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
September 30, 2022 of $200.5 million, an increase of 16%, compared
to the third quarter of 2021. The Company reported net income of
$30.6 million, or $1.25 per diluted share, for the third quarter of
2022, compared to net income of $23.3 million, or $0.95 per diluted
share, for the third quarter of 2021.
THIRD QUARTER 2022 YEAR-OVER-YEAR COMPANY HIGHLIGHTS:
- Rental revenues increased 15% to $118.4 million.
- Total revenues increased 16% to $200.5 million.
- Adjusted EBITDA1 increased 13% to $74.7 million.
- Dividend rate increased 5% to $0.455 per share for the
third quarter of 2022. On an annualized basis, this dividend
represents a 2.1% yield on the October 26, 2022 close price of
$85.85 per share.
Joe Hanna, President and CEO of McGrath, made the following
comments regarding these results and future expectations:
“We delivered strong third quarter results. Our 16% growth in
total company revenues was a result of robust performance in both
rental operations and sales revenues. Demand was healthy across
each of our rental segments. Mobile Modular rental revenues grew
17%, reflecting strong organic growth from our modular operations.
Rental revenue growth was also strong at TRS-RenTelco and Adler
Tanks, which grew 9% and 18%, respectively.
Mobile Modular had an impressive quarter. We saw broad-based
strength across our commercial, education and portable storage
customer bases. Education rental revenues increased 9%,
representing the highest growth since the first quarter of 2020 and
demonstrating post-pandemic recovery in this important customer
base. We addressed strong demand conditions with disciplined fleet
management and achieved average fleet utilization of 80.1%, a level
not seen since 2008, and ended the quarter at 81.2% utilization.
This substantial utilization improvement was accomplished while
growing our fleet and increasing average rental rates. Our
initiatives to grow modular sales also showed progress as sales
revenues increased by 10% compared to a year ago.
At TRS-RenTelco and Adler Tanks the positive trends we
experienced in the first half of this year continued in the third
quarter. TRS-RenTelco saw growth in both communications and
general-purpose rentals. Adler Tanks continued to experience
broad-based demand improvement across its regions and vertical
markets, ending the quarter at 58.3% utilization, a level last
achieved in 2018.
We are pleased with our year-to-date performance, and we have
entered the fourth quarter with good momentum across the business.
As a result, we are increasing our financial outlook for the full
year.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended
September 30, 2022 to the quarter ended September 30, 2021 unless
otherwise indicated.
MOBILE MODULAR
For the third quarter of 2022, the Company’s Mobile Modular
division reported income from operations of $27.8 million, an
increase of $4.3 million, or 18%, with Adjusted EBITDA increasing
$3.6 million, or 10%, to $39.7 million. Rental revenues increased
17% to $69.1 million, depreciation expense increased 3% to $7.7
million and other direct costs increased 38% to $22.8 million,
which resulted in an increase in gross profit on rental revenues of
10% to $38.5 million. The rental revenue increase was primarily
attributed to higher average rental equipment on rent and higher
average monthly rental rates. Rental related services revenues
increased 12% to $27.4 million, primarily attributable to higher
delivery and pick up activities for both modular buildings and
portable storage containers with associated gross profit increasing
24% to $7.4 million. Sales revenues increased 10% to $28.9 million,
primarily from higher used equipment sales. Gross margin on sales
was 35% compared to 31% in 2021, resulting in a 24% increase in
gross profit on sales revenues to $10.2 million. Selling and
administrative expenses increased 10% to $28.8 million, primarily
due to $1.6 million higher allocated corporate expenses and
increased employee salaries and benefit costs totaling $1.2
million.
TRS-RENTELCO
For the third quarter of 2022, the Company’s TRS-RenTelco
division reported income from operations of $11.3 million, an
increase of $1.8 million, or 19%, with Adjusted EBITDA increasing
$1.9 million, or 9%, to $23.9 million. Rental revenues increased 9%
to $31.8 million, depreciation expense increased 2% to $12.4
million and other direct costs increased 7% to $5.4 million, which
resulted in a 16% increase in gross profit on rental revenues to
$14.0 million. The rental revenue increase was the result of higher
average equipment on rent and higher average monthly rental rates
compared to the prior year. Sales revenues increased 16% to $5.5
million and gross profit on sales revenues increased 12% to $3.4
million. Selling and administrative expenses increased 12% to $6.7
million, primarily due to higher allocated corporate expenses.
ADLER TANKS
For the third quarter of 2022, the Company’s Adler Tanks
division reported income from operations of $5.5 million, an
increase of $2.6 million, with Adjusted EBITDA increasing $2.5
million, or 32%, to $10.2 million. Rental revenues increased $2.6
million, or 18%, to $17.5 million, depreciation expense decreased
3% to $4.0 million and other direct costs increased 11% to $3.5
million, which resulted in an increased gross profit on rental
revenues of 32%, to $10.0 million. The rental revenue increase was
broad based across regions and vertical markets served. Rental
related services revenues increased 13% to $7.2 million, with gross
profit on rental related services increasing 52%, to $1.8 million.
Selling and administrative expenses increased 13% to $7.1 million
primarily due to higher allocated corporate expenses and higher
employee salaries and benefit costs.
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 2022, the Company expects:
Previous
Current
●
Total revenue:
$695 to $720 million
$720 to $735 million
●
Adjusted EBITDA1, 2:
$266 to $276 million
$274 to $280 million
●
Gross rental equipment capital
expenditures:
$145 to $155 million
$168 to $174 million
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization, non-cash impairment costs and share-based
compensation. 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.
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, and its Adler Tank Rentals
business provides environmental containment solutions for hazardous
and nonhazardous liquids and solids. 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 September 29,
2022, McGrath RentCorp will host a conference call at 5:00 p.m.
Eastern Time (2:00 p.m. Pacific Time) on October 27, 2022 to
discuss the third quarter 2022 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 1-800-839-6980
(in the U.S.), or 1-402-220-6062 (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 healthy demand across each of our rental segments and the
expectation of good momentum in the following quarter, as well as
the statements regarding the full year 2022 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: the duration of the COVID-19 pandemic and its
economic impact, the extent and length of any restrictions
associated with COVID-19 pandemic, the health of the education and
commercial markets in our modular building division; the activity
levels in the general purpose and communications test equipment
markets at TRS-RenTelco; the utilization levels and rental rates of
our Adler Tanks liquid and solid containment tank and box rental
assets; 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 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 September
30,
Nine Months Ended September
30,
(in thousands,
except per share amounts)
2022
2021
2022
2021
Revenues
Rental
$
118,361
$
103,269
$
333,226
$
283,937
Rental related services
35,361
31,513
88,497
73,870
Rental operations
153,722
134,782
421,723
357,807
Sales
45,391
37,636
97,738
80,503
Other
1,423
874
3,479
2,612
Total revenues
200,536
173,292
522,940
440,922
Costs and
Expenses
Direct costs of rental operations:
Depreciation of rental equipment
24,176
23,802
72,114
68,216
Rental related services
25,971
24,356
64,967
56,236
Other
31,708
24,711
92,356
67,696
Total direct costs of rental
operations
81,855
72,869
229,437
192,148
Costs of sales
29,241
24,618
59,737
50,021
Total costs of revenues
111,096
97,487
289,174
242,169
Gross profit
89,440
75,805
233,766
198,753
Selling and administrative expenses
44,095
39,907
124,010
109,305
Income from operations
45,345
35,898
109,756
89,448
Other expense:
Interest expense
(4,177
)
(3,168
)
(9,998
)
(7,208
)
Foreign currency exchange loss
(236
)
(128
)
(404
)
(185
)
Income before provision for income
taxes
40,932
32,602
99,354
82,055
Provision for income taxes
10,365
9,350
23,857
20,797
Net income
$
30,567
$
23,252
$
75,497
$
61,258
Earnings per share:
Basic
$
1.25
$
0.96
$
3.10
$
2.53
Diluted
$
1.25
$
0.95
$
3.08
$
2.50
Shares used in per share calculation:
Basic
24,379
24,245
24,342
24,209
Diluted
24,504
24,507
24,516
24,506
Cash dividends declared per share
$
0.455
$
0.435
$
1.365
$
1.305
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
September 30,
December 31,
(in
thousands)
2022
2021
Assets
Cash
$
1,561
$
1,491
Accounts receivable, net of allowance for
credit losses of $2,125 in 2022 and 2021
189,959
159,499
Rental equipment, at cost:
Relocatable modular buildings
1,085,060
1,040,094
Electronic test equipment
396,068
361,391
Liquid and solid containment tanks and
boxes
309,607
309,908
1,790,735
1,711,393
Less: accumulated depreciation
(690,913
)
(646,169
)
Rental equipment, net
1,099,822
1,065,224
Property, plant and equipment, net
139,203
135,325
Prepaid expenses and other assets
72,258
54,945
Intangible assets, net
42,607
47,049
Goodwill
132,305
132,393
Total assets
$
1,677,715
$
1,595,926
Liabilities and
Shareholders' Equity
Liabilities:
Notes payable
$
419,464
$
426,451
Accounts payable and accrued
liabilities
154,942
136,313
Deferred income
92,115
58,716
Deferred income taxes, net
238,126
242,425
Total liabilities
904,647
863,905
Shareholders’ equity:
Common stock, no par value - Authorized
40,000 shares
Issued and outstanding - 24,382 shares as
of September 30, 2022 and 24,260 shares as of December 31, 2021
107,463
108,610
Retained earnings
665,530
623,465
Accumulated other comprehensive income
(loss)
75
(54
)
Total shareholders’ equity
773,068
732,021
Total liabilities and shareholders’
equity
$
1,677,715
$
1,595,926
MCGRATH RENTCORP
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September
30,
(in
thousands)
2022
2021
Cash Flows from
Operating Activities:
Net income
$
75,497
$
61,258
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
83,272
79,047
Deferred income taxes
(4,299
)
15,403
Provision for doubtful accounts
307
193
Share-based compensation
5,106
5,302
Gain on sale of used rental equipment
(26,705
)
(17,788
)
Foreign currency exchange loss
404
185
Amortization of debt issuance costs
13
11
Change in:
Accounts receivable
(30,767
)
(33,471
)
Prepaid expenses and other assets
(17,313
)
(11,409
)
Accounts payable and accrued
liabilities
14,384
17,428
Deferred income
33,399
20,128
Net cash provided by operating
activities
133,298
136,287
Cash Flows from
Investing Activities:
Purchases of rental equipment
(130,395
)
(90,379
)
Purchases of property, plant and
equipment
(10,594
)
(969
)
Cash paid for acquisition of
businesses
—
(285,624
)
Proceeds from sales of used rental
equipment
54,193
41,556
Net cash used in investing activities
(86,796
)
(335,416
)
Cash Flows from
Financing Activities:
Net (payments) borrowings under bank lines
of credit
(7,000
)
176,758
Borrowings under note purchase
agreement
—
100,000
Principal payment of Series B senior
notes
—
(40,000
)
Taxes paid related to net share settlement
of stock awards
(6,253
)
(4,847
)
Payment of dividends
(33,175
)
(31,635
)
Net cash (used in) provided by financing
activities
(46,428
)
200,276
Effect of foreign currency exchange rate
changes on cash
(4
)
(5
)
Net increase in cash
70
1,142
Cash balance, beginning of period
1,491
1,238
Cash balance, end of period
$
1,561
$
2,380
Supplemental
Disclosure of Cash Flow Information:
Interest paid, during the period
$
8,982
$
6,477
Net income taxes paid, during the
period
$
24,885
$
8,074
Dividends accrued during the period, not
yet paid
$
11,167
$
10,002
Rental equipment acquisitions, not yet
paid
$
9,555
$
2,199
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Three months ended September 30,
2022
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
69,111
$
31,760
$
17,490
$
—
$
118,361
Rental related services
27,353
845
7,163
—
35,361
Rental operations
96,464
32,605
24,653
—
153,722
Sales
28,922
5,514
977
9,978
45,391
Other
452
408
563
—
1,423
Total revenues
125,838
38,527
26,193
9,978
200,536
Costs and
Expenses
Direct costs of rental operations:
Depreciation
7,747
12,427
4,002
—
24,176
Rental related services
19,973
603
5,395
—
25,971
Other
22,837
5,366
3,505
—
31,708
Total direct costs of rental
operations
50,557
18,396
12,902
—
81,855
Costs of sales
18,696
2,133
693
7,719
29,241
Total costs of revenues
69,253
20,529
13,595
7,719
111,096
Gross
Profit
Rental
38,527
13,967
9,983
—
62,477
Rental related services
7,380
242
1,768
—
9,390
Rental operations
45,907
14,209
11,751
—
71,867
Sales
10,226
3,381
284
2,259
16,150
Other
452
408
563
—
1,423
Total gross profit
56,585
17,998
12,598
2,259
89,440
Selling and administrative expenses
28,798
6,726
7,141
1,430
44,095
Income from operations
$
27,787
$
11,272
$
5,457
$
829
45,345
Interest expense
(4,177
)
Foreign currency exchange loss
(236
)
Provision for income taxes
(10,365
)
Net income
$
30,567
Other
Information
Adjusted EBITDA 1
$
39,734
$
23,894
$
10,192
$
900
$
74,720
Average rental equipment 2
$
1,030,792
$
389,675
$
307,153
Average monthly total yield 3
2.23
%
2.71
%
1.90
%
Average utilization 4
80.1
%
65.3
%
54.9
%
Average monthly rental rate 5
2.79
%
4.16
%
3.46
%
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization, non-cash impairment costs and share-based
compensation.
2.
Average rental equipment represents the
cost of rental equipment, excluding accessory equipment. For Mobile
Modular and Adler Tanks, Average rental equipment also excludes new
equipment inventory.
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 September 30,
2021
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
59,223
$
29,204
$
14,842
$
—
$
103,269
Rental related services
24,468
699
6,346
—
31,513
Rental operations
83,691
29,903
21,188
—
134,782
Sales
26,362
4,773
960
5,541
37,636
Other
341
398
135
—
874
Total revenues
110,394
35,074
22,283
5,541
173,292
Costs and
Expenses
Direct costs of rental operations:
Depreciation
7,544
12,151
4,107
—
23,802
Rental related services
18,508
663
5,185
—
24,356
Other
16,533
5,015
3,163
—
24,711
Total direct costs of rental
operations
42,585
17,829
12,455
—
72,869
Costs of sales
18,145
1,743
680
4,050
24,618
Total costs of revenues
60,730
19,572
13,135
4,050
97,487
Gross
Profit
Rental
35,146
12,038
7,572
—
54,756
Rental related services
5,960
36
1,161
—
7,157
Rental operations
41,106
12,074
8,733
—
61,913
Sales
8,217
3,030
280
1,491
13,018
Other
341
398
135
—
874
Total gross profit
49,664
15,502
9,148
1,491
75,805
Selling and administrative expenses
26,138
6,010
6,333
1,426
39,907
Income from operations
$
23,526
$
9,492
$
2,815
$
65
35,898
Interest expense
(3,168
)
Foreign currency exchange loss
(128
)
Provision for income taxes
(9,350
)
Net income
$
23,252
Other
Information
Adjusted EBITDA 1
$
36,160
$
21,967
$
7,708
$
128
$
65,963
Average rental equipment 2
$
975,119
$
362,104
$
311,876
Average monthly total yield 3
2.02
%
2.69
%
1.59
%
Average utilization 4
76.5
%
66.9
%
48.1
%
Average monthly rental rate 5
2.65
%
4.02
%
3.30
%
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization, non-cash impairment costs and share-based
compensation.
2.
Average rental equipment represents the
cost of rental equipment, excluding accessory equipment. For Mobile
Modular and Adler Tanks, Average rental equipment also excludes new
equipment inventory.
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)
Nine months ended September 30,
2022
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
195,598
$
89,990
$
47,638
$
—
$
333,226
Rental related services
66,947
2,329
19,221
—
88,497
Rental operations
262,545
92,319
66,859
—
421,723
Sales
64,113
15,845
2,235
15,545
97,738
Other
1,202
1,195
1,082
—
3,479
Total revenues
327,860
109,359
70,176
15,545
522,940
Costs and
Expenses
Direct costs of rental operations:
Depreciation
23,329
36,789
11,996
—
72,114
Rental related services
48,269
1,847
14,851
—
64,967
Other
67,072
15,501
9,783
—
92,356
Total direct costs of rental
operations
138,670
54,137
36,630
—
229,437
Costs of sales
39,785
6,398
1,613
11,941
59,737
Total costs of revenues
178,455
60,535
38,243
11,941
289,174
Gross
Profit
Rental
105,197
37,700
25,859
—
168,756
Rental related services
18,678
482
4,370
—
23,530
Rental operations
123,875
38,182
30,229
—
192,286
Sales
24,328
9,447
622
3,604
38,001
Other
1,202
1,195
1,082
—
3,479
Total gross profit
149,405
48,824
31,933
3,604
233,766
Selling and administrative expenses
79,245
19,930
20,642
4,193
124,010
Income (loss) from operations
$
70,160
$
28,894
$
11,291
$
(589
)
109,756
Interest expense
(9,998
)
Foreign currency exchange loss
(404
)
Provision for income taxes
(23,857
)
Net income
$
75,497
Other
Information
Adjusted EBITDA 1
$
105,912
$
66,675
$
25,520
$
(377
)
$
197,730
Average rental equipment 2
$
1,019,105
$
379,181
$
307,731
Average monthly total yield 3
2.13
%
2.63
%
1.72
%
Average utilization 4
78.5
%
64.8
%
51.7
%
Average monthly rental rate 5
2.72
%
4.07
%
3.33
%
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization, non-cash impairment costs and share-based
compensation.
2.
Average rental equipment represents the
cost of rental equipment, excluding accessory equipment. For Mobile
Modular and Adler Tanks, Average rental equipment also excludes new
equipment inventory.
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)
Nine months ended September 30,
2021
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
159,118
$
84,340
$
40,479
$
—
$
283,937
Rental related services
54,726
2,149
16,995
—
73,870
Rental operations
213,844
86,489
57,474
—
357,807
Sales
48,766
14,679
2,161
14,897
80,503
Other
1,004
1,292
316
—
2,612
Total revenues
263,614
102,460
59,951
14,897
440,922
Costs and
Expenses
Direct costs of rental operations:
Depreciation
20,437
35,429
12,350
—
68,216
Rental related services
40,384
2,061
13,791
—
56,236
Other
45,309
14,267
8,120
—
67,696
Total direct costs of rental
operations
106,130
51,757
34,261
—
192,148
Costs of sales
32,127
5,836
1,523
10,535
50,021
Total costs of revenues
138,257
57,593
35,784
10,535
242,169
Gross
Profit
Rental
93,373
34,643
20,009
—
148,025
Rental related services
14,340
90
3,204
—
17,634
Rental operations
107,713
34,733
23,213
—
165,659
Sales
16,640
8,842
638
4,362
30,482
Other
1,004
1,292
316
—
2,612
Total gross profit
125,357
44,867
24,167
4,362
198,753
Selling and administrative expenses
67,977
18,381
18,853
4,094
109,305
Income from operations
$
57,380
$
26,486
$
5,314
$
268
89,448
Interest expense
(7,208
)
Foreign currency exchange loss
(185
)
Provision for income taxes
(20,797
)
Net income
$
61,258
Other
Information
Adjusted EBITDA 1
$
89,634
$
63,378
$
20,144
$
456
$
173,612
Average rental equipment 2
$
906,633
$
348,749
$
312,928
Average monthly total yield 3
1.95
%
2.69
%
1.44
%
Average utilization 4
76.0
%
67.4
%
44.0
%
Average monthly rental rate 5
2.57
%
3.98
%
3.26
%
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization, non-cash impairment costs and share-based
compensation.
2.
Average rental equipment represents the
cost of rental equipment, excluding accessory equipment. For Mobile
Modular and Adler Tanks, Average rental equipment also excludes new
equipment inventory.
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 and share-based compensation. 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, 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. 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 Net Income to
Adjusted EBITDA
(dollar amounts in
thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
Twelve Months Ended September
30,
2022
2021
2022
2021
2022
2021
Net income
$
30,567
$
23,252
$
75,497
$
61,258
$
103,944
$
92,433
Provision for income taxes
10,365
9,350
23,857
20,797
35,111
28,931
Interest expense
4,177
3,168
9,998
7,208
13,245
9,191
Depreciation and amortization
27,917
28,488
83,272
79,047
110,920
102,441
EBITDA
73,026
64,258
192,624
168,310
263,220
232,996
Share-based compensation
1,694
1,705
5,106
5,302
7,470
5,957
Adjusted EBITDA 1
$
74,720
$
65,963
$
197,730
$
173,612
$
270,690
$
238,953
Adjusted EBITDA margin 2
37
%
38
%
38
%
39
%
39
%
41
%
Reconciliation of Adjusted EBITDA to
Net Cash Provided by Operating Activities
(dollar amounts in
thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
Twelve Months Ended September
30,
2022
2021
2022
2021
2022
2021
Adjusted EBITDA 1
$
74,720
$
65,963
$
197,730
$
173,612
$
270,690
$
238,953
Interest paid
(3,161
)
(2,490
)
(8,982
)
(6,477
)
(12,831
)
(8,698
)
Income taxes paid, net of refunds
received
(7,807
)
(1,084
)
(24,885
)
(8,074
)
(25,898
)
(18,273
)
Gain on sale of used rental equipment
(10,612
)
(5,918
)
(26,705
)
(17,788
)
(34,358
)
(23,007
)
Foreign currency exchange loss (gain)
236
128
404
185
429
(82
)
Amortization of debt issuance costs
4
5
13
11
17
14
Change in certain assets and
liabilities:
Accounts receivable, net
(22,630
)
(27,922
)
(30,460
)
(33,278
)
(21,128
)
(27,161
)
Prepaid expenses and other assets
(6,458
)
(2,024
)
(17,313
)
(11,409
)
(12,720
)
(6,288
)
Accounts payable and other liabilities
12,399
(1,023
)
10,097
19,377
6,201
22,248
Deferred income
14,564
12,670
33,399
20,128
22,353
7,548
Net cash provided by operating
activities
$
51,255
$
38,305
$
133,298
$
136,287
$
192,755
$
185,254
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization and share-based compensation.
2.
Adjusted EBITDA Margin is calculated as
Adjusted EBITDA divided by total revenues for the period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026006087/en/
Keith E. Pratt EVP & Chief Financial Officer
925-606-9200
McGrath RentCorp (NASDAQ:MGRC)
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