McGrath RentCorp Announces Results for Second Quarter 2022

July 28, 2022 at 16:01 PM EDT

McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2022 of $177.0 million, an increase of 21%, compared to the second quarter of 2021. The Company reported net income of $26.1 million, or $1.07 per diluted share, for the second quarter of 2022, compared to net income of $20.6 million, or $0.84 per diluted share, for the second quarter of 2021.

SECOND QUARTER 2022 YEAR-OVER-YEAR COMPANY HIGHLIGHTS:

Rental revenues increased 17% to $110.6 million.
Total revenues increased 21% to $177.0 million.
Adjusted EBITDA¹ increased 13% to $66.3 million.
Dividend rate increased 5% to $0.455 per share for the second quarter of 2022. On an annualized basis, this dividend represents a 2.2% yield on the July 27, 2022 close price of $81.18 per share.

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

“We were very pleased with our second quarter results. Our 21% growth in total company revenues was a result of strong performance in both rental operations and sales revenues. Demand was healthy across each of our rental segments. Mobile Modular rental revenues grew 22%, with approximately half of the growth attributable to our Design Space and Titan Storage Container acquisitions. Excluding the acquisitions, the modular segment rental revenues grew by 11%. Rental revenue growth was also strong at TRS-RenTelco and Adler Tanks, which grew 7% and 18%, respectively.

Mobile Modular saw broad-based strength across our commercial, education and portable storage customer bases. We responded to this strong rental demand with increased capital spending to organically grow our fleet to capture growth opportunities, while also improving overall fleet utilization and increasing pricing. Operating expenses were elevated as we continued to spend robustly to prepare modular equipment for rent as we enter what is typically our busiest time of year for new project shipments. Our initiatives to also grow modular sales showed progress as sales revenues increased by 68% compared to a year ago.

At TRS-RenTelco and Adler Tanks the positive trends we experienced earlier this year continued in the second 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.

We have delivered strong performance in the first half of the year, and we have entered the second half with good momentum across the business. As a result, we have increased our financial outlook for the full year.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2022 to the quarter ended June 30, 2021 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2022, the Company’s Mobile Modular division reported income from operations of $23.9 million, an increase of $5.8 million, or 32%, with Adjusted EBITDA increasing $6.3 million, or 21%, to $35.8 million. Rental revenues increased 22% to $64.9 million, depreciation expense increased 10% to $7.7 million and other direct costs increased 51% to $24.1 million, which resulted in an increase in gross profit on rental revenues of 9% to $33.1 million. The rental revenue increase reflects the 2021 Design Space and Titan Storage Containers customers that contributed approximately one half of the increase. Rental related services revenues increased 31% to $21.2 million, primarily attributable to higher delivery and pick up activities, and higher site related and other services performed during the lease with associated gross profit increasing 39% to $6.1 million. Sales revenues increased 68% to $24.8 million, from both higher used and new equipment sales. Gross margin on sales was 41% compared to 39% in 2021, resulting in a 75% increase in gross profit on sales revenues to $10.1 million. Selling and administrative expenses increased 14% to $25.8 million, primarily due to increased employee salaries and benefit costs totaling $1.5 million reflecting the addition of Design Space employees, and $1.3 million higher allocated corporate expenses.

TRS-RENTELCO

For the second quarter of 2022, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $1.0 million, or 12%, with Adjusted EBITDA increasing $1.1 million, or 5%, to $22.1 million. Rental revenues increased 7% to $29.7 million, depreciation expense increased 3% to $12.3 million and other direct costs increased 15% to $5.4 million, which resulted in a 6% increase in gross profit on rental revenues to $11.9 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 35% to $6.4 million and gross profit on sales revenues increased 23% to $3.6 million. Selling and administrative expenses increased 9% to $6.6 million, primarily due to higher employees’ salaries and benefit costs.

ADLER TANKS

For the second quarter of 2022, the Company’s Adler Tanks division reported income from operations of $3.9 million, an increase of $2.2 million, with Adjusted EBITDA increasing $1.9 million, or 28%, to $8.6 million. Rental revenues increased $2.5 million, or 18%, to $16.0 million, depreciation expense decreased 4% to $4.0 million and other direct costs increased 24% to $3.3 million, which resulted in an increased gross profit on rental revenues of 30%, to $8.7 million. The rental revenue increase was broad based across regions and vertical markets served. Rental related services revenues increased 17% to $6.8 million, with gross profit on rental related services increasing 63%, to $1.7 million. Selling and administrative expenses increased 12% to $7.0 million primarily due to higher employees’ 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:	$675 million to $705 million	$695 million to $720 million
Adjusted EBITDA^{1, 2}:	$260 million to $275 million	$266 million to $276 million
Gross rental equipment capital expenditures:	$117 million to $127 million	$145 million to $155 million

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.
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 RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com

Modular Buildings – www.mobilemodular.com

Electronic Test Equipment – www.trsrentelco.com

Tanks and Boxes – www.adlertankrentals.com

Portable Storage – www.mobilemodularcontainers.com

School Facilities Manufacturing – www.enviroplex.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 June 30, 2022, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 28, 2022 to discuss the second quarter 2022 results. To participate in the teleconference, dial 1-800-445-7795 (in the U.S.), or 1-203-518-9848 (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 1-800-839-6975 (in the U.S.), or 1-402-220-6061 (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 spending robustly to prepare modular equipment for rent and the expectation of demand in the following quarter due to seasonality, 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 the 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 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 June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2022			2021			2022			2021
Revenues
Rental	$	110,624		$	94,581		$	214,865		$	180,668
Rental related services		28,819			22,688			53,136			42,357
Rental operations		139,443			117,269			268,001			223,025
Sales		36,471			28,256			52,347			42,867
Other		1,117			910			2,056			1,738
Total revenues		177,031			146,435			322,404			267,630
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		24,064			23,159			47,938			44,414
Rental related services		20,853			17,276			38,996			31,880
Other		32,825			23,278			60,648			42,985
Total direct costs of rental operations		77,742			63,713			147,582			119,279
Costs of sales		21,452			16,855			30,496			25,403
Total costs of revenues		99,194			80,568			178,078			144,682
Gross profit		77,837			65,867			144,326			122,948
Selling and administrative expenses		40,788			36,261			79,915			69,398
Income from operations		37,049			29,606			64,411			53,550
Other expense:
Interest expense		(3,001	)		(2,257	)		(5,821	)		(4,040	)
Foreign currency exchange loss		(181	)		(2	)		(168	)		(57	)
Income before provision for income taxes		33,867			27,347			58,422			49,453
Provision for income taxes		7,730			6,739			13,492			11,447
Net income	$	26,137		$	20,608		$	44,930		$	38,006
Earnings per share:
Basic	$	1.07		$	0.85		$	1.85		$	1.57
Diluted	$	1.07		$	0.84		$	1.83		$	1.55
Shares used in per share calculation:
Basic		24,360			24,229			24,323			24,191
Diluted		24,509			24,494			24,522			24,505
Cash dividends declared per share	$	0.455		$	0.435		$	0.910		$	0.870

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	June 30,			December 31,
(in thousands)	2022			2021
Assets
Cash	$	874		$	1,491
Accounts receivable, net of allowance for credit losses of $2,125 in 2022 and 2021		167,329			159,499
Rental equipment, at cost:
Relocatable modular buildings		1,075,898			1,040,094
Electronic test equipment		389,383			361,391
Liquid and solid containment tanks and boxes		309,010			309,908
		1,774,291			1,711,393
Less: accumulated depreciation		(676,766	)		(646,169	)
Rental equipment, net		1,097,525			1,065,224
Property, plant and equipment, net		137,465			135,325
Prepaid expenses and other assets		65,800			54,945
Intangible assets, net		44,086			47,049
Goodwill		132,305			132,393
Total assets	$	1,645,384		$	1,595,926
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	441,460		$	426,451
Accounts payable and accrued liabilities		137,729			136,313
Deferred income		77,551			58,716
Deferred income taxes, net		236,610			242,425
Total liabilities		893,350			863,905
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,378 shares as of June 30, 2022 and 24,260 shares as of December 31, 2021		105,894			108,610
Retained earnings		646,130			623,465
Accumulated other comprehensive income (loss)		10			(54	)
Total shareholders’ equity		752,034			732,021
Total liabilities and shareholders’ equity	$	1,645,384		$	1,595,926

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	Six Months Ended June 30,
(in thousands)	2022			2021
Cash Flows from Operating Activities:
Net income	$	44,930		$	38,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		55,355			50,559
Deferred income taxes		(5,815	)		7,268
Provision for doubtful accounts		49			138
Share-based compensation		3,412			3,597
Gain on sale of used rental equipment		(16,093	)		(11,870	)
Foreign currency exchange loss		168			57
Amortization of debt issuance costs		9			6
Change in:
Accounts receivable		(7,879	)		(5,494	)
Prepaid expenses and other assets		(10,855	)		(9,385	)
Accounts payable and accrued liabilities		(73	)		17,642
Deferred income		18,835			7,458
Net cash provided by operating activities		82,043			97,982
Cash Flows from Investing Activities:
Purchases of rental equipment		(94,820	)		(58,902	)
Purchases of property, plant and equipment		(6,594	)		(2,272	)
Cash paid for acquisition of businesses		—			(284,341	)
Proceeds from sales of used rental equipment		31,830			24,674
Net cash used in investing activities		(69,584	)		(320,841	)
Cash Flows from Financing Activities:
Net borrowings under bank lines of credit		15,000			189,983
Borrowings under note purchase agreement		—			60,000
Taxes paid related to net share settlement of stock awards		(6,128	)		(4,828	)
Payment of dividends		(22,083	)		(21,089	)
Net cash (used in) provided by financing activities		(13,211	)		224,066
Effect of foreign currency exchange rate changes on cash		135			(33	)
Net (decrease) increase in cash		(617	)		1,174
Cash balance, beginning of period		1,491			1,238
Cash balance, end of period	$	874		$	2,412
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period	$	5,821		$	3,987
Net income taxes paid, during the period	$	17,078		$	6,990
Dividends accrued during the period, not yet paid	$	11,009		$	9,918
Rental equipment acquisitions, not yet paid	$	6,906		$	8,502

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2022
(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex			Consolidated
Revenues
Rental	$	64,949		$	29,718		$	15,957		$	—		$	110,624
Rental related services		21,233			813			6,773			—			28,819
Rental operations		86,182			30,531			22,730			—			139,443
Sales		24,816			6,404			601			4,650			36,471
Other		379			406			332			—			1,117
Total revenues		111,377			37,341			23,663			4,650			177,031

Costs and Expenses
Direct costs of rental operations:
Depreciation		7,749			12,333			3,982			—			24,064
Rental related services		15,116			664			5,073			—			20,853
Other		24,073			5,443			3,309			—			32,825
Total direct costs of rental operations		46,938			18,440			12,364			—			77,742
Costs of sales		14,760			2,765			418			3,509			21,452
Total costs of revenues		61,698			21,205			12,782			3,509			99,194

Gross Profit
Rental		33,127			11,942			8,666			—			53,735
Rental related services		6,117			149			1,700			—			7,966
Rental operations		39,244			12,091			10,366			—			61,701
Sales		10,056			3,639			183			1,141			15,019
Other		379			406			332			—			1,117
Total gross profit		49,679			16,136			10,881			1,141			77,837
Selling and administrative expenses		25,755			6,614			6,979			1,440			40,788
Income (loss) from operations	$	23,924		$	9,522		$	3,902		$	(299	)		37,049
Interest expense														(3,001	)
Foreign currency exchange loss														(181	)
Provision for income taxes														(7,730	)
Net income													$	26,137

Other Information
Adjusted EBITDA ¹	$	35,773		$	22,128		$	8,620		$	(230	)	$	66,291
Average rental equipment ²	$	1,019,927		$	382,068		$	307,402
Average monthly total yield ³		2.12	%		2.59	%		1.73	%
Average utilization ⁴		78.1	%		64.5	%		51.6	%
Average monthly rental rate ⁵		2.72	%		4.02	%		3.35	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
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.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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 June 30, 2021
(dollar amounts in thousands)	Mobile Modular			TRS-RenTelco			Adler Tanks			Enviroplex		Consolidated
Revenues
Rental	$	53,238		$	27,860		$	13,483		$	—	$	94,581
Rental related services		16,207			710			5,771			—		22,688
Rental operations		69,445			28,570			19,254			—		117,269
Sales		14,784			4,757			593			8,122		28,256
Other		343			456			111			—		910
Total revenues		84,572			33,783			19,958			8,122		146,435

Costs and Expenses
Direct costs of rental operations:
Depreciation		7,074			11,916			4,169			—		23,159
Rental related services		11,804			745			4,727			—		17,276
Other		15,901			4,718			2,659			—		23,278
Total direct costs of rental operations		34,779			17,379			11,555			—		63,713
Costs of sales		9,034			1,792			427			5,602		16,855
Total costs of revenues		43,813			19,171			11,982			5,602		80,568

Gross Profit
Rental		30,264			11,225			6,655			—		48,144
Rental related services		4,401			(33	)		1,044			—		5,412
Rental operations		34,665			11,192			7,699			—		53,556
Sales		5,751			2,964			166			2,520		11,401
Other		343			456			111			—		910
Total gross profit		40,759			14,612			7,976			2,520		65,867
Selling and administrative expenses		22,602			6,073			6,253			1,333		36,261
Income from operations	$	18,157		$	8,539		$	1,723		$	1,187		29,606
Interest expense													(2,257	)
Foreign currency exchange loss													(2	)
Provision for income taxes													(6,739	)
Net income												$	20,608

Other Information
Adjusted EBITDA ¹	$	29,518		$	21,019		$	6,736		$	1,250	$	58,523
Average rental equipment ²	$	906,653		$	349,480		$	313,108
Average monthly total yield ³		1.96	%		2.66	%		1.44	%
Average utilization ⁴		75.5	%		67.7	%		44.0	%
Average monthly rental rate ⁵		2.59	%		3.93	%		3.27	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
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.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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)
Six months ended June 30, 2022
(dollar amounts in thousands)	Mobile Modular			TRS-RenTelco			Adler Tanks			Enviroplex			Consolidated
Revenues
Rental	$	126,487		$	58,230		$	30,148		$	—		$	214,865
Rental related services		39,594			1,484			12,058			—			53,136
Rental operations		166,081			59,714			42,206			—			268,001
Sales		35,191			10,331			1,258			5,567			52,347
Other		750			787			519			—			2,056
Total revenues		202,022			70,832			43,983			5,567			322,404

Costs and Expenses
Direct costs of rental operations:
Depreciation		15,582			24,362			7,994			—			47,938
Rental related services		28,296			1,244			9,456			—			38,996
Other		44,235			10,135			6,278			—			60,648
Total direct costs of rental operations		88,113			35,741			23,728			—			147,582
Costs of sales		21,089			4,265			920			4,222			30,496
Total costs of revenues		109,202			40,006			24,648			4,222			178,078

Gross Profit
Rental		66,670			23,733			15,876			—			106,279
Rental related services		11,298			240			2,602			—			14,140
Rental operations		77,968			23,973			18,478			—			120,419
Sales		14,102			6,066			338			1,345			21,851
Other		750			787			519			—			2,056
Total gross profit		92,820			30,826			19,335			1,345			144,326
Selling and administrative expenses		50,447			13,204			13,501			2,763			79,915
Income (loss) from operations	$	42,373		$	17,622		$	5,834		$	(1,418	)		64,411
Interest expense														(5,821	)
Foreign currency exchange loss														(168	)
Provision for income taxes														(13,492	)
Net income													$	44,930

Other Information
Adjusted EBITDA ¹	$	66,178		$	42,781		$	15,327		$	(1,276	)	$	123,010
Average rental equipment ²	$	1,013,361		$	374,364		$	307,985
Average monthly total yield ³		2.08	%		2.59	%		1.63	%
Average utilization ⁴		77.6	%		64.6	%		49.9	%
Average monthly rental rate ⁵		2.68	%		4.02	%		3.27	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
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.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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)
Six months ended June 30, 2021
(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex		Consolidated
Revenues
Rental	$	99,895		$	55,136		$	25,637		$	—	$	180,668
Rental related services		30,258			1,450			10,649			—		42,357
Rental operations		130,153			56,586			36,286			—		223,025
Sales		22,404			9,906			1,201			9,356		42,867
Other		663			894			181			—		1,738
Total revenues		153,220			67,386			37,668			9,356		267,630

Costs and Expenses
Direct costs of rental operations:
Depreciation		12,893			23,278			8,243			—		44,414
Rental related services		21,876			1,398			8,606			—		31,880
Other		28,776			9,252			4,957			—		42,985
Total direct costs of rental operations		63,545			33,928			21,806			—		119,279
Costs of sales		13,982			4,093			843			6,485		25,403
Total costs of revenues		77,527			38,021			22,649			6,485		144,682

Gross Profit
Rental		58,227			22,605			12,437			—		93,269
Rental related services		8,380			54			2,043			—		10,477
Rental operations		66,607			22,659			14,480			—		103,746
Sales		8,423			5,812			358			2,871		17,464
Other		663			894			181			—		1,738
Total gross profit		75,693			29,365			15,019			2,871		122,948
Selling and administrative expenses		41,839			12,371			12,520			2,668		69,398
Income from operations	$	33,854		$	16,994		$	2,499		$	203		53,550
Interest expense													(4,040	)
Foreign currency exchange loss													(57	)
Provision for income taxes													(11,447	)
Net income												$	38,006

Other Information
Adjusted EBITDA ¹	$	53,473		$	41,411		$	12,436		$	329	$	107,649
Average rental equipment ²	$	876,529		$	342,526		$	313,498
Average monthly total yield ³		1.90	%		2.68	%		1.36	%
Average utilization ⁴		75.7	%		67.7	%		42.1	%
Average monthly rental rate ⁵		2.44	%		3.96	%		3.24	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
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.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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 June 30,						Six Months Ended June 30,						Twelve Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Net income	$	26,137		$	20,608		$	44,930		$	38,006		$	96,629		$	97,282
Provision for income taxes		7,730			6,739			13,492			11,447			34,096			26,976
Interest expense		3,001			2,257			5,821			4,040			12,236			7,991
Depreciation and amortization		27,771			27,099			55,355			50,559			111,491			97,539
EBITDA		64,639			56,703			119,598			104,052			254,452			229,788
Share-based compensation		1,652			1,820			3,412			3,597			7,481			5,922
Adjusted EBITDA ¹	$	66,291		$	58,523		$	123,010		$	107,649		$	261,933		$	235,710
Adjusted EBITDA margin ²		37	%		40	%		38	%		40	%		39	%		41	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						Twelve Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Adjusted EBITDA ¹	$	66,291		$	58,523		$	123,010		$	107,649		$	261,933		$	235,710
Interest paid		(3,684	)		(2,362	)		(5,821	)		(3,987	)		(12,160	)		(8,006	)
Income taxes paid, net of refunds received		(16,658	)		(6,618	)		(17,078	)		(6,990	)		(19,175	)		(39,740	)
Gain on sale of used rental equipment		(10,729	)		(7,076	)		(16,093	)		(11,870	)		(29,664	)		(21,597	)
Foreign currency exchange loss (gain)		181			2			168			57			321			(340	)
Amortization of debt issuance costs		5			3			9			6			18			12
Change in certain assets and liabilities:
Accounts receivable, net		(15,765	)		(6,464	)		(7,830	)		(5,356	)		(26,420	)		(2,732	)
Prepaid expenses and other assets		(15,068	)		(9,291	)		(10,855	)		(9,385	)		(8,286	)		(3,937	)
Accounts payable and other liabilities		12,115			30,785			(2,302	)		20,400			(7,221	)		28,940
Deferred income		13,612			2,871			18,835			7,458			20,459			(7,346	)
Net cash provided by operating activities	$	30,300		$	60,373		$	82,043		$	97,982		$	179,805		$	180,964

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

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Contacts

Keith E. Pratt

EVP & Chief Financial Officer

925-606-9200