LIVERMORE, Calif.--(BUSINESS WIRE)--Oct. 24, 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 September 30, 2024 of $266.8 million, an increase of 10% compared to the third quarter of 2023. The Company reported net income from continuing operations of $149.3 million, or $6.08 per diluted share, for the third quarter of 2024, compared to net income from continuing operations of $40.4 million, or $1.65 per diluted share, for the third quarter of 2023. Excluding the $180.0 million merger termination payment received from WillScot Mobile Mini and $39.4 million in transaction costs incurred during the quarter, net of provision for income taxes, the Company reported net income from continuing operations of $45.9 million, or $1.87 per diluted share.

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

• Rental revenues increased 1% to $124.2 million.
• Total revenues increased 10% to $266.8 million.
• Payment on merger termination from WillScot Mobile Mini provided for $180.0 million in proceeds received by the Company, partly offset by $39.4 million in transaction costs and an increase in provision for income taxes, resulted in a $103.5 million net income contribution during the quarter, or $4.21 per diluted share.
• Adjusted EBITDA¹ increased 13% to $104.0 million.
• Dividend rate of $0.475 per share for the third quarter 2024. On an annualized basis, this dividend represents a 1.8% yield on the October 23, 2024 close price of $106.23 per share.

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

“We were very pleased with our third quarter results. The 10% increase in companywide revenues was driven by higher rental operations and sales revenues.

Our modular business was the highlight for the quarter, with 9% 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 weak, resulting in 11% lower rental revenues for the quarter, compared to a year ago. The weaker demand was broad-based across regions and was primarily a result of lower commercial construction project activity.

TRS-RenTelco experienced continued demand challenges, resulting in 10% 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 who maintained their focus on disciplined execution throughout the quarter. Looking ahead, I am excited about our multi-year opportunity to increase our customer base, geographic coverage and value-added service offerings in our Modular and Portable Storage businesses."

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended September 30, 2024 to the quarter ended September 30, 2023 unless otherwise indicated.

MOBILE MODULAR

For the third quarter of 2024, the Company’s Mobile Modular division reported Adjusted EBITDA of $71.4 million, an increase of $13.3 million, or 23%, when compared to the same quarter in 2023.

• Rental revenues increased 9% to $81.5 million, depreciation expense increased 11% to $10.1 million, and other direct costs decreased 3% to $20.5 million, which resulted in an increase in gross profit on rental revenues of 14% to $50.8 million.
• Rental related services revenues increased 23% to $42.4 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit increasing 32% to $15.0 million.
• Sales revenues increased 14% to $66.0 million, primarily from higher new equipment sales. Gross margin on sales was 34% in 2024, compared to 32% in 2023, resulting in a 20% increase in gross profit on sales revenues to $22.4 million. The increase in gross profit on sales was primarily attributed to the higher new sales revenues during the quarter.
• Selling and administrative expenses increased $2.2 million, or 7%, to $34.0 million.

PORTABLE STORAGE

For the third quarter of 2024, the Company’s Portable Storage division reported Adjusted EBITDA of $10.8 million, a decrease of $1.3 million, or 10%, when compared to the same quarter in 2023.

• Rental revenues decreased 11% to $17.0 million, depreciation expense increased 10% to $1.0 million, and other direct costs decreased 38% to $1.3 million, which resulted in a decrease in gross profit on rental revenues of 9% to $14.7 million.
• Rental related services revenues were $4.4 million and gross profit on rental related services revenues was $0.1 million, which was down from $0.3 million in the third quarter of 2023.
• Sales revenues increased $0.3 million to $1.4 million, primarily from higher used equipment sales. Gross margin on sales was 36%, compared to 32% in 2023, resulting in a $0.1 million increase in gross profit on sales revenues to $0.5 million.
• Selling and administrative expenses decreased $1.2 million, or 15%, to $6.8 million during the quarter.

TRS-RENTELCO

For the third quarter of 2024, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $18.9 million, a decrease of 10%, when compared to the same quarter in 2023.

• Rental revenues decreased 10% to $25.7 million, depreciation expense decreased 10%, and other direct costs increased 5%, resulting in an 18% decrease in gross profit on rental revenues to $9.4 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 13% to $7.6 million, primarily due to lower used equipment sales. Gross margin on sales was 52%, compared to 35% in 2023, resulting in a 27% increase in gross profit on sales revenues to $3.9 million.
• Selling and administrative expenses decreased 5%, to $6.6 million.

FINANCIAL OUTLOOK:

Based upon the Company's year-to-date results and current outlook for the remainder of the year, for the full-year 2024 the Company expects:

				(Continuing Operations)
•		Total revenue:		$910 to $920 million
•		Adjusted EBITDA1, 2:		$345 to $351 million
•		Gross rental equipment capital expenditures:		$180 to $190 million

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs, other income, net and non-operating transactions. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA.
2.		Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.

ABOUT MCGRATH:

McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies.

McGrath is headquartered in Livermore, California. Additional information about McGrath and its businesses is available at mgrc.com and investors.mgrc.com.

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

CONFERENCE CALL NOTE:

As previously announced in its press release of September 26, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 24, 2024 to discuss the third 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 1-800-753-9146 (in the U.S.), or 1-402-220-2705 (outside the U.S.). In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward-looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, (i) Mr. Hanna’s statements about the Company’s multi-year opportunity to increase its customer base, geographic coverage and value-added service offerings in its Modular and Portable Storage businesses, and (ii) statements regarding the full year 2024 in the “Financial Outlook” section, are forward-looking.

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta, Brekke Storage, Dixie Storage and Inland Storage acquisitions; any adverse impact of the termination of the merger with WillScot Mobile Mini; competition within the modular business; the activity levels in the semiconductor and general purpose and communications test equipment markets at TRS-RenTelco; the activity levels in commercial construction projects and impact on Portable Storage segment; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the other factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except per share amounts)		2024				2023				2024				2023
Revenues
Rental		$	124,203			$	122,686			$	365,708			$	350,773
Rental related services			47,701				40,492				111,640				101,481
Rental operations			171,904				163,178				477,349				452,254
Sales			92,508				77,115				181,992				148,576
Other			2,346				3,213				7,855				9,424
Total revenues			266,758				243,506				667,196				610,254
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			21,981				22,069				66,512				66,499
Rental related services			32,439				28,532				78,215				71,625
Other			27,252				28,493				84,182				90,188
Total direct costs of rental operations			81,672				79,094				228,909				228,312
Costs of sales			61,107				52,878				117,625				98,431
Total costs of revenues			142,779				131,972				346,534				326,743
Gross profit			123,979				111,534				320,661				283,511
Expenses:
Selling and administrative expenses			49,297				48,508				148,764				153,032
Other income, net			—				(3,559	)			(9,281	)			(3,559	)
Income from operations			74,682				66,585				181,178				134,038
Interest expense			12,641				11,025				38,383				28,434
Foreign currency exchange (gain) loss			(216	)			42				(53	)			(166	)
Gain on merger termination from WillScot Mobile Mini			(180,000	)			—				(180,000	)			—
WillScot Mobile Mini transaction costs			39,436				—				61,157				—
Income from continuing operations before provision for income taxes			202,821				55,518				261,691				105,770
Provision for income taxes from continuing operations			53,504				15,152				68,913				25,934
Income from continuing operations			149,317				40,366				192,778				79,836
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			—				—				—				61,513
Income from discontinued operations			—				—				—				62,769
Net income		$	149,317			$	40,366			$	192,778			$	142,605
Earnings per share from continuing operations:
Basic		$	6.08			$	1.65			$	7.86			$	3.26
Diluted		$	6.08			$	1.65			$	7.85			$	3.26
Earnings per share from discontinued operations:
Basic		$	—			$	—			$	—			$	2.57
Diluted		$	—			$	—			$	—			$	2.56
Earnings per share:
Basic		$	6.08			$	1.65			$	7.86			$	5.83
Diluted		$	6.08			$	1.65			$	7.85			$	5.81
Shares used in per share calculation:
Basic			24,551				24,487				24,538				24,461
Diluted			24,567				24,525				24,564				24,527
Cash dividends declared per share		$	0.475			$	0.465			$	1.425			$	1.395

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
		September 30,				December 31,
(in thousands)		2024				2023
Assets
Cash		$	4,056			$	877
Accounts receivable, net of allowance for credit losses of $2,866 at September 30, 2024 and $2,801 at December 31, 2023			224,529				227,368
Rental equipment, at cost:
Relocatable modular buildings			1,398,422				1,291,093
Portable storage containers			241,620				236,123
Electronic test equipment			356,979				377,587
			1,997,021				1,904,803
Less: accumulated depreciation			(605,339	)			(575,480	)
Rental equipment, net			1,391,682				1,329,323
Property, plant and equipment, net			195,593				169,114
Inventories			22,285				15,425
Prepaid expenses and other assets			67,376				87,364
Intangible assets, net			56,891				64,588
Goodwill			323,224				323,224
Total assets		$	2,285,636			$	2,217,283
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	608,562			$	762,975
Accounts payable			76,240				58,760
Accrued liabilities			109,367				108,763
Deferred income			123,925				111,428
Deferred income taxes, net			273,482				241,555
Total liabilities			1,191,576				1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,551 shares as of September 30, 2024 and 24,496 shares as of December 31, 2023			113,989				111,122
Retained earnings			980,244				822,796
Accumulated other comprehensive loss			(173	)			(116	)
Total shareholders’ equity			1,094,060				933,802
Total liabilities and shareholders’ equity		$	2,285,636			$	2,217,283

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
		Nine Months Ended September 30,
(in thousands)		2024				2023
Cash Flows from Operating Activities:
Net income		$	192,778			$	142,605
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			80,824				81,842
Deferred income taxes			31,927				(30,018	)
Provision for credit losses			1,437				1,794
Share-based compensation			6,949				5,273
Gain on sale of property, plant and equipment			(9,281	)			(3,559	)
Gain on sale of discontinued operations			—				(61,513	)
Gain on sale of used rental equipment			(25,185	)			(22,964	)
Foreign currency exchange gain			(53	)			(166	)
Amortization of debt issuance costs			6				6
Change in:
Accounts receivable			1,402				(27,733	)
Inventories			(6,860	)			(1,988	)
Prepaid expenses and other assets			19,988				(5,402	)
Accounts payable			30,562				22,513
Accrued liabilities			605				10,305
Deferred income			12,497				7,908
Net cash provided by operating activities			337,596				118,903
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations			—				268,012
Purchases of rental equipment			(167,269	)			(171,322	)
Purchases of property, plant and equipment			(36,070	)			(16,448	)
Cash paid for acquisition of businesses			—				(458,315	)
Cash paid for acquisition of business assets			—				(3,474	)
Proceeds from sales of used rental equipment			50,270				49,405
Proceeds from sales of property, plant and equipment			12,251				595
Net cash used in investing activities			(140,818	)			(331,547	)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit			(154,420	)			178,892
Borrowings under term note agreement			—				75,000
Taxes paid related to net share settlement of stock awards			(4,082	)			(6,100	)
Payment of dividends			(35,097	)			(34,168	)
Net cash (used in) provided by financing activities			(193,599	)			213,624
Effect of foreign currency exchange rate changes on cash			—				9
Net increase in cash			3,179				989
Cash balance, beginning of period			877				957
Cash balance, end of period		$	4,056			$	1,946
Supplemental Disclosure of Cash Flow Information:
Gain on merger termination, net of transaction costs, presented under net cash provided by operating activities		$	118,843			$	—
Interest paid, during the period		$	40,338			$	27,818
Net income taxes (refunded) paid, during the period		$	(3,826	)		$	9,547
Dividends accrued during the period, not yet paid		$	12,241			$	12,014
Rental equipment acquisitions, not yet paid		$	3,333			$	5,765

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2024
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	81,508			$	17,040			$	25,655			$	—			$	124,203
Rental related services			42,396				4,405				900				—				47,701
Rental operations			123,904				21,445				26,555				—				171,904
Sales			65,994				1,411				7,604				17,499				92,508
Other			1,509				195				642				—				2,346
Total revenues			191,407				23,051				34,801				17,499				266,758
Costs and Expenses
Direct costs of rental operations:
Depreciation			10,124				1,006				10,851				—				21,981
Rental related services			27,366				4,280				793				—				32,439
Other			20,549				1,327				5,376				—				27,252
Total direct costs of rental operations			58,039				6,613				17,020				—				81,672
Costs of sales			43,595				906				3,688				12,918				61,107
Total costs of revenues			101,634				7,519				20,708				12,918				142,779
Gross Profit
Rental			50,835				14,707				9,428				—				74,970
Rental related services			15,030				125				107				—				15,262
Rental operations			65,865				14,832				9,535				—				90,232
Sales			22,399				505				3,916				4,581				31,401
Other			1,509				195				642				—				2,346
Total gross profit			89,773				15,532				14,093				4,581				123,979
Selling and administrative expenses 6			34,028				6,790				6,627				1,851				49,296
Other income			—				—				—				—				—
Income from operations		$	55,745			$	8,742			$	7,466			$	2,730				74,683
Interest expense																			(12,641	)
Foreign currency exchange gain																			216
Gain on merger termination from WillScot Mobile Mini																			180,000
WillScot Mobile Mini transaction costs																			(39,436	)
Provision for income taxes																			(53,504	)
Net income																		$	149,317
Other Information
Adjusted EBITDA 1		$	71,420			$	10,796			$	18,945			$	2,822			$	103,983
Average rental equipment 2		$	1,240,950			$	229,231			$	362,431
Average monthly total yield 3			2.19	%			2.48	%			2.36	%
Average utilization 4			77.1	%			62.8	%			57.3	%
Average monthly rental rate 5			2.84	%			3.94	%			4.12	%

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.
6.		During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company has separately reported these transaction costs in the Company's Corporate segment and excluded such costs from Selling and administrative expenses.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2023
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	74,796			$	19,232			$	28,658			$	—			$	122,686
Rental related services			34,429				5,287				776				—				40,492
Rental operations			109,225				24,519				29,434				—				163,178
Sales			57,723				1,144				8,733				9,515				77,115
Other			1,908				363				942				—				3,213
Total revenues			168,856				26,026				39,109				9,515				243,506
Costs and Expenses
Direct costs of rental operations:
Depreciation			9,123				914				12,032				—				22,069
Rental related services			23,033				4,894				605				—				28,532
Other			21,222				2,131				5,140				—				28,493
Total direct costs of rental operations			53,378				7,939				17,777				—				79,094
Costs of sales			39,039				782				5,651				7,406				52,878
Total costs of revenues			92,417				8,721				23,428				7,406				131,972
Gross Profit
Rental			44,451				16,187				11,486				—				72,124
Rental related services			11,395				394				171				—				11,960
Rental operations			55,846				16,581				11,657				—				84,084
Sales			18,684				362				3,082				2,109				24,237
Other			1,908				363				942				—				3,213
Total gross profit			76,438				17,306				15,681				2,109				111,534
Selling and administrative expenses			31,813				8,019				6,999				1,677				48,508
Other income			(2,290	)			(450	)			(819	)			—				(3,559	)
Income from operations		$	46,915			$	9,737			$	9,501			$	432				66,585
Interest expense																			(11,025	)
Foreign currency exchange loss																			(42	)
Provision for income taxes																			(15,152	)
Net income																		$	40,366
Other Information
Adjusted EBITDA 1		$	58,166			$	12,047			$	21,039			$	517			$	91,769
Average rental equipment 2		$	1,137,675			$	212,888			$	385,353
Average monthly total yield 3			2.19	%			3.01	%			2.46	%
Average utilization 4			79.9	%			76.5	%			59.4	%
Average monthly rental rate 5			2.74	%			3.94	%			4.17	%

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)
Nine months ended September 30, 2024
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	236,040			$	53,270			$	76,398			$	—			$	365,708
Rental related services			95,450				13,768				2,422				—				111,640
Rental operations			331,490				67,039				78,820				—				477,349
Sales			127,251				3,889				20,261				30,591				181,992
Other			4,795				907				2,153				—				7,855
Total revenues			463,536				71,835				101,234				30,591				667,196
Costs and Expenses
Direct costs of rental operations:
Depreciation			29,994				2,971				33,547				—				66,512
Rental related services			62,974				13,212				2,029				—				78,215
Other			64,487				4,322				15,373				—				84,182
Total direct costs of rental operations			157,455				20,505				50,949				—				228,909
Costs of sales			83,180				2,390				9,346				22,709				117,625
Total costs of revenues			240,635				22,895				60,295				22,709				346,534
Gross Profit
Rental			141,559				45,977				27,478				—				215,014
Rental related services			32,476				556				393				—				33,425
Rental operations			174,035				46,533				27,871				—				248,439
Sales			44,071				1,499				10,915				7,882				64,367
Other			4,795				907				2,153				—				7,855
Total gross profit			222,901				48,939				40,939				7,882				320,661
Selling and administrative expenses 6			100,882				22,064				20,450				5,368				148,764
Other income			(6,220	)			(1,319	)			(1,742	)			—				(9,281	)
Income from operations		$	128,239			$	28,194			$	22,231			$	2,514				181,178
Interest expense																			(38,383	)
Foreign currency exchange gain																			53
Gain on merger termination from WillScot Mobile Mini																			180,000
WillScot Mobile Mini transaction costs																			(61,157	)
Provision for income taxes																			(68,913	)
Net income																		$	192,778
Other Information
Adjusted EBITDA 1		$	168,165			$	33,333			$	55,426			$	2,799			$	259,723
Average rental equipment 2		$	1,206,361			$	226,373			$	367,137
Average monthly total yield 3			2.17	%			2.61	%			2.31	%
Average utilization 4			78.0	%			66.1	%			56.8	%
Average monthly rental rate 5			2.79	%			3.95	%			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.
6.		During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company has separately reported these transaction costs in the Company's Corporate segment and excluded such costs from Selling and administrative expenses.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2023
(dollar amounts in thousands)		Mobile Modular				Portable Storage				TRS-RenTelco				Enviroplex				Consolidated
Revenues
Rental		$	209,622			$	54,776			$	86,375			$	—			$	350,773
Rental related services			83,799				15,359				2,323				—				101,481
Rental operations			293,421				70,135				88,698				—				452,254
Sales			112,939				2,890				21,368				11,379				148,576
Other			5,249				1,167				3,008				—				9,424
Total revenues			411,609				74,192				113,074				11,379				610,254
Costs and Expenses
Direct costs of rental operations:
Depreciation			27,196				2,570				36,733				—				66,499
Rental related services			55,702				13,916				2,007				—				71,625
Other			68,726				5,619				15,843				—				90,188
Total direct costs of rental operations			151,624				22,105				54,583				—				228,312
Costs of sales			76,303				1,799				11,307				9,022				98,431
Total costs of revenues			227,927				23,904				65,890				9,022				326,743
Gross Profit
Rental			113,700				46,587				33,799				—				194,086
Rental related services			28,097				1,443				316				—				29,856
Rental operations			141,797				48,030				34,115				—				223,942
Sales			36,636				1,091				10,061				2,357				50,145
Other			5,249				1,167				3,008				—				9,424
Total gross profit			183,682				50,288				47,184				2,357				283,511
Selling and administrative expenses			101,360				23,282				23,576				4,814				153,032
Other income			(2,290	)			(450	)			(819	)			—				(3,559	)
Income (loss) from operations		$	84,612			$	27,456			$	24,427			$	(2,457	)			134,038
Interest expense																			(28,434	)
Foreign currency exchange gain																			166
Provision for income taxes																			(25,934	)
Net income																		$	79,836
Other Information
Adjusted EBITDA 1		$	135,107			$	34,375			$	63,212			$	(2,207	)		$	230,487
Average rental equipment 2		$	1,073,384			$	201,946			$	391,993
Average monthly total yield 3			2.17	%			3.01	%			2.43	%
Average utilization 4			79.7	%			78.4	%			59.0	%
Average monthly rental rate 5			2.72	%			3.84	%			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, gains on property sales and non-operating transactions. The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA. 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, gains on property sales and non-operating transactions, 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, gains on property sales and non-operating transactions. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure, as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Reconciliation of Income from Continuing Operations to Adjusted EBITDA
(dollar amounts in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,								Twelve Months Ended September 30,
		2024				2023				2024				2023				2024				2023
Income from continuing operations		$	149,317			$	40,366			$	192,778			$	79,836			$	224,799			$	114,828
Provision for income taxes from continuing operations			53,502				15,152				68,913				25,934				80,586				35,624
Interest expense			12,642				11,025				38,383				28,434				50,509				32,607
Depreciation and amortization			26,693				26,884				80,824				80,385				108,357				103,893
EBITDA			242,154				93,427				380,898				214,589				464,249				286,952
Share-based compensation			2,393				1,891				6,949				5,155				9,951				7,658
Transaction costs 3			39,436				10				61,157				14,302				62,732				18,188
Other income, net 4			—				(3,559	)			(9,281	)			(3,559	)			(9,340	)			(3,559	)
Gain on merger termination from WillScot Mobile Mini 5			(180,000	)			—				(180,000	)			—				(180,000	)			—
Adjusted EBITDA 1		$	103,983			$	91,769			$	259,723			$	230,487			$	347,592			$	309,239
Adjusted EBITDA margin 2			39	%			39	%			38	%			38	%			39	%			39	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,								Twelve Months Ended September 30,
		2024				2023				2024				2023				2024				2023
Adjusted EBITDA 1		$	103,983			$	91,769			$	259,723			$	234,169			$	347,592			$	325,138
Interest paid			(13,944	)			(11,016	)			(40,338	)			(27,818	)			(51,123	)			(33,611	)
Income taxes paid, net of refunds received			(773	)			(2,616	)			3,826				(9,547	)			(78,192	)			(12,024	)
Gain on sale of used rental equipment			(9,648	)			(8,714	)			(25,185	)			(22,964	)			(33,863	)			(34,238	)
Foreign currency exchange loss			(216	)			42				(53	)			(166	)			(197	)			(192	)
Amortization of debt issuance costs			2				2				6				6				8				9
Change in certain assets and liabilities:
Accounts receivable, net			(7,150	)			(26,223	)			2,839				(25,939	)			(6,365	)			(26,003	)
Prepaid expenses and other assets			14,171				1,114				19,988				(7,390	)			(1,948	)			(6,561	)
Accounts payable and other liabilities			123,241				4,476				104,293				(29,356	)			119,382				(30,691	)
Deferred income			(10,699	)			(1,382	)			12,497				7,908				18,683				(1,790	)
Net cash provided by operating activities		$	198,967			$	47,452			$	337,596			$	118,903			$	313,977			$	180,037

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, other income, net and non-operating transactions. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the nine month period ended September 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.
5.		The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241023857571/en/

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

Source: McGrath RentCorp