LIVERMORE, Calif.--(BUSINESS WIRE)--Jul. 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 June 30, 2024 of $212.6 million, an increase of 5% compared to the second quarter of 2023. The Company reported net income from continuing operations of $20.6 million, or $0.84 per diluted share, for the second quarter of 2024, compared to net income from continuing operations of $28.0 million, or $1.14 per diluted share, for the second quarter of 2023.

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

• Rental revenues increased 3% to $121.2 million.
• Total revenues increased 5% to $212.6 million.
• Selling and administrative expenses increased 31% to $61.4 million primarily due to $12.4 million in transaction costs attributable to the pending merger with WillScot Mobile Mini, which decreased 2024 net income from continuing operations by $0.36 per diluted share.
• Adjusted EBITDA¹ increased 9% to $83.7 million.
• Dividend rate of $0.475 per share for the second quarter 2024. On an annualized basis, this dividend represents a 1.7% yield on the July 24, 2024 close price of $111.63 per share.

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

“We were pleased with our second quarter results. The 5% increase in companywide revenues was driven by higher rental operations and sales revenues.

Our modular business was the highlight for the quarter, with 10% rental revenue growth. Rental revenues grew across our 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.

Portable storage demand conditions were weaker than a year ago, resulting in 4% lower rental revenues for the quarter, compared to a year ago. The weaker demand was primarily a result of lower commercial construction project activity.

TRS-RenTelco experienced continued demand challenges, resulting in 11% lower rental revenues for the quarter, compared to a year ago. During the quarter we maintained disciplined 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 June 30, 2024 to the quarter ended June 30, 2023 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2024, the Company’s Mobile Modular division reported Adjusted EBITDA of $53.4 million, an increase of $8.9 million, or 20%, when compared to the same quarter in 2023.

• Rental revenues increased 10% to $78.0 million, depreciation expense increased 6% to $10.0 million, and other direct costs decreased 9% to $21.3 million, which resulted in an increase in gross profit on rental revenues of 23% to $46.8 million.
• Rental related services revenues increased 4% to $28.9 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit decreasing 3% to $9.1 million.
• Sales revenues decreased 6% to $35.9 million, primarily from lower new equipment sales. Gross margin on sales was 38% in 2024, compared to 31% in 2023, resulting in a 17% increase in gross profit on sales revenues to $13.8 million. The increase in gross margin on sales was primarily attributed to a higher mix of used versus new sales during the quarter.
• Selling and administrative expenses increased $11.2 million to $42.3 million. Included within selling and administrative expenses was $11.3 million higher allocated corporate costs, which included $9.0 million in allocated transaction costs attributed to the pending merger with WillScot Mobile Mini.

PORTABLE STORAGE

For the second quarter of 2024, the Company’s Portable Storage division reported Adjusted EBITDA of $11.0 million, a decrease of $1.3 million, or 11%, when compared to the same quarter in 2023.

• Rental revenues decreased 4% to $17.8 million, depreciation expense increased 15% to $1.0 million, and other direct costs decreased 10% to $1.5 million, which resulted in a decrease in gross profit on rental revenues of 4% to $15.3 million.
• Rental related services revenues were $4.6 million and gross profit on rental related services revenues was $0.2 million, which was down from $0.7 million in the second quarter of 2023.
• Sales revenues increased $0.2 million to $1.3 million, primarily from higher used equipment sales. Gross margin on sales was 43% compared to 38% in 2023, resulting in a $0.1 million increase in gross profit on sales revenues to $0.6 million.
• Selling and administrative expenses increased $1.7 million to $8.9 million, primarily due to higher allocated corporate expenses, which included $1.4 million in allocated transaction costs attributed to the pending WillScot Mobile Mini merger.

TRS-RENTELCO

For the second quarter of 2024, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $18.0 million, a decrease of 16%, when compared to the same quarter in 2023.

• Rental revenues decreased 11% to $25.3 million, depreciation expense decreased 9%, and other direct costs decreased 6%, resulting in a 16% decrease in gross profit on rental revenues to $9.0 million. The rental revenue decrease was primarily due to continued weakness in end markets, resulting in lower average rental equipment on rent compared to the prior year.
• Sales revenues decreased 22% to $5.8 million and gross profit on sales revenues decreased 23% to $3.1 million.
• Selling and administrative expenses increased 19%, to $8.5 million, primarily due to higher allocated corporate expenses, which included $1.9 million in transaction costs attributed to the pending merger with WillScot Mobile Mini.

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 July 1, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 25, 2024 to discuss the second 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 1-800-723-0488 (in the U.S.), or 1-402-220-2651 (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 June 30,								Six Months Ended June 30,
(in thousands, except per share amounts)		2024				2023				2024				2023
Revenues
Rental		$	121,176			$	117,840			$	241,508			$	228,087
Rental related services			34,358				33,857				63,938				60,989
Rental operations			155,534				151,697				305,446				289,076
Sales			54,414				47,801				89,483				71,461
Other			2,663				3,532				5,509				6,211
Total revenues			212,611				203,030				400,438				366,748
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			22,165				22,597				44,531				44,430
Rental related services			24,990				23,825				45,776				43,093
Other			27,920				30,560				56,930				61,695
Total direct costs of rental operations			75,075				76,982				147,237				149,218
Costs of sales			34,121				31,438				56,518				45,553
Total costs of revenues			109,196				108,420				203,755				194,771
Gross profit			103,415				94,610				196,683				171,977
Expenses:
Selling and administrative expenses			61,370				47,026				121,188				104,524
Other income, net			—				—				(9,281	)			—
Income from operations			42,045				47,584				84,776				67,453
Interest expense			13,037				9,945				25,741				17,409
Foreign currency exchange loss (gain)			31				18				163				(208	)
Income from continuing operations before provision for income taxes			28,977				37,621				58,872				50,252
Provision for income taxes from continuing operations			8,359				9,669				15,406				10,782
Income from continuing operations			20,618				27,952				43,466				39,470
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			—				2,630				—				61,513
Income from discontinued operations			—				2,630				—				62,769
Net income		$	20,618			$	30,582			$	43,466			$	102,239
Earnings per share from continuing operations:
Basic		$	0.84			$	1.14			$	1.77			$	1.61
Diluted		$	0.84			$	1.14			$	1.77			$	1.61
Earnings per share from discontinued operations:
Basic		$	—			$	0.11			$	—			$	2.57
Diluted		$	—			$	0.11			$	—			$	2.56
Earnings per share:
Basic		$	0.84			$	1.25			$	1.77			$	4.18
Diluted		$	0.84			$	1.25			$	1.77			$	4.17
Shares used in per share calculation:
Basic			24,549				24,479				24,531				24,448
Diluted			24,560				24,512				24,562				24,527
Cash dividends declared per share		$	0.475			$	0.465			$	0.950			$	0.930

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		June 30,				December 31,
(in thousands)		2024				2023
Assets
Cash		$	9,396			$	877
Accounts receivable, net of allowance for credit losses of $2,866 at June 30, 2024 and $2,801 at December 31, 2023			217,379				227,368
Rental equipment, at cost:
Relocatable modular buildings			1,398,475				1,291,093
Portable storage containers			242,107				236,123
Electronic test equipment			368,324				377,587
			2,008,906				1,904,803
Less: accumulated depreciation			(601,584	)			(575,480	)
Rental equipment, net			1,407,322				1,329,323
Property, plant and equipment, net			191,801				169,114
Inventories			28,213				15,425
Prepaid expenses and other assets			81,547				87,364
Intangible assets, net			59,453				64,588
Goodwill			323,224				323,224
Total assets		$	2,318,335			$	2,217,283
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	794,271			$	762,975
Accounts payable			73,132				58,760
Accrued liabilities			108,928				108,763
Deferred income			134,624				111,428
Deferred income taxes, net			253,147				241,555
Total liabilities			1,364,102				1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,550 shares as of June 30, 2024 and 24,496 shares as of December 31, 2023			111,596				111,122
Retained earnings			842,675				822,796
Accumulated other comprehensive loss			(38	)			(116	)
Total shareholders’ equity			954,233				933,802
Total liabilities and shareholders’ equity		$	2,318,335			$	2,217,283

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Six Months Ended June 30,
(in thousands)		2024				2023
Cash Flows from Operating Activities:
Net income		$	43,466			$	102,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			54,131				54,958
Deferred income taxes			11,592				(39,486	)
Provision for credit losses			873				1,400
Share-based compensation			4,556				3,382
Gain on sale of property, plant and equipment			(9,281	)			—
Gain on sale of discontinued operations			—				(61,513	)
Gain on sale of used rental equipment			(15,537	)			(14,250	)
Foreign currency exchange loss (gain)			163				(208	)
Amortization of debt issuance costs			4				4
Change in:
Accounts receivable			9,116				(1,116	)
Inventories			(12,788	)			(6,594	)
Prepaid expenses and other assets			5,817				(1,910	)
Accounts payable			23,155				19,209
Accrued liabilities			166				6,046
Deferred income			23,196				9,290
Net cash provided by operating activities			138,629				71,451
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations			—				268,012
Purchases of rental equipment			(145,345	)			(128,088	)
Purchases of property, plant and equipment			(30,125	)			(11,229	)
Cash paid for acquisition of businesses			—				(456,312	)
Proceeds from sales of used rental equipment			29,334				27,410
Proceeds from sales of property, plant and equipment			12,251				—
Net cash used in investing activities			(133,885	)			(300,207	)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit			(43,708	)			258,885
Borrowings under term note agreement			75,000				—
Taxes paid related to net share settlement of stock awards			(4,082	)			(6,100	)
Payment of dividends			(23,435	)			(22,782	)
Net cash provided by financing activities			3,775				230,003
Effect of foreign currency exchange rate changes on cash			—				1
Net increase in cash			8,519				1,248
Cash balance, beginning of period			877				957
Cash balance, end of period		$	9,396			$	2,205
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	26,394			$	16,802
Net income taxes (refunded) paid, during the period		$	(4,599	)		$	6,931
Dividends accrued during the period, not yet paid		$	12,150			$	11,937
Rental equipment acquisitions, not yet paid		$	7,634			$	7,612

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2024
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	78,039			$	17,823			$	25,314			$	—			$	121,176
Rental related services			28,920				4,640				798				—				34,358
Rental operations			106,959				22,463				26,112				—				155,534
Sales			35,930				1,266				5,845				11,373				54,414
Other			1,657				293				713				—				2,663
Total revenues			144,546				24,022				32,670				11,373				212,611
Costs and Expenses
Direct costs of rental operations:
Depreciation			9,995				1,001				11,169				—				22,165
Rental related services			19,828				4,476				686				—				24,990
Other			21,265				1,527				5,128				—				27,920
Total direct costs of rental operations			51,088				7,004				16,983				—				75,075
Costs of sales			22,172				716				2,716				8,517				34,121
Total costs of revenues			73,260				7,720				19,699				8,517				109,196
Gross Profit
Rental			46,779				15,295				9,017				—				71,091
Rental related services			9,092				164				112				—				9,368
Rental operations			55,871				15,459				9,129				—				80,459
Sales			13,758				550				3,129				2,856				20,293
Other			1,657				293				713				—				2,663
Total gross profit			71,286				16,302				12,971				2,856				103,415
Selling and administrative expenses			42,267				8,874				8,515				1,714				61,370
Income from operations		$	29,019			$	7,428			$	4,456			$	1,142				42,045
Interest expense																			(13,037	)
Foreign currency exchange loss																			(31	)
Provision for income taxes																			(8,359	)
Net income																		$	20,618
Other Information
Adjusted EBITDA 1		$	53,418			$	11,015			$	18,001			$	1,238			$	83,672
Average rental equipment 2		$	1,203,415			$	226,754			$	367,322
Average monthly total yield 3			2.16	%			2.62	%			2.28	%
Average utilization 4			78.4	%			66.1	%			56.5	%
Average monthly rental rate 5			2.76	%			3.96	%			4.07	%

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 June 30, 2023
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	70,770			$	18,487			$	28,583			$	—			$	117,840
Rental related services			27,836				5,354				667				—				33,857
Rental operations			98,606				23,841				29,250				—				151,697
Sales			38,248				1,109				7,521				923				47,801
Other			1,983				475				1,074				—				3,532
Total revenues			138,838				25,424				37,845				923				203,030
Costs and Expenses
Direct costs of rental operations:
Depreciation			9,415				870				12,312				—				22,597
Rental related services			18,443				4,641				741				—				23,825
Other			23,377				1,705				5,478				—				30,560
Total direct costs of rental operations			51,236				7,215				18,531				—				76,982
Costs of sales			26,517				690				3,431				800				31,438
Total costs of revenues			77,753				7,905				21,962				800				108,420
Gross Profit
Rental			37,977				15,913				10,793				—				64,683
Rental related services			9,393				713				(74	)			—				10,032
Rental operations			47,370				16,626				10,719				—				74,715
Sales			11,731				419				4,090				123				16,363
Other			1,983				475				1,074				—				3,532
Total gross profit			61,084				17,520				15,883				123				94,610
Selling and administrative expenses			31,092				7,204				7,126				1,604				47,026
Income (loss) from operations		$	29,993			$	10,315			$	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		$	44,516			$	12,308			$	21,538			$	(1,394	)		$	76,968
Average rental equipment 2		$	1,117,141			$	204,627			$	393,891
Average monthly total yield 3			2.11	%			3.01	%			2.40	%
Average utilization 4			79.3	%			78.2	%			58.2	%
Average monthly rental rate 5			2.66	%			3.85	%			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, 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)
Six months ended June 30, 2024
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	154,535			$	36,230			$	50,743			$	—			$	241,508
Rental related services			53,053				9,363				1,522				—				63,938
Rental operations			207,588				45,593				52,265				—				305,446
Sales			61,256				2,478				12,657				13,092				89,483
Other			3,287				711				1,511				—				5,509
Total revenues			272,131				48,782				66,433				13,092				400,438
Costs and Expenses
Direct costs of rental operations:
Depreciation			19,870				1,965				22,696				—				44,531
Rental related services			35,608				8,932				1,236				—				45,776
Other			43,938				2,995				9,997				—				56,930
Total direct costs of rental operations			99,416				13,892				33,929				—				147,237
Costs of sales			39,584				1,484				5,658				9,791				56,517
Total costs of revenues			139,000				15,377				39,587				9,791				203,755
Gross Profit
Rental			90,727				31,270				18,050				—				140,047
Rental related services			17,445				431				286				—				18,162
Rental operations			108,172				31,701				18,336				—				158,209
Sales			21,672				993				6,999				3,301				32,965
Other			3,287				711				1,511				—				5,509
Total gross profit			133,131				33,405				26,846				3,301				196,683
Selling and administrative expenses			82,354				17,885				17,433				3,517				121,189
Other income, net			(6,220	)			(1,319	)			(1,742	)			—				(9,281	)
Income (loss) from operations		$	56,999			$	16,840			$	11,155			$	(216	)			84,778
Interest expense																			(25,741	)
Foreign currency exchange loss																			(163	)
Provision for income taxes																			(15,406	)
Net income																		$	43,468
Other Information
Adjusted EBITDA 1		$	96,745			$	22,538			$	36,481			$	(24	)		$	155,740
Average rental equipment 2		$	1,188,828			$	225,025			$	369,756
Average monthly total yield 3			2.17	%			2.68	%			2.27	%
Average utilization 4			78.6	%			67.8	%			56.4	%
Average monthly rental rate 5			2.76	%			3.96	%			4.05	%

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)
Six months ended June 30, 2023
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Adler Tanks (Discontinued)				Consolidated
Revenues
Rental		$	134,826			$	35,544			$	57,717			$	—			$	6,520			$	234,607
Rental related services			49,370				10,072				1,547				—				2,584				63,573
Rental operations			184,196				45,616				59,264				—				9,104				298,180
Sales			55,215				1,747				12,635				1,864				269				71,730
Other			3,342				803				2,066				—				65				6,276
Total revenues			242,753				48,166				73,965				1,864				9,438				376,186
Costs and Expenses
Direct costs of rental operations:
Depreciation			18,072				1,657				24,701				—				1,325				45,755
Rental related services			32,669				9,022				1,402				—				2,020				45,113
Other			47,504				3,487				10,703				—				1,270				62,965
Total direct costs of rental operations			98,246				14,166				36,806				—				4,614				153,832
Costs of sales			37,263				1,018				5,656				1,616				159				45,712
Total costs of revenues			135,509				15,184				42,462				1,616				4,773				199,544
Gross Profit
Rental			69,249				30,400				22,313				—				3,926				125,888
Rental related services			16,701				1,050				145				—				564				18,460
Rental operations			85,950				31,450				22,458				—				4,490				144,348
Sales			17,952				729				6,979				248				110				26,018
Other			3,342				803				2,066				—				65				6,276
Total gross profit			107,244				32,982				31,503				248				4,665				176,642
Selling and administrative expenses			69,548				15,262				16,577				3,137				2,582				107,106
Income (loss) from operations		$	37,696			$	17,720			$	14,926			$	(2,889	)		$	2,083				69,536
Interest expense																							(17,783	)
Foreign currency exchange gain																							208
Provision for income taxes																							(11,235	)
Net income																						$	40,726
Other Information
Adjusted EBITDA 1		$	76,941			$	22,328			$	42,173			$	(2,724	)		$	3,682			$	142,400
Average rental equipment 2		$	1,044,711			$	196,577			$	395,049
Average monthly total yield 3			2.15	%			3.01	%			2.42	%
Average utilization 4			79.4	%			79.4	%			58.7	%
Average monthly rental rate 5			2.71	%			3.80	%			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, 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 June 30,								Six Months Ended June 30,								Twelve Months Ended June 30,
	2024				2023				2024				2023				2024				2023
Income from continuing operations	$	20,618			$	27,952			$	43,466			$	39,470			$	115,848			$	101,577
Provision for income taxes from continuing operations		8,359				9,669				15,406				10,782				42,234				29,654
Interest expense		13,037				9,945				25,741				17,409				48,892				24,937
Depreciation and amortization		26,944				27,368				54,131				53,501				108,548				100,650
EBITDA		68,958				74,934				138,744				121,162				315,522				256,818
Share-based compensation		2,347				1,889				4,556				3,264				9,449				7,228
Transaction costs 3		12,367				145				21,721				14,292				23,306				18,345
Other income, net 4		—				—				(9,281	)			—				(12,899	)			—
Adjusted EBITDA 1	$	83,672			$	76,968			$	155,740			$	138,718			$	335,378			$	282,391
Adjusted EBITDA margin 2		39	%			38	%			38	%			38	%			38	%			39	%

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,
	2024				2023				2024				2023				2024				2023
Adjusted EBITDA 1	$	83,672			$	76,968			$	155,740			$	142,400			$	335,378			$	308,256
Interest paid		(12,210	)			(8,985	)			(26,394	)			(16,802	)			(48,195	)			(25,756	)
Income taxes paid, net of refunds received		5,078				(6,518	)			4,599				(6,931	)			(80,035	)			(17,215	)
Gain on sale of used rental equipment		(8,182	)			(11,161	)			(15,537	)			(14,250	)			(32,929	)			(36,136	)
Foreign currency exchange loss		31				18				163				(208	)			61				2
Amortization of debt issuance costs		2				2				4				4				8				11
Change in certain assets and liabilities:
Accounts receivable, net		(5,429	)			(16,669	)			9,989				284				(25,438	)			(22,410	)
Prepaid expenses and other assets		519				(1,159	)			5,817				(8,504	)			(15,005	)			(14,133	)
Accounts payable and other liabilities		3,800				(2,828	)			(18,948	)			(33,832	)			(2,942	)			(22,935	)
Deferred income		11,928				6,072				23,196				9,290				28,000				14,156
Net cash provided by operating activities	$	79,209			$	35,740			$	138,629			$	71,451			$	158,903			$	183,840

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 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 month period ended June 30, 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/20240724863913/en/

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

Source: McGrath RentCorp