McGrath Announces Results for First Quarter 2023

McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues for the quarter ended March 31, 2023 of $173.2 million, an increase of 19%, compared to the first quarter of 2022. The Company reported net income of $71.7 million, or $2.92 per diluted share, for the first quarter of 2023, compared to net income of $18.8 million, or $0.77 per diluted share, for the first quarter of 2022.

During the quarter ended March 31, 2023, the Company divested its Adler Tanks business, which resulted in a net gain on sale of $58.9 million that is included in both income from discontinued operations and the Company's combined net income for the period. The Company's financial results have been separated by continuing operations and discontinued operations as a result of the divestiture. Of the total revenues for the quarter ended March 31, 2023, $163.7 million was attributed to revenues from continuing operations and $9.4 million to revenues from discontinued operations. The reported net income of $71.7 million includes $11.5 million in income from continuing operations, or $0.47 per diluted share, and $60.1 million in income from discontinued operations, or $2.45 per diluted share. Income from continuing operations for the first quarter of 2023 includes $14.2 million in Adler Tanks divestiture and Vesta Modular acquisition transaction costs. Excluding the divestiture and acquisition related transaction costs, first quarter 2023 earnings per diluted share was $0.89.

FIRST QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS):

  • Rental revenues increased 22% to $110.2 million.
  • Total revenues increased 31% to $163.7 million.
  • Adjusted EBITDA1 increased 23% to $61.8 million.
  • Dividend rate of $0.465 per share for the first quarter of 2023. On an annualized basis, this dividend represents a 2.1% yield on the May 3, 2023 close price of $88.46 per share.

Joe Hanna, President and CEO of McGrath, made the following comments regarding these results and future expectations:

“We were pleased with our first quarter results. Despite some weather-related project start delays we were able to deliver a 22% increase in companywide rental revenues, compared to the prior year. Modular rental revenues grew 32%, with approximately half of the growth attributable to our Vesta Modular and Brekke Storage acquisitions. Excluding the acquisitions, the modular segment rental revenues grew by a robust 17%. Rental revenues at TRS-RenTelco grew 2%.

Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. With healthy demand pipelines and high fleet utilization, we have front loaded some of our new rental equipment capital spending for the year. Our initiatives to grow modular sales also showed progress as sales revenues increased by 70% compared to a year ago.

TRS-RenTelco had a positive start to the year, and despite some softness in semiconductor related demand, was able to deliver growth in both communications and general purpose rentals during the first quarter.

Our teams have been very busy working through the integration of Vesta Modular and Brekke Storage, along with completing the divestiture of Adler Tanks. I am grateful for their exceptional support and very pleased with their progress. I am excited about the long-term potential from the Vesta business. Within the first few months we have begun to realize opportunities from our combined selling resources and expect many more opportunities to follow.

I am encouraged by the overall momentum we are seeing across the business. We are focused on disciplined operational execution to make the most of the market opportunities.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended March 31, 2023 to the quarter ended March 31, 2022 unless otherwise indicated.

MOBILE MODULAR

For the first quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $42.4 million, an increase of $12.0 million, or 40%.

  • Rental revenues increased 32% to $81.1 million, depreciation expense increased 21% to $9.4 million and other direct costs increased 29% to $25.9 million, which resulted in an increase in gross profit on rental revenues of 36% to $45.8 million. The rental revenue increase was due in part to $8.7 million earned during the quarter from the new Vesta Modular customers from the acquisition completed on February 1, 2023.
  • Rental related services revenues increased 43% to $26.3 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers, with associated gross profit increasing 48% to $7.6 million. Vesta Modular contributed $0.9 million gross profit on rental related services during the quarter.
  • Sales revenues increased 70% to $17.6 million, primarily from higher new and used equipment sales. Gross margin on sales was 37% compared to 39% in 2022, resulting in a 61% increase in gross profit on sales revenues to $6.5 million. Vesta Modular contributed $1.8 million gross profit on sales during the quarter.
  • Selling and administrative expenses increased 88% to $46.5 million, primarily due to $12.9 million in acquisition and divestiture related transaction costs and $4.6 million higher employee salaries and benefit costs, largely due to the addition of Vesta Modular employees.

TRS-RENTELCO

For the first quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $20.6 million, which was comparable to the prior year.

  • Rental revenues increased 2% to $29.1 million, depreciation expense increased 3% to $12.4 million and other direct costs increased 11% to $5.2 million, which resulted in a 2% decrease in gross profit on rental revenues to $11.5 million. The rental revenue increase was the result of higher average monthly rental rates, partly offset by lower average rental equipment on rent compared to the prior year.
  • Sales revenues increased 30% to $5.1 million and gross profit on sales revenues increased 19% to $2.9 million.
  • Selling and administrative expenses increased $2.9 million, or 43%, to $9.5 million, primarily due to higher allocated corporate expenses, which included $1.4 million of allocated transaction costs relating to the divestiture of Adler Tanks.

FINANCIAL OUTLOOK:

Based upon the Company's year-to-date results and current outlook for the remainder of the year, the Company is raising its financial outlook. For the full-year 2023, the Company expects:

 

 

Previous

Current

(Continuing Operations)

Total revenue:

$780 to $810 million

$790 to $820 million

Adjusted EBITDA1, 2:

$294 to $309 million

$300 to $315 million

Gross rental equipment capital expenditures:

$190 to $210 million

$190 to $210 million

1.

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended March 31, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks.

2.

Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.

ABOUT MCGRATH:

McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies.

Headquartered in Livermore, California. Additional information about McGrath and its businesses is available at mgrc.com and investors.mgrc.com.

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

CONFERENCE CALL NOTE:

As previously announced in its press release of March 31, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on May 4, 2023 to discuss the first quarter 2023 results. To participate in the teleconference, dial 1-800-245-3047 (in the U.S.), or 1-203-518-9765 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-800-753-5479 (in the U.S.), or 1-402-220-2675 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) the healthy demand pipelines in modular, (ii) the long-term potential from the Vesta Business, by realizing opportunities from combined selling resources, (iii) the outlook on future opportunities and the overall momentum across the business, and (iv) statements regarding the full year 2023 in the “Financial Outlook” section, are forward-looking.

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta and Brekke Storage acquisitions; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the other factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

Three Months Ended March 31,

(in thousands, except per share amounts)

 

2023

 

2022

Revenues

 

 

 

 

 

 

Rental

 

$

110,247

 

 

$

90,050

 

Rental related services

 

 

27,132

 

 

 

19,032

 

Rental operations

 

 

137,379

 

 

 

109,082

 

Sales

 

 

23,660

 

 

 

15,219

 

Other

 

 

2,679

 

 

 

752

 

Total revenues

 

 

163,718

 

 

 

125,053

 

Costs and Expenses

 

 

 

 

 

 

Direct costs of rental operations:

 

 

 

 

 

 

Depreciation of rental equipment

 

 

21,833

 

 

 

19,862

 

Rental related services

 

 

19,268

 

 

 

13,760

 

Other

 

 

31,135

 

 

 

24,854

 

Total direct costs of rental operations

 

 

72,236

 

 

 

58,476

 

Costs of sales

 

 

14,115

 

 

 

8,542

 

Total costs of revenues

 

 

86,351

 

 

 

67,018

 

Gross profit

 

 

77,367

 

 

 

58,035

 

Selling and administrative expenses

 

 

57,498

 

 

 

32,605

 

Income from operations

 

 

19,869

 

 

 

25,430

 

Other (expense) income:

 

 

 

 

 

 

Interest expense

 

 

(7,464

)

 

 

(2,276

)

Foreign currency exchange gain

 

 

226

 

 

 

13

 

Income from continuing operations before provision for income taxes

 

 

12,631

 

 

 

23,167

 

Provision for income taxes from continuing operations

 

 

1,113

 

 

 

5,489

 

Income from continuing operations

 

 

11,518

 

 

 

17,678

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

Income from discontinued operations before provision for income taxes

 

 

1,709

 

 

 

1,388

 

Provision for income taxes from discontinued operations

 

 

453

 

 

 

273

 

Gain on sale of discontinued operations, net of tax

 

 

58,883

 

 

 

 

Income from discontinued operations

 

 

60,139

 

 

 

1,115

 

 

 

 

 

 

 

 

Net income

 

$

71,657

 

 

$

18,793

 

 

 

 

 

 

 

 

Earnings per share from continuing operations:

 

 

 

 

 

 

Basic

 

$

0.47

 

 

$

0.73

 

Diluted

 

$

0.47

 

 

$

0.72

 

Earnings per share from discontinued operations:

 

 

 

 

 

 

Basic

 

$

2.46

 

 

$

0.05

 

Diluted

 

$

2.45

 

 

$

0.05

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

2.93

 

 

$

0.77

 

Diluted

 

$

2.92

 

 

$

0.77

 

Shares used in per share calculation:

 

 

 

 

 

 

Basic

 

 

24,416

 

 

 

24,285

 

Diluted

 

 

24,542

 

 

 

24,534

 

Cash dividends declared per share

 

$

0.465

 

 

$

0.455

 

 

MCGRATH RENTCORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

March 31,

 

December 31,

(in thousands)

 

2023

 

2022

Assets

 

 

 

 

 

 

Cash

 

$

690

 

 

$

957

 

Accounts receivable, net of allowance for credit losses of $2,612 in 2023 and $2,300 in 2022

 

 

177,006

 

 

 

169,937

 

Rental equipment, at cost:

 

 

 

 

 

 

Relocatable modular buildings

 

 

1,412,084

 

 

 

1,123,268

 

Electronic test equipment

 

 

401,801

 

 

 

398,267

 

 

 

 

1,813,885

 

 

 

1,521,535

 

Less: accumulated depreciation

 

 

(546,617

)

 

 

(531,218

)

Rental equipment, net

 

 

1,267,268

 

 

 

990,317

 

Property, plant and equipment, net

 

 

144,295

 

 

 

138,713

 

Prepaid expenses and other assets

 

 

80,490

 

 

 

69,837

 

Intangible assets, net

 

 

68,055

 

 

 

35,431

 

Goodwill

 

 

323,799

 

 

 

106,403

 

Assets of discontinued operations

 

 

 

 

 

196,249

 

Total assets

 

$

2,061,603

 

 

$

1,707,844

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Notes payable

 

$

658,777

 

 

$

413,742

 

Accounts payable and accrued liabilities

 

 

219,260

 

 

 

151,208

 

Deferred income

 

 

100,289

 

 

 

82,417

 

Deferred income taxes, net

 

 

223,739

 

 

 

203,361

 

Liabilities of discontinued operations

 

 

 

 

 

53,171

 

Total liabilities

 

 

1,202,065

 

 

 

903,899

 

Shareholders’ equity:

 

 

 

 

 

 

Common stock, no par value - Authorized 40,000 shares

 

 

 

 

 

 

Issued and outstanding - 24,466 shares as of March 31, 2023 and 24,388 shares as of December 31, 2022

 

 

105,487

 

 

 

110,080

 

Retained earnings

 

 

754,147

 

 

 

693,943

 

Accumulated other comprehensive loss

 

 

(96

)

 

 

(78

)

Total shareholders’ equity

 

 

859,538

 

 

 

803,945

 

Total liabilities and shareholders’ equity

 

$

2,061,603

 

 

$

1,707,844

 

 

 

 

 

 

 

 

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Three Months Ended March 31,

(in thousands)

 

2023

 

2022

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

71,657

 

 

$

18,793

 

Adjustments to reconcile net income to net cash provided by

operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

27,590

 

 

 

27,584

 

Deferred income taxes

 

 

(45,496

)

 

 

(3,676

)

Provision for credit losses

 

 

744

 

 

 

13

 

Share-based compensation

 

 

1,493

 

 

 

1,760

 

Gain on sale of discontinued operations

 

 

(58,883

)

 

 

 

Gain on sale of used rental equipment

 

 

(3,089

)

 

 

(5,364

)

Foreign currency exchange gain

 

 

(226

)

 

 

(13

)

Amortization of debt issuance costs

 

 

2

 

 

 

4

 

Change in:

 

 

 

 

 

 

Accounts receivable

 

 

16,209

 

 

 

7,922

 

Prepaid expenses and other assets

 

 

(7,345

)

 

 

4,213

 

Accounts payable and accrued liabilities

 

 

29,837

 

 

 

(4,716

)

Deferred income

 

 

3,218

 

 

 

5,223

 

Net cash provided by operating activities

 

 

35,711

 

 

 

51,743

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Proceeds from sale of discontinued operations

 

 

262,454

 

 

 

 

Purchases of rental equipment

 

 

(77,731

)

 

 

(39,430

)

Purchases of property, plant and equipment

 

 

(6,857

)

 

 

(5,417

)

Cash paid for acquisition of businesses

 

 

(453,592

)

 

 

 

Proceeds from sales of used rental equipment

 

 

12,197

 

 

 

10,308

 

Net cash used in investing activities

 

 

(263,529

)

 

 

(34,539

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Net borrowings (payments) under bank lines of credit

 

 

245,033

 

 

 

(2,482

)

Taxes paid related to net share settlement of stock awards

 

 

(6,086

)

 

 

(3,605

)

Payment of dividends

 

 

(11,400

)

 

 

(11,006

)

Net cash provided by (used in) financing activities

 

 

227,547

 

 

 

(17,093

)

Effect of foreign currency exchange rate changes on cash

 

 

4

 

 

 

1

 

Net (decrease) increase in cash

 

 

(267

)

 

 

112

 

Cash balance, beginning of period

 

 

957

 

 

 

1,491

 

Cash balance, end of period

 

$

690

 

 

$

1,603

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Interest paid, during the period

 

$

7,817

 

 

$

2,137

 

Net income taxes paid, during the period

 

$

413

 

 

$

420

 

Dividends accrued during the period, not yet paid

 

$

11,851

 

 

$

11,357

 

Rental equipment acquisitions, not yet paid

 

$

5,697

 

 

$

12,869

 

 

 

 

 

 

 

 

MCGRATH RENTCORP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BUSINESS SEGMENT DATA (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollar amounts in thousands)

 

Mobile Modular

 

 

TRS-RenTelco

 

 

Enviroplex

 

 

Adler Tanks (Discontinued)

 

 

Consolidated

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

81,113

 

 

$

29,134

 

 

$

 

 

$

6,520

 

 

$

116,767

 

Rental related services

 

 

26,252

 

 

 

880

 

 

 

 

 

 

2,584

 

 

 

29,716

 

Rental operations

 

 

107,365

 

 

 

30,014

 

 

 

 

 

 

9,104

 

 

 

146,483

 

Sales

 

 

17,605

 

 

 

5,114

 

 

 

941

 

 

 

269

 

 

 

23,929

 

Other

 

 

1,687

 

 

 

992

 

 

 

 

 

 

65

 

 

 

2,744

 

Total revenues

 

 

126,657

 

 

 

36,120

 

 

 

941

 

 

 

9,438

 

 

 

173,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs of rental operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

9,444

 

 

 

12,389

 

 

 

 

 

 

1,325

 

 

 

23,158

 

Rental related services

 

 

18,607

 

 

 

661

 

 

 

 

 

 

2,020

 

 

 

21,288

 

Other

 

 

25,910

 

 

 

5,225

 

 

 

 

 

 

1,270

 

 

 

32,405

 

Total direct costs of rental operations

 

 

53,961

 

 

 

18,275

 

 

 

 

 

 

4,614

 

 

 

76,850

 

Costs of sales

 

 

11,074

 

 

 

2,225

 

 

 

816

 

 

 

159

 

 

 

14,274

 

Total costs of revenues

 

 

65,035

 

 

 

20,500

 

 

 

816

 

 

 

4,773

 

 

 

91,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

 

45,759

 

 

 

11,520

 

 

 

 

 

 

3,926

 

 

 

61,205

 

Rental related services

 

 

7,645

 

 

 

219

 

 

 

 

 

 

564

 

 

 

8,428

 

Rental operations

 

 

53,404

 

 

 

11,739

 

 

 

 

 

 

4,490

 

 

 

69,633

 

Sales

 

 

6,531

 

 

 

2,889

 

 

 

125

 

 

 

110

 

 

 

9,655

 

Other

 

 

1,687

 

 

 

992

 

 

 

 

 

 

65

 

 

 

2,744

 

Total gross profit

 

 

61,622

 

 

 

15,620

 

 

 

125

 

 

 

4,665

 

 

 

82,032

 

Selling and administrative expenses

 

 

46,514

 

 

 

9,451

 

 

 

1,533

 

 

 

2,582

 

 

 

60,080

 

Income (loss) from operations

 

$

15,108

 

 

$

6,169

 

 

$

(1,408

)

 

$

2,083

 

 

$

21,952

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,838

)

Foreign currency exchange gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

226

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,566

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

12,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA 1

 

$

42,445

 

 

$

20,635

 

 

$

(1,330

)

 

$

3,682

 

 

$

65,432

 

Average rental equipment 2

 

$

1,176,874

 

 

$

396,835

 

 

 

 

 

 

 

 

 

 

Average monthly total yield 3

 

 

2.30

%

 

 

2.40

%

 

 

 

 

 

 

 

 

 

Average utilization 4

 

 

79.6

%

 

 

59.2

%

 

 

 

 

 

 

 

 

 

Average monthly rental rate 5

 

 

2.89

%

 

 

4.14

%

 

 

 

 

 

 

 

 

 

1.

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended March 31, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks.

2.

Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

3.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.

4.

Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.

5.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

MCGRATH RENTCORP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BUSINESS SEGMENT DATA (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollar amounts in thousands)

 

Mobile Modular

 

 

TRS-RenTelco

 

 

Enviroplex

 

 

Adler Tanks (Discontinued)

 

 

Consolidated

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

61,538

 

 

$

28,512

 

 

$

 

 

$

14,191

 

 

$

104,241

 

Rental related services

 

 

18,361

 

 

 

671

 

 

 

 

 

 

5,285

 

 

 

24,317

 

Rental operations

 

 

79,899

 

 

 

29,183

 

 

 

 

 

 

19,476

 

 

 

128,558

 

Sales

 

 

10,375

 

 

 

3,927

 

 

 

917

 

 

 

657

 

 

 

15,876

 

Other

 

 

371

 

 

 

381

 

 

 

 

 

 

187

 

 

 

939

 

Total revenues

 

 

90,645

 

 

 

33,491

 

 

 

917

 

 

 

20,320

 

 

 

145,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct costs of rental operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

7,833

 

 

 

12,029

 

 

 

 

 

 

4,012

 

 

 

23,874

 

Rental related services

 

 

13,180

 

 

 

580

 

 

 

 

 

 

4,383

 

 

 

18,143

 

Other

 

 

20,162

 

 

 

4,692

 

 

 

 

 

 

2,969

 

 

 

27,823

 

Total direct costs of rental operations

 

 

41,175

 

 

 

17,301

 

 

 

 

 

 

11,364

 

 

 

69,840

 

Costs of sales

 

 

6,329

 

 

 

1,500

 

 

 

713

 

 

 

502

 

 

 

9,044

 

Total costs of revenues

 

 

47,504

 

 

 

18,801

 

 

 

713

 

 

 

11,866

 

 

 

78,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

 

33,543

 

 

 

11,791

 

 

 

 

 

 

7,210

 

 

 

52,544

 

Rental related services

 

 

5,181

 

 

 

91

 

 

 

 

 

 

902

 

 

 

6,174

 

Rental operations

 

 

38,724

 

 

 

11,882

 

 

 

 

 

 

8,112

 

 

 

58,718

 

Sales

 

 

4,046

 

 

 

2,427

 

 

 

204

 

 

 

155

 

 

 

6,832

 

Other

 

 

371

 

 

 

381

 

 

 

 

 

 

187

 

 

 

939

 

Total gross profit

 

 

43,141

 

 

 

14,690

 

 

 

204

 

 

 

8,454

 

 

 

66,489

 

Selling and administrative expenses

 

 

24,692

 

 

 

6,590

 

 

 

1,323

 

 

 

6,522

 

 

 

39,127

 

Income (loss) from operations

 

$

18,449

 

 

$

8,100

 

 

$

(1,119

)

 

$

1,932

 

 

 

27,362

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,820

)

Foreign currency exchange gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,762

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

18,793

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA 1

 

$

30,405

 

 

$

20,653

 

 

$

(1,046

)

 

$

6,707

 

 

$

56,719

 

Average rental equipment 2

 

$

1,006,903

 

 

$

366,667

 

 

 

 

 

 

 

 

 

 

Average monthly total yield 3

 

 

2.04

%

 

 

2.59

%

 

 

 

 

 

 

 

 

 

Average utilization 4

 

 

77.1

%

 

 

64.6

%

 

 

 

 

 

 

 

 

 

Average monthly rental rate 5

 

 

2.64

%

 

 

4.01

%

 

 

 

 

 

 

 

 

 

1.

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs.

2.

Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

3.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.

4.

Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.

5.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, share-based compensation and transaction costs. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation and transaction costs, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges and transaction costs. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Reconciliation of Income from Continuing Operations to Adjusted EBITDA

(dollar amounts in thousands)

Three Months Ended

March 31,

 

Twelve Months Ended

March 31,

 

2023

 

2022

 

2023

 

2022

Income from continuing operations

$

11,518

 

 

$

17,678

 

 

$

97,169

 

 

$

85,804

 

Provision for income taxes from continuing operations

 

1,113

 

 

 

5,489

 

 

 

26,981

 

 

 

31,412

 

Interest expense

 

7,464

 

 

 

2,276

 

 

 

17,418

 

 

 

9,168

 

Depreciation and amortization

 

26,133

 

 

 

23,134

 

 

 

96,639

 

 

 

93,035

 

EBITDA

 

46,228

 

 

 

48,577

 

 

 

238,207

 

 

 

219,419

 

Share-based compensation

 

1,375

 

 

 

1,512

 

 

 

6,764

 

 

 

6,582

 

Transaction costs 3

 

14,147

 

 

 

 

 

 

18,200

 

 

 

2,045

 

Adjusted EBITDA 1

$

61,750

 

 

$

50,089

 

 

$

263,171

 

 

$

228,046

 

Adjusted EBITDA margin 2

 

38

%

 

 

40

%

 

 

39

%

 

 

41

%

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)

Three Months Ended

March 31,

 

Twelve Months Ended

March 31,

 

2023

 

2022

 

2023

 

2022

Adjusted EBITDA 1

$

65,432

 

 

$

56,719

 

 

$

297,579

 

 

$

256,210

 

Interest paid

 

(7,817

)

 

 

(2,137

)

 

 

(20,455

)

 

 

(10,838

)

Income taxes paid, net of refunds received

 

(413

)

 

 

(420

)

 

 

(27,355

)

 

 

(9,135

)

Gain on sale of used rental equipment

 

(3,089

)

 

 

(5,364

)

 

 

(35,704

)

 

 

(26,011

)

Foreign currency exchange (gain) loss

 

(226

)

 

 

(13

)

 

 

165

 

 

 

142

 

Amortization of debt issuance costs

 

2

 

 

 

4

 

 

 

14

 

 

 

16

 

Change in certain assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

16,953

 

 

 

7,935

 

 

 

(21,506

)

 

 

(17,119

)

Prepaid expenses and other assets

 

(7,345

)

 

 

4,213

 

 

 

(28,042

)

 

 

(2,509

)

Accounts payable and other liabilities

 

(31,004

)

 

 

(14,417

)

 

 

(7,992

)

 

 

9,404

 

Deferred income

 

3,218

 

 

 

5,223

 

 

 

21,696

 

 

 

9,718

 

Net cash provided by operating activities

$

35,711

 

 

$

51,743

 

 

$

178,400

 

 

$

209,878

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended March 31, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for March 31, 2023 and 2022, was $3,682 and $6,630, respectively.

2.

Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

3.

Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.

 

Contacts

Keith E. Pratt

EVP & Chief Financial Officer

925-606-9200

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