McGrath Announces Results for Fourth Quarter 2023 and Announces 33rd Annual Dividend Increase

February 21, 2024 at 4:01 PM EST

LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 21, 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 December 31, 2023 of $221.6 million, an increase of 21% compared to the fourth quarter of 2022. The Company reported net income from continuing operations of $32.0 million, or $1.30 per diluted share, for the fourth quarter of 2023, compared to net income from continuing operations of $35.0 million, or $1.43 per diluted share, for the fourth quarter of 2022.

Total revenues from continuing operations for the full year ended December 31, 2023 increased to $831.8 million from $635.7 million in 2022, with adjusted EBITDA increasing $70.8 million, or 28%, to $322.0 million. Net income from continuing operations for the year ended December 31, 2023 was $111.9 million, or $4.56 per diluted share, compared to $103.3 million, or $4.21 per diluted share, in 2022.

The Company also announced that the board of directors declared a cash dividend of $0.475 per share for the upcoming quarter ending March 31, 2024, a quarterly increase of $0.01, or 2%, over the prior year period. The cash dividend will be payable on April 30, 2024 to all shareholders of record on April 16, 2024. This marks 33 consecutive years the Company has increased its annual dividend.

FOURTH QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS):

Rental revenues increased 19% to $123.6 million.
Total revenues increased 21% to $221.6 million.
Adjusted EBITDA¹ increased 12% to $87.9 million.
Dividend rate of $0.465 per share for the fourth quarter 2023. On an annualized basis, this dividend represents a 1.4% yield on the February 20, 2024 close price of $128.65 per share.

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

“We were pleased with our fourth quarter results. Our 19% increase in companywide rental revenues was driven by strong modular and portable storage performance. Modular rental revenues grew 37%, with approximately two-thirds of the growth attributable to our Vesta Modular acquisition. Portable storage rental revenues grew 13%.

Our modular and portable storage businesses saw 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. Our initiatives to grow modular sales also showed progress as sales revenues increased 21% compared to a year ago.

TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in 11% 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 am very proud of everything we accomplished in 2023. Our full year revenue and profit growth reflects a diligent focus on execution. We pursued our strategic growth focus on the modular and portable storage businesses with significant organic investment in new fleet, while optimizing pricing and maintaining high fleet utilization. Our growth initiatives for Mobile Modular Plus, Site Related Services and new modular equipment sales all showed significant progress. Vesta Modular was a strong contributor to our successful year, and we completed all our Vesta integration work on schedule by year end.

The recently announced transaction with WillScot Mobile Mini validates the strength of the McGrath business, the hard work and dedication of our team members and the valuable solutions we provide to our customers. We will maintain our independent focus on disciplined operational execution through the transaction close."

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2023 to the quarter ended December 31, 2022 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $54.1 million, an increase of $11.6 million, or 27%, when compared to the same quarter in 2022.

Rental revenues increased 37% to $75.9 million, depreciation expense increased 37% to $9.7 million, and other direct costs increased 29% to $18.3 million, which resulted in an increase in gross profit on rental revenues of 41% to $48.0 million.
Rental related services revenues increased 50% to $30.7 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit increasing 61% to $11.0 million.
Sales revenues increased 21% to $42.3 million, primarily from higher new equipment sales. Gross margin on sales was 32% for both 2023 and 2022, resulting in a 20% increase in gross profit on sales revenues to $13.6 million.
Selling and administrative expenses increased $12.9 million to $37.2 million. The increase was primarily attributed to $6.4 million higher salary and benefit costs, mostly related to the increased headcount from the Vesta Modular acquisition and $3.8 million higher allocated corporate expenses.

PORTABLE STORAGE

For the fourth quarter of 2023, the Company’s Portable Storage division reported Adjusted EBITDA of $12.8 million, an increase of $2.2 million, or 20%, when compared to the same quarter in 2022.

Rental revenues increased 13% to $19.8 million, depreciation expense increased 30% to $0.9 million, and other direct costs decreased 6% to $1.7 million, which resulted in an increase in gross profit on rental revenues of 15% to $17.1 million.
Rental related services revenues increased 17% to $5.2 million, primarily attributable to higher delivery and return delivery activities, with associated gross profit increasing $0.4 million to $0.5 million.
Sales revenues increased $0.8 million to $1.7 million, primarily from higher used equipment sales. Gross margin on sales was 38% compared to 30% in 2022, resulting in a $0.4 million increase in gross profit on sales revenues to $0.6 million.
Selling and administrative expenses increased $1.6 million to $8.3 million, primarily due to higher allocated corporate expenses.

TRS-RENTELCO

For the fourth quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $20.7 million, a decrease of 18%, when compared to the same quarter in 2022.

Rental revenues decreased 11% to $27.9 million, depreciation expense decreased 6%, and other direct costs decreased 18%, resulting in a 13% decrease in gross profit on rental revenues to $11.3 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 decreased 34% to $5.8 million and gross profit on sales revenues decreased 41% to $3.2 million.
Selling and administrative expenses increased 1%, to $7.4 million, when compared to the prior year.

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 February 1, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 21, 2024 to discuss the fourth 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 1-800-839-8320 (in the U.S.), or 1-402-220-6072 (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 December 31,						Twelve Months Ended December 31,
(in thousands, except per share amounts)	2023			2022			2023			2022
Revenues
Rental	$	123,563		$	104,075		$	474,336		$	389,663
Rental related services		36,679			25,687			138,160			94,963
Rental operations		160,242			129,762			612,496			484,626
Sales		58,589			52,217			207,165			147,720
Other		2,757			922			12,181			3,319
Total revenues		221,588			182,901			831,842			635,665
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		22,413			20,307			88,912			80,425
Rental related services		25,003			18,730			96,628			68,846
Other		24,754			21,785			114,942			104,358
Total direct costs of rental operations		72,170			60,822			300,482			253,629
Costs of sales		39,296			33,704			137,727			91,828
Total costs of revenues		111,466			94,526			438,209			345,457
Gross profit		110,122			88,375			393,633			290,208
Selling and administrative expenses		(54,506	)		(39,546	)		(207,539	)		(142,914	)
Other income		59			—			3,618			—
Income from operations		55,675			48,829			189,712			147,294
Interest expense		(12,126	)		(4,173	)		(40,560	)		(12,230	)
Foreign currency exchange gain (loss)		144			26			310			(378	)
Income from continuing operations before provision for income taxes		43,693			44,682			149,462			134,686
Provision for income taxes from continuing operations		11,676			9,690			37,610			31,377
Income from continuing operations		32,017			34,992			111,852			103,309

Discontinued operations:
Income from discontinued operations before provision for income taxes		—			5,984			1,709			15,334
Provision for income taxes from discontinued operations		—			1,335			453			3,505
Gain on sale of discontinued operations, net of tax		—			—			61,513			—
Income from discontinued operations		—			4,649			62,769			11,829

Net income	$	32,017		$	39,641		$	174,621		$	115,138

Earnings per share from continuing operations:
Basic	$	1.31		$	1.44		$	4.57		$	4.24
Diluted	$	1.30		$	1.43		$	4.56		$	4.21
Earnings per share from discontinued operations:
Basic	$	—		$	0.19		$	2.57		$	0.49
Diluted	$	—		$	0.19		$	2.56		$	0.48
Earnings per share:
Basic	$	1.31		$	1.63		$	7.14		$	4.73
Diluted	$	1.30		$	1.62		$	7.12		$	4.70
Shares used in per share calculation:
Basic		24,492			24,384			24,469			24,353
Diluted		24,535			24,527			24,529			24,519
Cash dividends declared per share	$	0.465		$	0.455		$	1.86		$	1.82

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	December 31,
(in thousands)	2023			2022
Assets
Cash	$	877		$	957
Accounts receivable, net of allowance for credit losses of $2,801 at December 31, 2023 and $2,300 at December 31, 2022		227,368			169,937
Rental equipment, at cost:
Relocatable modular buildings		1,291,093			938,081
Portable storage containers		236,123			185,187
Electronic test equipment		377,587			398,267
		1,904,803			1,521,535
Less: accumulated depreciation		(575,480	)		(531,218	)
Rental equipment, net		1,329,323			990,317
Property, plant and equipment, net		169,114			138,713
Prepaid expenses and other assets		102,789			69,837
Intangible assets, net		64,588			35,431
Goodwill		323,224			106,403
Assets of discontinued operations		—			196,249
Total assets	$	2,217,283		$	1,707,844
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	762,975		$	413,742
Accounts payable and accrued liabilities		167,523			151,208
Deferred income		111,428			82,417
Deferred income taxes, net		241,555			203,361
Liabilities of discontinued operations		—			53,171
Total liabilities		1,283,481			903,899
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,496 shares as of December 31, 2023 and 24,388 shares as of December 31, 2022		111,122			110,080
Retained earnings		822,796			693,943
Accumulated other comprehensive loss		(116	)		(78	)
Total shareholders’ equity		933,802			803,945
Total liabilities and shareholders’ equity	$	2,217,283		$	1,707,844

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Twelve Months Ended December 31,
(in thousands)	2023			2022
Cash Flows from Operating Activities:
Net income	$	174,621		$	115,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		109,375			111,344
Deferred income taxes		(16,952	)		4,486
Provision for credit losses		2,633			837
Share-based compensation		8,275			8,009
Gain on sale of property, plant and equipment		(3,618	)		—
Gain on sale of discontinued operations		(61,513	)		—
Gain on sale of used rental equipment		(31,642	)		(37,979	)
Foreign currency exchange (gain) loss		(310	)		378
Amortization of debt issuance costs		8			16
Change in:
Accounts receivable		(37,776	)		(31,361	)
Prepaid expenses and other assets		(29,326	)		(16,484	)
Accounts payable and accrued liabilities		(32,526	)		16,347
Deferred income		14,094			23,701
Net cash provided by operating activities		95,343			194,432
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations		268,012			—
Purchases of rental equipment		(229,679	)		(187,689	)
Purchases of property, plant and equipment		(43,989	)		(17,617	)
Cash paid for acquisition of businesses		(458,315	)		—
Cash paid for acquisition of business assets		(3,767	)		—
Proceeds from sales of used rental equipment		66,168			73,879
Proceeds from sales of property, plant and equipment		9,702			—
Net cash used in investing activities		(391,868	)		(131,427	)
Cash Flows from Financing Activities:
Net borrowings under bank lines of credit		274,225			47,275
Borrowings under senior note purchase agreement		75,000			—
Principal payment of Series C senior notes		—			(60,000	)
Taxes paid related to net share settlement of stock awards		(7,233	)		(6,539	)
Payment of dividends		(45,556	)		(44,269	)
Net cash provided by (used in) financing activities		296,436			(63,533	)
Effect of foreign currency exchange rate changes on cash		9			(6	)
Net increase (decrease) in cash		(80	)		(534	)
Cash balance, beginning of period		957			1,491
Cash balance, end of period	$	877		$	957
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period	$	38,603		$	14,775
Net income taxes paid, during the period	$	91,565		$	27,362
Dividends accrued during the period, not yet paid	$	12,010		$	11,227
Rental equipment acquisitions, not yet paid	$	16,653		$	13,220

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2023
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS- RenTelco			Enviroplex			Adler Tanks (Discontinued)		Consolidated

Revenues
Rental	$	75,931		$	19,760		$	27,872		$	—		$	—	$	123,563
Rental related services		30,713			5,150			816			—			—		36,679
Rental operations		106,644			24,910			28,688			—			—		160,242
Sales		42,329			1,696			5,751			8,813			—		58,589
Other		1,686			338			733			—			—		2,875
Total revenues		150,659			26,944			35,172			8,813			—		221,706

Costs and Expenses
Direct costs of rental operations:
Depreciation		9,725			944			11,744			—			—		22,413
Rental related services		19,689			4,651			663			—			—		25,003
Other		18,256			1,699			4,799			—			—		24,754
Total direct costs of rental operations		47,670			7,294			17,206			—			—		72,170
Costs of sales		28,718			1,059			2,577			6,942			—		39,296
Total costs of revenues		76,388			8,353			19,783			6,942			—		111,466

Gross Profit
Rental		47,950			17,117			11,329			—			—		76,396
Rental related services		11,024			499			153			—			—		11,676
Rental operations		58,974			17,616			11,482			—			—		88,072
Sales		13,611			637			3,174			1,871			—		19,293
Other		1,686			338			733			—			—		2,868
Total gross profit		74,271			18,591			15,389			1,871			—		110,122
Selling and administrative expenses		(37,213	)		(8,255	)		(7,386	)		(1,652	)		—		(54,506	)
Other income		38			7			14			—			—		59
Income from operations	$	37,096		$	10,343		$	8,017		$	219			—	$	55,675
Interest expense																(12,126	)
Foreign currency exchange gain																144
Provision for income taxes																(11,676	)
Net income															$	32,017

Other Information
Adjusted EBITDA ¹	$	54,144		$	12,772		$	20,704		$	308			—	$	87,928
Average rental equipment ²	$	1,155,413		$	218,976		$	379,214
Average monthly total yield ³		2.19	%		3.01	%		2.43	%
Average utilization ⁴		79.7	%		74.8	%		58.9	%
Average monthly rental rate ⁵		2.75	%		4.02	%		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.
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 December 31, 2022
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS- RenTelco			Enviroplex			Adler Tanks (Discontinued)			Consolidated

Revenues
Rental	$	55,230		$	17,460		$	31,385		$	—		$	18,728		$	122,803
Rental related services		20,514			4,390			783			—			8,433			34,120
Rental operations		75,744			21,850			32,168			—			27,161			156,923
Sales		34,923			943			8,726			7,625			698			52,915
Other		337			60			525			—			123			1,045
Total revenues		111,004			22,853			41,419			7,625			27,982			210,883

Costs and Expenses
Direct costs of rental operations:
Depreciation		7,119			724			12,464			—			4,008			24,315
Rental related services		13,674			4,311			745			—			6,096			24,826
Other		14,150			1,809			5,826			—			2,639			24,424
Total direct costs of rental operations		34,943			6,844			19,035			—			12,743			73,565
Costs of sales		23,625			663			3,309			6,107			472			34,176
Total costs of revenues		58,568			7,507			22,344			6,107			13,215			107,741

Gross Profit
Rental		33,961			14,927			13,095			—			12,081			74,064
Rental related services		6,839			80			38			—			2,337			9,294
Rental operations		40,800			15,007			13,133			—			14,418			83,358
Sales		11,298			280			5,417			1,518			226			18,739
Other		337			60			525			—			123			1,045
Total gross profit		52,436			15,346			19,075			1,518			14,767			103,142
Selling and administrative expenses		(24,317	)		(6,672	)		(7,315	)		(1,242	)		(7,786	)		(47,332	)
Other income		—			—			—			—			—			—
Income from operations	$	28,119		$	8,674		$	11,760		$	276		$	6,981			55,810
Interest expense																	(5,170	)
Foreign currency exchange gain																	26
Provision for income taxes																	(11,025	)
Net income																$	39,641

Other Information
Adjusted EBITDA ¹	$	42,528		$	10,617		$	25,333		$	351		$	12,140		$	90,969
Average rental equipment ²	$	863,088		$	181,633		$	395,789
Average monthly total yield ³		2.13	%		3.20	%		2.63	%
Average utilization ⁴		80.5	%		84.9	%		63.0	%
Average monthly rental rate ⁵		2.65	%		3.77	%		4.20	%

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.
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)
Twelve months ended December 31, 2023
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS- RenTelco			Enviroplex			Adler Tanks (Discontinued)			Consolidated

Revenues
Rental	$	285,553		$	74,536		$	114,247		$	—		$	6,520		$	480,856
Rental related services		114,511			20,510			3,139			—			2,584			140,744
Rental operations		400,064			95,046			117,386			—			9,104			621,600
Sales		155,267			4,587			27,119			20,192			269			207,434
Other		6,905			1,504			3,772			—			65			19,025
Total revenues		562,236			101,137			148,277			20,192			9,438			841,280

Costs and Expenses
Direct costs of rental operations:
Depreciation		36,921			3,514			48,477			—			1,325			90,237
Rental related services		75,390			18,568			2,670			—			2,020			98,648
Other		86,983			7,317			20,642			—			1,270			116,212
Total direct costs of rental operations		199,294			29,399			71,789			—			4,614			305,096
Costs of sales		105,021			2,858			13,884			15,964			159			137,886
Total costs of revenues		304,315			32,257			85,673			15,964			4,773			442,982

Gross Profit
Rental		161,649			63,705			45,128			—			3,926			274,408
Rental related services		39,121			1,942			469			—			564			42,096
Rental operations		200,770			65,647			45,597			—			4,490			316,504
Sales		50,246			1,729			13,235			4,228			110			69,548
Other		6,905			1,504			3,772			—			65			12,246
Total gross profit		257,921			68,880			62,604			4,228			4,665			398,298
Selling and administrative expenses		(138,574	)		(31,537	)		(30,962	)		(6,466	)		(2,582	)		(210,121	)
Other income		2,329			457			832			—			—			3,618
Income (loss) from operations	$	121,676		$	37,800		$	32,474		$	(2,238	)	$	2,083		$	191,795
Interest expense																	(40,934	)
Foreign currency exchange loss																	310
Provision for income taxes																	(38,063	)
Net income																$	113,108

Other Information
Adjusted EBITDA ¹	$	191,990		$	47,147		$	84,736		$	(1,899	)	$	3,682		$	325,656
Average rental equipment ²	$	1,093,086		$	206,095		$	388,679
Average monthly total yield ³		2.18	%		3.01	%		2.43	%
Average utilization ⁴		79.7	%		77.3	%		58.9	%
Average monthly rental rate ⁵		2.73	%		3.90	%		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 year ended December 31, 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)
Twelve months ended December 31, 2022
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS- RenTelco			Enviroplex			Adler Tanks (Discontinued)			Consolidated

Revenues
Rental	$	206,070		$	62,218		$	121,375		$	—		$	66,366		$	456,029
Rental related services		74,756			17,095			3,112			—			27,654			122,617
Rental operations		280,826			79,313			124,487			—			94,020			578,646
Sales		97,046			2,933			24,571			23,170			2,933			150,653
Other		1,339			260			1,720			—			1,205			4,524
Total revenues		379,211			82,506			150,778			23,170			98,158			733,823

Costs and Expenses
Direct costs of rental operations:
Depreciation		28,373			2,799			49,253			—			16,004			96,429
Rental related services		49,910			16,344			2,592			—			20,947			89,793
Other		76,819			6,212			21,327			—			12,422			116,780
Total direct costs of rental operations		155,102			25,355			73,172			—			49,373			303,002
Costs of sales		62,224			1,849			9,707			18,048			2,085			93,913
Total costs of revenues		217,326			27,204			82,879			18,048			51,458			396,915

Gross Profit
Rental		100,878			53,207			50,795			—			37,940			242,820
Rental related services		24,847			750			520			—			6,707			32,824
Rental operations		125,725			53,957			51,315			—			44,647			275,644
Sales		34,822			1,084			14,864			5,122			848			56,740
Other		1,339			260			1,720			—			1,205			4,524
Total gross profit		161,885			55,302			67,899			5,122			46,700			336,908
Selling and administrative expenses		(85,769	)		(24,465	)		(27,245	)		(5,435	)		(28,428	)		(171,342	)
Other income		—			—			—			—			—			—
Income (loss) from operations	$	76,116		$	30,837		$	40,654		$	(313	)	$	18,272		$	165,566
Interest expense																	(15,168	)
Foreign currency exchange loss																	(378	)
Provision for income taxes																	(34,882	)
Net income																$	115,138

Other Information
Adjusted EBITDA ¹	$	121,831		$	37,393		$	92,007		$	(25	)	$	37,660		$	288,866
Average rental equipment ²	$	855,640		$	169,997		$	383,235
Average monthly total yield ³		2.01	%		3.05	%		2.63	%
Average utilization ⁴		78.0	%		84.8	%		64.2	%
Average monthly rental rate ⁵		2.57	%		3.60	%		4.11	%

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.
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 December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Income from continuing operations	$	32,016		$	34,992		$	111,852		$	103,309
Provision for income taxes from continuing operations		11,676			9,690			37,610			31,377
Interest expense		12,126			4,173			40,560			12,230
Depreciation and amortization		27,533			23,508			107,918			93,490
EBITDA		83,351			72,363			297,940			240,406
Share-based compensation		3,002			2,503			8,157			6,747
Transaction costs ³		1,575			3,886			15,877			4,053
Adjusted EBITDA ¹	$	87,928		$	78,752		$	321,974		$	251,206
Adjusted EBITDA margin ²		40	%		43	%		39	%		40	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Adjusted EBITDA ¹	$	87,928		$	90,969		$	325,656		$	288,866
Interest paid		(10,785	)		(5,793	)		(38,603	)		(14,775	)
Income taxes paid, net of refunds received		(82,018	)		(2,477	)		(91,565	)		(27,362	)
Gain on sale of used rental equipment		(8,678	)		(11,274	)		(31,642	)		(37,979	)
Foreign currency exchange loss		(144	)		(26	)		(310	)		378
Amortization of debt issuance costs		2			3			8			16
Change in certain assets and liabilities:
Accounts receivable, net		(9,204	)		(64	)		(35,143	)		(30,524	)
Prepaid expenses and other assets		(21,936	)		829			(29,326	)		(16,484	)
Accounts payable and other liabilities		15,089			(1,335	)		(17,826	)		8,595
Deferred income		6,186			(9,698	)		14,094			23,701
Net cash (used in) provided by operating activities	$	(23,560	)	$	61,134		$	95,343		$	194,432

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 twelve months ended December 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 years ended December 31, 2023 and 2022, was $3,682 and $37,660, 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/20240220559341/en/

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

Source: McGrath RentCorp

Release Details

McGrath Announces Results for Fourth Quarter 2023 and Announces 33rd Annual Dividend Increase