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
December 31, 2022 of $210.9 million, an increase of 20%, compared
to the fourth quarter of 2021. The Company reported net income of
$39.6 million, or $1.62 per diluted share, for the fourth quarter
of 2022, compared to net income of $28.4 million, or $1.16 per
diluted share, for the fourth quarter of 2021.
Total revenues for the year ended December 31, 2022 increased to
$733.8 million from $616.8 million in 2021, with adjusted EBITDA
increasing $40.2 million, or 16%, to $288.9 million. Net income for
the year ended December 31, 2022 was $115.1 million, or $4.70 per
diluted share, compared to $89.7 million, or $3.66 per diluted
share, in 2021.
The Company also announced that the board of directors declared
a cash dividend of $0.465 per share for the upcoming quarter ending
March 31, 2023, a quarterly increase of $0.01, or 2%, over the
prior year period. The cash dividend will be payable on April 28,
2023 to all shareholders of record on April 14, 2023. This marks 32
consecutive years the Company has increased its annual
dividend.
FOURTH QUARTER 2022 YEAR-OVER-YEAR COMPANY
HIGHLIGHTS:
- Rental revenues increased 16% to $122.8 million.
- Total revenues increased 20% to $210.9 million.
- Adjusted EBITDA1 increased 23% to $91.0 million.
- Dividend rate of $0.455 per share for the fourth quarter
of 2022. On an annualized basis, this dividend represents a 1.7%
yield on the February 21, 2023 close price of $105.86 per
share.
Joe Hanna, President and CEO of McGrath, made the following
comments regarding these results and future expectations:
“We delivered strong fourth quarter results. Our 20% 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
18%, reflecting strong organic growth from modular operations. Our
initiatives to grow modular sales also showed progress as sales
revenues increased by 77% compared to a year ago. Rental revenue
growth was also strong at TRS-RenTelco and Adler Tanks, which grew
8% and 20%, respectively.
I am very proud of everything we accomplished in 2022. Our full
year revenue and profit growth reflects a diligent focus on
execution as we made the most of healthy market conditions across
each of our segments. We pursued our strategic growth focus on the
modular segment with significant organic investment in new fleet,
while managing pricing to higher rates and improving fleet
utilization. We also made progress with our modular growth
initiatives for additional services and new equipment sales. In
addition to our operational accomplishments, we continued our
strategic work to explore options to accelerate and strengthen our
long-term growth momentum. This work culminated in the Vesta
Modular acquisition and Adler divestiture, which we announced on
February 1, 2023.
Looking forward to 2023, I believe we will continue to make
progress in expanding our businesses. We will maintain our focus on
disciplined operational execution, while also working on the
successful integration of Vesta. Demand conditions continue to be
healthy and we are well positioned for further business growth in
2023.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended
December 31, 2022 to the quarter ended December 31, 2021 unless
otherwise indicated.
MOBILE MODULAR
For the fourth quarter of 2022, the Company’s Mobile Modular
division reported income from operations of $36.8 million, an
increase of $10.7 million, or 41%, with Adjusted EBITDA increasing
$14.0 million, or 36%, to $53.1 million. Rental revenues increased
18% to $72.7 million, depreciation expense increased 3% to $7.8
million and other direct costs increased 6% to $16.0 million, which
resulted in an increase in gross profit on rental revenues of 26%
to $48.9 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 41% to $24.9 million, primarily attributable to higher
delivery and pick up activities for both modular buildings and
portable storage containers with associated gross profit increasing
39% to $6.9 million. Sales revenues increased 77% to $35.9 million,
primarily from higher used and new equipment sales. Gross margin on
sales was 32% compared to 33% in 2021, resulting in a 76% increase
in gross profit on sales revenues to $11.6 million. Selling and
administrative expenses increased 26% to $31.0 million, primarily
due to $3.7 million higher allocated corporate expenses and $2.2
million increased marketing and administrative costs.
TRS-RENTELCO
For the fourth quarter of 2022, the Company’s TRS-RenTelco
division reported income from operations of $11.8 million, an
increase of $2.0 million, or 21%, with Adjusted EBITDA increasing
$3.0 million, or 13%, to $25.3 million. Rental revenues increased
8% to $31.4 million, depreciation expense increased 4% to $12.5
million and other direct costs increased 19% to $5.8 million, which
resulted in a 7% increase in gross profit on rental revenues to
$13.1 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 15% to $8.7
million and gross profit on sales revenues increased 42% to $5.4
million. Selling and administrative expenses increased 8% to $7.3
million, primarily due to higher allocated corporate expenses.
ADLER TANKS
For the fourth quarter of 2022, the Company’s Adler Tanks
division reported income from operations of $7.0 million, an
increase of $4.1 million, with Adjusted EBITDA increasing $4.3
million, or 55%, to $12.1 million. Rental revenues increased $3.2
million, or 20%, to $18.7 million, depreciation expense decreased
2% to $4.0 million and other direct costs decreased 22% to $2.6
million, which resulted in an increased gross profit on rental
revenues of 49%, to $12.1 million. The rental revenue increase was
broad-based across regions and vertical markets served. Rental
related services revenues increased 44% to $8.4 million, with gross
profit on rental related services increasing $1.2 million to $2.3
million, compared to $1.1 million in the fourth quarter of 2021.
Selling and administrative expenses increased 16% to $7.8 million
primarily due to higher allocated corporate expenses and higher
employee salaries and benefit costs.
FINANCIAL OUTLOOK:
For the full-year 2023, the Company expects:
2023
Outlook
2022
Actual
●
Total revenue:
$780 to $810 million
$734 million
●
Adjusted EBITDA1, 2:
$294 to $309 million
$289 million
●
Gross rental equipment capital
expenditures:
$190 to $210 million
$188 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.
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 January 19,
2023, McGrath RentCorp will host a conference call at 5:00 p.m.
Eastern Time (2:00 p.m. Pacific Time) on February 22, 2023 to
discuss the fourth 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 making progress to expand the Company's businesses in 2023,
the Company's strategic focus to explore options to accelerate and
strengthen long-term growth, healthy demand conditions and being
well positioned for further business growth in 2023, the successful
integration of Vesta, as well as the 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: the continued economic impact of the COVID-19
pandemic; the health of the education and commercial markets in our
modular building division; unforeseen liabilities and integration
challenges associated with the Vesta acquisition; 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 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 December
31,
Twelve Months Ended December
31,
(in thousands,
except per share amounts)
2022
2021
2022
2021
Revenues
Rental
$
122,803
$
106,076
$
456,029
$
390,013
Rental related services
34,120
24,191
122,617
98,061
Rental operations
156,923
130,267
578,646
488,074
Sales
52,915
44,732
150,653
125,235
Other
1,045
912
4,524
3,524
Total revenues
210,883
175,911
733,823
616,833
Costs and
Expenses
Direct costs of rental operations:
Depreciation of rental equipment
24,315
23,671
96,429
91,887
Rental related services
24,826
18,020
89,793
74,256
Other
24,424
23,373
116,780
91,069
Total direct costs of rental
operations
73,565
65,064
303,002
257,212
Costs of sales
34,176
28,579
93,913
78,600
Total costs of revenues
107,741
93,643
396,915
335,812
Gross profit
103,142
82,268
336,908
281,021
Selling and administrative expenses
47,332
39,295
171,342
148,600
Income from operations
55,810
42,973
165,566
132,421
Other (expense) income:
Interest expense
(5,170
)
(3,247
)
(15,168
)
(10,455
)
Foreign currency exchange (loss) gain
26
(25
)
(378
)
(210
)
Income before provision for income
taxes
50,666
39,701
150,020
121,756
Provision for income taxes
11,025
11,254
34,882
32,051
Net income
$
39,641
$
28,447
$
115,138
$
89,705
Earnings per share:
Basic
$
1.63
$
1.17
$
4.73
$
3.70
Diluted
$
1.62
$
1.16
$
4.70
$
3.66
Shares used in per share calculation:
Basic
24,384
24,252
24,353
24,220
Diluted
24,527
24,537
24,519
24,515
Cash dividends declared per share
$
0.455
$
0.435
$
1.82
$
1.74
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
December 31,
(in
thousands)
2022
2021
Assets
Cash
$
957
$
1,491
Accounts receivable, net of allowance for
credit losses of $2,300 in 2022 and $2,125 in 2021
190,023
159,499
Rental equipment, at cost:
Relocatable modular buildings
1,123,268
1,040,094
Electronic test equipment
398,267
361,391
Liquid and solid containment tanks and
boxes
308,396
309,908
1,829,931
1,711,393
Less: accumulated depreciation
(701,877
)
(646,169
)
Rental equipment, net
1,128,054
1,065,224
Property, plant and equipment, net
143,945
135,325
Prepaid expenses and other assets
71,429
54,945
Intangible assets, net
41,131
47,049
Goodwill
132,305
132,393
Total assets
$
1,707,844
$
1,595,926
Liabilities and
Shareholders' Equity
Liabilities:
Notes payable
$
413,742
$
426,451
Accounts payable and accrued
liabilities
160,829
136,313
Deferred income
82,417
58,716
Deferred income taxes, net
246,911
242,425
Total liabilities
903,899
863,905
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock, no par value - Authorized
40,000 shares
Issued and outstanding - 24,388 shares as
of December 31, 2022 and 24,260 shares as of December 31, 2021
110,080
108,610
Retained earnings
693,943
623,465
Accumulated other comprehensive loss
(78
)
(54
)
Total shareholders’ equity
803,945
732,021
Total liabilities and shareholders’
equity
$
1,707,844
$
1,595,926
MCGRATH RENTCORP
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended December
31,
(in
thousands)
2022
2021
Cash Flows from
Operating Activities:
Net income
$
115,138
$
89,704
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
111,344
106,695
Deferred income taxes
4,486
26,348
Provision for credit losses
837
451
Share-based compensation
8,009
7,666
Gain on sale of used rental equipment
(37,979
)
(25,441
)
Foreign currency exchange loss
378
210
Amortization of debt issuance costs
16
15
Change in:
Accounts receivable
(31,361
)
(24,397
)
Prepaid expenses and other assets
(16,484
)
(6,816
)
Accounts payable and accrued
liabilities
16,347
12,226
Deferred income
23,701
9,082
Net cash provided by operating
activities
194,432
195,743
Cash Flows from
Investing Activities:
Purchases of rental equipment
(187,689
)
(114,145
)
Purchases of property, plant and
equipment
(17,617
)
(2,680
)
Cash paid for acquisition of
businesses
—
(283,124
)
Cash paid for acquisition of Titan
business assets
—
(6,585
)
Cash paid for acquisition of non-compete
agreements
—
(2,500
)
Proceeds from sales of used rental
equipment
73,879
57,337
Net cash used in investing activities
(131,427
)
(351,696
)
Cash Flows from
Financing Activities:
Net borrowings borrowings under bank lines
of credit
47,275
143,729
Borrowings under note purchase
agreement
—
100,000
Principal payment of Series C senior
notes
(60,000
)
—
Principal payment of Series B senior
notes
—
(40,000
)
Taxes paid related to net share settlement
of stock awards
(6,539
)
(5,345
)
Payment of dividends
(44,269
)
(42,182
)
Net cash (used in) provided by financing
activities
(63,533
)
156,202
Effect of foreign currency exchange rate
changes on cash
(6
)
4
Net (decrease) increase in cash
(534
)
253
Cash balance, beginning of period
1,491
1,238
Cash balance, end of period
$
957
$
1,491
Supplemental
Disclosure of Cash Flow Information:
Interest paid, during the period
$
14,775
$
10,326
Net income taxes paid, during the
period
$
27,362
$
9,087
Dividends accrued during the period, not
yet paid
$
11,227
$
11,280
Rental equipment acquisitions, not yet
paid
$
13,220
$
5,750
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Three months ended December 31,
2022
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
72,690
$
31,385
$
18,728
$
—
$
122,803
Rental related services
24,904
783
8,433
—
34,120
Rental operations
97,594
32,168
27,161
—
156,923
Sales
35,866
8,726
698
7,625
52,915
Other
397
525
123
—
1,045
Total revenues
133,857
41,419
27,982
7,625
210,883
Costs and
Expenses
Direct costs of rental operations:
Depreciation
7,843
12,464
4,008
—
24,315
Rental related services
17,985
745
6,096
—
24,826
Other
15,959
5,826
2,639
—
24,424
Total direct costs of rental
operations
41,787
19,035
12,743
—
73,565
Costs of sales
24,288
3,309
472
6,107
34,176
Total costs of revenues
66,075
22,344
13,215
6,107
107,741
Gross
Profit
Rental
48,888
13,095
12,081
—
74,064
Rental related services
6,919
38
2,337
—
9,294
Rental operations
55,807
13,133
14,418
—
83,358
Sales
11,578
5,417
226
1,518
18,739
Other
397
525
123
—
1,045
Total gross profit
67,782
19,075
14,767
1,518
103,142
Selling and administrative expenses
30,989
7,315
7,786
1,242
47,332
Income from operations
$
36,793
$
11,760
$
6,981
$
276
$
55,810
Interest expense
(5,170
)
Foreign currency exchange gain
26
Provision for income taxes
(11,025
)
Net income
$
39,641
Other
Information
Adjusted EBITDA 1
$
53,145
$
25,333
$
12,140
$
351
$
90,969
Average rental equipment 2
$
1,044,751
$
395,789
$
307,398
Average monthly total yield 3
2.32
%
2.63
%
2.03
%
Average utilization 4
81.2
%
63.0
%
58.0
%
Average monthly rental rate 5
2.86
%
4.20
%
3.50
%
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. During the year ended December 31, 2022, the
calculation for Adjusted EBITDA was adjusted to include one-time
transaction costs attributed to acquisition, divestiture and
integration related activities. For comparability, the transaction
costs incurred during 2021 were included in the Adjusted EBITDA
calculation for the year ended December 31, 2021.
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 December 31,
2021
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
61,451
$
29,079
$
15,546
$
—
$
106,076
Rental related services
17,604
731
5,856
—
24,191
Rental operations
79,055
29,810
21,402
—
130,267
Sales
20,216
7,563
769
16,184
44,732
Other
431
361
120
—
912
Total revenues
99,702
37,734
22,291
16,184
175,911
Costs and
Expenses
Direct costs of rental operations:
Depreciation
7,634
11,945
4,092
—
23,671
Rental related services
12,634
643
4,743
—
18,020
Other
15,120
4,881
3,372
—
23,373
Total direct costs of rental
operations
35,388
17,469
12,207
—
65,064
Costs of sales
13,631
3,738
552
10,658
28,579
Total costs of revenues
49,019
21,207
12,759
10,658
93,643
Gross
Profit
Rental
38,697
12,253
8,082
—
59,032
Rental related services
4,970
88
1,113
—
6,171
Rental operations
43,667
12,341
9,195
—
65,203
Sales
6,585
3,825
217
5,526
16,153
Other
431
361
120
—
912
Total gross profit
50,683
16,527
9,532
5,526
82,268
Selling and administrative expenses
24,627
6,770
6,689
1,209
39,295
Income from operations
$
26,056
$
9,757
$
2,843
$
4,317
42,973
Interest expense
(3,247
)
Foreign currency exchange loss
(25
)
Provision for income taxes
(11,254
)
Net income
$
28,447
Other
Information
Adjusted EBITDA 1
$
39,144
$
22,345
$
7,817
$
4,386
$
73,692
Average rental equipment 2
$
988,067
$
362,760
$
309,841
Average monthly total yield 3
2.07
%
2.67
%
1.67
%
Average utilization 4
76.9
%
65.9
%
50.1
%
Average monthly rental rate 5
2.70
%
4.05
%
3.34
%
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. During the year ended December 31, 2022, the
calculation for Adjusted EBITDA was adjusted to include one-time
transaction costs attributed to acquisition, divestiture and
integration related activities. For comparability, the transaction
costs incurred during 2021 were included in the Adjusted EBITDA
calculation for the year ended December 31, 2021.
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)
Twelve months ended December 31,
2022
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
268,288
$
121,375
$
66,366
$
—
$
456,029
Rental related services
91,851
3,112
27,654
—
122,617
Rental operations
360,139
124,487
94,020
—
578,646
Sales
99,979
24,571
2,933
23,170
150,653
Other
1,599
1,720
1,205
—
4,524
Total revenues
461,717
150,778
98,158
23,170
733,823
Costs and
Expenses
Direct costs of rental operations:
Depreciation
31,172
49,253
16,004
—
96,429
Rental related services
66,254
2,592
20,947
—
89,793
Other
83,031
21,327
12,422
—
116,780
Total direct costs of rental
operations
180,457
73,172
49,373
—
303,002
Costs of sales
64,073
9,707
2,085
18,048
93,913
Total costs of revenues
244,530
82,879
51,458
18,048
396,915
Gross
Profit
Rental
154,085
50,795
37,940
—
242,820
Rental related services
25,597
520
6,707
—
32,824
Rental operations
179,682
51,315
44,647
—
275,644
Sales
35,906
14,864
848
5,122
56,740
Other
1,599
1,720
1,205
—
4,524
Total gross profit
217,187
67,899
46,700
5,122
336,908
Selling and administrative expenses
110,234
27,245
28,428
5,435
171,342
Income (loss) from operations
$
106,953
$
40,654
$
18,272
$
(313
)
$
165,566
Interest expense
(15,168
)
Foreign currency exchange loss
(378
)
Provision for income taxes
(34,882
)
Net income
$
115,138
Other
Information
Adjusted EBITDA 1
$
159,224
$
92,007
$
37,660
$
(25
)
$
288,866
Average rental equipment 2
$
1,025,637
$
383,235
$
307,651
Average monthly total yield 3
2.18
%
2.63
%
1.80
%
Average utilization 4
79.1
%
64.2
%
53.1
%
Average monthly rental rate 5
2.75
%
4.11
%
3.38
%
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. During the year ended December 31, 2022, the
calculation for Adjusted EBITDA was adjusted to include one-time
transaction costs attributed to acquisition, divestiture and
integration related activities. For comparability, the transaction
costs incurred during 2021 were included in the Adjusted EBITDA
calculation for the year ended December 31, 2021.
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)
Twelve months ended December 31,
2021
(dollar amounts in
thousands)
Mobile Modular
TRS- RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
220,569
$
113,419
$
56,025
$
—
$
390,013
Rental related services
72,330
2,880
22,851
—
98,061
Rental operations
292,899
116,299
78,876
—
488,074
Sales
68,982
22,242
2,930
31,081
125,235
Other
1,435
1,653
436
—
3,524
Total revenues
363,316
140,194
82,242
31,081
616,833
Costs and
Expenses
Direct costs of rental operations:
Depreciation
28,071
47,374
16,442
—
91,887
Rental related services
53,018
2,704
18,534
—
74,256
Other
60,429
19,148
11,492
—
91,069
Total direct costs of rental
operations
141,518
69,226
46,468
—
257,212
Costs of sales
45,758
9,574
2,075
21,193
78,600
Total costs of revenues
187,276
78,800
48,543
21,193
335,812
Gross
Profit
Rental
132,070
46,897
28,091
—
207,058
Rental related services
19,310
176
4,317
—
23,803
Rental operations
151,380
47,073
32,408
—
230,861
Sales
23,225
12,667
855
9,888
46,635
Other
1,435
1,653
436
—
3,524
Total gross profit
176,040
61,394
33,699
9,888
281,021
Selling and administrative expenses
92,603
25,152
25,542
5,303
148,600
Income from operations
$
83,436
$
36,243
$
8,157
$
4,585
$
132,421
Interest expense
(10,455
)
Foreign currency exchange loss
(210
)
Provision for income taxes
(32,051
)
Net income
$
89,705
Other
Information
Adjusted EBITDA 1
$
130,089
$
85,723
$
27,961
$
4,844
$
248,617
Average rental equipment 2
$
925,951
$
351,895
$
312,150
Average monthly total yield 3
1.99
%
2.69
%
1.50
%
Average utilization 4
76.2
%
67.0
%
45.4
%
Average monthly rental rate 5
2.61
%
4.01
%
3.29
%
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. During the year ended December 31, 2022, the
calculation for Adjusted EBITDA was adjusted to include one-time
transaction costs attributed to acquisition, divestiture and
integration related activities. For comparability, the transaction
costs incurred during 2021 were included in the Adjusted EBITDA
calculation for the year ended December 31, 2021.
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, 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 Net Income to
Adjusted EBITDA
(dollar amounts in
thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Net income
$
39,641
$
28,447
$
115,138
$
89,705
Provision for income taxes
11,025
11,254
34,882
32,051
Interest expense
5,170
3,247
15,168
10,455
Depreciation and amortization
28,072
27,648
111,344
106,695
EBITDA
83,908
70,596
276,532
238,906
Share-based compensation
2,903
2,364
8,009
7,666
Transaction costs 3
4,158
732
4,325
2,045
Adjusted EBITDA 1
$
90,969
$
73,692
$
288,866
$
248,617
Adjusted EBITDA margin 2
43
%
41
%
39
%
40
%
Reconciliation of Adjusted EBITDA to
Net Cash Provided by Operating Activities
(dollar amounts in
thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Adjusted EBITDA 1
$
90,969
$
73,692
$
288,866
$
248,617
Interest paid
(5,793
)
(3,849
)
(14,775
)
(10,326
)
Income taxes paid, net of refunds
received
(2,477
)
(1,013
)
(27,362
)
(9,087
)
Gain on sale of used rental equipment
(11,274
)
(7,653
)
(37,979
)
(25,441
)
Foreign currency exchange (gain) loss
(26
)
25
378
210
Amortization of debt issuance costs
3
4
16
15
Change in certain assets and
liabilities:
Accounts receivable, net
(64
)
9,332
(30,524
)
(23,946
)
Prepaid expenses and other assets
829
4,593
(16,484
)
(6,816
)
Accounts payable and other liabilities
(1,335
)
(4,628
)
8,595
13,435
Deferred income
(9,698
)
(11,046
)
23,701
9,082
Net cash provided by operating
activities
$
61,134
$
59,457
$
194,432
$
195,743
1.
Adjusted EBITDA is defined as net income
before interest expense, provision for income taxes, depreciation,
amortization, share-based compensation and transaction costs.
During the year ended December 31, 2022, the calculation for
Adjusted EBITDA was adjusted to include one-time transaction costs
attributed to acquisition, divestiture and integration related
activities. For comparability, the transaction costs incurred
during 2021 were included in the Adjusted EBITDA calculation for
the year ended December 31, 2021.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230221005895/en/
Keith E. Pratt EVP & Chief Financial Officer
925-606-9200
McGrath RentCorp (NASDAQ:MGRC)
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