Good afternoon, 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, 2018, as well as to subsequent filings with the SEC. You can access these filings on the company’s Web site at www.ur.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 and changes in expectations. You should also note that the company’s press release, investor presentation and today’s call include references to free cash flow, adjusted EPS, EBITDA and adjusted EBITDA, each of which is a non-GAAP term. Please refer to the back of the company's recent investor presentations to see the reconciliations from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Michael Kneeland, Chief Executive Officer; Jessica Graziano, Chief Financial Officer; and Matt Flannery, President and Chief Operating Officer. I will now turn the call over to Mr. Kneeland. Mr. Kneeland, you may begin.

Good afternoon, everyone, and thanks for joining us. As you saw yesterday, we delivered a strong fourth quarter performance to cap another record year. Our results underscore two key dynamics that were fundamentally important to our narrative in 2018 and again in 2019. First, that our industry continues to benefit from a positive operating environment; and second, that we’re positioned to leverage demand through a combination of scale, technology and other sustainable competitive advantages. Now we take all these factors into account when we strategize about growth and profitability. And in our fourth quarter results, you saw proof that our strategy is working. In a few minutes, Matt will talk about our strategy in our operating landscape and Jessica will cover the numbers. But I’d like to touch on the highlights of the quarter upfront. As reported, our adjusted EBITDA was 18% higher than a year ago and a 20% increase on total revenue. This reflects both M&A and organic growth. Volume increased by almost 17% and rates increased by 2.2%, two indicators of a healthy marketplace. Our time utilization decreased by 120 basis points to 68.8% reflecting the impacts of Baker and BlueLine as well as tough comp from the prior year hurricanes. Looking at the 12 months of 2018, our free cash flow was very strong at more than a $1.3 billion and our return on invested capital was a robust 11%, and both of these were company records. So a lot of momentum going into 2019 and a broad-based market activity to support a positive forecast. On the subject of the macro, as you might imagine, we get asked about it a lot and obviously there’s some uncertainty out there in things like interest rates and tariffs, and you can see that in the stock market. But…

Thanks, Mike. I appreciate the kind words but more importantly your help in preparing me for this opportunity. I couldn’t be more proud to take on the CEO role. I look forward to leading the company with the support of our Board, Mike and the 19,000 dedicated employees and continuing on the strategic course that’s taken us from an early focus of building scale to a culture of profitable growth. Before I talk about our operations, I want to summarize the three key themes I introduced on Investor Day. Number one, that we’ve built a machine with a large capacity for growth. Our base is already diversified by customers, geographies, end markets and products, but we want to explore more verticals and deepen our penetration in traditional markets. Number two is operational excellence where we’ve created a platform that turns our volume into growth and returns. This is a critical lever for us. And number three is fleet management. We have more than $14 billion of fleet which represents a huge opportunity to manage these assets for optimal profitability while continuing to broaden our offering for customers. All three of these areas required continued investment and this is where our scale and our strategy converge. Scale is synergistic. It gets us efficiency and productivity and it also allows us to generate the cash that we need to advance our strategy. Our specialty segment is a compelling example of this. We planted the seeds for our specialty segment about 10 years ago when we first began to diversify our business. And over time it’s become a core part of our strategy. In 2018 you saw us acquire BakerCorp and extend both the depth and reach of our Fluid Solutions business. We also did some smaller deals and site services and we…

Thanks, Matt, and good afternoon, everyone. As a reminder, the numbers I’ll be reviewing are as reported except for a few cases where I’ll call them out as pro forma. The pro forma numbers include the Baker and BlueLine acquisitions as if we owned them a year ago. Let’s begin with rental revenue. Rental revenue for the fourth quarter was 1.99 billion which is up almost 21% or 343 million year-over-year. If we break that down further, OER grew 19% or an increase of 266 million. That growth came mostly from higher volume which was up just under 17% or 239 million. Another 2.2% or about 31 million came from rate improvement. The impact from inflation on our replacement CapEx was a headwind of about 1.5% or 21 million. That leaves the impact of mix and other which was a benefit of 1.3% or a healthy 17 million coming primarily from the growth of our specialty business. The other components of rental revenue were re-rent and ancillary which increased by a combined 77 million. Both benefitted from increased volume as well as the additions of Baker and BlueLine. Now I’ll note that rental revenue on a pro forma basis was strong, up 8.5% year-over-year and that included a 2.4% improvement in rates. Taking a look at used sales. Used sales revenue was up 8.1% or 14 million year-over-year. Adjusted gross margin on used sales was 51%, down from 58%. That reflects that impact of selling older, fully depreciated NES equipment in 2017. Now to be clear, the used equipment market remains very strong. Our sales as a percentage of OEC was 59%, which is 500 basis points higher than last year. That came primarily from a strong pricing environment and to a lesser extent from the blend of equipment sold.…

Certainly. [Operator Instructions]. Our first question comes from the line of Ross Gilardi from Bank of America Merrill Lynch. Your question please.

Hi, Ross.

Hi, Ross.

Thank you. Hi, everybody. And Michael, congratulations and thanks for everything and best of luck in the chairmanship.

Thank you. I appreciate it.

Just had a few questions. Just first, can you guys just talk a little bit more about the macro? It sounds like you’re still seeing a lot of strength out there, fairly broad based. So maybe if you could give a little more granularity what regions and end markets are the relative outperformers versus the laggards? And what really gives you any true visibility into what’s to come in 2019?

Yes. Ross, let me start out and then Matt can chime in and give you more of the details specifically on the regions. So when you take a look at – look, our results speak for themselves and it was very broad based. Both geography wise and vertical end markets all showed growth which is a telltale sign. Our customer survey, our confidence surveys remain very encouraging. We recently completed our annual bottoms-up budget process which factors into that real-time data. And then all the external data points across both our construction and industrial end markets continued to show a positive growth component whether it’s the construction activity and construction put in place, the ABI, employment data, backlogs, industrial activity, ISM, PMI, the Federal National Activity Index, manufacturing surveys, very broad. But as far as the level of detail on the regions, Matt?

Sure. Ross, this is Matt. I think Mike covered it but then additionally when we see the results being broad, not just the customer confidence index which is an addition to all the macro data that everybody has access to. But then as Mike spoke about it in his opening remarks, we have 1,200 locations with barriers to the ground, this is their job. So they are in customers’ offices, they’re looking at backlogs. So the data, the anecdotal, the local intelligence, all point to a strong 2019. And once again it’s very broad. So there’s no hot pockets that anybody is relying on to drive growth.

Okay. Thanks very much, guys. And then I want to ask, just talk a little bit about margins. It’s very clear a lot of investors still view your company as incredibly cyclical and the same company it was 10 to 15 years ago and value the stock that way. But if you look at the last five years for supposedly cyclical business, your rental gross margins have been 42% to 43% for five years in a row and that’s through a pretty challenging industrial recessions, same holds true for EBITDA margins. I think you’ve been at 48%, 49% for the last five years. So the key part of the message here that your margins are a heck of a lot more stable than people realize, can you comment on that and can you actually take margins higher from here? You’re more or less assuming it looks like 48% again for EBITDA in 2019.

Hi, Ross. Good afternoon. It’s Jess. Yes. We definitely believe that those margins are not only stable but that we can actually grow them. As we’ve talked about flow through just even as we look at 2019, we’ve talked about the acquisitions being a bit of a drag. But as those acquisitions continue to be integrated and we focus on the growth, the overall flow through of 60% across the core business just even mathematically means that we believe there’s opportunity to grow margins going forward.

Okay. Thanks. And then just lastly, when does specialty rental gross margins inflect positively began? I think they’ve been down for a few quarters and like in the fourth quarter at least, they don’t look that different from the gen rent margins and we realize some of that might be Baker in M&A. But when do we see a positive inflection in specialty gross margins?

So I can’t pinpoint one specific quarter for you, Ross. But as we talked about, Baker is a drag on those margins. As we continue to integrate that business, you will see the inflection as we anticipate growing those margins in the future.

Okay. Thank you.

Thank you. Our next question comes from the line of David Raso from Evercore ISI. Your question please.

Hi, David.

Hi. Good morning. Jess, you just mentioned kind of core incremental for next year at 60%, or at least you said framework-wise, you think at the core of 60. Unless I’m doing the numbers wrong, if I think of just the incremental, not the full year, the incremental business in '19 from BlueLine and BakerCorp, It seems to be implying the incremental is more like low 50s. I’m trying to add some of the savings that you spoke of on top of the core margins at both Baker and BlueLine and I’m just trying to understand, is that lower 50 number a reflection like what happened in the fourth quarter or assuming lower margins on the used equipment? I’m just trying to understand is that maybe conservatism in the guide or something I’m missing about the incremental at a core basis?

Yes. Hi, David. So I think the first caution I would give is on the midpoint. Obviously, if we use the midpoint that is going to connote a specific number. If we look at the contribution that we’re expecting for the acquisitions in '19, and we also adding the synergies that we expect – what we expect to realize within a year, excluding those, we are still plus or minus closer to 60% across the core.

Okay. I can take this offline just because I would think you’re getting incremental sales about 8.75 from BlueLine and Baker combined, just the incremental. I’m just using a core about 40 on BlueLine, add 20 million of savings; 28 on Baker, add 12.5 of savings. I’m just coming out with the core business seems a little bit light and I just get – I’m not trying to characterize it as pessimistic, conservative, just the framework, am I missing something on the numbers. But we can take it offline. You’re still going with the idea your guide midpoint implies core incremental at 60.

Closer to 60, that’s right. Yes.

Okay. And my second question as you – in the slides you’re targeting at year end the leverage down to the low end of your range, right, the 2.5 --

Yes, 2.5, that’s right.

How should I think about – and again this is obviously conjecture looking out a year, but for what it’s worth some of the construction spend forecast that you put in your slide show 2020 is a slower growth year for U.S. construction spending but still positive. So when I think about CapEx needs in 2020, I would think they’re at a minimum no greater than this year necessarily. What do we do with cash flow as just the base framework? And again just – look, we have to model past one year. If you’re at the low end of your leverage at the end of '19 and you’re going to generate – we can talk offline about all the puts and takes of cash interest and cash tax changes, but how should we think about the model going forward with, all right, we’re at the low end of the range on leverage at the end of '19, how do we think about deploying 2020 cash flow?

So obviously we haven’t locked in on a plan for 2020, so I don’t want to speculate on this call. But we’re always coming back to our capital allocation strategy and what we believe is appropriate for the business given where the business is at that time. So we’re very comfortable with where the leverage range is right now at 2.5x to 3.5x. We know that we’ll be at the closer end of that range should '19 play out the way we think it will right now. And we have discussions with our Board formally through the year about whether or not there should be any change to our direction on the way we approach our strategy. So there’s no change to talk through right now, but we – obviously we’ll have those discussions with our Board as the year plays out.

And I would just add – go ahead, David. Sorry.

I wanted to ask you a question [ph], Matt. Obviously, Mike will still be in there as non-exec chair but if you want to add your two cents on, you’ve seen the reaction to the share repo, the stock is still from a historical perspective with this cash flow yield still very low. How do we think about the stock still viewed in this manner? Is there a toggle here between – there’s obviously some scale logical consolidation thoughts, but maybe the right thing to do and you’ve seen the reaction of late, maybe just keep buying back your shares. I’m just trying to get maybe the transition of CEO your two cents on the tape here of how do you think about this valuation versus consolidation angle?

So I think the prioritization of what we do with our free cash flow remains the same. So it has been a big part of the strategy, so it will be a little disingenuous for there to be a major pivot. If there was, I should have spoke up sooner during my current role. But I think that the prioritization certainly influenced by what we think the end market looks like in the next 12 to 18 months and that’s how we’ve made our decisions for '19, we’ll go through that same process. But organic growth primary looking for any opportunities whether they be tuck-ins – I don’t know at this point if I’ll say too many transformational M&A, but looking at M&A it’s got a higher threshold at certain points in the market. And then how do we do the combination of paying down debt if our leverage is already in a good spot. Then we look at how do we return cash to shareholders? And that as Jess appropriately said something that we go through our Board. But I wouldn’t look for a major shift in strategy. And if we do develop strategy, we’ll certainly as always communicate.

I appreciate it. It was a bit of an unfair question but just given obviously some of the management changes and the recent repo announcement I thought I’d just give you the platform to answer it as you wish. So I appreciate the answer. Thank you.

Thanks, David.

Thanks, David.

Thank you. Our next question comes from the line of Rob Wertheimer from Melius. Your question please.

Hi. Good morning, everyone. My question is going to be on customer retention or expansion and acquisitions. And it’s what we’ve gotten from investors recently as you look at the acquisitions you’ve done in recent years, including BlueLine, you have the opportunity to sort of gain loyalty through better execution maybe through some of the IT things you talked about at your Investor Day on benchmarking and providing more value to people, and the only opportunity to lose customers as they maybe dual source versus what they had then. So would you comment on just your trend on customer retention through the acquisitions you’ve done in recent times? Thanks.

So as you know, Rob, we’ve done nine acquisitions in the last two years and we model each one of these out just by the spend and within that is customer retention, cross-sell goals, how can we take our value prop on this base of customers that we acquire and make it accretive? How can we be a better owner of the business? We’ve been very pleased with our ability to do that. I think that one of the primary reasons is the breadth and depth of our offering. There’s nobody else that could own these businesses that we buy that has that opportunity, that muscle to flex and I think it’s been a big secret to our success and something that we’re really focused on. It starts with retention of the employees and retention of the capacity that you acquired as well and those are our two biggest focuses in the first days, not even weeks, days of integration. How do we make sure we maintain the relationships, the capacity that we bought and leverage it into growth? And you hit on the head of that manifest itself in customer retention and customer cross-sell. So we feel real good about it. It’s a huge focus for us.

Perfect. And then just any early look on how BlueLine is going with respect to that and operational improvements? Thanks.

Sure. We’re really pleased with the BlueLine integration for the first couple of months here. We’ll have – as I mentioned in the script, most of the structural decisions have been made and they’ll be – if they haven’t been executed already they will be by the end of Q1. And then the next phase as we get into the seasonal strength of our build is when we’ll really see how we leverage those additional relationships, sell more value into those customers that came with the BlueLine team. And we’re looking forward to that. We’d love to buy every company in April when we get to the seasonal build because we won’t really be able to take advantage of that scale we bought until April when the seasonality kicks in. So looking ahead to that and looking forward to it.

Perfect. Thanks, Matt.

Thank you. Our next question comes from the line of Joe O’Dea from Vertical Research Partners. Your question please.

Hi, Joe.

Hi, Joe. Joe O’Dea: Hi. First, Matt, I just want to go back to an earlier comment you made on acquisitions and you think about how active the company has been over the past couple of years. But just to kind of gauge what your appetite is at this point and how that kind of carves out between what you talked about in terms of transformational versus bolt-on and just how you’re sort of generally approaching the M&A kind of opportunities?

Sure. Well, if you think about that in the last 24 months we’ve bought three of the Top 10 in the gen-rent space, you’d have to imagine at this point we’re looking at opportunistic tuck-ins and certainly anything that broadens our offering, such as you saw with Baker. Anything in the specialty space is something we’d be more focused on. But it has to still meet the three strategic levers that we’ve always talked about, the three points of entry. And I would say that the financial bar has to be higher right now. We’ve got a lot on our plate. We’re doing a great job absorbing it, but we still have opportunity to grow off this new platform. So that raises the bar a little bit on M&A as far as what has to be done. But we’re still willing to look at tuck-ins, looking at opportunities to broaden our penetration and our offering. So I would just say a higher bar. Joe O’Dea: Got it. And then a second one just on fleet productivity and any details and how you kind of evaluate that internally? I would think generally I targeted a minimum to offset inflationary pressures, but when we think about all the factors involved just trying to get comfortable with what the right kind of bogey is or how you think about whether you’re meeting targets there or missing?

So – and I’ll ask Jess to take you through some of this as well, but when I think about it qualitatively, it’s real important to explain. I think Jess did a great job in her opening remarks, but remind everybody of why we’re doing this. It’s because the other metrics that we were giving on their own out of context don’t show what we’re really doing in the field every day. I’ve often given the example of a 60-foot boom versus a light tower. If we rent 10 60-foot booms last year and I rent five this year at the same rate, it just shows up as a zero impact to rate. The volume doesn’t change, nothing changes. If I flip my – I’ll use light tower as a high return example of a category. If I switch my – if I double my light tower volume, but at the same rate as I did the previous year, shows no impact to rate. Actually the mix of those two 60 booms usually have higher time utilization. Light towers have lower. We’d have a negative impact on time. Yet the business decision would bring us more profitability. That’s captured in mix. That’s really just to put it in a simplistic operational view why we’re introducing the new metric. All that value that we created in that fleet ship gets hidden in the metrics that people were focused on. So we had to look in the mirror and say how can we put together a more comprehensive view of the benefit of that decision. They all foreshadowed a little bit at Investor Day if you remember a couple of slides and we’ve done – the team’s done a lot of work on that since then and that’s why we’re introducing this fleet productivity metric. We think it really captures the overall view of the decisions that are made in the field day-in and day-out. Jess, I don’t know if you have anything to add?

So what I’d add to that is, as we think about fleet productivity, it’s going to help from a communications perspective and giving insight to how we’re managing across those levers that we talked about. The math behind it is that it’s really aggregation of change in rate and change in time and change in mix. And so throughout the field we’re still going to be focused on each of those levers and how we can use them to continue to focus on profitable growth, and then ultimately decisions that with those levers are going to optimize returns. But in bringing them together into a fleet productivity metric, it allows for us to communicate how those three levers have kind of played against each other, the interplay across the three of them. When you think about it from a consolidated perspective, what that also does is it helps us to make sure that our capital decisions, right, that change in the OEC that you’ll see is a separate component of how we talk about rental revenue, it will help us to make sure that we’re optimizing our decisions specific to what’s arguably one of the most important decisions we make in the business which is how much capital we’re going to buy and sell.

Rob, I’ll take this opportunity to remind everybody. To be clear – I’m sorry, Joe, to be clear, this is very much impacted by our focus on managing rate and time. So there’s no change in that philosophy, just more comprehensive and I want to share that with everyone. It’d be a big mistake if somebody mistook that we’re getting away from managing rate. It’s still a great lever for us. Joe O’Dea: Thank you.

Thank you. Our next question comes from the line of Steven Fisher from UBS. Your question please.

Thanks. Good afternoon.

Hi, Steven.

Hi. It’s good to hear that the macro is broadly positive, but there’s still some investor concern about the private non-res side of construction being a little bit softer as we go forward here. So in the event that we were to see that decline a little bit, maybe Matt could you maybe rank for us what some of the most top few impactful initiatives would be that would drive some growth ahead of what that market would be, be it cold starts, cross-selling, verticals expansion or anything else? And if you could kind of quantify what you think the revenue impact of those top kind of two or three could be, that will be helpful?

So, first of all, all the impacts are embedded within the guidance that we gave. So I won’t get into parsing out what participation each one has numerically. But I would just say our overall portfolio; our continued focus on cross-sell, our continued headroom in the end markets that we serve organically, even more so in specialty, and then last would be any opportunities to add products and services. We’re building out our onsite services platform right now. That’s a great growth opportunity. It also further provides service to our customers as a one-stop shop. That kind of cross-selling has been the secret sauce to our success. And it’s a differentiator because not everyone can do it. Matter of fact, most can’t as broadly as we can. So that’s how we look at the levers, Steve, and I think that that’s the way I would characterize it.

Okay. Thank you. And then just to follow up on Joe’s question there about fleet productivity. Just wondering how we should think about the pace of fleet productivity that’s embedded in your 2019 guidance? Is it expected to be in sort of this low-single digit growth range? How lumpy might it be quarter-to-quarter? Is there sort of just kind of a general range that we should be thinking about?

Yes, so – hi, Steven, it’s Jess. So we’re not going to guide to that number. That’s going to be more of an output each quarter as to what’s happened in the aggregate across the rate, time and mix. So I definitely don’t want to try and put a number out there. I will – just as folks are going through the information we’ve put in the investor presentation, I will just note that the as reported fleet productivity will continue to be impacted by our acquisitions. They will be a drag on what the total productivity number is. So let me give you an example. You’ll see in our investor presentation that the productivity on an as-reported basis is 1.5. So that’s got a little bit of a drag from the acquisitions. On a pro forma basis, that number is 3.9. So we’ll give context to fleet productivity going forward when we give the quarter. But at this point, we’re not going to guide to it.

And I think that’s one of the reasons why we’re going to continue to give the quarterly rate and time for the first half of '19. It will help people get to reconcile how they’ve thought about the business, how we’re continuing to focus on the overall returns. But also it will help some of the M&A noise flow through the numbers and we’ll get a little bit more stable because you could look at the history here on Slide 36 and why we called out the M&A. It does make the numbers a little bit choppy for a couple of quarters, then we integrate it into our network, we get the improved productivity and then we bought somebody else. So we think this will stabilize a little bit and be helpful going forward.

Terrific. Thanks a lot.

Thanks, Steven.

Thank you. And our next question comes from the line of Seth Weber from RBC Capital Markets. Your question please.

Hi, Seth.

Hi, Seth.

Hi. Good afternoon, everybody. How are you?

Good.

Great.

So, Jess, maybe just – I just wanted to go back to some of the EBITDA pull through questions. Is there anything that we should be thinking about that will weigh against the core number, whether it’s higher incentive comp or mix that you are anticipating being an incremental headwind that could weigh against that 60% core number for 2019?

Hi, Seth. Honestly, there is nothing that I would call out that has any kind of a significant effect year-over-year within '19. Nothing that – outside of the impact of the acquisitions on total flow through, that 60% or something close to that 60% across the core, doesn’t have anything that needs any kind of call out.

Okay. Thanks. And then maybe just a question on CapEx. The 2.2 billion-ish that you’re talking about from a growth CapEx level for this year, is it possible – maybe it’s a question for Matt or Dale if he is on, just kind of how much of that is committed at this point and how much flexibility you have to change that number if you see market conditions changing versus what you’re thinking today?

Sure, Seth. So we do have a lot of flexibility. Depending on the vendor, we have 30 or 40 days cancellation policies. But we’ve also got a lot of pre-buys out there. The pipeline is build for us to be able to be responsive in the peak seasons of Q2 and Q3. And then we make the appropriate – as we see the seasonal build of Q2, Q1 is kind of locked in. There’s nothing in Q1 that would make us change our view to be overly optimistic or overly pessimistic to be frank. But as we get into the build of April, May and into June, we’ll need to pull CapEx forward or delay some CapEx. So those are the levers that we use. We’ve got great relationships with our partners to be able to do this. And it’s part of why you keep hearing us talk about flexibility. And if we start to move towards the top end of our range that we’ve guided and we see the demand for the next 12 months continues to be robust, we’ll pull some forward. And then as we get into Q4 as we did this year, we’ll continue to fund. If the opposite is true, we have that flexibility to respond. So we’re really comfortable within that spend bucket that we can be very responsive even within, let’s say, 70% that we pre-slot for. Those are pre-slots to reserve, not necessarily commitments to buy.

Okay. So that’s a fair number. Is that kind of a similar number to where we were at the same point last year? I guess 70% number is pretty normal for you guys sitting here at the end of January then?

Yes, our planned number. It’s usually – this is something that we finish before the new year. So our process hasn’t changed.

Right. Okay. And the cadence for spending should be pretty normal quarter-to-quarter?

Yes.

All righty. Thank you very much, guys. Appreciate it.

Thanks.

Thanks, Seth.

Thank you. Our next question comes from the line of Steven Ramsey from Thompson Research. Your question please.

Hi, everybody. Also wanted to think about the CapEx topic. I guess in flexing CapEx, is there a scenario or likelihood that you would pull back gen rent CapEx and maintain or grow the specialty side, or to kind of ask it another way thinking longer term, do you expect specialty to be more or less resilient from a cyclical standpoint?

So we already – so just as a note, about a third of our growth CapEx this year will go toward specialty. So that’s – we pretty much fund the specialty growth, not just for the cold starts but that continued organic growth that the team is driving over and above their 20%, 23% average of the company today. So that’s how we continue to fund that robust growth, because it’s a great business decision for us on many levels, strategically and financially. As far in pulling back the gen rent CapEx, that would be a separate discussion on seeing if we were having opportunity or challenges in the gen rent business market-by-market. That’s the way we manage it. We review it regularly. But it’s important to understand these are all mostly the same customer base, so they are very connected. And strength of one helps strength of the others. So I think that’s just important to note, report them separately. We’ve really intertwined these businesses together as one United Rentals’ value prop.

Got you. And then thinking about – I know you’re upstream exposure is not large, but it wasn’t that large in the last downturn. So you’ve talked about that market continuing to perform well. But if the choppiness does turn into you guys or even others pulling fleet out of those markets and creating an oversupply situation like a few years ago, how do you think that impacts you guys now given where your fleet mix is and being just a bigger company in general?

So just to clarify a data point for you in case you didn’t have it, so it’s about – we have about 5% exposure to upstream oil and gas which is primarily where everybody’s worried about and I believe what you’re asking about, that’s less than half of what it was last time back in '14, '15. I also think the industry doesn’t have as much exposure for a couple of reasons. First of all, the end market is not trading at that premium that it was then. So your tradeoff of how much fleet you’re going to put in that end market versus other opportunities is not out weighted in pricing and returns. It’s more like the rest of the business. And I also think to give that industry kudos. I think they’ve done a better job of driving productivity in their exploration, in their drilling. They get more pull per pad. There’s all kinds of innovation going on in that space where they don’t need the equipment that they needed for each, I’ll just say, barrel of pull in the past. And I think they’ve lowered their cost to pull in some of the more mature [indiscernible]. I think the industry’s in the same position. So we’re not worried about an oversupply. If something did collapse, which we’re not seeing, we saw 5% percent growth in Q4 and 4% sequential growth on our upstream oil and gas in Q4. So the true momentum is still positive, but we’re not getting overly weighted in that category and I think the industry is also very conscious of that.

Excellent. Thank you.

Thank you.

Thank you. Our next question comes from the line of Jerry Revich from Goldman Sachs. Your question please.

Yes. Hi. Good afternoon. And Mike and Matt, congratulations and best wishes in your new roles.

Thank you.

Thank you.

Over the course of your tenure in your prior positions, the company’s profitability and free cash flow profile has meaningfully improved and I’m wondering if you folks can talk about in your new roles what are the strategic signposts, if you will, of what you expect the company to look like if we’re having this conversation in five-plus years? What do you hope to accomplish with the business from here? I appreciate we’re coming from the Analyst Day just a little while ago, but it was before the formal announcement. So I’m wondering if you could just step through a few talking points on that front.

So I’ll tongue-in-cheek a little bit here. I think – I would love to say Mike’s going to expect more now that he’s Chairman, but frankly he did that when he was CEO as well. So he was always driving us forward. But I think the company that we created and the trajectory of the strategy has a momentum to carry us forward. We are constantly looking at new opportunities. I think you see just in our guidance here in '19, in the near term we think there is more headroom in our existing space. But we’re looking at new opportunities, whether they’re adjacencies, whether there is opportunities to expand in different products and services for a same customer base or just the continued secular penetration that we think is still there for an industry that’s maybe 50% penetration right now. So we don’t think that our strategy needs to change. It needs to involve and enhance and our investments in productivity and technology that we’ve made internally, we think we can turn outward now and help drive better performance, better productivity for our customers. So that’s one of the areas that we’re focused on. Our scale gives us that opportunity to invest and innovate in technology and that I would call out as a primary focus if I was going to call out any single one.

Jerry, I would only add that Matt got that completely right. The company over time – our cap structure is solid and we are a cash generator and we are focused on returns. But as Matt mentioned, how can we help and facilitate productivity and safety in the workplace? And that’s where we’ll turn to and Matt and team will work with the Board in developing that strategy and we’re very excited about it.

Okay. And separately on the fleet productivity metric, just as we all try to get calibrated on that metric versus the rest of rental industry metrics that we’ve been using, can you just talk about why dollar utilization was down year-over-year, but fleet productivity which also captures rental rates and utilization was up a few hundred basis points on a pro forma basis? Can you just help us bridge that and maybe flush out what makes improvement entailed, whether it’s specialty or otherwise just to help us better understand the transition?

Sure, Jerry. So first off, the dollar on a pro forma basis, which is probably the more appropriate way to look at it, was up 30 bips. The 80 bips was dragged down obviously by some of the lower dollar utilization assets from Baker and other acquisitions; by the way, high return assets as well, long-lived assets. So if anybody thinks that that balance was very – what’s the right word, it was an important one for us in making decision on that acquisition. Also, it’s additional products and service for our customers. But to answer your question more directly, we feel that this fleet productivity measure is just going to be an accurate filter to look at the business through. We get that folks are going to need to be recalibrated. That is intentional, because we do need to be recalibrated. The specialty mix and that continuing growing specialty mix and evolution of our offerings has changed our company. It’s made us more resilient. It’s made us more diverse and we feel very strongly, it’s made us more profitable. That’s why we’re able to report record returns. So that’s the way we’re looking at it and we will continue to be as helpful as we can to help the investment community through the transition and the evolution with us.

Hi, Jerry, it’s Jess. I’d just like to add one thing. We know that as folks are calibrating themselves to the new metric, there’s obviously the math behind how fleet productivity comes together. What we will do after the call is we’ll actually add a cheat sheet to our investor presentation that walks through the math behind how we used to reconcile OER in total rental revenue and how the new bridge to rental revenue will look like using fleet productivity as a component of OER. So everybody can look for that cheat sheet to be up very soon after this call is over.

Okay. I appreciate it, Jess. And the short answer is specialty mix is what’s driving that gap though? I just want to make sure I’m drawing that inclusion right from your comments.

Sure, mostly. But as I gave you the other conversation, we look at mix within our gen rent offerings. We look at mix within same categories. So it’s not just specialty. Specialty, as it grows larger than the company average, has therefore a larger impact. But it’s not just specialty. It’s a strategic decision throughout our portfolio.

Okay. I appreciate it. Thank you.

Thank you.

Thanks, Jerry.

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Mr. Michael Kneeland for any further remarks.

Thanks everyone for joining us this afternoon. Our fourth quarter deck is available to download along with the presentation from our Investor Day. And as Jessica mentioned, we’ll be updating our new metric, so that we’ll be out there as well. Any questions, please feel free to reach out to Ted Grace, our Head of IR, if you have any additional questions. And we look forward to reporting and talking to you again after the first quarter. And I want to thank everybody.

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.