LIVERMORE, Calif.--(BUSINESS WIRE)--Apr. 25, 2024-- 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 March 31, 2024 of $187.8 million, an increase of 15% compared to the first quarter of 2023. The Company reported net income from continuing operations of $22.8 million, or $0.93 per diluted share, for the first quarter of 2024, compared to net income from continuing operations of $11.5 million, or $0.47 per diluted share, for the first quarter of 2023.

FIRST QUARTER 2024 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS):

• Rental revenues increased 9% to $120.3 million.
• Total revenues increased 15% to $187.8 million.
• Other income, net for the first quarter 2024 included a $9.3 million net gain on sale of a property, which increased earnings per diluted share by $0.28.
• Adjusted EBITDA increased 17% to $72.1 million.
• Dividend rate of $0.475 per share for the first quarter 2024. On an annualized basis, this dividend represents a 1.8% yield on the April 24, 2024 close price of $108.53 per share.

Joe Hanna, President and CEO of McGrath, made the following comments:

“We were pleased with our first quarter results. The 9% increase in companywide rental revenues was driven by strong modular and portable storage performance. Modular rental revenues grew 19% and benefited from a full quarter of Vesta Modular contribution in 2024 compared with two months in 2023. Portable storage rental revenues grew 8%.

“Our modular business was a highlight for the quarter, with broad based rental strength across commercial and education customer bases. We maintained our focus on pricing optimization, rental fleet utilization, and value-added services for our customers. Growth initiatives for Mobile Modular Plus, Site Related Services and new modular equipment sales all continued to show progress.

“TRS-RenTelco experienced continued demand challenges, particularly for semiconductor related projects, resulting in 13% lower rental revenues for the quarter, compared to a year ago. During the quarter we reduced new equipment capital spending and made progress with reducing the fleet size to better align with demand conditions.

“I appreciate the strong commitment from the McGrath employee team as we maintain our independent focus on disciplined execution during the pending WillScot Mobile Mini transaction.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended March 31, 2024 to the quarter ended March 31, 2023 unless otherwise indicated.

MOBILE MODULAR

For the first quarter of 2024, the Company’s Mobile Modular division reported Adjusted EBITDA of $43.3 million, an increase of $10.9 million, or 34%, when compared to the same quarter in 2023.

• Rental revenues increased 19% to $76.5 million, depreciation expense increased 14% to $9.9 million, and other direct costs decreased 6% to $22.7 million, which resulted in an increase in gross profit on rental revenues of 41% to $43.9 million.
• Rental related services revenues increased 12% to $24.1 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit increasing 14% to $8.4 million.
• Sales revenues increased 49% to $25.3 million, primarily from higher new equipment sales. Gross margin on sales was 31% in 2024, compared to 37% in 2023, resulting in a 27% increase in gross profit on sales revenues to $7.9 million. The reduction in gross margin on sales was primarily attributed to a higher mix of new versus used sales in 2024.
• Selling and administrative expenses increased $1.6 million to $40.1 million. Included within selling and administrative expenses was $5.3 million higher allocated corporate costs, which included $6.5 million in allocated transaction costs related to the pending merger with WillScot Mobile Mini.

PORTABLE STORAGE

For the first quarter of 2024, the Company’s Portable Storage division reported Adjusted EBITDA of $11.5 million, an increase of $1.5 million, or 15%, when compared to the same quarter in 2023.

• Rental revenues increased 8% to $18.4 million, depreciation expense increased 23% to $1.0 million, and other direct costs decreased 18% to $1.5 million, which resulted in an increase in gross profit on rental revenues of 10% to $16.0 million.
• Rental related services revenues were $4.7 million and gross profit on rental related services revenues was $0.3 million, which were both comparable to the first quarter of 2023.
• Sales revenues increased $0.6 million to $1.2 million, primarily from higher used equipment sales. Gross margin on sales was 37% compared to 49% in 2023, resulting in a $0.1 million increase in gross profit on sales revenues to $0.4 million.
• Selling and administrative expenses increased $1.0 million to $9.0 million, primarily due to higher allocated corporate expenses and marketing and administrative costs.

TRS-RENTELCO

For the first quarter of 2024, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $18.5 million, a decrease of 10%, when compared to the same quarter in 2023.

• Rental revenues decreased 13% to $25.4 million, depreciation expense decreased 7%, and other direct costs decreased 7%, resulting in a 22% decrease in gross profit on rental revenues to $9.0 million. The rental revenue decrease was primarily due to weakness in the semiconductor related end markets, resulting in lower average rental equipment on rent compared to the prior year.
• Sales revenues increased 33% to $6.8 million and gross profit on sales revenues increased 34% to $3.9 million.
• Selling and administrative expenses decreased 6%, to $8.9 million, primarily due to lower allocated corporate expenses.

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 April 4, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on April 25, 2024 to discuss the first quarter 2024 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 1-800-723-5782 (in the U.S.), or 1-402-220-2663 (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.

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three Months Ended March 31,
(in thousands, except per share amounts)		2024				2023
Revenues
Rental		$	120,332			$	110,247
Rental related services			29,580				27,132
Rental operations			149,912				137,379
Sales			35,069				23,660
Other			2,846				2,679
Total revenues			187,827				163,718
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			22,366				21,833
Rental related services			20,786				19,268
Other			29,010				31,135
Total direct costs of rental operations			72,162				72,236
Costs of sales			22,397				14,115
Total costs of revenues			94,559				86,351
Gross profit			93,268				77,367
Expenses:
Selling and administrative expenses			59,818				57,498
Other income, net			(9,281	)			—
Income from operations			42,731				19,869
Interest expense			12,704				7,464
Foreign currency exchange loss (gain)			132				(226	)
Income from continuing operations before provision for income taxes			29,895				12,631
Provision for income taxes from continuing operations			7,047				1,113
Income from continuing operations			22,848				11,518
Discontinued operations:
Income from discontinued operations before provision for income taxes			—				1,709
Provision for income taxes from discontinued operations			—				453
Gain on sale of discontinued operations, net of tax			—				58,883
Income from discontinued operations			—				60,139
Net income		$	22,848			$	71,657
Earnings per share from continuing operations:
Basic		$	0.93			$	0.47
Diluted		$	0.93			$	0.47
Earnings per share from discontinued operations:
Basic		$	—			$	2.46
Diluted		$	—			$	2.45
Earnings per share:
Basic		$	0.93			$	2.93
Diluted		$	0.93			$	2.92
Shares used in per share calculation:
Basic			24,513				24,416
Diluted			24,564				24,542
Cash dividends declared per share		$	0.475			$	0.465

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		March 31,				December 31,
(in thousands)		2024				2023
Assets
Cash		$	1,912			$	877
Accounts receivable, net of allowance for credit losses of $2,819 at March 31, 2024 and $2,801 at December 31, 2023			211,950				227,368
Rental equipment, at cost:
Relocatable modular buildings			1,345,919				1,291,093
Portable storage containers			240,517				236,123
Electronic test equipment			370,641				377,587
			1,957,077				1,904,803
Less: accumulated depreciation			(588,535	)			(575,480	)
Rental equipment, net			1,368,542				1,329,323
Property, plant and equipment, net			189,166				169,114
Inventories			24,548				15,425
Prepaid expenses and other assets			82,066				87,364
Intangible assets, net			62,020				64,588
Goodwill			323,224				323,224
Total assets		$	2,263,428			$	2,217,283
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	798,561			$	762,975
Accounts payable			57,162				58,760
Accrued liabilities			95,725				108,763
Deferred income			122,696				111,428
Deferred income taxes, net			246,264				241,555
Total liabilities			1,320,408				1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,541 shares as of March 31, 2024 and 24,496 shares as of December 31, 2023			109,249				111,122
Retained earnings			833,820				822,796
Accumulated other comprehensive loss			(49	)			(116	)
Total shareholders’ equity			943,020				933,802
Total liabilities and shareholders’ equity		$	2,263,428			$	2,217,283

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Three Months Ended March 31,
(in thousands)		2024				2023
Cash Flows from Operating Activities:
Net income		$	22,848			$	71,657
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			27,187				27,590
Deferred income taxes			4,709				(45,496	)
Provision for credit losses			253				744
Share-based compensation			2,209				1,493
Gain on sale of property, plant and equipment			(9,281	)			—
Gain on sale of discontinued operations			—				(58,883	)
Gain on sale of used rental equipment			(7,355	)			(3,089	)
Foreign currency exchange loss (gain)			132				(226	)
Amortization of debt issuance costs			2				2
Change in:
Accounts receivable			15,165				16,209
Inventories			(9,123	)			(5,313	)
Prepaid expenses and other assets			5,298				(2,032	)
Accounts payable			9,145				31,559
Accrued liabilities			(13,037	)			(1,722	)
Deferred income			11,268				3,218
Net cash provided by operating activities			59,420				35,711
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations			—				262,454
Purchases of rental equipment			(78,641	)			(77,731	)
Purchases of property, plant and equipment			(25,277	)			(6,857	)
Cash paid for acquisition of businesses			—				(453,592	)
Proceeds from sales of used rental equipment			13,554				12,197
Proceeds from sales of property, plant and equipment			12,251				—
Net cash used in investing activities			(78,113	)			(263,529	)
Cash Flows from Financing Activities:
Net borrowings under bank lines of credit			35,584				245,033
Taxes paid related to net share settlement of stock awards			(4,082	)			(6,086	)
Payment of dividends			(11,774	)			(11,400	)
Net cash provided by financing activities			19,728				227,547
Effect of foreign currency exchange rate changes on cash			—				4
Net increase (decrease) in cash			1,035				(267	)
Cash balance, beginning of period			877				957
Cash balance, end of period		$	1,912			$	690
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	14,184			$	7,817
Net income taxes paid, during the period		$	479			$	413
Dividends accrued during the period, not yet paid		$	12,060			$	11,851
Rental equipment acquisitions, not yet paid		$	5,795			$	5,697

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended March 31, 2024
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	76,496			$	18,407			$	25,429			$	—			$	120,332
Rental related services			24,133				4,723				724				—				29,580
Rental operations			100,629				23,130				26,153				—				149,912
Sales			25,326				1,212				6,812				1,719				35,069
Other			1,630				418				798				—				2,846
Total revenues			127,585				24,760				33,763				1,719				187,827
Costs and Expenses
Direct costs of rental operations:
Depreciation			9,874				965				11,527				—				22,366
Rental related services			15,780				4,456				550				—				20,786
Other			22,673				1,468				4,869				—				29,010
Total direct costs of rental operations			48,327				6,889				16,946				—				72,162
Costs of sales			17,413				768				2,942				1,274				22,397
Total costs of revenues			65,740				7,657				19,888				1,274				94,559
Gross Profit
Rental			43,949				15,974				9,033				—				68,956
Rental related services			8,353				267				174				—				8,794
Rental operations			52,302				16,241				9,207				—				77,750
Sales			7,913				444				3,870				445				12,672
Other			1,630				418				798				—				2,846
Total gross profit			61,845				17,103				13,875				445				93,268
Selling and administrative expenses			40,087				9,010				8,918				1,803				59,818
Other income, net			(6,220	)			(1,319	)			(1,742	)			—				(9,281	)
Income (loss) from operations		$	27,978			$	9,412			$	6,699			$	(1,358	)		$	42,731
Interest expense																			12,704
Foreign currency exchange loss																			132
Provision for income taxes																			7,047
Net income																		$	22,848
Other Information
Adjusted EBITDA 1		$	43,327			$	11,522			$	18,480			$	(1,261	)		$	72,068
Average rental equipment 2		$	1,174,327			$	223,285			$	372,081
Average monthly total yield 3			2.17	%			2.75	%			2.18	%
Average utilization 4			78.7	%			69.8	%			56.5	%
Average monthly rental rate 5			2.76	%			3.94	%			4.03	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net.
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 March 31, 2023
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Adler Tanks (Discontinued)				Consolidated
Revenues
Rental		$	64,056			$	17,057			$	29,134			$	—			$	6,520			$	116,767
Rental related services			21,534				4,718				880				—				2,584				29,716
Rental operations			85,590				21,775				30,014				—				9,104				146,483
Sales			16,967				638				5,114				941				269				23,929
Other			1,370				317				992				—				65				2,744
Total revenues			103,927				22,730				36,120				941				9,438				173,156
Costs and Expenses
Direct costs of rental operations:
Depreciation			8,657				787				12,389				—				1,325				23,158
Rental related services			14,226				4,381				661				—				2,020				21,288
Other			24,127				1,783				5,225				—				1,270				32,405
Total direct costs of rental operations			47,009				6,952				18,275				—				4,614				76,850
Costs of sales			10,747				327				2,225				816				159				14,274
Total costs of revenues			57,756				7,279				20,500				816				4,773				91,124
Gross Profit
Rental			31,273				14,486				11,520				—				3,926				61,205
Rental related services			7,308				337				219				—				564				8,428
Rental operations			38,581				14,823				11,739				—				4,490				69,633
Sales			6,220				311				2,889				125				110				9,655
Other			1,370				317				992				—				65				2,744
Total gross profit			46,171				15,451				15,620				125				4,665				82,032
Selling and administrative expenses			38,456				8,058				9,451				1,533				2,582				60,080
Other income, net			—				—				—				—				—				—
Income (loss) from operations		$	7,715			$	7,393			$	6,169			$	(1,408	)		$	2,083				21,952
Interest expense																							7,838
Foreign currency exchange gain																							(226	)
Provision for income taxes																							1,566
Net income																						$	12,774
Other Information
Adjusted EBITDA 1		$	32,425			$	10,020			$	20,635			$	(1,330	)		$	3,682			$	65,432
Average rental equipment 2		$	987,526			$	189,348			$	396,835
Average monthly total yield 3			2.16	%			3.01	%			2.40	%
Average utilization 4			79.4	%			80.8	%			59.2	%
Average monthly rental rate 5			2.72	%			3.71	%			4.14	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net.
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, non-cash impairment costs, share-based compensation, transaction costs and gains on property sales. 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 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 and non-recurring transactions, including share-based compensation, transaction costs and gains on property sales 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, transaction costs and gains on property sales. 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 March 31,								Twelve Months Ended March 31,
	2024				2023				2024				2023
Income from continuing operations	$	22,848			$	11,518			$	123,182			$	97,169
Provision for income taxes from continuing operations		7,047				1,113				43,544				26,981
Interest expense		12,704				7,464				45,800				17,418
Depreciation and amortization		27,187				26,133				108,972				96,489
EBITDA		69,786				46,228				321,498				238,057
Share-based compensation		2,209				1,375				8,991				6,610
Transaction costs 3		9,354				14,147				11,084				18,200
Other income, net 4		(9,281	)			—				(12,899	)			—
Adjusted EBITDA 1	$	72,068			$	61,750			$	328,674			$	262,867
Adjusted EBITDA margin 2		37	%			38	%			38	%			39	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)	Three Months Ended March 31,								Twelve Months Ended March 31,
	2024				2023				2024				2023
Adjusted EBITDA 1	$	72,068			$	65,432			$	328,674			$	297,579
Interest paid		(14,184	)			(7,817	)			(44,970	)			(20,455	)
Income taxes paid, net of refunds received		(479	)			(413	)			(91,631	)			(27,355	)
Gain on sale of used rental equipment		(7,355	)			(3,089	)			(35,908	)			(35,704	)
Foreign currency exchange loss		132				(226	)			48				165
Amortization of debt issuance costs		2				2				8				14
Change in certain assets and liabilities:
Accounts receivable, net		15,418				16,953				(36,678	)			(21,506	)
Prepaid expenses and other assets		5,298				(7,345	)			(16,683	)			(28,042	)
Accounts payable and other liabilities		(22,748	)			(31,004	)			(9,570	)			(7,992	)
Deferred income		11,268				3,218				22,144				21,696
Net cash provided by operating activities	$	59,420			$	35,711			$	115,434			$	178,400

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net. Adjusted EBITDA for the three months ended March 31, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the period ended March 31, 2023 was $3,682.
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.
4. Other income, net consists of net gains on property, plant and equipment sales that are infrequent in nature and excluded from Adjusted EBITDA.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240424358321/en/

Keith E. Pratt
EVP & Chief Financial Officer
925-606-9200

Source: McGrath RentCorp