEx was $469 million.

Moving to returns and free cash flow, our return on invested capital of 13% remained well above our weighted average cost of capital, while full-year free cash flow totaled a robust $2.06 billion. Our balance sheet remains very strong, with net leverage of 1.8 times at the end of December and total liquidity of over $2.8 billion. I'll note this was after returning a record of over $1.9 billion to shareholders in 2024, including $434 million via dividend and $1.5 billion through repurchases that reduced our share count by over 2.1 million shares. So to wrap up both the quarter and the full year, we were very pleased with the results our team achieved in 2024. Now, let's look forward and talk about our 2025 guidance, which I'll remind you is standalone, meaning it does not include any contribution from H&E.

As you've seen from the press release, we anticipate another record year. Total revenue is expected in the range of $15.6-$16.1 billion, implying full-year growth of 3.3% at midpoint. Within total revenue, I'll note that our used sales guidance is implied at roughly $1.45 billion, or a mid-single-digit year-on-year decline on a percentage basis. This, in turn, implies a little faster growth within our core rental revenue, call it mid-single digit on a percentage basis. Within used, I'll add that we expect to sell around $2.8 billion of OEC, translating to a recovery rate in the low 50s versus the mid-50s in 2024, but in line with pre-pandemic norms. Our adjusted EBITDA range is $7.2 billion-$7.45 billion.

At the midpoint, excluding the impact of used, this implies flow-through in the 40s and flattish Adjusted EBITDA margins versus as reported flow-through of around 30% and approximately 50 basis points of margin compression at the midpoint of guidance. On the fleet side, our gross CapEx guidance is $3.65 billion-$3.95 billion, with net CapEx of $2.2 billion-$2.5 billion. Within this, we peg our 2025 maintenance CapEx at around $3.3 billion, implying growth CapEx of roughly $500 million at midpoint. And finally, we are guiding to another year of strong free cash flow in the range of $2 billion-$2.2 billion. Turning to capital allocation, one of the benefits of our balance sheet strategy and free cash generation are the flexibility they provide to invest in growth opportunities when they arise.

As you know, we intend to capitalize on this through the pending acquisition of H&E, where we will invest almost $5 billion at targeted returns well above our cost of capital. As previously shared, we are pausing our buyback program ahead of H&E, and we intend to utilize our free cash flow in 2025 to reduce our leverage from roughly 2.3 times on a pro forma basis to a goal of around 2 times within 12 months of close. Finally, consistent with our strategy to return excess capital to our shareholders, I am very pleased to reiterate that we are increasing our quarterly dividend by 10% to $1.79 per share, translating to an annualized dividend of $7.16. So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.

Operator (participant)

The floor is now open for your questions. If you would like to ask a question at this time, please press star one on your telephone keypad. If you find your question has been answered, you may remove yourself by pressing star two. Once again, if you would like to ask a question at this time, please press star one. Our first question will come from Steven Fisher with UBS. Please go ahead. Your line is open.

Steven Fisher (Managing Director and Equity Research Analyst)

Thank you, and congratulations on a nice year. Maybe you could just touch upon the bigger than usual ancillary and re-rent. What's the main activity driving that? Was that sort of more shifting of equipment around that you got fees on? And maybe what's the expectation for the next few quarters on that, if you could even forecast it? And I suppose the bigger picture question here is, on the margin side, what would you have to see in order to get flow-through back into the kind of 50%+ range?

Ted Grace (CFO)

Sure. I'll start, Steve, and then Matt can jump in. So on ancillary and re-rent, I think there are a couple of things. Certainly, the storm-related opportunities were a big part of both, probably more so in re-rent than ancillary, although there was definitely a benefit in ancillary. And then within ancillary, the other thing we've talked about all year is some of the benefits we've had in specialty. So in terms of setting things up, breaking them down, and those kinds of services that relate to some of the new businesses we're in, those obviously have seen kind of sharp growth in 2024, and that's contributed to that outperformance versus, call it, OER. Does that help on the first question?

Steven Fisher (Managing Director and Equity Research Analyst)

Yes.

Ted Grace (CFO)

On the second question, I think there are a couple of things. I mean, certainly, relative growth rates matter. I think I made the comment just a couple of minutes ago that we think we're in the slower growth phase of the cycle. And the reason that's important is it drives relative fixed cost absorption. So as we get through 2025 and we do expect to accelerate thereafter, that obviously drives good absorption that helps drive better flow-through. At the same time, in this environment, we've talked about making very intentional investments in things like cold starts and technology that have been marginal drags. We think those have been excellent investments with great ROI. That's why we've called them out and been pretty clear that we don't want to forego those opportunities just for the sake of an arbitrary flow-through goal. So, Matt, anything you'd add there?

Matthew Flannery (President and CEO)

No, we still always drive towards holding strong margins, and Ted could take you through it. But within this guide, right, ex-used sales, we expect to have margins similar to year-over-year comps.

Ted Grace (CFO)

Yeah, and that's a good point. Just, I'm not sure you asked it specifically, but in my comments, I made the point that if you back out used, flow-through would be in the mid-40s, and we'd have flat margins, which we view as very good performance in this environment. I'll remind people, as much as inflation has subsided, it's certainly not going backwards, so we still have a decent amount of inflation we're absorbing, so to deliver these kinds of results does take hard work.

Steven Fisher (Managing Director and Equity Research Analyst)

Yep. Great. That's helpful. And then just maybe on the pipeline of large projects, I'm curious how that looks today relative to a year ago. What do you see as the differences in the large project landscape this year versus last year?

Matthew Flannery (President and CEO)

Yeah, I'd call it very similar with the addition of that we're carrying in demand from projects that are ongoing. So when you add that to some of the newer projects that are planned to come out of the ground, we feel good about this segment and certainly feel good about our alignment and serving that part of the business. So I would call it overall, really the whole demand environment, very similar to what we experienced 2024 and our guide, right? So we feel good about the year going forward.

Steven Fisher (Managing Director and Equity Research Analyst)

Terrific. Thank you very much.

Matthew Flannery (President and CEO)

Thanks.

Operator (participant)

Thank you. Our next question will come from Blake Greenhalgh with Bank of America. Please go ahead. Your line is open.

Blake Greenhalgh (Equity Research Analyst)

Yeah. First one would be just cadence of growth in 2025. Are you guys baking anything that's more second half weighted?

Matthew Flannery (President and CEO)

So we won't get into quarterly guidance, but if you just think about CapEx as a starting point, right, we expect to spend CapEx on a similar cadence, more historically normal cadence that we did in 2024. From there, there's nothing that I would call out, certainly not back-weighted. We think it'll flow with normal seasonality of our business and, more importantly, our customers' demand, right?

Blake Greenhalgh (Equity Research Analyst)

Great. And then on power, there's been a lot of discussion this week about renewables, grid, data centers. Can you remind us how big that business is for you guys and anything you're hearing for 2025 that you want to talk about?

Ted Grace (CFO)

Yeah. So in its entirety, power is called about 10% of our total revenue. Within that, solar and wind are a relatively small fraction. So those are not markets that move the needle terribly in our power business. So hopefully that helps give you some sense.

Matthew Flannery (President and CEO)

Yeah. Regardless of the political environment and all the pontificating of what's going to happen, there's a need for that grid to continue to be upgraded. There was long before chips and data centers, and there's going to be going forward with or without the same level of chips and data centers. We're not concerned about this. This is a segment we focused on and we feel really good about.

Operator (participant)

Thank you. Our next question will come from Jerry Revich with Goldman Sachs. Please go ahead.

Hi. This is Clay for Jerry. First question here. What was the specialty organic growth in the quarter? And if you could talk about the color on the dispersion between the individual business lines within specialty, that'd be great. Thanks.

Matthew Flannery (President and CEO)

We don't really get into the individual business lines too much. I'll say specialty, as you saw, showed great growth at 30%. But as I said in my opening remarks, even ex-Yak, 18%, and that would be what we call organic growth. Admittedly, there's some cold starts in there. So that's inclusive of that. But really strong growth that we feel good about. And this has been going on for quite a few years, just double-digit growth in specialty. And as we add new products, as we have in the last couple of years through acquisitions, getting further dispersion of that footprint's another big driver of growth. And we think that'll continue on, and we'll probably do another 50+ cold starts in 2025 to add to that opportunity.

Great. Super helpful. And then, I guess, yeah, just expanding on the options for 2025. I don't want to speak directly to the individual product lines, but just curious if there's which ones are performing stronger relative to that average?

I wouldn't say performing stronger. They're all growing strong. I would say that you could think about where the growth is more pronounced, specifically in the cold starts, is the products that we've added over the last couple of years. Think about the General Finance acquisition, and specifically here in the U.S. with Pac-Van, we continue to exceed those goals that we had to double that business in five years, and cold starts will be a part of that as well, continue and expand their footprint. With Yak, our most recent new product line, they're ahead of schedule on our goals to double their business in five years. They're really doing well, and that's been a lot of organic growth. We haven't even broadly gotten to growing the footprint. That's a future opportunity that we're going to do there.

And our ROS business, right, our Reliable Onsite business continues to grow organically and through cold starts. So those are the three I'd point out. But with all that being said, one of our most mature ones is power, and they're growing tremendously by adding new products and just continuing to grow their footprint. So it's pretty much across the board, Clay.

Thanks. I really appreciate the cover.

No worries. Thanks.

Operator (participant)

Thank you. Our next question will come from Tim Thein with Raymond James. Please go ahead.

Tim Thein (Managing Director and Senior Research Analyst)

Good morning, Matt. Maybe just starting on fleet productivity, the target that you outlined in terms of the ability to outrun inflation of 1.5%, I think. Still believe in that in terms of a realistic target for 2025. And then maybe as part of that, is there an area where maybe there's a, I don't know, better opportunity in terms of whether it's time or rate? And maybe you could just speak to that in terms of how you're thinking about just the broader fleet productivity setup for 2025.

Matthew Flannery (President and CEO)

Yeah. So we feel really good about the performance of the team, and as you know, we won't do it quantitatively, but qualitatively. We talked about, back this time last year, if we were able to repeat 2023 time utilization, we'd feel really good, and we were able to do that, and so the team executed well, and that's embedded in our expectations for 2025 and in this guidance, and then from there, you look at the other two variables. We still believe this is a constructive rate environment, really out of necessity. When you think about the amount of fleet inflation that we've all absorbed, the whole industry has absorbed over the last couple of years, the industry needs to get priced to continue to eat into that, so I think you've seen that, and I think that'll continue on.

And then the variable is mix, which is really an output depending on, right, the amount of products that grow faster, what we do in different business lines. And there's a bunch of things in there. You guys have gone over them before, but that'll be the variable. And we do believe it'll be positive, meaning we will be able to exceed that inflation in its simplest form. Fleet productivity is can you grow your rent revenue faster than you can grow your fleet growth? And that's embedded in our guidance that we will do that again this year.

Tim Thein (Managing Director and Senior Research Analyst)

Got it. Okay. And then just with the impact of M&A, obviously, as the company has grown, a couple hundred million isn't what it used to be to United. But is there a way, Ted, just to think about that in terms of the contribution as to what we can expect from the deals done in the back half of the year? Presumably, that's driving some benefit. Any way to help us in terms of what that may translate from a revenue perspective in 2025? Did you annualize that?

Ted Grace (CFO)

So we don't get too specific breaking out, obviously, the smaller deals. But you would have seen there was something on the order of $300 million of deals we did. Most hit late in the quarter, so there really wasn't much benefit in the fourth. In terms of rolling forward, it was a combination of gen rent and specialty. So you can think about what multiple you'd want to apply to EBITDA and figure out what kind of margin that would imply. It's not a huge part of the growth. It'll contribute. These are nice deals. We're excited about them, but it's not going to be very impactful in the scheme of our guidance.

Matthew Flannery (President and CEO)

Yeah. More importantly, it's all embedded within our guidance, so.

Tim Thein (Managing Director and Senior Research Analyst)

Yeah. Yeah. Okay. All right. Thanks for the time.

Ted Grace (CFO)

Thanks, Tim.

Operator (participant)

Thank you. Our next question will come from Kyle Menges with Citigroup. Please go ahead.

Hi, good morning. This is Randy on for Kyle. Looking at the guide with gross CapEx up a little in 2025, could you give some color on what areas you're growing OEC during the year and any areas you plan to pull back a little bit?

Matthew Flannery (President and CEO)

Yeah. So we're not really expecting to pull back on any, Randy. As we told you, we have really strong utilization of our fleet, and we think the demand environment's going to remain similar. So no reason to pull back on anything. You could imagine when you think about our growth CapEx, we talked about specialty growth and specifically the cold starts. They'll get an overweight amount of the growth CapEx, which just to take you through that math, since we haven't talked about it yet, we've planned to sell about $2.8 billion worth of OEC this year. The replacement on that, if you think about the stuff that we bought eight years ago, is about 20% more now, will be about $3.3 billion. That leaves at the midpoint about $500 million of growth CapEx.

You could imagine, as we think about it, more than its fair share of that will go to support our specialty growth.

Got it. And then another quick one. Can you just give some color on what kind of changes you've seen in customer behavior and sentiment following the election and then maybe more recently on some of Trump's executive orders?

I'll take the first part. Ted could take the second. We've had strong customer sentiment, and more importantly, our field teams have been feeling good about the year all throughout 2024. That's why we came out with the guide we did, even though maybe there were winds blowing the other way from some folks. We see the same thing coming into this year. Our customers feel good about it. Our leadership team feels good about it. We're really not going to overreact to the new cycle of the day. I think having that extra touches into the customer really gives us confidence in our guide and what our plans are. Ted, you could touch on the other part if you'd like.

Ted Grace (CFO)

Yeah. In terms of any impact of executive orders, I mean, aside from people may have whiplash, I don't think there's been too much. I do think at the end of the day, you look at our customers, you look at their sentiment, I would say it's improved since the election. And I think that's people's perception that you've got a government that's going to be pro-growth, wanting to invest in America. They've been pretty clear about that. Certainly, our customers are well-positioned to support that growth, and we're well-positioned to support them in that endeavor. So whether it's areas of infrastructure, onshoring, certainly power, energy. Obviously, Stargate was a big announcement. There's a lot of different things that will continue and/or be incremental that we think are going to be exciting opportunities in 2025 and beyond. So, Matt, I don't know if you've shared anything.

Matthew Flannery (President and CEO)

No, I think you covered it well.

Got it. That's helpful. Thank you, guys.

You got it, Randy.

Operator (participant)

Thank you. Our next question will come from Angel Castillo with Morgan Stanley. Please go ahead.

Hi. Thanks. This is Brendan on for Angel. In your press release, just diving more into that customer optimism. So you noted that in your press release. We've talked about it here today on the call. Just curious how much of that's actually translating to greater activity today, and then in any areas where it hasn't resulted in an uptick in activity yet, can you describe maybe what customers are waiting for, whether it's greater certainty around interest rates, policy, labor availability, or just anything else that you would like to call out, please?

Ted Grace (CFO)

Yeah. I'll do my best there. But to be clear, it's a sentiment-based measurement, right? So it's not measuring kind of what they're doing today. What it asks them is on a forward 12-month basis, what are your expectations for your own growth? And from that standpoint, you've got an improvement in net responses, right? It's a diffusion-based index. So it's certainly something that would support the guidance we've introduced. It's hard to say too much more because we don't get granular beyond that in that kind of survey.

Okay. That's fine.

But I guess the other thing is people feel good about, I think, just the broader environment. I mean, you're beyond the election. I think people are expecting more accommodative monetary policy out of the Fed. That'll be good for the economy. A lot of the things that people have been positive on remain on track. And so I guess it's the culmination of all those things coming together that drive the economy, but certainly feels like things are heading in a positive direction.

Okay. Thank you. I guess dovetailing on that, so you noted that you have a similar pipeline for the new large projects. What does your guidance contemplate for the small kind of local markets that have been more interest rate challenged?

Matthew Flannery (President and CEO)

I would say generally, right? Speaking generality, similar. Some markets have more growth opportunities than others, no different than in 2024, whereas the previous years, we had talked so much about broad-based. We were really selecting who we wanted to send the fleet to, not who didn't need it. So the great thing about our model and really the rental model overall is the fungibility of these assets to move them not just from vertical, but from geography. And that's what we're doing. And I think we're doing it pretty effectively, which is why we were able to keep these high levels of time utilization over the past two years, and we expect to do the same this year.

Great. Thank you.

Thank you.

Operator (participant)

Thank you. Our next question will come from Ken Newman with KeyBanc Capital Markets. Please go ahead.

Ken Newman (VP and Equity Research Analyst)

Hey, morning, guys.

Matthew Flannery (President and CEO)

Hey, Ken.

Ted Grace (CFO)

Hey, Ken.

Ken Newman (VP and Equity Research Analyst)

Hey, morning. I know you guys don't want to talk too deep on the segments in particular, but 2024 was a bit of a softer rental revenue growth year for gen rent. I'm curious if the guide assumes a similar growth profile in 2025. I guess additionally, on top of that, if there's any way to quantify what you think the impacts from mix are, that's implied in the margin guide.

Matthew Flannery (President and CEO)

So when we think about gen rent for specialty growth, I mean, you guys have seen the numbers, and we talked about 2025 being similar. So yeah, at the outset, you could assume similar. The great news is we have flexibility within our, let's call it $3.8 billion at the midpoint, within that CapEx, not just the $500 million of growth, but even the rest of it, the $3.3 billion modeled replacement. So we can move the appropriate assets to the appropriate markets to feed whatever growth there is. And that's really about all the color I can give you. Other than that, we will continue to feed the specialty footprint growth and cold start growth and really their double-digit growth they've had for 10+ years.

Ted Grace (CFO)

I think on the second part of your question, Ken, I think from a mix standpoint, to Matt's point, 2025 is likely to look similar to 2024. So I don't think we're looking for an appreciable shift in mix, if that helps answer the question.

Agreed.

Ken Newman (VP and Equity Research Analyst)

Yep. That's very helpful. And then maybe just dovetailing off the prior question here right before me, is there a way to talk about the magnitude of demand between the national and the local accounts, particularly as I think about just the rate differential between those two? Obviously, I know you don't want to talk about H&E, but they've had a little bit more challenges on the rate side. Curious if you're kind of seeing a similar dynamic.

Matthew Flannery (President and CEO)

Yeah. As you know, we don't get into the specific components of rate time and mix, but we've driven positive fleet productivity. And that's really why we put them all together, because it shows up in different ways with different products and with different customers. We've talked about, do national accounts have? Do they leverage your spend? Of course they do. But the truth is everybody. It's a competitive market out there, and we participate actively in it and appropriately for each level. So there's nothing I'd call out specifically to any customer segment. It's just not something that's as differentiated as maybe what people think about on the outside.

Ken Newman (VP and Equity Research Analyst)

Understood. Very helpful, guys. Thanks.

Matthew Flannery (President and CEO)

Thanks.

Operator (participant)

Thank you. Our next question will come from Scott Schneeberger with Oppenheimer. Please go ahead.

Scott Schneeberger (Managing Director and Senior Analyst)

Thanks very much. Hey, guys. On infrastructure bill and those funds flowing, we talked high level about large projects, and I think that would be in both, but more large. What are you seeing there? Are you seeing those funds flow? It sounds like you're expecting the same in 2025 as you were in 2024, but I want to carve out that piece specifically out of the way from mega projects, away from small local projects. Thanks.

Ted Grace (CFO)

Yeah. Scott, I'll take a crack at that. Certainly, we continue to see nice growth in infrastructure. In terms of figuring out where the funding's coming from, that's a much more difficult process. I think if you look at some of the information that had been released right ahead of the change of administration, I think there was still something like $300 billion from IIJA that had yet to be allocated. So there's $200 billion that has been allocated. I think it's a fraction of that that's actually been spent. So we continue to feel really good about the opportunity that's underpinned by a lot of that spending that God knows the country needs the investment, and it's certainly had bipartisan support. So our expectation that'll continue to be a good area for us.

Scott Schneeberger (Managing Director and Senior Analyst)

Thanks. Appreciate that. And just to the extent you can answer, I assume you just made a large acquisition. There's going to be integration time on that. Should we not, and you said what you want to do with leverage and everything and pause the stock buybacks, could we assume that there won't be any more sizable activity prior to the end of the year? And just maybe some commentary on what the pipeline looked like for M&A, obviously, with H&E. But do you have still a very large and existing pipeline and any additional thoughts on that? Thanks.

Matthew Flannery (President and CEO)

Yeah. I mean, we have a very strong team that's constantly working that pipeline. And I would say it's been consistently strong, right, for a couple of years now. And as you see, we only execute on a few of them. You could imagine this is a pretty big deal. We'll have a lot to absorb here, and that'll be our focus. And as Ted mentioned, we're going to focus on getting that leverage back to the midpoint. So that'll be the priority. If a nice deal tuck-in comes in that's with a new product line, then we'll have to look at that and see how that fits into the overall strategy and would we want to do that. We'll always work the pipeline, and then we'll make the appropriate decision that what makes sense for our business at that given time.

There certainly is a period here where we're going to absorb. We're going to be focused on absorbing this large acquisition.

Scott Schneeberger (Managing Director and Senior Analyst)

Thanks, Matt. Thanks, Ted.

Matthew Flannery (President and CEO)

Yeah.

Operator (participant)

Thank you. And at this time, it appears we have no further questions in queue. I will now turn the call back to Matt Flannery for any additional or closing remarks.

Matthew Flannery (President and CEO)

Thank you, operator, and everyone on the call. We appreciate your time. Glad you could join us today. Our Q4 Investor Deck has the latest and greatest updates. As always, Elizabeth's available to answer your questions. Until we talk again in April, stay safe. Operator, you can now end the call.

Operator (participant)

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