Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries McGrath Announces Results for Third Quarter 2023 By: McGrath RentCorp via Business Wire October 26, 2023 at 16:01 PM EDT McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues from continuing operations for the quarter ended September 30, 2023 of $243.5 million, an increase of 40% compared to the third quarter of 2022. The Company reported net income from continuing operations of $40.4 million, or $1.65 per diluted share, for the third quarter of 2023, compared to net income from continuing operations of $27.1 million, or $1.11 per diluted share, for the third quarter of 2022. THIRD QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS): Rental revenues increased 22% to $122.7 million. Total revenues increased 40% to $243.5 million. Other income for the third quarter 2023 includes a $3.6 million net gain on sale of two properties, which increased earnings per diluted share by $0.11. Adjusted EBITDA1 increased 47% to $95.3 million. Dividend rate of $0.465 per share for the third quarter of 2023. On an annualized basis, this dividend represents a 1.9% yield on the October 25, 2023 close price of $97.06 per share. Joe Hanna, President and CEO of McGrath, made the following comments regarding these results and future expectations: “We were very pleased with our third quarter results. Our 22% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 36%, with over half of the growth attributable to our Vesta Modular and several smaller Portable Storage acquisitions completed earlier this year. Before acquisitions, the modular segment rental revenues grew organically by a robust 13%. Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. We maintained our focus on pricing optimization, rental fleet utilization, and value-added services for our modular customers. Our initiatives to grow modular sales also showed progress as sales revenues doubled compared to a year ago. TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in 10% lower rental revenues for the quarter, compared to a year ago. During the quarter we reduced new equipment capital spending, made progress with sales of underutilized equipment, and improved rental fleet utilization to above 60% at quarter-end. We made good progress with the Vesta integration. Our organization work is complete and the Vesta team is fully integrated into the McGrath organization. I am very pleased with the team collaboration and commercial successes that have been achieved. We are very pleased with our year-to-date performance, and we are fully focused on solid execution for the remainder of the year.” DIVISION HIGHLIGHTS: All comparisons presented below are for the quarter ended September 30, 2023 to the quarter ended September 30, 2022 unless otherwise indicated. MOBILE MODULAR For the third quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $73.0 million, an increase of $33.1 million, or 83%. Rental revenues increased 36% to $94.0 million, depreciation expense increased 30% to $10.0 million, and other direct costs increased 2% to $23.4 million, which resulted in an increase in gross profit on rental revenues of 57% to $60.6 million. Vesta Modular contributed $14.8 million and $10.2 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 45% to $39.7 million, primarily attributable to higher delivery and pick up activities and higher site related services, with associated gross profit increasing 60% to $11.8 million. Vesta Modular contributed $4.0 million and $1.8 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased $29.9 million to $58.9 million, primarily from higher new equipment sales. Gross margin on sales was 32% compared to 35% in 2022, resulting in a 86% increase in gross profit on sales revenues to $19.0 million. Vesta Modular contributed $16.2 million and $5.1 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $11.0 million to $39.8 million. The addition of Vesta Modular increased selling and administrative expenses by $6.0 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.7 million. TRS-RENTELCO For the third quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.9 million, a decrease of 9%, when compared to the same quarter in 2022. Rental revenues decreased 10% to $28.7 million, depreciation expense decreased 3%, and other direct costs decreased 4%, resulting in a 18% decrease in gross profit on rental revenues to $11.5 million. The rental revenue decrease was primarily the result of lower average rental equipment on rent compared to the prior year and comparable average monthly rental rates. Sales revenues increased 58% to $8.7 million and gross profit on sales revenues decreased 9% to $3.1 million. The higher sales revenues and lower gross profit on sales can be attributed to the mix of equipment sold, which can fluctuate quarterly depending on customer requirements, equipment availability and funding. Selling and administrative expenses increased $0.3 million, or 4%, to $7.0 million, primarily due to higher allocated corporate expenses. FINANCIAL OUTLOOK: Based upon the Company's year-to-date results and current outlook for the remainder of the year, the Company is revising its financial outlook. For the full-year 2023, the Company expects: Previous (Continuing Operations) Current (Continuing Operations) • Total revenue: $805 to $830 million $820 to $830 million • Adjusted EBITDA1, 2: $306 to $320 million $312 to $320 million • Gross rental equipment capital expenditures: $190 to $200 million $190 to $200 million Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. 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. McGrath is 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 28, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 26, 2023 to discuss the third quarter 2023 results. To participate in the teleconference, dial 1-800-245-3047 (in the U.S.), or 1-203-518-9765 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-800-839-5685 (in the U.S.), or 1-402-220-2567 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations. FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) progress with sales of underutilized TRS equipment, (ii) focus on solid execution for the remainder of the year, and (iii) statements regarding the full year 2023 in the “Financial Outlook” section, are forward-looking. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta, Brekke Storage, Dixie Storage and Inland Storage acquisitions; competition within the modular business; the activity levels in the semiconductor and general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the other factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings. Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release. MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Rental $ 122,686 $ 100,871 $ 350,773 $ 285,588 Rental related services 40,492 28,198 101,481 69,276 Rental operations 163,178 129,069 452,254 354,864 Sales 77,115 44,414 148,576 95,503 Other 3,213 860 9,424 2,397 Total revenues 243,506 174,343 610,254 452,764 Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 22,069 20,174 66,499 60,118 Rental related services 28,532 20,576 71,625 50,116 Other 28,493 28,203 90,188 82,573 Total direct costs of rental operations 79,094 68,953 228,312 192,807 Costs of sales 52,878 28,548 98,431 58,124 Total costs of revenues 131,972 97,501 326,743 250,931 Gross profit 111,534 76,842 283,511 201,833 Selling and administrative expenses 48,508 36,954 153,032 103,368 Other income (3,559 ) — (3,559 ) — Income from operations 66,585 39,888 134,038 98,465 Interest expense (11,025 ) (3,355 ) (28,434 ) (8,057 ) Foreign currency exchange (loss) gain (42 ) (236 ) 166 (404 ) Income from continuing operations before provision for income taxes 55,518 36,297 105,770 90,004 Provision for income taxes from continuing operations 15,152 9,182 25,934 21,687 Income from continuing operations 40,366 27,115 79,836 68,317 Discontinued operations: Income from discontinued operations before provision for income taxes — 4,635 1,709 9,350 Provision for income taxes from discontinued operations — 1,183 453 2,170 Gain on sale of discontinued operations, net of tax — — 61,513 — Income from discontinued operations — 3,452 62,769 7,180 �� Net income $ 40,366 $ 30,567 $ 142,605 $ 75,497 Earnings per share from continuing operations: Basic $ 1.65 $ 1.11 $ 3.26 $ 2.81 Diluted $ 1.65 $ 1.11 $ 3.26 $ 2.79 Earnings per share from discontinued operations: Basic $ — $ 0.14 $ 2.57 $ 0.29 Diluted $ — $ 0.14 $ 2.56 $ 0.29 Earnings per share: Basic $ 1.65 $ 1.25 $ 5.83 $ 3.10 Diluted $ 1.65 $ 1.25 $ 5.81 $ 3.08 Shares used in per share calculation: Basic 24,487 24,379 24,461 24,342 Diluted 24,525 24,504 24,527 24,516 Cash dividends declared per share $ 0.465 $ 0.455 $ 1.395 $ 1.365 MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, December 31, (in thousands) 2023 2022 Assets Cash $ 1,946 $ 957 Accounts receivable, net of allowance for credit losses of $2,683 in 2023 and $2,300 in 2022 224,269 169,937 Rental equipment, at cost: Relocatable modular buildings 1,474,359 1,123,268 Electronic test equipment 383,006 398,267 1,857,365 1,521,535 Less: accumulated depreciation (565,497 ) (531,218 ) Rental equipment, net 1,291,868 990,317 Property, plant and equipment, net 146,484 138,713 Prepaid expenses and other assets 80,853 69,837 Intangible assets, net 67,480 35,431 Goodwill 323,771 106,403 Assets of discontinued operations — 196,249 Total assets $ 2,136,671 $ 1,707,844 Liabilities and Shareholders' Equity Liabilities: Notes payable $ 667,640 $ 413,742 Accounts payable and accrued liabilities 223,010 151,208 Deferred income 105,534 82,417 Deferred income taxes, net 229,115 203,361 Liabilities of discontinued operations — 53,171 Total liabilities 1,225,299 903,899 Shareholders’ equity: Common stock, no par value - Authorized 40,000 shares Issued and outstanding - 24,489 shares as of September 30, 2023 and 24,388 shares as of December 31, 2022 109,253 110,080 Retained earnings 802,161 693,943 Accumulated other comprehensive loss (42 ) (78 ) Total shareholders’ equity 911,372 803,945 Total liabilities and shareholders’ equity $ 2,136,671 $ 1,707,844 MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income $ 142,605 $ 75,497 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 81,842 83,272 Deferred income taxes (30,018 ) (4,299 ) Provision for credit losses 1,794 307 Share-based compensation 5,273 5,106 Gain on sale of property, plant and equipment (3,559 ) — Gain on sale of discontinued operations (61,513 ) — Gain on sale of used rental equipment (22,964 ) (26,705 ) Foreign currency exchange (gain) loss (166 ) 404 Amortization of debt issuance costs 6 13 Change in: Accounts receivable (27,733 ) (30,767 ) Prepaid expenses and other assets (7,390 ) (17,313 ) Accounts payable and accrued liabilities 32,818 14,384 Deferred income 7,908 33,399 Net cash provided by operating activities 118,903 133,298 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 268,012 — Purchases of rental equipment (171,322 ) (130,395 ) Purchases of property, plant and equipment (16,448 ) (10,594 ) Cash paid for acquisition of businesses (458,315 ) — Cash paid for acquisition of business assets (3,474 ) — Proceeds from sales of used rental equipment 49,405 54,193 Proceeds from sales of property, plant and equipment 595 — Net cash used in investing activities (331,547 ) (86,796 ) Cash Flows from Financing Activities: Net borrowings (payments) under bank lines of credit 178,892 (7,000 ) Borrowings under note purchase agreement 75,000 — Taxes paid related to net share settlement of stock awards (6,100 ) (6,253 ) Payment of dividends (34,168 ) (33,175 ) Net cash provided by (used in) financing activities 213,624 (46,428 ) Effect of foreign currency exchange rate changes on cash 9 (4 ) Net increase in cash 989 70 Cash balance, beginning of period 957 1,491 Cash balance, end of period $ 1,946 $ 1,561 Supplemental Disclosure of Cash Flow Information: Interest paid, during the period $ 27,818 $ 8,982 Net income taxes paid, during the period $ 9,547 $ 24,885 Dividends accrued during the period, not yet paid $ 12,014 $ 11,167 Rental equipment acquisitions, not yet paid $ 5,765 $ 9,555 Proceeds to be received on the sale of property, plant and equipment $ 6,370 $ — Business acquisition payments withheld $ 293 $ — MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended September 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 94,028 $ 28,658 $ — $ — $ 122,686 Rental related services 39,716 776 — — 40,492 Rental operations 133,744 29,434 — — 163,178 Sales 58,867 8,733 9,515 — 77,115 Other 2,271 942 — — 3,213 Total revenues 194,882 39,109 9,515 — 243,506 Costs and Expenses Direct costs of rental operations: Depreciation 10,037 12,032 — — 22,069 Rental related services 27,927 605 — — 28,532 Other 23,353 5,140 — — 28,493 Total direct costs of rental operations 61,317 17,777 — — 79,094 Costs of sales 39,821 5,651 7,406 — 52,878 Total costs of revenues 101,138 23,428 7,406 — 131,972 Gross Profit Rental 60,638 11,486 — — 72,124 Rental related services 11,789 171 — — 11,960 Rental operations 72,427 11,657 — — 84,084 Sales 19,046 3,082 2,109 — 24,237 Other 2,271 942 — — 3,213 Total gross profit 93,744 15,681 2,109 — 111,534 Selling and administrative expenses 39,832 6,999 1,677 — 48,508 Other income (2,740 ) (819 ) — — (3,559 ) Income from operations $ 56,652 $ 9,501 $ 432 $ — 66,585 Interest expense (11,025 ) Foreign currency exchange loss (42 ) Provision for income taxes (15,152 ) Net income $ 40,366 Other Information Adjusted EBITDA 1 $ 72,953 $ 21,858 $ 517 $ — $ 95,328 Average rental equipment 2 $ 1,350,562 $ 385,353 Average monthly total yield 3 2.32 % 2.46 % Average utilization 4 79.4 % 59.4 % Average monthly rental rate 5 2.92 % 4.17 % Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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 September 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) 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 9,978 977 45,391 Other 452 408 — 563 1,423 Total revenues 125,838 38,527 9,978 26,193 200,536 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 7,719 693 29,241 Total costs of revenues 69,253 20,529 7,719 13,595 111,096 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 2,259 284 16,150 Other 452 408 — 563 1,423 Total gross profit 56,585 17,998 2,259 12,598 89,440 Selling and administrative expenses 28,798 6,726 1,430 7,141 44,095 Other income — — — — — Income from operations $ 27,787 $ 11,272 $ 829 $ 5,457 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 $ 39,901 $ 23,894 $ 900 $ 10,192 $ 74,887 Average rental equipment 2 $ 1,030,792 $ 389,675 Average monthly total yield 3 2.23 % 2.71 % Average utilization 4 80.1 % 65.3 % Average monthly rental rate 5 2.79 % 4.16 % 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. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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) Nine months ended September 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 264,398 $ 86,375 $ — $ 6,520 $ 357,293 Rental related services 99,158 2,323 — 2,584 104,065 Rental operations 363,556 88,698 — 9,104 461,358 Sales 115,829 21,368 11,379 269 148,845 Other 6,416 3,008 — 65 9,489 Total revenues 485,801 113,074 11,379 9,438 619,692 Costs and Expenses Direct costs of rental operations: Depreciation 29,766 36,733 — 1,325 67,824 Rental related services 69,618 2,007 — 2,020 73,645 Other 74,345 15,843 — 1,270 91,458 Total direct costs of rental operations 173,729 54,583 — 4,614 232,926 Costs of sales 78,102 11,307 9,022 159 98,590 Total costs of revenues 251,831 65,890 9,022 4,773 331,516 Gross Profit Rental 160,287 33,799 — 3,926 198,012 Rental related services 29,540 316 — 564 30,420 Rental operations 189,827 34,115 — 4,490 228,432 Sales 37,727 10,061 2,357 110 50,255 Other 6,416 3,008 — 65 9,489 Total gross profit 233,970 47,184 2,357 4,665 288,176 Selling and administrative expenses 124,642 23,576 4,814 2,582 155,614 Other income (2,740 ) (819 ) — — (3,559 ) Income (loss) from operations $ 112,068 $ 24,427 $ (2,457 ) $ 2,083 136,121 Interest expense (28,808 ) Foreign currency exchange loss 166 Provision for income taxes (26,387 ) Net income $ 81,092 Other Information Adjusted EBITDA 1 $ 172,222 $ 64,031 $ (2,207 ) $ 3,682 $ 237,728 Average rental equipment 2 $ 1,275,330 $ 391,993 Average monthly total yield 3 2.30 % 2.43 % Average utilization 4 79.5 % 59.0 % Average monthly rental rate 5 2.90 % 4.15 % Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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) Nine months ended September 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) 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 15,545 2,235 97,738 Other 1,202 1,195 — 1,082 3,479 Total revenues 327,860 109,359 15,545 70,176 522,940 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 11,941 1,613 59,737 Total costs of revenues 178,455 60,535 11,941 38,243 289,174 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 3,604 622 38,001 Other 1,202 1,195 — 1,082 3,479 Total gross profit 149,405 48,824 3,604 31,933 233,766 Selling and administrative expenses 79,245 19,930 4,193 20,642 124,010 Other income — — — — — Income (loss) from operations $ 70,160 $ 28,894 $ (589 ) $ 11,291 109,756 Interest expense (9,998 ) Foreign currency exchange loss (404 ) Provision for income taxes (23,857 ) Net income $ 75,497 Other Information Adjusted EBITDA 1 $ 106,156 $ 66,675 $ (377 ) $ 25,443 $ 197,897 Average rental equipment 2 $ 1,019,105 $ 379,181 Average monthly total yield 3 2.13 % 2.63 % Average utilization 4 78.5 % 64.8 % Average monthly rental rate 5 2.72 % 4.07 % 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. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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, share-based compensation and transaction costs. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company. Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation and transaction costs, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges and transaction costs. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP. Reconciliation of Income from Continuing Operations to Adjusted EBITDA (dollar amounts in thousands) Three Months Ended September 30, Nine Months Ended September 30, Twelve Months Ended September 30, 2023 2022 2023 2022 2023 2022 Income from continuing operations $ 40,366 $ 27,115 $ 79,836 $ 68,317 $ 114,828 $ 95,182 Provision for income taxes from continuing operations 15,152 9,182 25,934 21,687 35,624 32,331 Interest expense 11,025 3,355 28,434 8,057 32,607 10,653 Depreciation and amortization 26,884 23,491 80,385 69,982 104,043 93,065 EBITDA 93,427 63,143 214,589 168,043 287,102 231,231 Share-based compensation 1,891 1,461 5,155 4,244 7,658 6,278 Transaction costs 3 10 167 14,302 167 18,188 899 Adjusted EBITDA 1 $ 95,328 $ 64,771 $ 234,046 $ 172,454 $ 312,948 $ 238,408 Adjusted EBITDA margin 2 39 % 37 % 38 % 38 % 39 % 39 % 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, 2023 2022 2023 2022 2023 2022 Adjusted EBITDA 1 $ 95,328 $ 74,887 $ 237,728 $ 197,897 $ 328,697 $ 271,589 Interest paid (11,016 ) (3,161 ) (27,818 ) (8,982 ) (33,611 ) (12,831 ) Income taxes paid, net of refunds received (2,616 ) (7,807 ) (9,547 ) (24,885 ) (12,024 ) (25,898 ) Gain on sale of used rental equipment (8,714 ) (10,612 ) (22,964 ) (26,705 ) (34,238 ) (34,358 ) Foreign currency exchange loss 42 236 (166 ) 404 (192 ) 429 Amortization of debt issuance costs 2 4 6 13 9 17 Change in certain assets and liabilities: Accounts receivable, net (26,223 ) (22,630 ) (25,939 ) (30,460 ) (26,003 ) (21,128 ) Prepaid expenses and other assets 1,114 (6,458 ) (7,390 ) (17,313 ) (6,561 ) (12,720 ) Accounts payable and other liabilities 917 12,232 (32,915 ) 9,930 (34,250 ) 5,302 Deferred income (1,382 ) 14,564 7,908 33,399 (1,790 ) 22,353 Net cash provided by operating activities $ 47,452 $ 51,255 $ 118,903 $ 133,298 $ 180,037 $ 192,755 Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the nine months ended September 30, 2023 and 2022, was $3,682 and $25,443, respectively. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. 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/20231026163496/en/Contacts Keith E. Pratt EVP & Chief Financial Officer 925-606-9200 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
McGrath Announces Results for Third Quarter 2023 By: McGrath RentCorp via Business Wire October 26, 2023 at 16:01 PM EDT McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues from continuing operations for the quarter ended September 30, 2023 of $243.5 million, an increase of 40% compared to the third quarter of 2022. The Company reported net income from continuing operations of $40.4 million, or $1.65 per diluted share, for the third quarter of 2023, compared to net income from continuing operations of $27.1 million, or $1.11 per diluted share, for the third quarter of 2022. THIRD QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS): Rental revenues increased 22% to $122.7 million. Total revenues increased 40% to $243.5 million. Other income for the third quarter 2023 includes a $3.6 million net gain on sale of two properties, which increased earnings per diluted share by $0.11. Adjusted EBITDA1 increased 47% to $95.3 million. Dividend rate of $0.465 per share for the third quarter of 2023. On an annualized basis, this dividend represents a 1.9% yield on the October 25, 2023 close price of $97.06 per share. Joe Hanna, President and CEO of McGrath, made the following comments regarding these results and future expectations: “We were very pleased with our third quarter results. Our 22% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 36%, with over half of the growth attributable to our Vesta Modular and several smaller Portable Storage acquisitions completed earlier this year. Before acquisitions, the modular segment rental revenues grew organically by a robust 13%. Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. We maintained our focus on pricing optimization, rental fleet utilization, and value-added services for our modular customers. Our initiatives to grow modular sales also showed progress as sales revenues doubled compared to a year ago. TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in 10% lower rental revenues for the quarter, compared to a year ago. During the quarter we reduced new equipment capital spending, made progress with sales of underutilized equipment, and improved rental fleet utilization to above 60% at quarter-end. We made good progress with the Vesta integration. Our organization work is complete and the Vesta team is fully integrated into the McGrath organization. I am very pleased with the team collaboration and commercial successes that have been achieved. We are very pleased with our year-to-date performance, and we are fully focused on solid execution for the remainder of the year.” DIVISION HIGHLIGHTS: All comparisons presented below are for the quarter ended September 30, 2023 to the quarter ended September 30, 2022 unless otherwise indicated. MOBILE MODULAR For the third quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $73.0 million, an increase of $33.1 million, or 83%. Rental revenues increased 36% to $94.0 million, depreciation expense increased 30% to $10.0 million, and other direct costs increased 2% to $23.4 million, which resulted in an increase in gross profit on rental revenues of 57% to $60.6 million. Vesta Modular contributed $14.8 million and $10.2 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 45% to $39.7 million, primarily attributable to higher delivery and pick up activities and higher site related services, with associated gross profit increasing 60% to $11.8 million. Vesta Modular contributed $4.0 million and $1.8 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased $29.9 million to $58.9 million, primarily from higher new equipment sales. Gross margin on sales was 32% compared to 35% in 2022, resulting in a 86% increase in gross profit on sales revenues to $19.0 million. Vesta Modular contributed $16.2 million and $5.1 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $11.0 million to $39.8 million. The addition of Vesta Modular increased selling and administrative expenses by $6.0 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.7 million. TRS-RENTELCO For the third quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.9 million, a decrease of 9%, when compared to the same quarter in 2022. Rental revenues decreased 10% to $28.7 million, depreciation expense decreased 3%, and other direct costs decreased 4%, resulting in a 18% decrease in gross profit on rental revenues to $11.5 million. The rental revenue decrease was primarily the result of lower average rental equipment on rent compared to the prior year and comparable average monthly rental rates. Sales revenues increased 58% to $8.7 million and gross profit on sales revenues decreased 9% to $3.1 million. The higher sales revenues and lower gross profit on sales can be attributed to the mix of equipment sold, which can fluctuate quarterly depending on customer requirements, equipment availability and funding. Selling and administrative expenses increased $0.3 million, or 4%, to $7.0 million, primarily due to higher allocated corporate expenses. FINANCIAL OUTLOOK: Based upon the Company's year-to-date results and current outlook for the remainder of the year, the Company is revising its financial outlook. For the full-year 2023, the Company expects: Previous (Continuing Operations) Current (Continuing Operations) • Total revenue: $805 to $830 million $820 to $830 million • Adjusted EBITDA1, 2: $306 to $320 million $312 to $320 million • Gross rental equipment capital expenditures: $190 to $200 million $190 to $200 million Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. 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. McGrath is 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 28, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 26, 2023 to discuss the third quarter 2023 results. To participate in the teleconference, dial 1-800-245-3047 (in the U.S.), or 1-203-518-9765 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-800-839-5685 (in the U.S.), or 1-402-220-2567 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations. FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) progress with sales of underutilized TRS equipment, (ii) focus on solid execution for the remainder of the year, and (iii) statements regarding the full year 2023 in the “Financial Outlook” section, are forward-looking. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta, Brekke Storage, Dixie Storage and Inland Storage acquisitions; competition within the modular business; the activity levels in the semiconductor and general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the other factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings. Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release. MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Rental $ 122,686 $ 100,871 $ 350,773 $ 285,588 Rental related services 40,492 28,198 101,481 69,276 Rental operations 163,178 129,069 452,254 354,864 Sales 77,115 44,414 148,576 95,503 Other 3,213 860 9,424 2,397 Total revenues 243,506 174,343 610,254 452,764 Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 22,069 20,174 66,499 60,118 Rental related services 28,532 20,576 71,625 50,116 Other 28,493 28,203 90,188 82,573 Total direct costs of rental operations 79,094 68,953 228,312 192,807 Costs of sales 52,878 28,548 98,431 58,124 Total costs of revenues 131,972 97,501 326,743 250,931 Gross profit 111,534 76,842 283,511 201,833 Selling and administrative expenses 48,508 36,954 153,032 103,368 Other income (3,559 ) — (3,559 ) — Income from operations 66,585 39,888 134,038 98,465 Interest expense (11,025 ) (3,355 ) (28,434 ) (8,057 ) Foreign currency exchange (loss) gain (42 ) (236 ) 166 (404 ) Income from continuing operations before provision for income taxes 55,518 36,297 105,770 90,004 Provision for income taxes from continuing operations 15,152 9,182 25,934 21,687 Income from continuing operations 40,366 27,115 79,836 68,317 Discontinued operations: Income from discontinued operations before provision for income taxes — 4,635 1,709 9,350 Provision for income taxes from discontinued operations — 1,183 453 2,170 Gain on sale of discontinued operations, net of tax — — 61,513 — Income from discontinued operations — 3,452 62,769 7,180 �� Net income $ 40,366 $ 30,567 $ 142,605 $ 75,497 Earnings per share from continuing operations: Basic $ 1.65 $ 1.11 $ 3.26 $ 2.81 Diluted $ 1.65 $ 1.11 $ 3.26 $ 2.79 Earnings per share from discontinued operations: Basic $ — $ 0.14 $ 2.57 $ 0.29 Diluted $ — $ 0.14 $ 2.56 $ 0.29 Earnings per share: Basic $ 1.65 $ 1.25 $ 5.83 $ 3.10 Diluted $ 1.65 $ 1.25 $ 5.81 $ 3.08 Shares used in per share calculation: Basic 24,487 24,379 24,461 24,342 Diluted 24,525 24,504 24,527 24,516 Cash dividends declared per share $ 0.465 $ 0.455 $ 1.395 $ 1.365 MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, December 31, (in thousands) 2023 2022 Assets Cash $ 1,946 $ 957 Accounts receivable, net of allowance for credit losses of $2,683 in 2023 and $2,300 in 2022 224,269 169,937 Rental equipment, at cost: Relocatable modular buildings 1,474,359 1,123,268 Electronic test equipment 383,006 398,267 1,857,365 1,521,535 Less: accumulated depreciation (565,497 ) (531,218 ) Rental equipment, net 1,291,868 990,317 Property, plant and equipment, net 146,484 138,713 Prepaid expenses and other assets 80,853 69,837 Intangible assets, net 67,480 35,431 Goodwill 323,771 106,403 Assets of discontinued operations — 196,249 Total assets $ 2,136,671 $ 1,707,844 Liabilities and Shareholders' Equity Liabilities: Notes payable $ 667,640 $ 413,742 Accounts payable and accrued liabilities 223,010 151,208 Deferred income 105,534 82,417 Deferred income taxes, net 229,115 203,361 Liabilities of discontinued operations — 53,171 Total liabilities 1,225,299 903,899 Shareholders’ equity: Common stock, no par value - Authorized 40,000 shares Issued and outstanding - 24,489 shares as of September 30, 2023 and 24,388 shares as of December 31, 2022 109,253 110,080 Retained earnings 802,161 693,943 Accumulated other comprehensive loss (42 ) (78 ) Total shareholders’ equity 911,372 803,945 Total liabilities and shareholders’ equity $ 2,136,671 $ 1,707,844 MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income $ 142,605 $ 75,497 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 81,842 83,272 Deferred income taxes (30,018 ) (4,299 ) Provision for credit losses 1,794 307 Share-based compensation 5,273 5,106 Gain on sale of property, plant and equipment (3,559 ) — Gain on sale of discontinued operations (61,513 ) — Gain on sale of used rental equipment (22,964 ) (26,705 ) Foreign currency exchange (gain) loss (166 ) 404 Amortization of debt issuance costs 6 13 Change in: Accounts receivable (27,733 ) (30,767 ) Prepaid expenses and other assets (7,390 ) (17,313 ) Accounts payable and accrued liabilities 32,818 14,384 Deferred income 7,908 33,399 Net cash provided by operating activities 118,903 133,298 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 268,012 — Purchases of rental equipment (171,322 ) (130,395 ) Purchases of property, plant and equipment (16,448 ) (10,594 ) Cash paid for acquisition of businesses (458,315 ) — Cash paid for acquisition of business assets (3,474 ) — Proceeds from sales of used rental equipment 49,405 54,193 Proceeds from sales of property, plant and equipment 595 — Net cash used in investing activities (331,547 ) (86,796 ) Cash Flows from Financing Activities: Net borrowings (payments) under bank lines of credit 178,892 (7,000 ) Borrowings under note purchase agreement 75,000 — Taxes paid related to net share settlement of stock awards (6,100 ) (6,253 ) Payment of dividends (34,168 ) (33,175 ) Net cash provided by (used in) financing activities 213,624 (46,428 ) Effect of foreign currency exchange rate changes on cash 9 (4 ) Net increase in cash 989 70 Cash balance, beginning of period 957 1,491 Cash balance, end of period $ 1,946 $ 1,561 Supplemental Disclosure of Cash Flow Information: Interest paid, during the period $ 27,818 $ 8,982 Net income taxes paid, during the period $ 9,547 $ 24,885 Dividends accrued during the period, not yet paid $ 12,014 $ 11,167 Rental equipment acquisitions, not yet paid $ 5,765 $ 9,555 Proceeds to be received on the sale of property, plant and equipment $ 6,370 $ — Business acquisition payments withheld $ 293 $ — MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended September 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 94,028 $ 28,658 $ — $ — $ 122,686 Rental related services 39,716 776 — — 40,492 Rental operations 133,744 29,434 — — 163,178 Sales 58,867 8,733 9,515 — 77,115 Other 2,271 942 — — 3,213 Total revenues 194,882 39,109 9,515 — 243,506 Costs and Expenses Direct costs of rental operations: Depreciation 10,037 12,032 — — 22,069 Rental related services 27,927 605 — — 28,532 Other 23,353 5,140 — — 28,493 Total direct costs of rental operations 61,317 17,777 — — 79,094 Costs of sales 39,821 5,651 7,406 — 52,878 Total costs of revenues 101,138 23,428 7,406 — 131,972 Gross Profit Rental 60,638 11,486 — — 72,124 Rental related services 11,789 171 — — 11,960 Rental operations 72,427 11,657 — — 84,084 Sales 19,046 3,082 2,109 — 24,237 Other 2,271 942 — — 3,213 Total gross profit 93,744 15,681 2,109 — 111,534 Selling and administrative expenses 39,832 6,999 1,677 — 48,508 Other income (2,740 ) (819 ) — — (3,559 ) Income from operations $ 56,652 $ 9,501 $ 432 $ — 66,585 Interest expense (11,025 ) Foreign currency exchange loss (42 ) Provision for income taxes (15,152 ) Net income $ 40,366 Other Information Adjusted EBITDA 1 $ 72,953 $ 21,858 $ 517 $ — $ 95,328 Average rental equipment 2 $ 1,350,562 $ 385,353 Average monthly total yield 3 2.32 % 2.46 % Average utilization 4 79.4 % 59.4 % Average monthly rental rate 5 2.92 % 4.17 % Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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 September 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) 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 9,978 977 45,391 Other 452 408 — 563 1,423 Total revenues 125,838 38,527 9,978 26,193 200,536 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 7,719 693 29,241 Total costs of revenues 69,253 20,529 7,719 13,595 111,096 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 2,259 284 16,150 Other 452 408 — 563 1,423 Total gross profit 56,585 17,998 2,259 12,598 89,440 Selling and administrative expenses 28,798 6,726 1,430 7,141 44,095 Other income — — — — — Income from operations $ 27,787 $ 11,272 $ 829 $ 5,457 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 $ 39,901 $ 23,894 $ 900 $ 10,192 $ 74,887 Average rental equipment 2 $ 1,030,792 $ 389,675 Average monthly total yield 3 2.23 % 2.71 % Average utilization 4 80.1 % 65.3 % Average monthly rental rate 5 2.79 % 4.16 % 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. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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) Nine months ended September 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 264,398 $ 86,375 $ — $ 6,520 $ 357,293 Rental related services 99,158 2,323 — 2,584 104,065 Rental operations 363,556 88,698 — 9,104 461,358 Sales 115,829 21,368 11,379 269 148,845 Other 6,416 3,008 — 65 9,489 Total revenues 485,801 113,074 11,379 9,438 619,692 Costs and Expenses Direct costs of rental operations: Depreciation 29,766 36,733 — 1,325 67,824 Rental related services 69,618 2,007 — 2,020 73,645 Other 74,345 15,843 — 1,270 91,458 Total direct costs of rental operations 173,729 54,583 — 4,614 232,926 Costs of sales 78,102 11,307 9,022 159 98,590 Total costs of revenues 251,831 65,890 9,022 4,773 331,516 Gross Profit Rental 160,287 33,799 — 3,926 198,012 Rental related services 29,540 316 — 564 30,420 Rental operations 189,827 34,115 — 4,490 228,432 Sales 37,727 10,061 2,357 110 50,255 Other 6,416 3,008 — 65 9,489 Total gross profit 233,970 47,184 2,357 4,665 288,176 Selling and administrative expenses 124,642 23,576 4,814 2,582 155,614 Other income (2,740 ) (819 ) — — (3,559 ) Income (loss) from operations $ 112,068 $ 24,427 $ (2,457 ) $ 2,083 136,121 Interest expense (28,808 ) Foreign currency exchange loss 166 Provision for income taxes (26,387 ) Net income $ 81,092 Other Information Adjusted EBITDA 1 $ 172,222 $ 64,031 $ (2,207 ) $ 3,682 $ 237,728 Average rental equipment 2 $ 1,275,330 $ 391,993 Average monthly total yield 3 2.30 % 2.43 % Average utilization 4 79.5 % 59.0 % Average monthly rental rate 5 2.90 % 4.15 % Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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) Nine months ended September 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) 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 15,545 2,235 97,738 Other 1,202 1,195 — 1,082 3,479 Total revenues 327,860 109,359 15,545 70,176 522,940 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 11,941 1,613 59,737 Total costs of revenues 178,455 60,535 11,941 38,243 289,174 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 3,604 622 38,001 Other 1,202 1,195 — 1,082 3,479 Total gross profit 149,405 48,824 3,604 31,933 233,766 Selling and administrative expenses 79,245 19,930 4,193 20,642 124,010 Other income — — — — — Income (loss) from operations $ 70,160 $ 28,894 $ (589 ) $ 11,291 109,756 Interest expense (9,998 ) Foreign currency exchange loss (404 ) Provision for income taxes (23,857 ) Net income $ 75,497 Other Information Adjusted EBITDA 1 $ 106,156 $ 66,675 $ (377 ) $ 25,443 $ 197,897 Average rental equipment 2 $ 1,019,105 $ 379,181 Average monthly total yield 3 2.13 % 2.63 % Average utilization 4 78.5 % 64.8 % Average monthly rental rate 5 2.72 % 4.07 % 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. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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, share-based compensation and transaction costs. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company. Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation and transaction costs, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges and transaction costs. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP. Reconciliation of Income from Continuing Operations to Adjusted EBITDA (dollar amounts in thousands) Three Months Ended September 30, Nine Months Ended September 30, Twelve Months Ended September 30, 2023 2022 2023 2022 2023 2022 Income from continuing operations $ 40,366 $ 27,115 $ 79,836 $ 68,317 $ 114,828 $ 95,182 Provision for income taxes from continuing operations 15,152 9,182 25,934 21,687 35,624 32,331 Interest expense 11,025 3,355 28,434 8,057 32,607 10,653 Depreciation and amortization 26,884 23,491 80,385 69,982 104,043 93,065 EBITDA 93,427 63,143 214,589 168,043 287,102 231,231 Share-based compensation 1,891 1,461 5,155 4,244 7,658 6,278 Transaction costs 3 10 167 14,302 167 18,188 899 Adjusted EBITDA 1 $ 95,328 $ 64,771 $ 234,046 $ 172,454 $ 312,948 $ 238,408 Adjusted EBITDA margin 2 39 % 37 % 38 % 38 % 39 % 39 % 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, 2023 2022 2023 2022 2023 2022 Adjusted EBITDA 1 $ 95,328 $ 74,887 $ 237,728 $ 197,897 $ 328,697 $ 271,589 Interest paid (11,016 ) (3,161 ) (27,818 ) (8,982 ) (33,611 ) (12,831 ) Income taxes paid, net of refunds received (2,616 ) (7,807 ) (9,547 ) (24,885 ) (12,024 ) (25,898 ) Gain on sale of used rental equipment (8,714 ) (10,612 ) (22,964 ) (26,705 ) (34,238 ) (34,358 ) Foreign currency exchange loss 42 236 (166 ) 404 (192 ) 429 Amortization of debt issuance costs 2 4 6 13 9 17 Change in certain assets and liabilities: Accounts receivable, net (26,223 ) (22,630 ) (25,939 ) (30,460 ) (26,003 ) (21,128 ) Prepaid expenses and other assets 1,114 (6,458 ) (7,390 ) (17,313 ) (6,561 ) (12,720 ) Accounts payable and other liabilities 917 12,232 (32,915 ) 9,930 (34,250 ) 5,302 Deferred income (1,382 ) 14,564 7,908 33,399 (1,790 ) 22,353 Net cash provided by operating activities $ 47,452 $ 51,255 $ 118,903 $ 133,298 $ 180,037 $ 192,755 Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the nine months ended September 30, 2023 and 2022, was $3,682 and $25,443, respectively. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. 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/20231026163496/en/Contacts Keith E. Pratt EVP & Chief Financial Officer 925-606-9200
McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues from continuing operations for the quarter ended September 30, 2023 of $243.5 million, an increase of 40% compared to the third quarter of 2022. The Company reported net income from continuing operations of $40.4 million, or $1.65 per diluted share, for the third quarter of 2023, compared to net income from continuing operations of $27.1 million, or $1.11 per diluted share, for the third quarter of 2022. THIRD QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS): Rental revenues increased 22% to $122.7 million. Total revenues increased 40% to $243.5 million. Other income for the third quarter 2023 includes a $3.6 million net gain on sale of two properties, which increased earnings per diluted share by $0.11. Adjusted EBITDA1 increased 47% to $95.3 million. Dividend rate of $0.465 per share for the third quarter of 2023. On an annualized basis, this dividend represents a 1.9% yield on the October 25, 2023 close price of $97.06 per share. Joe Hanna, President and CEO of McGrath, made the following comments regarding these results and future expectations: “We were very pleased with our third quarter results. Our 22% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 36%, with over half of the growth attributable to our Vesta Modular and several smaller Portable Storage acquisitions completed earlier this year. Before acquisitions, the modular segment rental revenues grew organically by a robust 13%. Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. We maintained our focus on pricing optimization, rental fleet utilization, and value-added services for our modular customers. Our initiatives to grow modular sales also showed progress as sales revenues doubled compared to a year ago. TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in 10% lower rental revenues for the quarter, compared to a year ago. During the quarter we reduced new equipment capital spending, made progress with sales of underutilized equipment, and improved rental fleet utilization to above 60% at quarter-end. We made good progress with the Vesta integration. Our organization work is complete and the Vesta team is fully integrated into the McGrath organization. I am very pleased with the team collaboration and commercial successes that have been achieved. We are very pleased with our year-to-date performance, and we are fully focused on solid execution for the remainder of the year.” DIVISION HIGHLIGHTS: All comparisons presented below are for the quarter ended September 30, 2023 to the quarter ended September 30, 2022 unless otherwise indicated. MOBILE MODULAR For the third quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $73.0 million, an increase of $33.1 million, or 83%. Rental revenues increased 36% to $94.0 million, depreciation expense increased 30% to $10.0 million, and other direct costs increased 2% to $23.4 million, which resulted in an increase in gross profit on rental revenues of 57% to $60.6 million. Vesta Modular contributed $14.8 million and $10.2 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 45% to $39.7 million, primarily attributable to higher delivery and pick up activities and higher site related services, with associated gross profit increasing 60% to $11.8 million. Vesta Modular contributed $4.0 million and $1.8 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased $29.9 million to $58.9 million, primarily from higher new equipment sales. Gross margin on sales was 32% compared to 35% in 2022, resulting in a 86% increase in gross profit on sales revenues to $19.0 million. Vesta Modular contributed $16.2 million and $5.1 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $11.0 million to $39.8 million. The addition of Vesta Modular increased selling and administrative expenses by $6.0 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.7 million. TRS-RENTELCO For the third quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.9 million, a decrease of 9%, when compared to the same quarter in 2022. Rental revenues decreased 10% to $28.7 million, depreciation expense decreased 3%, and other direct costs decreased 4%, resulting in a 18% decrease in gross profit on rental revenues to $11.5 million. The rental revenue decrease was primarily the result of lower average rental equipment on rent compared to the prior year and comparable average monthly rental rates. Sales revenues increased 58% to $8.7 million and gross profit on sales revenues decreased 9% to $3.1 million. The higher sales revenues and lower gross profit on sales can be attributed to the mix of equipment sold, which can fluctuate quarterly depending on customer requirements, equipment availability and funding. Selling and administrative expenses increased $0.3 million, or 4%, to $7.0 million, primarily due to higher allocated corporate expenses. FINANCIAL OUTLOOK: Based upon the Company's year-to-date results and current outlook for the remainder of the year, the Company is revising its financial outlook. For the full-year 2023, the Company expects: Previous (Continuing Operations) Current (Continuing Operations) • Total revenue: $805 to $830 million $820 to $830 million • Adjusted EBITDA1, 2: $306 to $320 million $312 to $320 million • Gross rental equipment capital expenditures: $190 to $200 million $190 to $200 million Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. 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. McGrath is 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 28, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 26, 2023 to discuss the third quarter 2023 results. To participate in the teleconference, dial 1-800-245-3047 (in the U.S.), or 1-203-518-9765 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-800-839-5685 (in the U.S.), or 1-402-220-2567 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations. FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) progress with sales of underutilized TRS equipment, (ii) focus on solid execution for the remainder of the year, and (iii) statements regarding the full year 2023 in the “Financial Outlook” section, are forward-looking. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta, Brekke Storage, Dixie Storage and Inland Storage acquisitions; competition within the modular business; the activity levels in the semiconductor and general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the other factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings. Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release. MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Rental $ 122,686 $ 100,871 $ 350,773 $ 285,588 Rental related services 40,492 28,198 101,481 69,276 Rental operations 163,178 129,069 452,254 354,864 Sales 77,115 44,414 148,576 95,503 Other 3,213 860 9,424 2,397 Total revenues 243,506 174,343 610,254 452,764 Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 22,069 20,174 66,499 60,118 Rental related services 28,532 20,576 71,625 50,116 Other 28,493 28,203 90,188 82,573 Total direct costs of rental operations 79,094 68,953 228,312 192,807 Costs of sales 52,878 28,548 98,431 58,124 Total costs of revenues 131,972 97,501 326,743 250,931 Gross profit 111,534 76,842 283,511 201,833 Selling and administrative expenses 48,508 36,954 153,032 103,368 Other income (3,559 ) — (3,559 ) — Income from operations 66,585 39,888 134,038 98,465 Interest expense (11,025 ) (3,355 ) (28,434 ) (8,057 ) Foreign currency exchange (loss) gain (42 ) (236 ) 166 (404 ) Income from continuing operations before provision for income taxes 55,518 36,297 105,770 90,004 Provision for income taxes from continuing operations 15,152 9,182 25,934 21,687 Income from continuing operations 40,366 27,115 79,836 68,317 Discontinued operations: Income from discontinued operations before provision for income taxes — 4,635 1,709 9,350 Provision for income taxes from discontinued operations — 1,183 453 2,170 Gain on sale of discontinued operations, net of tax — — 61,513 — Income from discontinued operations — 3,452 62,769 7,180 �� Net income $ 40,366 $ 30,567 $ 142,605 $ 75,497 Earnings per share from continuing operations: Basic $ 1.65 $ 1.11 $ 3.26 $ 2.81 Diluted $ 1.65 $ 1.11 $ 3.26 $ 2.79 Earnings per share from discontinued operations: Basic $ — $ 0.14 $ 2.57 $ 0.29 Diluted $ — $ 0.14 $ 2.56 $ 0.29 Earnings per share: Basic $ 1.65 $ 1.25 $ 5.83 $ 3.10 Diluted $ 1.65 $ 1.25 $ 5.81 $ 3.08 Shares used in per share calculation: Basic 24,487 24,379 24,461 24,342 Diluted 24,525 24,504 24,527 24,516 Cash dividends declared per share $ 0.465 $ 0.455 $ 1.395 $ 1.365 MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, December 31, (in thousands) 2023 2022 Assets Cash $ 1,946 $ 957 Accounts receivable, net of allowance for credit losses of $2,683 in 2023 and $2,300 in 2022 224,269 169,937 Rental equipment, at cost: Relocatable modular buildings 1,474,359 1,123,268 Electronic test equipment 383,006 398,267 1,857,365 1,521,535 Less: accumulated depreciation (565,497 ) (531,218 ) Rental equipment, net 1,291,868 990,317 Property, plant and equipment, net 146,484 138,713 Prepaid expenses and other assets 80,853 69,837 Intangible assets, net 67,480 35,431 Goodwill 323,771 106,403 Assets of discontinued operations — 196,249 Total assets $ 2,136,671 $ 1,707,844 Liabilities and Shareholders' Equity Liabilities: Notes payable $ 667,640 $ 413,742 Accounts payable and accrued liabilities 223,010 151,208 Deferred income 105,534 82,417 Deferred income taxes, net 229,115 203,361 Liabilities of discontinued operations — 53,171 Total liabilities 1,225,299 903,899 Shareholders’ equity: Common stock, no par value - Authorized 40,000 shares Issued and outstanding - 24,489 shares as of September 30, 2023 and 24,388 shares as of December 31, 2022 109,253 110,080 Retained earnings 802,161 693,943 Accumulated other comprehensive loss (42 ) (78 ) Total shareholders’ equity 911,372 803,945 Total liabilities and shareholders’ equity $ 2,136,671 $ 1,707,844 MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income $ 142,605 $ 75,497 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 81,842 83,272 Deferred income taxes (30,018 ) (4,299 ) Provision for credit losses 1,794 307 Share-based compensation 5,273 5,106 Gain on sale of property, plant and equipment (3,559 ) — Gain on sale of discontinued operations (61,513 ) — Gain on sale of used rental equipment (22,964 ) (26,705 ) Foreign currency exchange (gain) loss (166 ) 404 Amortization of debt issuance costs 6 13 Change in: Accounts receivable (27,733 ) (30,767 ) Prepaid expenses and other assets (7,390 ) (17,313 ) Accounts payable and accrued liabilities 32,818 14,384 Deferred income 7,908 33,399 Net cash provided by operating activities 118,903 133,298 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 268,012 — Purchases of rental equipment (171,322 ) (130,395 ) Purchases of property, plant and equipment (16,448 ) (10,594 ) Cash paid for acquisition of businesses (458,315 ) — Cash paid for acquisition of business assets (3,474 ) — Proceeds from sales of used rental equipment 49,405 54,193 Proceeds from sales of property, plant and equipment 595 — Net cash used in investing activities (331,547 ) (86,796 ) Cash Flows from Financing Activities: Net borrowings (payments) under bank lines of credit 178,892 (7,000 ) Borrowings under note purchase agreement 75,000 — Taxes paid related to net share settlement of stock awards (6,100 ) (6,253 ) Payment of dividends (34,168 ) (33,175 ) Net cash provided by (used in) financing activities 213,624 (46,428 ) Effect of foreign currency exchange rate changes on cash 9 (4 ) Net increase in cash 989 70 Cash balance, beginning of period 957 1,491 Cash balance, end of period $ 1,946 $ 1,561 Supplemental Disclosure of Cash Flow Information: Interest paid, during the period $ 27,818 $ 8,982 Net income taxes paid, during the period $ 9,547 $ 24,885 Dividends accrued during the period, not yet paid $ 12,014 $ 11,167 Rental equipment acquisitions, not yet paid $ 5,765 $ 9,555 Proceeds to be received on the sale of property, plant and equipment $ 6,370 $ — Business acquisition payments withheld $ 293 $ — MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended September 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 94,028 $ 28,658 $ — $ — $ 122,686 Rental related services 39,716 776 — — 40,492 Rental operations 133,744 29,434 — — 163,178 Sales 58,867 8,733 9,515 — 77,115 Other 2,271 942 — — 3,213 Total revenues 194,882 39,109 9,515 — 243,506 Costs and Expenses Direct costs of rental operations: Depreciation 10,037 12,032 — — 22,069 Rental related services 27,927 605 — — 28,532 Other 23,353 5,140 — — 28,493 Total direct costs of rental operations 61,317 17,777 — — 79,094 Costs of sales 39,821 5,651 7,406 — 52,878 Total costs of revenues 101,138 23,428 7,406 — 131,972 Gross Profit Rental 60,638 11,486 — — 72,124 Rental related services 11,789 171 — — 11,960 Rental operations 72,427 11,657 — — 84,084 Sales 19,046 3,082 2,109 — 24,237 Other 2,271 942 — — 3,213 Total gross profit 93,744 15,681 2,109 — 111,534 Selling and administrative expenses 39,832 6,999 1,677 — 48,508 Other income (2,740 ) (819 ) — — (3,559 ) Income from operations $ 56,652 $ 9,501 $ 432 $ — 66,585 Interest expense (11,025 ) Foreign currency exchange loss (42 ) Provision for income taxes (15,152 ) Net income $ 40,366 Other Information Adjusted EBITDA 1 $ 72,953 $ 21,858 $ 517 $ — $ 95,328 Average rental equipment 2 $ 1,350,562 $ 385,353 Average monthly total yield 3 2.32 % 2.46 % Average utilization 4 79.4 % 59.4 % Average monthly rental rate 5 2.92 % 4.17 % Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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 September 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) 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 9,978 977 45,391 Other 452 408 — 563 1,423 Total revenues 125,838 38,527 9,978 26,193 200,536 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 7,719 693 29,241 Total costs of revenues 69,253 20,529 7,719 13,595 111,096 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 2,259 284 16,150 Other 452 408 — 563 1,423 Total gross profit 56,585 17,998 2,259 12,598 89,440 Selling and administrative expenses 28,798 6,726 1,430 7,141 44,095 Other income — — — — — Income from operations $ 27,787 $ 11,272 $ 829 $ 5,457 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 $ 39,901 $ 23,894 $ 900 $ 10,192 $ 74,887 Average rental equipment 2 $ 1,030,792 $ 389,675 Average monthly total yield 3 2.23 % 2.71 % Average utilization 4 80.1 % 65.3 % Average monthly rental rate 5 2.79 % 4.16 % 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. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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) Nine months ended September 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 264,398 $ 86,375 $ — $ 6,520 $ 357,293 Rental related services 99,158 2,323 — 2,584 104,065 Rental operations 363,556 88,698 — 9,104 461,358 Sales 115,829 21,368 11,379 269 148,845 Other 6,416 3,008 — 65 9,489 Total revenues 485,801 113,074 11,379 9,438 619,692 Costs and Expenses Direct costs of rental operations: Depreciation 29,766 36,733 — 1,325 67,824 Rental related services 69,618 2,007 — 2,020 73,645 Other 74,345 15,843 — 1,270 91,458 Total direct costs of rental operations 173,729 54,583 — 4,614 232,926 Costs of sales 78,102 11,307 9,022 159 98,590 Total costs of revenues 251,831 65,890 9,022 4,773 331,516 Gross Profit Rental 160,287 33,799 — 3,926 198,012 Rental related services 29,540 316 — 564 30,420 Rental operations 189,827 34,115 — 4,490 228,432 Sales 37,727 10,061 2,357 110 50,255 Other 6,416 3,008 — 65 9,489 Total gross profit 233,970 47,184 2,357 4,665 288,176 Selling and administrative expenses 124,642 23,576 4,814 2,582 155,614 Other income (2,740 ) (819 ) — — (3,559 ) Income (loss) from operations $ 112,068 $ 24,427 $ (2,457 ) $ 2,083 136,121 Interest expense (28,808 ) Foreign currency exchange loss 166 Provision for income taxes (26,387 ) Net income $ 81,092 Other Information Adjusted EBITDA 1 $ 172,222 $ 64,031 $ (2,207 ) $ 3,682 $ 237,728 Average rental equipment 2 $ 1,275,330 $ 391,993 Average monthly total yield 3 2.30 % 2.43 % Average utilization 4 79.5 % 59.0 % Average monthly rental rate 5 2.90 % 4.15 % Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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) Nine months ended September 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) 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 15,545 2,235 97,738 Other 1,202 1,195 — 1,082 3,479 Total revenues 327,860 109,359 15,545 70,176 522,940 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 11,941 1,613 59,737 Total costs of revenues 178,455 60,535 11,941 38,243 289,174 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 3,604 622 38,001 Other 1,202 1,195 — 1,082 3,479 Total gross profit 149,405 48,824 3,604 31,933 233,766 Selling and administrative expenses 79,245 19,930 4,193 20,642 124,010 Other income — — — — — Income (loss) from operations $ 70,160 $ 28,894 $ (589 ) $ 11,291 109,756 Interest expense (9,998 ) Foreign currency exchange loss (404 ) Provision for income taxes (23,857 ) Net income $ 75,497 Other Information Adjusted EBITDA 1 $ 106,156 $ 66,675 $ (377 ) $ 25,443 $ 197,897 Average rental equipment 2 $ 1,019,105 $ 379,181 Average monthly total yield 3 2.13 % 2.63 % Average utilization 4 78.5 % 64.8 % Average monthly rental rate 5 2.72 % 4.07 % 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. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 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, share-based compensation and transaction costs. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company. Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation and transaction costs, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges and transaction costs. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP. Reconciliation of Income from Continuing Operations to Adjusted EBITDA (dollar amounts in thousands) Three Months Ended September 30, Nine Months Ended September 30, Twelve Months Ended September 30, 2023 2022 2023 2022 2023 2022 Income from continuing operations $ 40,366 $ 27,115 $ 79,836 $ 68,317 $ 114,828 $ 95,182 Provision for income taxes from continuing operations 15,152 9,182 25,934 21,687 35,624 32,331 Interest expense 11,025 3,355 28,434 8,057 32,607 10,653 Depreciation and amortization 26,884 23,491 80,385 69,982 104,043 93,065 EBITDA 93,427 63,143 214,589 168,043 287,102 231,231 Share-based compensation 1,891 1,461 5,155 4,244 7,658 6,278 Transaction costs 3 10 167 14,302 167 18,188 899 Adjusted EBITDA 1 $ 95,328 $ 64,771 $ 234,046 $ 172,454 $ 312,948 $ 238,408 Adjusted EBITDA margin 2 39 % 37 % 38 % 38 % 39 % 39 % 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, 2023 2022 2023 2022 2023 2022 Adjusted EBITDA 1 $ 95,328 $ 74,887 $ 237,728 $ 197,897 $ 328,697 $ 271,589 Interest paid (11,016 ) (3,161 ) (27,818 ) (8,982 ) (33,611 ) (12,831 ) Income taxes paid, net of refunds received (2,616 ) (7,807 ) (9,547 ) (24,885 ) (12,024 ) (25,898 ) Gain on sale of used rental equipment (8,714 ) (10,612 ) (22,964 ) (26,705 ) (34,238 ) (34,358 ) Foreign currency exchange loss 42 236 (166 ) 404 (192 ) 429 Amortization of debt issuance costs 2 4 6 13 9 17 Change in certain assets and liabilities: Accounts receivable, net (26,223 ) (22,630 ) (25,939 ) (30,460 ) (26,003 ) (21,128 ) Prepaid expenses and other assets 1,114 (6,458 ) (7,390 ) (17,313 ) (6,561 ) (12,720 ) Accounts payable and other liabilities 917 12,232 (32,915 ) 9,930 (34,250 ) 5,302 Deferred income (1,382 ) 14,564 7,908 33,399 (1,790 ) 22,353 Net cash provided by operating activities $ 47,452 $ 51,255 $ 118,903 $ 133,298 $ 180,037 $ 192,755 Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the nine months ended September 30, 2023 and 2022, was $3,682 and $25,443, respectively. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. 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/20231026163496/en/