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 Second Quarter 2023 By: McGrath RentCorp via Business Wire July 27, 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 June 30, 2023 of $203.0 million, an increase of 32%, compared to the second quarter of 2022. The Company reported net income from continuing operations of $28.0 million, or $1.14 per diluted share, for the second quarter of 2023, compared to net income from continuing operations of $23.5 million, or $0.96 per diluted share, for the second quarter of 2022. SECOND QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS): Rental revenues increased 24% to $117.8 million. Total revenues increased 32% to $203.0 million. Adjusted EBITDA1 increased 33% to $77.0 million. Dividend rate of $0.465 per share for the second quarter of 2023. On an annualized basis, this dividend represents a 2.0% yield on the July 26, 2023 close price of $92.16 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 second quarter results. Our 24% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 37%, 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 14%. Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. Overall demand conditions continued to be positive. Our initiatives to grow modular sales also showed progress as sales revenues increased by 59% compared to a year ago. Consistent with our growth objectives, we increased our portable storage geographic coverage with the acquisitions of Dixie Storage and Inland Leasing and Storage. TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in lower general purpose rentals during the quarter, while communications rentals were flat, compared to a year ago. Rental revenues at TRS-RenTelco decreased by 4%. We are continuing to make good progress with the strategic transformation of McGrath’s business portfolio. The Adler divestiture will be fully completed at the end of July, which has been a substantial undertaking for the McGrath team through the first half of the year. Concurrently, we have been making good progress with the Vesta integration. I am very pleased with the team collaboration and commercial successes that we have seen in the last few months. Our first half accomplishments have been significant, and we look forward to building on that momentum in the second half of the year. I am excited by the range of long-term growth opportunities for McGrath.” DIVISION HIGHLIGHTS: All comparisons presented below are for the quarter ended June 30, 2023 to the quarter ended June 30, 2022 unless otherwise indicated. MOBILE MODULAR For the second quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $56.8 million, an increase of $21.1 million, or 59%. Rental revenues increased 37% to $89.3 million, depreciation expense increased 33% to $10.3 million and other direct costs increased 4% to $25.1 million, which resulted in an increase in gross profit on rental revenues of 63% to $53.9 million. Vesta Modular contributed $13.9 million and $8.9 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 56% to $33.2 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers, with associated gross profit increasing 65% to $10.1 million. Vesta Modular contributed $4.6 million and $1.7 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased 59% to $39.4 million, primarily from higher new equipment sales. Gross margin on sales was 31% compared to 41% in 2022, resulting in a 21% increase in gross profit on sales revenues to $12.2 million. Vesta Modular contributed $11.2 million and $2.8 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $12.5 million to $38.3 million. The addition of Vesta Modular increased selling and administrative expenses by $6.6 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.8 million. TRS-RENTELCO For the second quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.5 million, a decrease of 3%, when compared to the same quarter in 2022. Rental revenues decreased 4% to $28.6 million, with depreciation expense and other direct costs comparable to the previous period, resulting in a 10% decrease in gross profit on rental revenues to $10.8 million. The rental revenue decrease was the result of lower average rental equipment on rent compared to the prior year, partly offset by higher average monthly rental rates. Sales revenues increased 17% to $7.5 million and gross profit on sales revenues increased 12% to $4.1 million. Selling and administrative expenses increased $0.5 million, or 8%, to $7.1 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: $790 to $820 million $805 to $830 million ● Adjusted EBITDA1, 2: $300 to $315 million $306 to $320 million ● Gross rental equipment capital expenditures: $190 to $210 million $190 to $200 million 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended June 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. 2. Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release. ABOUT MCGRATH: McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies. 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 June 29, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 27, 2023 to discuss the second 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 1-800-839-3413 (in the U.S.), or 1-402-220-7236 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations. FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) the overall demand conditions, (ii) the progress with the strategic transformation of McGrath's business portfolio (iii) success with the integration of Vesta and additional business opportunities stemming from the acquisition, (iv) the outlook on future opportunities and the overall growth across the business, and (v) 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 June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Rental $ 117,840 $ 94,667 $ 228,087 $ 184,717 Rental related services 33,857 22,046 60,989 41,078 Rental operations 151,697 116,713 289,076 225,795 Sales 47,801 35,870 71,461 51,089 Other 3,532 785 6,211 1,537 Total revenues 203,030 153,368 366,748 278,421 Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 22,597 20,082 44,430 39,944 Rental related services 23,825 15,780 43,093 29,540 Other 30,560 29,516 61,695 54,370 Total direct costs of rental operations 76,982 65,378 149,218 123,854 Costs of sales 31,438 21,034 45,553 29,576 Total costs of revenues 108,420 86,412 194,771 153,430 Gross profit 94,610 66,956 171,977 124,991 Selling and administrative expenses 47,026 33,809 104,524 66,414 Income from operations 47,584 33,147 67,453 58,577 Other (expense) income: Interest expense (9,945 ) (2,426 ) (17,409 ) (4,702 ) Foreign currency exchange (loss) gain (18 ) (181 ) 208 (168 ) Income from continuing operations before provision for income taxes 37,621 30,540 50,252 53,707 Provision for income taxes from continuing operations 9,669 6,996 10,782 12,505 Income from continuing operations 27,952 23,544 39,470 41,202 Discontinued operations: Income from discontinued operations before provision for income taxes — 3,327 1,709 4,715 Provision for income taxes from discontinued operations — 734 453 987 Gain on sale of discontinued operations, net of tax 2,630 — 61,513 — Income from discontinued operations 2,630 2,593 62,769 3,728 Net income $ 30,582 $ 26,137 $ 102,239 $ 44,930 Earnings per share from continuing operations: Basic $ 1.14 $ 0.96 $ 1.61 $ 1.68 Diluted $ 1.14 $ 0.96 $ 1.61 $ 1.68 Earnings per share from discontinued operations: Basic $ 0.11 $ 0.11 $ 2.57 $ 0.15 Diluted $ 0.11 $ 0.11 $ 2.56 $ 0.15 Earnings per share: Basic $ 1.25 $ 1.07 $ 4.18 $ 1.83 Diluted $ 1.25 $ 1.07 $ 4.17 $ 1.83 Shares used in per share calculation: Basic 24,479 24,360 24,448 24,323 Diluted 24,512 24,509 24,527 24,522 Cash dividends declared per share $ 0.465 $ 0.455 $ 0.930 $ 0.910 MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, (in thousands) 2023 2022 Assets Cash $ 2,205 $ 957 Accounts receivable, net of allowance for credit losses of $2,600 in 2023 and $2,300 in 2022 191,676 169,937 Rental equipment, at cost: Relocatable modular buildings 1,457,984 1,123,268 Electronic test equipment 390,832 398,267 1,848,816 1,521,535 Less: accumulated depreciation (553,166 ) (531,218 ) Rental equipment, net 1,295,650 990,317 Property, plant and equipment, net 146,624 138,713 Prepaid expenses and other assets 81,967 69,837 Intangible assets, net 65,607 35,431 Goodwill 325,354 106,403 Assets of discontinued operations — 196,249 Total assets $ 2,109,083 $ 1,707,844 Liabilities and Shareholders' Equity Liabilities: Notes payable $ 672,631 $ 413,742 Accounts payable and accrued liabilities 219,611 151,208 Deferred income 106,523 82,417 Deferred income taxes, net 229,749 203,361 Liabilities of discontinued operations — 53,171 Total liabilities 1,228,514 903,899 Shareholders’ equity: Common stock, no par value - Authorized 40,000 shares Issued and outstanding - 24,485 shares as of June 30, 2023 and 24,388 shares as of December 31, 2022 107,362 110,080 Retained earnings 773,260 693,943 Accumulated other comprehensive loss (53 ) (78 ) Total shareholders’ equity 880,569 803,945 Total liabilities and shareholders’ equity $ 2,109,083 $ 1,707,844 MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income $ 102,239 $ 44,930 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 54,958 55,355 Deferred income taxes (39,486 ) (5,815 ) Provision for credit losses 1,400 49 Share-based compensation 3,382 3,412 Gain on sale of discontinued operations (61,513 ) — Gain on sale of used rental equipment (14,250 ) (16,093 ) Foreign currency exchange (gain) loss (208 ) 168 Amortization of debt issuance costs 4 9 Change in: Accounts receivable (1,116 ) (7,879 ) Prepaid expenses and other assets (8,504 ) (10,855 ) Accounts payable and accrued liabilities 25,255 (73 ) Deferred income 9,290 18,835 Net cash provided by operating activities 71,451 82,043 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 268,012 — Purchases of rental equipment (128,088 ) (94,820 ) Purchases of property, plant and equipment (11,229 ) (6,594 ) Cash paid for acquisition of businesses (456,312 ) — Proceeds from sales of used rental equipment 27,410 31,830 Net cash used in investing activities (300,207 ) (69,584 ) Cash Flows from Financing Activities: Net borrowings under bank lines of credit 258,885 15,000 Taxes paid related to net share settlement of stock awards (6,100 ) (6,128 ) Payment of dividends (22,782 ) (22,083 ) Net cash provided by (used in) financing activities 230,003 (13,211 ) Effect of foreign currency exchange rate changes on cash 1 135 Net increase (decrease) in cash 1,248 (617 ) Cash balance, beginning of period 957 1,491 Cash balance, end of period $ 2,205 $ 874 Supplemental Disclosure of Cash Flow Information: Interest paid, during the period $ 16,802 $ 5,821 Net income taxes paid, during the period $ 6,931 $ 17,078 Dividends accrued during the period, not yet paid $ 11,937 $ 11,009 Rental equipment acquisitions, not yet paid $ 7,612 $ 6,906 MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended June 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 89,257 $ 28,583 $ — $ — $ 117,840 Rental related services 33,190 667 — — 33,857 Rental operations 122,447 29,250 — — 151,697 Sales 39,357 7,521 923 — 47,801 Other 2,458 1,074 — — 3,532 Total revenues 164,262 37,845 923 — 203,030 Costs and Expenses Direct costs of rental operations: Depreciation 10,285 12,312 — — 22,597 Rental related services 23,084 741 — — 23,825 Other 25,082 5,478 — — 30,560 Total direct costs of rental operations 58,451 18,531 — — 76,982 Costs of sales 27,207 3,431 800 — 31,438 Total costs of revenues 85,658 21,962 800 — 108,420 Gross Profit (Loss) Rental 53,890 10,793 — — 64,683 Rental related services 10,106 (74 ) — — 10,032 Rental operations 63,996 10,719 — — 74,715 Sales 12,150 4,090 123 — 16,363 Other 2,458 1,074 — — 3,532 Total gross profit 78,604 15,883 123 — 94,610 Selling and administrative expenses 38,296 7,126 1,604 — 47,026 Income (loss) from operations $ 40,308 $ 8,757 $ (1,481 ) $ — 47,584 Interest expense (9,945 ) Foreign currency exchange loss (18 ) Provision for income taxes (9,669 ) Net income $ 27,952 Other Information Adjusted EBITDA 1 $ 56,824 $ 21,538 $ (1,394 ) $ — $ 76,968 Average rental equipment 2 $ 1,321,767 $ 393,891 Average monthly total yield 3 2.25 % 2.40 % Average utilization 4 79.1 % 58.2 % Average monthly rental rate 5 2.84 % 4.16 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended June 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 64,949 $ 29,718 $ — $ 15,957 $ 110,624 Rental related services 21,233 813 — 6,773 28,819 Rental operations 86,182 30,531 — 22,730 139,443 Sales 24,816 6,404 4,650 601 36,471 Other 379 406 — 332 1,117 Total revenues 111,377 37,341 4,650 23,663 177,031 Costs and Expenses Direct costs of rental operations: Depreciation 7,749 12,333 — 3,982 24,064 Rental related services 15,116 664 — 5,073 20,853 Other 24,073 5,443 — 3,309 32,825 Total direct costs of rental operations 46,938 18,440 — 12,364 77,742 Costs of sales 14,760 2,765 3,509 418 21,452 Total costs of revenues 61,698 21,205 3,509 12,782 99,194 Gross Profit Rental 33,127 11,942 — 8,666 53,735 Rental related services 6,117 149 — 1,700 7,966 Rental operations 39,244 12,091 — 10,366 61,701 Sales 10,056 3,639 1,141 183 15,019 Other 379 406 — 332 1,117 Total gross profit 49,679 16,136 1,141 10,881 77,837 Selling and administrative expenses 25,755 6,614 1,440 6,979 40,788 Income (loss) from operations $ 23,924 $ 9,522 $ (299 ) $ 3,902 37,049 Interest expense (3,001 ) Foreign currency exchange loss (181 ) Provision for income taxes (7,730 ) Net income $ 26,137 Other Information Adjusted EBITDA 1 $ 35,773 $ 22,128 $ (230 ) $ 8,620 $ 66,291 Average rental equipment 2 $ 1,019,927 $ 382,068 Average monthly total yield 3 2.12 % 2.59 % Average utilization 4 78.1 % 64.5 % Average monthly rental rate 5 2.72 % 4.02 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Six months ended June 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 170,370 $ 57,717 $ — $ 6,520 $ 228,087 Rental related services 59,442 1,547 — 2,584 60,989 Rental operations 229,812 59,264 — 9,104 289,076 Sales 56,962 12,635 1,864 269 71,461 Other 4,145 2,066 — 65 6,211 Total revenues 290,919 73,965 1,864 9,438 366,748 Costs and Expenses Direct costs of rental operations: Depreciation 19,729 24,701 — 1,325 44,430 Rental related services 41,691 1,402 — 2,020 43,093 Other 50,992 10,703 — 1,270 61,695 Total direct costs of rental operations 112,412 36,806 — 4,614 149,218 Costs of sales 38,281 5,656 1,616 159 45,553 Total costs of revenues 150,693 42,462 1,616 4,773 194,771 Gross Profit Rental 99,649 22,313 — 3,926 121,962 Rental related services 17,751 145 — 564 17,896 Rental operations 117,400 22,458 — 4,490 139,858 Sales 18,681 6,979 248 110 25,908 Other 4,145 2,066 — 65 6,211 Total gross profit 140,226 31,503 248 4,665 171,977 Selling and administrative expenses 84,810 16,577 3,137 2,582 104,524 Income (loss) from operations $ 55,416 $ 14,926 $ (2,889 ) $ 2,083 67,453 Interest expense (17,783 ) Foreign currency exchange loss 208 Provision for income taxes (11,235 ) Net income $ 38,643 Other Information Adjusted EBITDA 1 $ 99,269 $ 42,173 $ (2,724 ) $ 3,682 $ 142,400 Average rental equipment 2 $ 1,241,287 $ 395,049 Average monthly total yield 3 2.29 % 2.42 % Average utilization 4 79.4 % 58.7 % Average monthly rental rate 5 2.88 % 4.15 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Six months ended June 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 126,487 $ 58,230 $ — $ 30,148 $ 214,865 Rental related services 39,594 1,484 — 12,058 53,136 Rental operations 166,081 59,714 — 42,206 268,001 Sales 35,191 10,331 5,567 1,258 52,347 Other 750 787 — 519 2,056 Total revenues 202,022 70,832 5,567 43,983 322,404 Costs and Expenses Direct costs of rental operations: Depreciation 15,582 24,362 — 7,994 47,938 Rental related services 28,296 1,244 — 9,456 38,996 Other 44,235 10,135 — 6,278 60,648 Total direct costs of rental operations 88,113 35,741 — 23,728 147,582 Costs of sales 21,089 4,265 4,222 920 30,496 Total costs of revenues 109,202 40,006 4,222 24,648 178,078 Gross Profit Rental 66,670 23,733 — 15,876 106,279 Rental related services 11,298 240 — 2,602 14,140 Rental operations 77,968 23,973 — 18,478 120,419 Sales 14,102 6,066 1,345 338 21,851 Other 750 787 — 519 2,056 Total gross profit 92,820 30,826 1,345 19,335 144,326 Selling and administrative expenses 50,447 13,204 2,763 13,501 79,915 Income (loss) from operations $ 42,373 $ 17,622 $ (1,418 ) $ 5,834 64,411 Interest expense (5,821 ) Foreign currency exchange loss (168 ) Provision for income taxes (13,492 ) Net income $ 44,930 Other Information Adjusted EBITDA 1 $ 66,178 $ 42,781 $ (1,276 ) $ 15,327 $ 123,010 Average rental equipment 2 $ 1,013,361 $ 374,364 Average monthly total yield 3 2.08 % 2.59 % Average utilization 4 77.6 % 64.6 % Average monthly rental rate 5 2.68 % 4.02 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. 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 June 30, Six Months Ended June 30, Twelve Months Ended June 30, 2023 2022 2023 2022 2023 2022 Income from continuing operations $ 27,952 $ 23,544 $ 39,470 $ 41,202 $ 101,577 $ 89,756 Provision for income taxes from continuing operations 9,669 6,996 10,782 12,505 29,654 31,885 Interest expense 9,945 2,426 17,409 4,702 24,937 9,828 Depreciation and amortization 27,368 23,357 53,501 46,491 100,650 93,469 EBITDA 74,934 56,323 121,162 104,900 256,818 224,938 Share-based compensation 1,889 1,271 3,264 2,783 7,228 6,296 Transaction costs 3 145 — 14,292 — 18,345 1,141 Adjusted EBITDA 1 $ 76,968 $ 57,594 $ 138,718 $ 107,683 $ 282,391 $ 232,375 Adjusted EBITDA margin 2 38 % 38 % 38 % 39 % 39 % 40 % Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities (dollar amounts in thousands) Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30, 2023 2022 2023 2022 2023 2022 Adjusted EBITDA 1 $ 76,968 $ 66,291 $ 142,400 $ 123,010 $ 308,256 $ 263,074 Interest paid (8,985 ) (3,684 ) (16,802 ) (5,821 ) (25,756 ) (12,160 ) Income taxes paid, net of refunds received (6,518 ) (16,658 ) (6,931 ) (17,078 ) (17,215 ) (19,175 ) Gain on sale of used rental equipment (11,161 ) (10,729 ) (14,250 ) (16,093 ) (36,136 ) (29,664 ) Foreign currency exchange (gain) loss 18 181 (208 ) 168 2 321 Amortization of debt issuance costs 2 5 4 9 11 18 Change in certain assets and liabilities: Accounts receivable, net (16,669 ) (15,765 ) 284 (7,830 ) (22,410 ) (26,420 ) Prepaid expenses and other assets (1,159 ) (15,068 ) (8,504 ) (10,855 ) (14,133 ) (8,286 ) Accounts payable and other liabilities (2,828 ) 12,115 (33,832 ) (2,302 ) (22,935 ) (8,362 ) Deferred income 6,072 13,612 9,290 18,835 14,156 20,459 Net cash provided by operating activities $ 35,740 $ 30,300 $ 71,451 $ 82,043 $ 183,840 $ 179,805 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the six months ended June 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 six months ended June 30, 2023 and 2022, was $3,682 and $15,173, respectively. 2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. 3. Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions. View source version on businesswire.com: https://www.businesswire.com/news/home/20230726023794/en/Contacts Keith E. 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McGrath Announces Results for Second Quarter 2023 By: McGrath RentCorp via Business Wire July 27, 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 June 30, 2023 of $203.0 million, an increase of 32%, compared to the second quarter of 2022. The Company reported net income from continuing operations of $28.0 million, or $1.14 per diluted share, for the second quarter of 2023, compared to net income from continuing operations of $23.5 million, or $0.96 per diluted share, for the second quarter of 2022. SECOND QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS): Rental revenues increased 24% to $117.8 million. Total revenues increased 32% to $203.0 million. Adjusted EBITDA1 increased 33% to $77.0 million. Dividend rate of $0.465 per share for the second quarter of 2023. On an annualized basis, this dividend represents a 2.0% yield on the July 26, 2023 close price of $92.16 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 second quarter results. Our 24% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 37%, 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 14%. Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. Overall demand conditions continued to be positive. Our initiatives to grow modular sales also showed progress as sales revenues increased by 59% compared to a year ago. Consistent with our growth objectives, we increased our portable storage geographic coverage with the acquisitions of Dixie Storage and Inland Leasing and Storage. TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in lower general purpose rentals during the quarter, while communications rentals were flat, compared to a year ago. Rental revenues at TRS-RenTelco decreased by 4%. We are continuing to make good progress with the strategic transformation of McGrath’s business portfolio. The Adler divestiture will be fully completed at the end of July, which has been a substantial undertaking for the McGrath team through the first half of the year. Concurrently, we have been making good progress with the Vesta integration. I am very pleased with the team collaboration and commercial successes that we have seen in the last few months. Our first half accomplishments have been significant, and we look forward to building on that momentum in the second half of the year. I am excited by the range of long-term growth opportunities for McGrath.” DIVISION HIGHLIGHTS: All comparisons presented below are for the quarter ended June 30, 2023 to the quarter ended June 30, 2022 unless otherwise indicated. MOBILE MODULAR For the second quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $56.8 million, an increase of $21.1 million, or 59%. Rental revenues increased 37% to $89.3 million, depreciation expense increased 33% to $10.3 million and other direct costs increased 4% to $25.1 million, which resulted in an increase in gross profit on rental revenues of 63% to $53.9 million. Vesta Modular contributed $13.9 million and $8.9 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 56% to $33.2 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers, with associated gross profit increasing 65% to $10.1 million. Vesta Modular contributed $4.6 million and $1.7 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased 59% to $39.4 million, primarily from higher new equipment sales. Gross margin on sales was 31% compared to 41% in 2022, resulting in a 21% increase in gross profit on sales revenues to $12.2 million. Vesta Modular contributed $11.2 million and $2.8 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $12.5 million to $38.3 million. The addition of Vesta Modular increased selling and administrative expenses by $6.6 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.8 million. TRS-RENTELCO For the second quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.5 million, a decrease of 3%, when compared to the same quarter in 2022. Rental revenues decreased 4% to $28.6 million, with depreciation expense and other direct costs comparable to the previous period, resulting in a 10% decrease in gross profit on rental revenues to $10.8 million. The rental revenue decrease was the result of lower average rental equipment on rent compared to the prior year, partly offset by higher average monthly rental rates. Sales revenues increased 17% to $7.5 million and gross profit on sales revenues increased 12% to $4.1 million. Selling and administrative expenses increased $0.5 million, or 8%, to $7.1 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: $790 to $820 million $805 to $830 million ● Adjusted EBITDA1, 2: $300 to $315 million $306 to $320 million ● Gross rental equipment capital expenditures: $190 to $210 million $190 to $200 million 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended June 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. 2. Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release. ABOUT MCGRATH: McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies. 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 June 29, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 27, 2023 to discuss the second 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 1-800-839-3413 (in the U.S.), or 1-402-220-7236 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations. FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) the overall demand conditions, (ii) the progress with the strategic transformation of McGrath's business portfolio (iii) success with the integration of Vesta and additional business opportunities stemming from the acquisition, (iv) the outlook on future opportunities and the overall growth across the business, and (v) 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 June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Rental $ 117,840 $ 94,667 $ 228,087 $ 184,717 Rental related services 33,857 22,046 60,989 41,078 Rental operations 151,697 116,713 289,076 225,795 Sales 47,801 35,870 71,461 51,089 Other 3,532 785 6,211 1,537 Total revenues 203,030 153,368 366,748 278,421 Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 22,597 20,082 44,430 39,944 Rental related services 23,825 15,780 43,093 29,540 Other 30,560 29,516 61,695 54,370 Total direct costs of rental operations 76,982 65,378 149,218 123,854 Costs of sales 31,438 21,034 45,553 29,576 Total costs of revenues 108,420 86,412 194,771 153,430 Gross profit 94,610 66,956 171,977 124,991 Selling and administrative expenses 47,026 33,809 104,524 66,414 Income from operations 47,584 33,147 67,453 58,577 Other (expense) income: Interest expense (9,945 ) (2,426 ) (17,409 ) (4,702 ) Foreign currency exchange (loss) gain (18 ) (181 ) 208 (168 ) Income from continuing operations before provision for income taxes 37,621 30,540 50,252 53,707 Provision for income taxes from continuing operations 9,669 6,996 10,782 12,505 Income from continuing operations 27,952 23,544 39,470 41,202 Discontinued operations: Income from discontinued operations before provision for income taxes — 3,327 1,709 4,715 Provision for income taxes from discontinued operations — 734 453 987 Gain on sale of discontinued operations, net of tax 2,630 — 61,513 — Income from discontinued operations 2,630 2,593 62,769 3,728 Net income $ 30,582 $ 26,137 $ 102,239 $ 44,930 Earnings per share from continuing operations: Basic $ 1.14 $ 0.96 $ 1.61 $ 1.68 Diluted $ 1.14 $ 0.96 $ 1.61 $ 1.68 Earnings per share from discontinued operations: Basic $ 0.11 $ 0.11 $ 2.57 $ 0.15 Diluted $ 0.11 $ 0.11 $ 2.56 $ 0.15 Earnings per share: Basic $ 1.25 $ 1.07 $ 4.18 $ 1.83 Diluted $ 1.25 $ 1.07 $ 4.17 $ 1.83 Shares used in per share calculation: Basic 24,479 24,360 24,448 24,323 Diluted 24,512 24,509 24,527 24,522 Cash dividends declared per share $ 0.465 $ 0.455 $ 0.930 $ 0.910 MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, (in thousands) 2023 2022 Assets Cash $ 2,205 $ 957 Accounts receivable, net of allowance for credit losses of $2,600 in 2023 and $2,300 in 2022 191,676 169,937 Rental equipment, at cost: Relocatable modular buildings 1,457,984 1,123,268 Electronic test equipment 390,832 398,267 1,848,816 1,521,535 Less: accumulated depreciation (553,166 ) (531,218 ) Rental equipment, net 1,295,650 990,317 Property, plant and equipment, net 146,624 138,713 Prepaid expenses and other assets 81,967 69,837 Intangible assets, net 65,607 35,431 Goodwill 325,354 106,403 Assets of discontinued operations — 196,249 Total assets $ 2,109,083 $ 1,707,844 Liabilities and Shareholders' Equity Liabilities: Notes payable $ 672,631 $ 413,742 Accounts payable and accrued liabilities 219,611 151,208 Deferred income 106,523 82,417 Deferred income taxes, net 229,749 203,361 Liabilities of discontinued operations — 53,171 Total liabilities 1,228,514 903,899 Shareholders’ equity: Common stock, no par value - Authorized 40,000 shares Issued and outstanding - 24,485 shares as of June 30, 2023 and 24,388 shares as of December 31, 2022 107,362 110,080 Retained earnings 773,260 693,943 Accumulated other comprehensive loss (53 ) (78 ) Total shareholders’ equity 880,569 803,945 Total liabilities and shareholders’ equity $ 2,109,083 $ 1,707,844 MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income $ 102,239 $ 44,930 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 54,958 55,355 Deferred income taxes (39,486 ) (5,815 ) Provision for credit losses 1,400 49 Share-based compensation 3,382 3,412 Gain on sale of discontinued operations (61,513 ) — Gain on sale of used rental equipment (14,250 ) (16,093 ) Foreign currency exchange (gain) loss (208 ) 168 Amortization of debt issuance costs 4 9 Change in: Accounts receivable (1,116 ) (7,879 ) Prepaid expenses and other assets (8,504 ) (10,855 ) Accounts payable and accrued liabilities 25,255 (73 ) Deferred income 9,290 18,835 Net cash provided by operating activities 71,451 82,043 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 268,012 — Purchases of rental equipment (128,088 ) (94,820 ) Purchases of property, plant and equipment (11,229 ) (6,594 ) Cash paid for acquisition of businesses (456,312 ) — Proceeds from sales of used rental equipment 27,410 31,830 Net cash used in investing activities (300,207 ) (69,584 ) Cash Flows from Financing Activities: Net borrowings under bank lines of credit 258,885 15,000 Taxes paid related to net share settlement of stock awards (6,100 ) (6,128 ) Payment of dividends (22,782 ) (22,083 ) Net cash provided by (used in) financing activities 230,003 (13,211 ) Effect of foreign currency exchange rate changes on cash 1 135 Net increase (decrease) in cash 1,248 (617 ) Cash balance, beginning of period 957 1,491 Cash balance, end of period $ 2,205 $ 874 Supplemental Disclosure of Cash Flow Information: Interest paid, during the period $ 16,802 $ 5,821 Net income taxes paid, during the period $ 6,931 $ 17,078 Dividends accrued during the period, not yet paid $ 11,937 $ 11,009 Rental equipment acquisitions, not yet paid $ 7,612 $ 6,906 MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended June 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 89,257 $ 28,583 $ — $ — $ 117,840 Rental related services 33,190 667 — — 33,857 Rental operations 122,447 29,250 — — 151,697 Sales 39,357 7,521 923 — 47,801 Other 2,458 1,074 — — 3,532 Total revenues 164,262 37,845 923 — 203,030 Costs and Expenses Direct costs of rental operations: Depreciation 10,285 12,312 — — 22,597 Rental related services 23,084 741 — — 23,825 Other 25,082 5,478 — — 30,560 Total direct costs of rental operations 58,451 18,531 — — 76,982 Costs of sales 27,207 3,431 800 — 31,438 Total costs of revenues 85,658 21,962 800 — 108,420 Gross Profit (Loss) Rental 53,890 10,793 — — 64,683 Rental related services 10,106 (74 ) — — 10,032 Rental operations 63,996 10,719 — — 74,715 Sales 12,150 4,090 123 — 16,363 Other 2,458 1,074 — — 3,532 Total gross profit 78,604 15,883 123 — 94,610 Selling and administrative expenses 38,296 7,126 1,604 — 47,026 Income (loss) from operations $ 40,308 $ 8,757 $ (1,481 ) $ — 47,584 Interest expense (9,945 ) Foreign currency exchange loss (18 ) Provision for income taxes (9,669 ) Net income $ 27,952 Other Information Adjusted EBITDA 1 $ 56,824 $ 21,538 $ (1,394 ) $ — $ 76,968 Average rental equipment 2 $ 1,321,767 $ 393,891 Average monthly total yield 3 2.25 % 2.40 % Average utilization 4 79.1 % 58.2 % Average monthly rental rate 5 2.84 % 4.16 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended June 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 64,949 $ 29,718 $ — $ 15,957 $ 110,624 Rental related services 21,233 813 — 6,773 28,819 Rental operations 86,182 30,531 — 22,730 139,443 Sales 24,816 6,404 4,650 601 36,471 Other 379 406 — 332 1,117 Total revenues 111,377 37,341 4,650 23,663 177,031 Costs and Expenses Direct costs of rental operations: Depreciation 7,749 12,333 — 3,982 24,064 Rental related services 15,116 664 — 5,073 20,853 Other 24,073 5,443 — 3,309 32,825 Total direct costs of rental operations 46,938 18,440 — 12,364 77,742 Costs of sales 14,760 2,765 3,509 418 21,452 Total costs of revenues 61,698 21,205 3,509 12,782 99,194 Gross Profit Rental 33,127 11,942 — 8,666 53,735 Rental related services 6,117 149 — 1,700 7,966 Rental operations 39,244 12,091 — 10,366 61,701 Sales 10,056 3,639 1,141 183 15,019 Other 379 406 — 332 1,117 Total gross profit 49,679 16,136 1,141 10,881 77,837 Selling and administrative expenses 25,755 6,614 1,440 6,979 40,788 Income (loss) from operations $ 23,924 $ 9,522 $ (299 ) $ 3,902 37,049 Interest expense (3,001 ) Foreign currency exchange loss (181 ) Provision for income taxes (7,730 ) Net income $ 26,137 Other Information Adjusted EBITDA 1 $ 35,773 $ 22,128 $ (230 ) $ 8,620 $ 66,291 Average rental equipment 2 $ 1,019,927 $ 382,068 Average monthly total yield 3 2.12 % 2.59 % Average utilization 4 78.1 % 64.5 % Average monthly rental rate 5 2.72 % 4.02 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Six months ended June 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 170,370 $ 57,717 $ — $ 6,520 $ 228,087 Rental related services 59,442 1,547 — 2,584 60,989 Rental operations 229,812 59,264 — 9,104 289,076 Sales 56,962 12,635 1,864 269 71,461 Other 4,145 2,066 — 65 6,211 Total revenues 290,919 73,965 1,864 9,438 366,748 Costs and Expenses Direct costs of rental operations: Depreciation 19,729 24,701 — 1,325 44,430 Rental related services 41,691 1,402 — 2,020 43,093 Other 50,992 10,703 — 1,270 61,695 Total direct costs of rental operations 112,412 36,806 — 4,614 149,218 Costs of sales 38,281 5,656 1,616 159 45,553 Total costs of revenues 150,693 42,462 1,616 4,773 194,771 Gross Profit Rental 99,649 22,313 — 3,926 121,962 Rental related services 17,751 145 — 564 17,896 Rental operations 117,400 22,458 — 4,490 139,858 Sales 18,681 6,979 248 110 25,908 Other 4,145 2,066 — 65 6,211 Total gross profit 140,226 31,503 248 4,665 171,977 Selling and administrative expenses 84,810 16,577 3,137 2,582 104,524 Income (loss) from operations $ 55,416 $ 14,926 $ (2,889 ) $ 2,083 67,453 Interest expense (17,783 ) Foreign currency exchange loss 208 Provision for income taxes (11,235 ) Net income $ 38,643 Other Information Adjusted EBITDA 1 $ 99,269 $ 42,173 $ (2,724 ) $ 3,682 $ 142,400 Average rental equipment 2 $ 1,241,287 $ 395,049 Average monthly total yield 3 2.29 % 2.42 % Average utilization 4 79.4 % 58.7 % Average monthly rental rate 5 2.88 % 4.15 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Six months ended June 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 126,487 $ 58,230 $ — $ 30,148 $ 214,865 Rental related services 39,594 1,484 — 12,058 53,136 Rental operations 166,081 59,714 — 42,206 268,001 Sales 35,191 10,331 5,567 1,258 52,347 Other 750 787 — 519 2,056 Total revenues 202,022 70,832 5,567 43,983 322,404 Costs and Expenses Direct costs of rental operations: Depreciation 15,582 24,362 — 7,994 47,938 Rental related services 28,296 1,244 — 9,456 38,996 Other 44,235 10,135 — 6,278 60,648 Total direct costs of rental operations 88,113 35,741 — 23,728 147,582 Costs of sales 21,089 4,265 4,222 920 30,496 Total costs of revenues 109,202 40,006 4,222 24,648 178,078 Gross Profit Rental 66,670 23,733 — 15,876 106,279 Rental related services 11,298 240 — 2,602 14,140 Rental operations 77,968 23,973 — 18,478 120,419 Sales 14,102 6,066 1,345 338 21,851 Other 750 787 — 519 2,056 Total gross profit 92,820 30,826 1,345 19,335 144,326 Selling and administrative expenses 50,447 13,204 2,763 13,501 79,915 Income (loss) from operations $ 42,373 $ 17,622 $ (1,418 ) $ 5,834 64,411 Interest expense (5,821 ) Foreign currency exchange loss (168 ) Provision for income taxes (13,492 ) Net income $ 44,930 Other Information Adjusted EBITDA 1 $ 66,178 $ 42,781 $ (1,276 ) $ 15,327 $ 123,010 Average rental equipment 2 $ 1,013,361 $ 374,364 Average monthly total yield 3 2.08 % 2.59 % Average utilization 4 77.6 % 64.6 % Average monthly rental rate 5 2.68 % 4.02 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. 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 June 30, Six Months Ended June 30, Twelve Months Ended June 30, 2023 2022 2023 2022 2023 2022 Income from continuing operations $ 27,952 $ 23,544 $ 39,470 $ 41,202 $ 101,577 $ 89,756 Provision for income taxes from continuing operations 9,669 6,996 10,782 12,505 29,654 31,885 Interest expense 9,945 2,426 17,409 4,702 24,937 9,828 Depreciation and amortization 27,368 23,357 53,501 46,491 100,650 93,469 EBITDA 74,934 56,323 121,162 104,900 256,818 224,938 Share-based compensation 1,889 1,271 3,264 2,783 7,228 6,296 Transaction costs 3 145 — 14,292 — 18,345 1,141 Adjusted EBITDA 1 $ 76,968 $ 57,594 $ 138,718 $ 107,683 $ 282,391 $ 232,375 Adjusted EBITDA margin 2 38 % 38 % 38 % 39 % 39 % 40 % Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities (dollar amounts in thousands) Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30, 2023 2022 2023 2022 2023 2022 Adjusted EBITDA 1 $ 76,968 $ 66,291 $ 142,400 $ 123,010 $ 308,256 $ 263,074 Interest paid (8,985 ) (3,684 ) (16,802 ) (5,821 ) (25,756 ) (12,160 ) Income taxes paid, net of refunds received (6,518 ) (16,658 ) (6,931 ) (17,078 ) (17,215 ) (19,175 ) Gain on sale of used rental equipment (11,161 ) (10,729 ) (14,250 ) (16,093 ) (36,136 ) (29,664 ) Foreign currency exchange (gain) loss 18 181 (208 ) 168 2 321 Amortization of debt issuance costs 2 5 4 9 11 18 Change in certain assets and liabilities: Accounts receivable, net (16,669 ) (15,765 ) 284 (7,830 ) (22,410 ) (26,420 ) Prepaid expenses and other assets (1,159 ) (15,068 ) (8,504 ) (10,855 ) (14,133 ) (8,286 ) Accounts payable and other liabilities (2,828 ) 12,115 (33,832 ) (2,302 ) (22,935 ) (8,362 ) Deferred income 6,072 13,612 9,290 18,835 14,156 20,459 Net cash provided by operating activities $ 35,740 $ 30,300 $ 71,451 $ 82,043 $ 183,840 $ 179,805 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the six months ended June 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 six months ended June 30, 2023 and 2022, was $3,682 and $15,173, respectively. 2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. 3. Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions. View source version on businesswire.com: https://www.businesswire.com/news/home/20230726023794/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 June 30, 2023 of $203.0 million, an increase of 32%, compared to the second quarter of 2022. The Company reported net income from continuing operations of $28.0 million, or $1.14 per diluted share, for the second quarter of 2023, compared to net income from continuing operations of $23.5 million, or $0.96 per diluted share, for the second quarter of 2022. SECOND QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS): Rental revenues increased 24% to $117.8 million. Total revenues increased 32% to $203.0 million. Adjusted EBITDA1 increased 33% to $77.0 million. Dividend rate of $0.465 per share for the second quarter of 2023. On an annualized basis, this dividend represents a 2.0% yield on the July 26, 2023 close price of $92.16 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 second quarter results. Our 24% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 37%, 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 14%. Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. Overall demand conditions continued to be positive. Our initiatives to grow modular sales also showed progress as sales revenues increased by 59% compared to a year ago. Consistent with our growth objectives, we increased our portable storage geographic coverage with the acquisitions of Dixie Storage and Inland Leasing and Storage. TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in lower general purpose rentals during the quarter, while communications rentals were flat, compared to a year ago. Rental revenues at TRS-RenTelco decreased by 4%. We are continuing to make good progress with the strategic transformation of McGrath’s business portfolio. The Adler divestiture will be fully completed at the end of July, which has been a substantial undertaking for the McGrath team through the first half of the year. Concurrently, we have been making good progress with the Vesta integration. I am very pleased with the team collaboration and commercial successes that we have seen in the last few months. Our first half accomplishments have been significant, and we look forward to building on that momentum in the second half of the year. I am excited by the range of long-term growth opportunities for McGrath.” DIVISION HIGHLIGHTS: All comparisons presented below are for the quarter ended June 30, 2023 to the quarter ended June 30, 2022 unless otherwise indicated. MOBILE MODULAR For the second quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $56.8 million, an increase of $21.1 million, or 59%. Rental revenues increased 37% to $89.3 million, depreciation expense increased 33% to $10.3 million and other direct costs increased 4% to $25.1 million, which resulted in an increase in gross profit on rental revenues of 63% to $53.9 million. Vesta Modular contributed $13.9 million and $8.9 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 56% to $33.2 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers, with associated gross profit increasing 65% to $10.1 million. Vesta Modular contributed $4.6 million and $1.7 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased 59% to $39.4 million, primarily from higher new equipment sales. Gross margin on sales was 31% compared to 41% in 2022, resulting in a 21% increase in gross profit on sales revenues to $12.2 million. Vesta Modular contributed $11.2 million and $2.8 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $12.5 million to $38.3 million. The addition of Vesta Modular increased selling and administrative expenses by $6.6 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.8 million. TRS-RENTELCO For the second quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.5 million, a decrease of 3%, when compared to the same quarter in 2022. Rental revenues decreased 4% to $28.6 million, with depreciation expense and other direct costs comparable to the previous period, resulting in a 10% decrease in gross profit on rental revenues to $10.8 million. The rental revenue decrease was the result of lower average rental equipment on rent compared to the prior year, partly offset by higher average monthly rental rates. Sales revenues increased 17% to $7.5 million and gross profit on sales revenues increased 12% to $4.1 million. Selling and administrative expenses increased $0.5 million, or 8%, to $7.1 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: $790 to $820 million $805 to $830 million ● Adjusted EBITDA1, 2: $300 to $315 million $306 to $320 million ● Gross rental equipment capital expenditures: $190 to $210 million $190 to $200 million 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended June 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. 2. Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release. ABOUT MCGRATH: McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies. 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 June 29, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 27, 2023 to discuss the second 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 1-800-839-3413 (in the U.S.), or 1-402-220-7236 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations. FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about (i) the overall demand conditions, (ii) the progress with the strategic transformation of McGrath's business portfolio (iii) success with the integration of Vesta and additional business opportunities stemming from the acquisition, (iv) the outlook on future opportunities and the overall growth across the business, and (v) 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 June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Revenues Rental $ 117,840 $ 94,667 $ 228,087 $ 184,717 Rental related services 33,857 22,046 60,989 41,078 Rental operations 151,697 116,713 289,076 225,795 Sales 47,801 35,870 71,461 51,089 Other 3,532 785 6,211 1,537 Total revenues 203,030 153,368 366,748 278,421 Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 22,597 20,082 44,430 39,944 Rental related services 23,825 15,780 43,093 29,540 Other 30,560 29,516 61,695 54,370 Total direct costs of rental operations 76,982 65,378 149,218 123,854 Costs of sales 31,438 21,034 45,553 29,576 Total costs of revenues 108,420 86,412 194,771 153,430 Gross profit 94,610 66,956 171,977 124,991 Selling and administrative expenses 47,026 33,809 104,524 66,414 Income from operations 47,584 33,147 67,453 58,577 Other (expense) income: Interest expense (9,945 ) (2,426 ) (17,409 ) (4,702 ) Foreign currency exchange (loss) gain (18 ) (181 ) 208 (168 ) Income from continuing operations before provision for income taxes 37,621 30,540 50,252 53,707 Provision for income taxes from continuing operations 9,669 6,996 10,782 12,505 Income from continuing operations 27,952 23,544 39,470 41,202 Discontinued operations: Income from discontinued operations before provision for income taxes — 3,327 1,709 4,715 Provision for income taxes from discontinued operations — 734 453 987 Gain on sale of discontinued operations, net of tax 2,630 — 61,513 — Income from discontinued operations 2,630 2,593 62,769 3,728 Net income $ 30,582 $ 26,137 $ 102,239 $ 44,930 Earnings per share from continuing operations: Basic $ 1.14 $ 0.96 $ 1.61 $ 1.68 Diluted $ 1.14 $ 0.96 $ 1.61 $ 1.68 Earnings per share from discontinued operations: Basic $ 0.11 $ 0.11 $ 2.57 $ 0.15 Diluted $ 0.11 $ 0.11 $ 2.56 $ 0.15 Earnings per share: Basic $ 1.25 $ 1.07 $ 4.18 $ 1.83 Diluted $ 1.25 $ 1.07 $ 4.17 $ 1.83 Shares used in per share calculation: Basic 24,479 24,360 24,448 24,323 Diluted 24,512 24,509 24,527 24,522 Cash dividends declared per share $ 0.465 $ 0.455 $ 0.930 $ 0.910 MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, (in thousands) 2023 2022 Assets Cash $ 2,205 $ 957 Accounts receivable, net of allowance for credit losses of $2,600 in 2023 and $2,300 in 2022 191,676 169,937 Rental equipment, at cost: Relocatable modular buildings 1,457,984 1,123,268 Electronic test equipment 390,832 398,267 1,848,816 1,521,535 Less: accumulated depreciation (553,166 ) (531,218 ) Rental equipment, net 1,295,650 990,317 Property, plant and equipment, net 146,624 138,713 Prepaid expenses and other assets 81,967 69,837 Intangible assets, net 65,607 35,431 Goodwill 325,354 106,403 Assets of discontinued operations — 196,249 Total assets $ 2,109,083 $ 1,707,844 Liabilities and Shareholders' Equity Liabilities: Notes payable $ 672,631 $ 413,742 Accounts payable and accrued liabilities 219,611 151,208 Deferred income 106,523 82,417 Deferred income taxes, net 229,749 203,361 Liabilities of discontinued operations — 53,171 Total liabilities 1,228,514 903,899 Shareholders’ equity: Common stock, no par value - Authorized 40,000 shares Issued and outstanding - 24,485 shares as of June 30, 2023 and 24,388 shares as of December 31, 2022 107,362 110,080 Retained earnings 773,260 693,943 Accumulated other comprehensive loss (53 ) (78 ) Total shareholders’ equity 880,569 803,945 Total liabilities and shareholders’ equity $ 2,109,083 $ 1,707,844 MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income $ 102,239 $ 44,930 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 54,958 55,355 Deferred income taxes (39,486 ) (5,815 ) Provision for credit losses 1,400 49 Share-based compensation 3,382 3,412 Gain on sale of discontinued operations (61,513 ) — Gain on sale of used rental equipment (14,250 ) (16,093 ) Foreign currency exchange (gain) loss (208 ) 168 Amortization of debt issuance costs 4 9 Change in: Accounts receivable (1,116 ) (7,879 ) Prepaid expenses and other assets (8,504 ) (10,855 ) Accounts payable and accrued liabilities 25,255 (73 ) Deferred income 9,290 18,835 Net cash provided by operating activities 71,451 82,043 Cash Flows from Investing Activities: Proceeds from sale of discontinued operations 268,012 — Purchases of rental equipment (128,088 ) (94,820 ) Purchases of property, plant and equipment (11,229 ) (6,594 ) Cash paid for acquisition of businesses (456,312 ) — Proceeds from sales of used rental equipment 27,410 31,830 Net cash used in investing activities (300,207 ) (69,584 ) Cash Flows from Financing Activities: Net borrowings under bank lines of credit 258,885 15,000 Taxes paid related to net share settlement of stock awards (6,100 ) (6,128 ) Payment of dividends (22,782 ) (22,083 ) Net cash provided by (used in) financing activities 230,003 (13,211 ) Effect of foreign currency exchange rate changes on cash 1 135 Net increase (decrease) in cash 1,248 (617 ) Cash balance, beginning of period 957 1,491 Cash balance, end of period $ 2,205 $ 874 Supplemental Disclosure of Cash Flow Information: Interest paid, during the period $ 16,802 $ 5,821 Net income taxes paid, during the period $ 6,931 $ 17,078 Dividends accrued during the period, not yet paid $ 11,937 $ 11,009 Rental equipment acquisitions, not yet paid $ 7,612 $ 6,906 MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended June 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 89,257 $ 28,583 $ — $ — $ 117,840 Rental related services 33,190 667 — — 33,857 Rental operations 122,447 29,250 — — 151,697 Sales 39,357 7,521 923 — 47,801 Other 2,458 1,074 — — 3,532 Total revenues 164,262 37,845 923 — 203,030 Costs and Expenses Direct costs of rental operations: Depreciation 10,285 12,312 — — 22,597 Rental related services 23,084 741 — — 23,825 Other 25,082 5,478 — — 30,560 Total direct costs of rental operations 58,451 18,531 — — 76,982 Costs of sales 27,207 3,431 800 — 31,438 Total costs of revenues 85,658 21,962 800 — 108,420 Gross Profit (Loss) Rental 53,890 10,793 — — 64,683 Rental related services 10,106 (74 ) — — 10,032 Rental operations 63,996 10,719 — — 74,715 Sales 12,150 4,090 123 — 16,363 Other 2,458 1,074 — — 3,532 Total gross profit 78,604 15,883 123 — 94,610 Selling and administrative expenses 38,296 7,126 1,604 — 47,026 Income (loss) from operations $ 40,308 $ 8,757 $ (1,481 ) $ — 47,584 Interest expense (9,945 ) Foreign currency exchange loss (18 ) Provision for income taxes (9,669 ) Net income $ 27,952 Other Information Adjusted EBITDA 1 $ 56,824 $ 21,538 $ (1,394 ) $ — $ 76,968 Average rental equipment 2 $ 1,321,767 $ 393,891 Average monthly total yield 3 2.25 % 2.40 % Average utilization 4 79.1 % 58.2 % Average monthly rental rate 5 2.84 % 4.16 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Three months ended June 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 64,949 $ 29,718 $ — $ 15,957 $ 110,624 Rental related services 21,233 813 — 6,773 28,819 Rental operations 86,182 30,531 — 22,730 139,443 Sales 24,816 6,404 4,650 601 36,471 Other 379 406 — 332 1,117 Total revenues 111,377 37,341 4,650 23,663 177,031 Costs and Expenses Direct costs of rental operations: Depreciation 7,749 12,333 — 3,982 24,064 Rental related services 15,116 664 — 5,073 20,853 Other 24,073 5,443 — 3,309 32,825 Total direct costs of rental operations 46,938 18,440 — 12,364 77,742 Costs of sales 14,760 2,765 3,509 418 21,452 Total costs of revenues 61,698 21,205 3,509 12,782 99,194 Gross Profit Rental 33,127 11,942 — 8,666 53,735 Rental related services 6,117 149 — 1,700 7,966 Rental operations 39,244 12,091 — 10,366 61,701 Sales 10,056 3,639 1,141 183 15,019 Other 379 406 — 332 1,117 Total gross profit 49,679 16,136 1,141 10,881 77,837 Selling and administrative expenses 25,755 6,614 1,440 6,979 40,788 Income (loss) from operations $ 23,924 $ 9,522 $ (299 ) $ 3,902 37,049 Interest expense (3,001 ) Foreign currency exchange loss (181 ) Provision for income taxes (7,730 ) Net income $ 26,137 Other Information Adjusted EBITDA 1 $ 35,773 $ 22,128 $ (230 ) $ 8,620 $ 66,291 Average rental equipment 2 $ 1,019,927 $ 382,068 Average monthly total yield 3 2.12 % 2.59 % Average utilization 4 78.1 % 64.5 % Average monthly rental rate 5 2.72 % 4.02 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Six months ended June 30, 2023 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 170,370 $ 57,717 $ — $ 6,520 $ 228,087 Rental related services 59,442 1,547 — 2,584 60,989 Rental operations 229,812 59,264 — 9,104 289,076 Sales 56,962 12,635 1,864 269 71,461 Other 4,145 2,066 — 65 6,211 Total revenues 290,919 73,965 1,864 9,438 366,748 Costs and Expenses Direct costs of rental operations: Depreciation 19,729 24,701 — 1,325 44,430 Rental related services 41,691 1,402 — 2,020 43,093 Other 50,992 10,703 — 1,270 61,695 Total direct costs of rental operations 112,412 36,806 — 4,614 149,218 Costs of sales 38,281 5,656 1,616 159 45,553 Total costs of revenues 150,693 42,462 1,616 4,773 194,771 Gross Profit Rental 99,649 22,313 — 3,926 121,962 Rental related services 17,751 145 — 564 17,896 Rental operations 117,400 22,458 — 4,490 139,858 Sales 18,681 6,979 248 110 25,908 Other 4,145 2,066 — 65 6,211 Total gross profit 140,226 31,503 248 4,665 171,977 Selling and administrative expenses 84,810 16,577 3,137 2,582 104,524 Income (loss) from operations $ 55,416 $ 14,926 $ (2,889 ) $ 2,083 67,453 Interest expense (17,783 ) Foreign currency exchange loss 208 Provision for income taxes (11,235 ) Net income $ 38,643 Other Information Adjusted EBITDA 1 $ 99,269 $ 42,173 $ (2,724 ) $ 3,682 $ 142,400 Average rental equipment 2 $ 1,241,287 $ 395,049 Average monthly total yield 3 2.29 % 2.42 % Average utilization 4 79.4 % 58.7 % Average monthly rental rate 5 2.88 % 4.15 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. MCGRATH RENTCORP BUSINESS SEGMENT DATA (unaudited) Six months ended June 30, 2022 (dollar amounts in thousands) Mobile Modular TRS-RenTelco Enviroplex Adler Tanks (Discontinued) Consolidated Revenues Rental $ 126,487 $ 58,230 $ — $ 30,148 $ 214,865 Rental related services 39,594 1,484 — 12,058 53,136 Rental operations 166,081 59,714 — 42,206 268,001 Sales 35,191 10,331 5,567 1,258 52,347 Other 750 787 — 519 2,056 Total revenues 202,022 70,832 5,567 43,983 322,404 Costs and Expenses Direct costs of rental operations: Depreciation 15,582 24,362 — 7,994 47,938 Rental related services 28,296 1,244 — 9,456 38,996 Other 44,235 10,135 — 6,278 60,648 Total direct costs of rental operations 88,113 35,741 — 23,728 147,582 Costs of sales 21,089 4,265 4,222 920 30,496 Total costs of revenues 109,202 40,006 4,222 24,648 178,078 Gross Profit Rental 66,670 23,733 — 15,876 106,279 Rental related services 11,298 240 — 2,602 14,140 Rental operations 77,968 23,973 — 18,478 120,419 Sales 14,102 6,066 1,345 338 21,851 Other 750 787 — 519 2,056 Total gross profit 92,820 30,826 1,345 19,335 144,326 Selling and administrative expenses 50,447 13,204 2,763 13,501 79,915 Income (loss) from operations $ 42,373 $ 17,622 $ (1,418 ) $ 5,834 64,411 Interest expense (5,821 ) Foreign currency exchange loss (168 ) Provision for income taxes (13,492 ) Net income $ 44,930 Other Information Adjusted EBITDA 1 $ 66,178 $ 42,781 $ (1,276 ) $ 15,327 $ 123,010 Average rental equipment 2 $ 1,013,361 $ 374,364 Average monthly total yield 3 2.08 % 2.59 % Average utilization 4 77.6 % 64.6 % Average monthly rental rate 5 2.68 % 4.02 % 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. 2. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. 3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. 5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period. 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 June 30, Six Months Ended June 30, Twelve Months Ended June 30, 2023 2022 2023 2022 2023 2022 Income from continuing operations $ 27,952 $ 23,544 $ 39,470 $ 41,202 $ 101,577 $ 89,756 Provision for income taxes from continuing operations 9,669 6,996 10,782 12,505 29,654 31,885 Interest expense 9,945 2,426 17,409 4,702 24,937 9,828 Depreciation and amortization 27,368 23,357 53,501 46,491 100,650 93,469 EBITDA 74,934 56,323 121,162 104,900 256,818 224,938 Share-based compensation 1,889 1,271 3,264 2,783 7,228 6,296 Transaction costs 3 145 — 14,292 — 18,345 1,141 Adjusted EBITDA 1 $ 76,968 $ 57,594 $ 138,718 $ 107,683 $ 282,391 $ 232,375 Adjusted EBITDA margin 2 38 % 38 % 38 % 39 % 39 % 40 % Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities (dollar amounts in thousands) Three Months Ended June 30, Six Months Ended June 30, Twelve Months Ended June 30, 2023 2022 2023 2022 2023 2022 Adjusted EBITDA 1 $ 76,968 $ 66,291 $ 142,400 $ 123,010 $ 308,256 $ 263,074 Interest paid (8,985 ) (3,684 ) (16,802 ) (5,821 ) (25,756 ) (12,160 ) Income taxes paid, net of refunds received (6,518 ) (16,658 ) (6,931 ) (17,078 ) (17,215 ) (19,175 ) Gain on sale of used rental equipment (11,161 ) (10,729 ) (14,250 ) (16,093 ) (36,136 ) (29,664 ) Foreign currency exchange (gain) loss 18 181 (208 ) 168 2 321 Amortization of debt issuance costs 2 5 4 9 11 18 Change in certain assets and liabilities: Accounts receivable, net (16,669 ) (15,765 ) 284 (7,830 ) (22,410 ) (26,420 ) Prepaid expenses and other assets (1,159 ) (15,068 ) (8,504 ) (10,855 ) (14,133 ) (8,286 ) Accounts payable and other liabilities (2,828 ) 12,115 (33,832 ) (2,302 ) (22,935 ) (8,362 ) Deferred income 6,072 13,612 9,290 18,835 14,156 20,459 Net cash provided by operating activities $ 35,740 $ 30,300 $ 71,451 $ 82,043 $ 183,840 $ 179,805 1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the six months ended June 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 six months ended June 30, 2023 and 2022, was $3,682 and $15,173, respectively. 2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. 3. Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions. View source version on businesswire.com: https://www.businesswire.com/news/home/20230726023794/en/