McGrath RentCorp Announces Results for Fourth Quarter 2021

February 23, 2022 at 4:01 PM EST

Company Announces 5% Dividend Increase

LIVERMORE, Calif.--(BUSINESS WIRE)--Feb. 23, 2022-- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2021 of $175.9 million, an increase of 18%, compared to the fourth quarter of 2020. The Company reported net income of $28.4 million, or $1.16 per diluted share, for the fourth quarter of 2021, compared to net income of $31.2 million, or $1.27 per diluted share, for the fourth quarter of 2020.

Total revenues for the year ended December 31, 2021 increased to $616.8 million from $572.6 million in 2020, with adjusted EBITDA increasing $5.6 million, or 2%, to $246.6 million. Net income for the year ended December 31, 2021 was $89.7 million, or $3.66 per diluted share, compared to $102.0 million, or $4.16 per diluted share, in 2020.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.455 per share for the quarter ending March 31, 2022, an increase of $0.02, or 5%, over the prior year period. The cash dividend will be payable on April 29, 2022 to all shareholders of record on April 15, 2022. This marks 31 consecutive years the Company has increased its annual dividend.

FOURTH QUARTER 2021 COMPANY HIGHLIGHTS:

Rental revenues increased 20% year-over-year to $106.1 million.
Total revenues increased 18% year-over-year to $175.9 million.
Adjusted EBITDA¹ increased 12% year-over-year to $73.0 million.
Dividend rate increased 4% year-over-year to $0.435 per share for the fourth quarter of 2021. On an annualized basis, this dividend represents a 2.4% yield on the February 22, 2022 close price of $72.98 per share.

Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:

“We were pleased with our fourth quarter results. Improved end market conditions in each of our three rental business segments enabled us to deliver a 20% increase in companywide rental revenues in the fourth quarter, compared to the prior year. Modular rental revenues grew 29%, with approximately three quarters of the growth attributable to our Design Space and Kitchens To Go acquisitions. Rental revenues at TRS-RenTelco and Adler Tanks grew 4% and 19%, respectively. We were also pleased with the high volume of modular new equipment sales during the quarter, as some previously delayed projects were completed by year end.

"2021 was a year of strategic growth investments, with particular emphasis on the modular acquisitions. We expanded our geographic coverage, added new customers and welcomed new team members. I am extremely grateful to our team members who worked tirelessly throughout 2021 to serve our customers and integrate our new acquisitions. With the major integration steps now complete we are very focused on revenue and profit growth, as reflected by our 12% adjusted EBITDA growth in the fourth quarter.

"We are encouraged by the positive rental demand trends since the start of the year. Year to date new order bookings at Mobile Modular are up significantly from a year ago. We are well positioned to continue growing this business as demand conditions continue to strengthen.

"Our strategic priorities for the next few years are centered on our modular business. We see significant opportunities to further expand our geographic coverage and to broaden the value we bring to customers with rental solutions, site related services and new modular equipment sales. As we demonstrated in 2021, we expect to utilize a disciplined combination of organic investments and acquisitions to deploy growth capital and accelerate these priorities. With an experienced leadership team, track record of execution, strong balance sheet and healthy free cash flow generation we are well positioned for long term growth.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2021 to the quarter ended December 31, 2020 unless otherwise indicated.

MOBILE MODULAR

The Company’s Mobile Modular division reported income from operations of $26.1 million, an increase of $3.6 million, or 16%, with Adjusted EBITDA increasing $8.4 million, or 28%, to $38.4 million. Rental revenues increased 29% to $61.5 million, depreciation expense increased 32% to $7.6 million and other direct costs increased 38% to $15.1 million, which resulted in an increase in gross profit on rental revenues of 26% to $38.7 million. The rental revenue increase reflects in part the new Design Space and Kitchens To Go customers that contributed approximately three quarters of the increase. Rental related services revenues increased 8% to $17.6 million, primarily attributable to services performed during the lease and increased delivery and return delivery revenues at Portable Storage, with associated gross profit increasing 9% to $5.0 million. Sales revenues increased 68% to $20.2 million, due to increased new and used equipment sales. Gross margin on sales was 33% compared to 27% in 2020, resulting in an increase in gross profit on sales revenues of $3.3 million. Selling and administrative expenses increased $8.2 million, or 50%, primarily due to increased employee salaries and benefit costs totaling $2.7 million, mostly from the addition of Design Space and Kitchens To Go employees, $2.4 million higher allocated corporate expenses and $1.7 million higher amortization of intangible assets associated with the Design Space and Kitchens To Go acquisitions.

TRS-RENTELCO

The Company’s TRS-RenTelco division reported income from operations of $9.8 million, a decrease of $1.1 million, or 10%, with Adjusted EBITDA decreasing $0.4 million, or 2%, to $22.3 million. Rental revenues increased 4% to $29.1 million, depreciation expense increased 5% to $11.9 million and other direct costs increased 12% to $4.9 million, which resulted in gross profit on rental revenues comparable to the prior year. Rental revenue increases were primarily from increased demand for general purpose equipment. Sales revenues decreased 13% to $7.6 million while gross margin on sales improved to 51% in 2021 from 47% in 2020, which together resulted in a 7% decrease in gross profit on sales revenues to $3.8 million. Selling and administrative expenses increased 11% to $6.8 million, primarily due to increased marketing and administrative expenses and higher allocated corporate expenses.

ADLER TANKS

The Company’s Adler Tanks division reported income from operations of $2.8 million, an increase of 29%, with Adjusted EBITDA increasing $0.8 million, or 12%, to $7.8 million. Rental revenues increased 19% to $15.5 million, as a result of broad based regional and end market demand. Depreciation expense was comparable to the prior year and other direct costs increased 47% to $3.4 million, which resulted in an increased gross profit on rental revenues of 21%, to $8.1 million. Rental related services revenues increased 10% to $5.9 million, with gross profit on rental related services decreasing 13%, to $1.1 million. Selling and administrative expenses increased 16% to $6.7 million primarily due to increased employee salaries and benefit costs and higher allocated corporate expenses.

FINANCIAL OUTLOOK:

For the full-year 2022, the Company expects:

		2022 Outlook	2021 Actual
•	Total revenue:	$675 million to $705 million	$616.8 million
•	Adjusted EBITDA ^{1, 2}:	$260 million to $275 million	$246.6 million
•	Gross rental equipment capital expenditures:	$117 million to $127 million	$114.1 million

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. 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.
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 RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.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 January 20, 2022, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2022 to discuss the fourth quarter 2021 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (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 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the conference call replay is 8842099. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about the expectation to deploy more rental equipment capital and to expand the breadth of products and services to the Company’s customers, optimism about the overall positive rental demand trends, to further expand geographic coverage through the utilization of organic investments and acquisitions, and that the Company is positioned for long term growth, as well as the statements regarding the full year 2022 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: the duration of the ongoing COVID-19 pandemic and its economic impact, the extent and length of the restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our 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 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 December 31,						Twelve Months Ended December 31,
(in thousands, except per share amounts)	2021			2020			2021			2020
Revenues
Rental	$	106,076		$	88,517		$	390,013		$	351,790
Rental related services		24,191			22,367			98,061			92,393
Rental operations		130,267			110,884			488,074			444,183
Sales		44,732			37,238			125,235			124,604
Other		912			858			3,524			3,767
Total revenues		175,911			148,980			616,833			572,554
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		23,671			21,226			91,887			85,866
Rental related services		18,020			16,345			74,256			68,105
Other		23,373			17,647			91,069			73,818
Total direct costs of rental operations		65,064			55,218			257,212			227,789
Costs of sales		28,579			23,108			78,600			81,019
Total costs of revenues		93,643			78,326			335,812			308,808
Gross profit		82,268			70,653			281,021			263,746
Selling and administrative expenses		39,295			29,628			148,600			122,993
Income from operations		42,973			41,025			132,421			140,753
Other income (expense):
Interest expense		(3,247	)		(1,983	)		(10,455	)		(8,787	)
Foreign currency exchange (loss) gain		(25	)		267			(210	)		78
Income before provision for income taxes		39,701			39,309			121,756			132,044
Provision for income taxes		11,254			8,133			32,051			30,060
Net income	$	28,447		$	31,176		$	89,705		$	101,984
Earnings per share:
Basic	$	1.17		$	1.29		$	3.70		$	4.22
Diluted	$	1.16		$	1.27		$	3.66		$	4.16
Shares used in per share calculation:
Basic		24,252			24,119			24,220			24,157
Diluted		24,537			24,453			24,515			24,531
Cash dividends declared per share	$	0.435		$	0.420		$	1.74		$	1.68

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	December 31,
(in thousands)	2021			2020
Assets
Cash	$	1,491		$	1,238
Accounts receivable, net of allowance for doubtful accounts of $2,125 in 2021 and $2,100 in 2020		159,499			123,316
Rental equipment, at cost:
Relocatable modular buildings		1,040,094			882,115
Electronic test equipment		361,391			333,020
Liquid and solid containment tanks and boxes		309,908			315,706
		1,711,393			1,530,841
Less: accumulated depreciation		(646,169	)		(592,725	)
Rental equipment, net		1,065,224			938,116
Property, plant and equipment, net		135,325			136,210
Prepaid expenses and other assets		54,945			41,549
Intangible assets, net		47,049			7,118
Goodwill		132,393			28,197
Total assets	$	1,595,926		$	1,275,744
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	426,451		$	222,754
Accounts payable and accrued liabilities		136,313			108,334
Deferred income		58,716			45,975
Deferred income taxes, net		242,425			216,077
Total liabilities		863,905			593,140
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,260 shares as of December 31, 2021 and 24,128 shares as of December 31, 2020		108,610			106,289
Retained earnings		623,465			576,419
Accumulated other comprehensive loss		(54	)		(104	)
Total shareholders’ equity		732,021			682,604
Total liabilities and shareholders’ equity	$	1,595,926		$	1,275,744

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Twelve Months Ended December 31,
(in thousands)	2021			2020
Cash Flows from Operating Activities:
Net income	$	89,705		$	101,984
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		106,695			94,643
Deferred income taxes		26,348			(2,193	)
Provision for doubtful accounts		451			1,343
Share-based compensation		7,666			5,549
Gain on sale of used rental equipment		(25,441	)		(19,329	)
Foreign currency exchange loss (gain)		210			(78	)
Amortization of debt issuance costs		15			11
Change in:
Accounts receivable		(24,397	)		3,440
Prepaid expenses and other assets		(6,816	)		3,807
Accounts payable and accrued liabilities		12,226			316
Deferred income		9,082			(8,989	)
Net cash provided by operating activities		195,744			180,504
Cash Flows from Investing Activities:
Purchases of rental equipment		(114,145	)		(86,329	)
Purchases of property, plant and equipment		(2,680	)		(13,724	)
Cash paid for acquisition of businesses		(283,124	)		—
Cash paid for acquisition of Titan business assets		(6,585	)		—
Cash paid for acquisition of non-compete agreements		(2,500	)		—
Proceeds from sales of used rental equipment		57,337			47,052
Net cash used in investing activities		(351,697	)		(53,001	)
Cash Flows from Financing Activities:
Net borrowing (repayment) under bank lines of credit		143,729			(70,689	)
Borrowings under note purchase agreement		100,000			—
Principal payment of Series B senior notes		(40,000	)		—
Repurchase of common stock		—			(13,617	)
Taxes paid related to net share settlement of stock awards		(5,345	)		(4,376	)
Payment of dividends		(42,182	)		(39,769	)
Net cash provided by (used in) financing activities		156,202			(128,451	)
Effect of foreign currency exchange rate changes on cash		4			(156	)
Net increase (decrease) in cash		253			(1,104	)
Cash balance, beginning of period		1,238			2,342
Cash balance, end of period	$	1,491		$	1,238
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period	$	10,326		$	9,050
Net income taxes paid, during the period	$	9,087		$	34,903
Dividends accrued during the period, not yet paid	$	11,280		$	10,083
Rental equipment acquisitions, not yet paid	$	5,750		$	4,373

Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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, 2021
(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex		Consolidated

Revenues
Rental	$	61,451		$	29,079		$	15,546		$	—	$	106,076
Rental related services		17,604			731			5,856			—		24,191
Rental operations		79,055			29,810			21,402			—		130,267
Sales		20,216			7,563			769			16,184		44,732
Other		431			361			120			—		912
Total revenues		99,702			37,734			22,291			16,184		175,911

Costs and Expenses
Direct costs of rental operations:
Depreciation		7,634			11,945			4,092			—		23,671
Rental related services		12,634			643			4,743			—		18,020
Other		15,120			4,881			3,372			—		23,373
Total direct costs of rental operations		35,388			17,469			12,207			—		65,064
Costs of sales		13,631			3,738			552			10,658		28,579
Total costs of revenues		49,019			21,207			12,759			10,658		93,643

Gross Profit
Rental		38,697			12,253			8,082			—		59,032
Rental related services		4,970			88			1,113			—		6,171
Rental operations		43,667			12,341			9,195			—		65,203
Sales		6,585			3,825			217			5,526		16,153
Other		431			361			120			—		912
Total gross profit		50,683			16,527			9,532			5,526		82,268
Selling and administrative expenses		24,627			6,770			6,689			1,209		39,295
Income from operations	$	26,056		$	9,757		$	2,843		$	4,317	$	42,973
Interest expense													(3,247	)
Foreign currency exchange loss													(25	)
Provision for income taxes													(11,254	)
Net income												$	28,447

Other Information
Adjusted EBITDA ¹	$	38,412		$	22,345		$	7,817		$	4,386	$	72,960
Average rental equipment ²	$	988,067		$	362,760		$	309,841
Average monthly total yield ³		2.07	%		2.67	%		1.67	%
Average utilization ⁴		76.9	%		65.9	%		50.1	%
Average monthly rental rate ⁵		2.70	%		4.05	%		3.34	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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, 2020
(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex		Consolidated

Revenues
Rental	$	47,548		$	27,916		$	13,054		$	—	$	88,518
Rental related services		16,236			784			5,347			—		22,367
Rental operations		63,784			28,700			18,401			—		110,885
Sales		12,016			8,675			426			16,121		37,238
Other		351			438			68			—		857
Total revenues		76,151			37,813			18,895			16,121		148,980

Costs and Expenses
Direct costs of rental operations:
Depreciation		5,790			11,343			4,093			—		21,226
Rental related services		11,688			583			4,074			—		16,345
Other		10,989			4,371			2,287			—		17,647
Total direct costs of rental operations		28,467			16,297			10,454			—		55,218
Costs of sales		8,737			4,573			478			9,320		23,108
Total costs of revenues		37,204			20,870			10,932			9,320		78,326

Gross Profit
Rental		30,769			12,202			6,674			—		49,645
Rental related services		4,548			201			1,273			—		6,022
Rental operations		35,317			12,403			7,947			—		55,667
Sales		3,279			4,102			(52	)		6,801		14,130
Other		351			438			68			—		857
Total gross profit		38,947			16,943			7,963			6,801		70,654
Selling and administrative expenses		16,456			6,108			5,766			1,298		29,628
Income from operations	$	22,491		$	10,835		$	2,197		$	5,503		41,026
Interest expense													(1,983	)
Foreign currency exchange gain													267
Provision for income taxes													(8,134	)
Net income												$	31,176

Other Information
Adjusted EBITDA ¹	$	30,024		$	22,767		$	6,983		$	5,567	$	65,341
Average rental equipment ²	$	834,599		$	333,505		$	314,647
Average monthly total yield ³		1.90	%		2.74	%		1.38	%
Average utilization ⁴		76.2	%		67.1	%		42.6	%
Average monthly rental rate ⁵		2.49	%		4.08	%		3.25	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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, 2021
(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex		Consolidated

Revenues
Rental	$	220,569		$	113,419		$	56,025		$	—	$	390,013
Rental related services		72,330			2,880			22,851			—		98,061
Rental operations		292,899			116,299			78,876			—		488,074
Sales		68,982			22,242			2,930			31,081		125,235
Other		1,435			1,653			436			—		3,524
Total revenues		363,316			140,194			82,242			31,081		616,833

Costs and Expenses
Direct costs of rental operations:
Depreciation		28,071			47,374			16,442			—		91,887
Rental related services		53,018			2,704			18,534			—		74,256
Other		60,429			19,148			11,492			—		91,069
Total direct costs of rental operations		141,518			69,226			46,468			—		257,212
Costs of sales		45,758			9,574			2,075			21,193		78,600
Total costs of revenues		187,276			78,800			48,543			21,193		335,812

Gross Profit
Rental		132,070			46,897			28,091			—		207,058
Rental related services		19,310			176			4,317			—		23,803
Rental operations		151,380			47,073			32,408			—		230,861
Sales		23,225			12,667			855			9,888		46,635
Other		1,435			1,653			436			—		3,524
Total gross profit		176,040			61,394			33,699			9,888		281,021
Selling and administrative expenses		92,603			25,152			25,542			5,303		148,600
Income from operations	$	83,436		$	36,243		$	8,157		$	4,585	$	132,421
Interest expense													(10,455	)
Foreign currency exchange loss													(210	)
Provision for income taxes													(32,051	)
Net income												$	89,705

Other Information
Adjusted EBITDA ¹	$	128,044		$	85,723		$	27,961		$	4,844	$	246,572
Average rental equipment ²	$	925,951		$	351,895		$	312,150
Average monthly total yield ³		1.99	%		2.69	%		1.50	%
Average utilization ⁴		76.2	%		67.0	%		45.4	%
Average monthly rental rate ⁵		2.61	%		4.01	%		3.29	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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, 2020
(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex		Consolidated

Revenues
Rental	$	188,719		$	109,083		$	53,988		$	—	$	351,790
Rental related services		67,527			3,080			21,786			—		92,393
Rental operations		256,246			112,163			75,774			—		444,183
Sales		63,863			26,618			1,386			32,737		124,604
Other		1,415			2,030			322			—		3,767
Total revenues		321,524			140,811			77,482			32,737		572,554

Costs and Expenses
Direct costs of rental operations:
Depreciation		22,967			46,472			16,427			—		85,866
Rental related services		48,910			2,419			16,776			—		68,105
Other		47,762			17,133			8,923			—		73,818
Total direct costs of rental operations		119,639			66,024			42,126			—		227,789
Costs of sales		46,011			13,923			1,277			19,808		81,019
Total costs of revenues		165,650			79,947			43,403			19,808		308,808

Gross Profit
Rental		117,990			45,478			28,638			—		192,106
Rental related services		18,617			661			5,010			—		24,288
Rental operations		136,607			46,139			33,648			—		216,394
Sales		17,852			12,695			109			12,929		43,585
Other		1,415			2,030			322			—		3,767
Total gross profit		155,874			60,864			34,079			12,929		263,746
Selling and administrative expenses		68,470			24,306			24,764			5,453		122,993
Income from operations	$	87,404		$	36,558		$	9,315		$	7,476	$	140,753
Interest expense													(8,787	)
Foreign currency exchange gain													78
Provision for income taxes													(30,060	)
Net income												$	101,984

Other Information
Adjusted EBITDA ¹	$	119,202		$	85,082		$	29,010		$	7,729	$	241,023
Average rental equipment ²	$	825,614		$	336,399		$	314,797
Average monthly total yield ³		1.88	%		2.70	%		1.43	%
Average utilization ⁴		77.2	%		66.2	%		44.6	%
Average monthly rental rate ⁵		2.47	%		4.08	%		3.21	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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 and share-based compensation. 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, 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. 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 Net Income to Adjusted EBITDA
(dollar amounts in thousands)	Three Months Ended December 31,						Twelve Months Ended December 31,
	2021			2020			2021			2020
Net income	$	28,447		$	31,175		$	89,705		$	101,984
Provision for income taxes		11,254			8,134			32,051			30,060
Interest expense		3,247			1,983			10,455			8,787
Depreciation and amortization		27,648			23,394			106,695			94,643
EBITDA		70,596			64,686			238,906			235,474
Share-based compensation		2,364			655			7,666			5,549
Adjusted EBITDA ¹	$	72,960		$	65,341		$	246,572		$	241,023
Adjusted EBITDA margin ²		41	%		44	%		40	%		42	%

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,
	2021			2020			2021			2020
Adjusted EBITDA ¹	$	72,960		$	65,341		$	246,572		$	241,023
Interest paid		(3,849	)		(2,221	)		(10,326	)		(9,050	)
Income taxes paid, net of refunds received		(1,013	)		(10,199	)		(9,087	)		(34,903	)
Gain on sale of used rental equipment		(7,653	)		(5,219	)		(25,441	)		(19,329	)
Foreign currency exchange loss (gain)		25			(267	)		210			(78	)
Amortization of debt issuance costs		4			3			15			11
Change in certain assets and liabilities:
Accounts receivable, net		9,332			6,117			(23,946	)		4,783
Prepaid expenses and other assets		4,593			5,121			(6,816	)		3,807
Accounts payable and other liabilities		(3,896	)		2,871			15,481			3,229
Deferred income		(11,046	)		(12,580	)		9,082			(8,989	)
Net cash provided by operating activities	$	59,457		$	48,967		$	195,744		$	180,504

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220222006248/en/

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

Source: McGrath RentCorp

Release Details

McGrath RentCorp Announces Results for Fourth Quarter 2021