LIVERMORE, Calif.--(BUSINESS WIRE)--Jul. 28, 2022-- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2022 of $177.0 million, an increase of 21%, compared to the second quarter of 2021. The Company reported net income of $26.1 million, or $1.07 per diluted share, for the second quarter of 2022, compared to net income of $20.6 million, or $0.84 per diluted share, for the second quarter of 2021.

SECOND QUARTER 2022 YEAR-OVER-YEAR COMPANY HIGHLIGHTS:

• Rental revenues increased 17% to $110.6 million.
• Total revenues increased 21% to $177.0 million.
• Adjusted EBITDA¹ increased 13% to $66.3 million.
• Dividend rate increased 5% to $0.455 per share for the second quarter of 2022. On an annualized basis, this dividend represents a 2.2% yield on the July 27, 2022 close price of $81.18 per share.

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

“We were very pleased with our second quarter results. Our 21% growth in total company revenues was a result of strong performance in both rental operations and sales revenues. Demand was healthy across each of our rental segments. Mobile Modular rental revenues grew 22%, with approximately half of the growth attributable to our Design Space and Titan Storage Container acquisitions. Excluding the acquisitions, the modular segment rental revenues grew by 11%. Rental revenue growth was also strong at TRS-RenTelco and Adler Tanks, which grew 7% and 18%, respectively.

Mobile Modular saw broad-based strength across our commercial, education and portable storage customer bases. We responded to this strong rental demand with increased capital spending to organically grow our fleet to capture growth opportunities, while also improving overall fleet utilization and increasing pricing. Operating expenses were elevated as we continued to spend robustly to prepare modular equipment for rent as we enter what is typically our busiest time of year for new project shipments. Our initiatives to also grow modular sales showed progress as sales revenues increased by 68% compared to a year ago.

At TRS-RenTelco and Adler Tanks the positive trends we experienced earlier this year continued in the second quarter. TRS-RenTelco saw growth in both communications and general-purpose rentals. Adler Tanks continued to experience broad-based demand improvement across its regions and vertical markets.

We have delivered strong performance in the first half of the year, and we have entered the second half with good momentum across the business. As a result, we have increased our financial outlook for the full year.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2022 to the quarter ended June 30, 2021 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2022, the Company’s Mobile Modular division reported income from operations of $23.9 million, an increase of $5.8 million, or 32%, with Adjusted EBITDA increasing $6.3 million, or 21%, to $35.8 million. Rental revenues increased 22% to $64.9 million, depreciation expense increased 10% to $7.7 million and other direct costs increased 51% to $24.1 million, which resulted in an increase in gross profit on rental revenues of 9% to $33.1 million. The rental revenue increase reflects the 2021 Design Space and Titan Storage Containers customers that contributed approximately one half of the increase. Rental related services revenues increased 31% to $21.2 million, primarily attributable to higher delivery and pick up activities, and higher site related and other services performed during the lease with associated gross profit increasing 39% to $6.1 million. Sales revenues increased 68% to $24.8 million, from both higher used and new equipment sales. Gross margin on sales was 41% compared to 39% in 2021, resulting in a 75% increase in gross profit on sales revenues to $10.1 million. Selling and administrative expenses increased 14% to $25.8 million, primarily due to increased employee salaries and benefit costs totaling $1.5 million reflecting the addition of Design Space employees, and $1.3 million higher allocated corporate expenses.

TRS-RENTELCO

For the second quarter of 2022, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $1.0 million, or 12%, with Adjusted EBITDA increasing $1.1 million, or 5%, to $22.1 million. Rental revenues increased 7% to $29.7 million, depreciation expense increased 3% to $12.3 million and other direct costs increased 15% to $5.4 million, which resulted in a 6% increase in gross profit on rental revenues to $11.9 million. The rental revenue increase was the result of higher average equipment on rent and higher average monthly rental rates compared to the prior year. Sales revenues increased 35% to $6.4 million and gross profit on sales revenues increased 23% to $3.6 million. Selling and administrative expenses increased 9% to $6.6 million, primarily due to higher employees’ salaries and benefit costs.

ADLER TANKS

For the second quarter of 2022, the Company’s Adler Tanks division reported income from operations of $3.9 million, an increase of $2.2 million, with Adjusted EBITDA increasing $1.9 million, or 28%, to $8.6 million. Rental revenues increased $2.5 million, or 18%, to $16.0 million, depreciation expense decreased 4% to $4.0 million and other direct costs increased 24% to $3.3 million, which resulted in an increased gross profit on rental revenues of 30%, to $8.7 million. The rental revenue increase was broad based across regions and vertical markets served. Rental related services revenues increased 17% to $6.8 million, with gross profit on rental related services increasing 63%, to $1.7 million. Selling and administrative expenses increased 12% to $7.0 million primarily due to higher employees’ salaries and benefit costs.

FINANCIAL OUTLOOK:

Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is raising its financial outlook. For the full-year 2022, the Company expects:

				Previous		Current
		Total revenue:		$675 million to $705 million		$695 million to $720 million
		Adjusted EBITDA1, 2:		$260 million to $275 million		$266 million to $276 million
		Gross rental equipment capital expenditures:		$117 million to $127 million		$145 million to $155 million

1. 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.
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 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 June 30, 2022, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 28, 2022 to discuss the second quarter 2022 results. To participate in the teleconference, dial 1-800-445-7795 (in the U.S.), or 1-203-518-9848 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-800-839-6975 (in the U.S.), or 1-402-220-6061 (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, Mr. Hanna’s statements about spending robustly to prepare modular equipment for rent and the expectation of demand in the following quarter due to seasonality, 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 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 June 30,								Six Months Ended June 30,
(in thousands, except per share amounts)		2022				2021				2022				2021
Revenues
Rental		$	110,624			$	94,581			$	214,865			$	180,668
Rental related services			28,819				22,688				53,136				42,357
Rental operations			139,443				117,269				268,001				223,025
Sales			36,471				28,256				52,347				42,867
Other			1,117				910				2,056				1,738
Total revenues			177,031				146,435				322,404				267,630
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			24,064				23,159				47,938				44,414
Rental related services			20,853				17,276				38,996				31,880
Other			32,825				23,278				60,648				42,985
Total direct costs of rental operations			77,742				63,713				147,582				119,279
Costs of sales			21,452				16,855				30,496				25,403
Total costs of revenues			99,194				80,568				178,078				144,682
Gross profit			77,837				65,867				144,326				122,948
Selling and administrative expenses			40,788				36,261				79,915				69,398
Income from operations			37,049				29,606				64,411				53,550
Other expense:
Interest expense			(3,001	)			(2,257	)			(5,821	)			(4,040	)
Foreign currency exchange loss			(181	)			(2	)			(168	)			(57	)
Income before provision for income taxes			33,867				27,347				58,422				49,453
Provision for income taxes			7,730				6,739				13,492				11,447
Net income		$	26,137			$	20,608			$	44,930			$	38,006
Earnings per share:
Basic		$	1.07			$	0.85			$	1.85			$	1.57
Diluted		$	1.07			$	0.84			$	1.83			$	1.55
Shares used in per share calculation:
Basic			24,360				24,229				24,323				24,191
Diluted			24,509				24,494				24,522				24,505
Cash dividends declared per share		$	0.455			$	0.435			$	0.910			$	0.870

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		June 30,				December 31,
(in thousands)		2022				2021
Assets
Cash		$	874			$	1,491
Accounts receivable, net of allowance for credit losses of $2,125 in 2022 and 2021			167,329				159,499
Rental equipment, at cost:
Relocatable modular buildings			1,075,898				1,040,094
Electronic test equipment			389,383				361,391
Liquid and solid containment tanks and boxes			309,010				309,908
			1,774,291				1,711,393
Less: accumulated depreciation			(676,766	)			(646,169	)
Rental equipment, net			1,097,525				1,065,224
Property, plant and equipment, net			137,465				135,325
Prepaid expenses and other assets			65,800				54,945
Intangible assets, net			44,086				47,049
Goodwill			132,305				132,393
Total assets		$	1,645,384			$	1,595,926
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	441,460			$	426,451
Accounts payable and accrued liabilities			137,729				136,313
Deferred income			77,551				58,716
Deferred income taxes, net			236,610				242,425
Total liabilities			893,350				863,905
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,378 shares as of June 30, 2022 and 24,260 shares as of December 31, 2021			105,894				108,610
Retained earnings			646,130				623,465
Accumulated other comprehensive income (loss)			10				(54	)
Total shareholders’ equity			752,034				732,021
Total liabilities and shareholders’ equity		$	1,645,384			$	1,595,926

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Six Months Ended June 30,
(in thousands)		2022				2021
Cash Flows from Operating Activities:
Net income		$	44,930			$	38,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			55,355				50,559
Deferred income taxes			(5,815	)			7,268
Provision for doubtful accounts			49				138
Share-based compensation			3,412				3,597
Gain on sale of used rental equipment			(16,093	)			(11,870	)
Foreign currency exchange loss			168				57
Amortization of debt issuance costs			9				6
Change in:
Accounts receivable			(7,879	)			(5,494	)
Prepaid expenses and other assets			(10,855	)			(9,385	)
Accounts payable and accrued liabilities			(73	)			17,642
Deferred income			18,835				7,458
Net cash provided by operating activities			82,043				97,982
Cash Flows from Investing Activities:
Purchases of rental equipment			(94,820	)			(58,902	)
Purchases of property, plant and equipment			(6,594	)			(2,272	)
Cash paid for acquisition of businesses			—				(284,341	)
Proceeds from sales of used rental equipment			31,830				24,674
Net cash used in investing activities			(69,584	)			(320,841	)
Cash Flows from Financing Activities:
Net borrowings under bank lines of credit			15,000				189,983
Borrowings under note purchase agreement			—				60,000
Taxes paid related to net share settlement of stock awards			(6,128	)			(4,828	)
Payment of dividends			(22,083	)			(21,089	)
Net cash (used in) provided by financing activities			(13,211	)			224,066
Effect of foreign currency exchange rate changes on cash			135				(33	)
Net (decrease) increase in cash			(617	)			1,174
Cash balance, beginning of period			1,491				1,238
Cash balance, end of period		$	874			$	2,412
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	5,821			$	3,987
Net income taxes paid, during the period		$	17,078			$	6,990
Dividends accrued during the period, not yet paid		$	11,009			$	9,918
Rental equipment acquisitions, not yet paid		$	6,906			$	8,502

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2022
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	64,949			$	29,718			$	15,957			$	—			$	110,624
Rental related services			21,233				813				6,773				—				28,819
Rental operations			86,182				30,531				22,730				—				139,443
Sales			24,816				6,404				601				4,650				36,471
Other			379				406				332				—				1,117
Total revenues			111,377				37,341				23,663				4,650				177,031
Costs and Expenses
Direct costs of rental operations:
Depreciation			7,749				12,333				3,982				—				24,064
Rental related services			15,116				664				5,073				—				20,853
Other			24,073				5,443				3,309				—				32,825
Total direct costs of rental operations			46,938				18,440				12,364				—				77,742
Costs of sales			14,760				2,765				418				3,509				21,452
Total costs of revenues			61,698				21,205				12,782				3,509				99,194
Gross Profit
Rental			33,127				11,942				8,666				—				53,735
Rental related services			6,117				149				1,700				—				7,966
Rental operations			39,244				12,091				10,366				—				61,701
Sales			10,056				3,639				183				1,141				15,019
Other			379				406				332				—				1,117
Total gross profit			49,679				16,136				10,881				1,141				77,837
Selling and administrative expenses			25,755				6,614				6,979				1,440				40,788
Income (loss) from operations		$	23,924			$	9,522			$	3,902			$	(299	)			37,049
Interest expense																			(3,001	)
Foreign currency exchange loss																			(181	)
Provision for income taxes																			(7,730	)
Net income																		$	26,137
Other Information
Adjusted EBITDA 1		$	35,773			$	22,128			$	8,620			$	(230	)		$	66,291
Average rental equipment 2		$	1,019,927			$	382,068			$	307,402
Average monthly total yield 3			2.12	%			2.59	%			1.73	%
Average utilization 4			78.1	%			64.5	%			51.6	%
Average monthly rental rate 5			2.72	%			4.02	%			3.35	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. 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.
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, 2021
(dollar amounts in thousands)		Mobile Modular				TRS-RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	53,238			$	27,860			$	13,483			$	—			$	94,581
Rental related services			16,207				710				5,771				—				22,688
Rental operations			69,445				28,570				19,254				—				117,269
Sales			14,784				4,757				593				8,122				28,256
Other			343				456				111				—				910
Total revenues			84,572				33,783				19,958				8,122				146,435
Costs and Expenses
Direct costs of rental operations:
Depreciation			7,074				11,916				4,169				—				23,159
Rental related services			11,804				745				4,727				—				17,276
Other			15,901				4,718				2,659				—				23,278
Total direct costs of rental operations			34,779				17,379				11,555				—				63,713
Costs of sales			9,034				1,792				427				5,602				16,855
Total costs of revenues			43,813				19,171				11,982				5,602				80,568
Gross Profit
Rental			30,264				11,225				6,655				—				48,144
Rental related services			4,401				(33	)			1,044				—				5,412
Rental operations			34,665				11,192				7,699				—				53,556
Sales			5,751				2,964				166				2,520				11,401
Other			343				456				111				—				910
Total gross profit			40,759				14,612				7,976				2,520				65,867
Selling and administrative expenses			22,602				6,073				6,253				1,333				36,261
Income from operations		$	18,157			$	8,539			$	1,723			$	1,187				29,606
Interest expense																			(2,257	)
Foreign currency exchange loss																			(2	)
Provision for income taxes																			(6,739	)
Net income																		$	20,608
Other Information
Adjusted EBITDA 1		$	29,518			$	21,019			$	6,736			$	1,250			$	58,523
Average rental equipment 2		$	906,653			$	349,480			$	313,108
Average monthly total yield 3			1.96	%			2.66	%			1.44	%
Average utilization 4			75.5	%			67.7	%			44.0	%
Average monthly rental rate 5			2.59	%			3.93	%			3.27	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. 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.
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, 2022
(dollar amounts in thousands)		Mobile Modular				TRS-RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	126,487			$	58,230			$	30,148			$	—			$	214,865
Rental related services			39,594				1,484				12,058				—				53,136
Rental operations			166,081				59,714				42,206				—				268,001
Sales			35,191				10,331				1,258				5,567				52,347
Other			750				787				519				—				2,056
Total revenues			202,022				70,832				43,983				5,567				322,404
Costs and Expenses
Direct costs of rental operations:
Depreciation			15,582				24,362				7,994				—				47,938
Rental related services			28,296				1,244				9,456				—				38,996
Other			44,235				10,135				6,278				—				60,648
Total direct costs of rental operations			88,113				35,741				23,728				—				147,582
Costs of sales			21,089				4,265				920				4,222				30,496
Total costs of revenues			109,202				40,006				24,648				4,222				178,078
Gross Profit
Rental			66,670				23,733				15,876				—				106,279
Rental related services			11,298				240				2,602				—				14,140
Rental operations			77,968				23,973				18,478				—				120,419
Sales			14,102				6,066				338				1,345				21,851
Other			750				787				519				—				2,056
Total gross profit			92,820				30,826				19,335				1,345				144,326
Selling and administrative expenses			50,447				13,204				13,501				2,763				79,915
Income (loss) from operations		$	42,373			$	17,622			$	5,834			$	(1,418	)			64,411
Interest expense																			(5,821	)
Foreign currency exchange loss																			(168	)
Provision for income taxes																			(13,492	)
Net income																		$	44,930
Other Information
Adjusted EBITDA 1		$	66,178			$	42,781			$	15,327			$	(1,276	)		$	123,010
Average rental equipment 2		$	1,013,361			$	374,364			$	307,985
Average monthly total yield 3			2.08	%			2.59	%			1.63	%
Average utilization 4			77.6	%			64.6	%			49.9	%
Average monthly rental rate 5			2.68	%			4.02	%			3.27	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. 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.
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, 2021
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	99,895			$	55,136			$	25,637			$	—			$	180,668
Rental related services			30,258				1,450				10,649				—				42,357
Rental operations			130,153				56,586				36,286				—				223,025
Sales			22,404				9,906				1,201				9,356				42,867
Other			663				894				181				—				1,738
Total revenues			153,220				67,386				37,668				9,356				267,630
Costs and Expenses
Direct costs of rental operations:
Depreciation			12,893				23,278				8,243				—				44,414
Rental related services			21,876				1,398				8,606				—				31,880
Other			28,776				9,252				4,957				—				42,985
Total direct costs of rental operations			63,545				33,928				21,806				—				119,279
Costs of sales			13,982				4,093				843				6,485				25,403
Total costs of revenues			77,527				38,021				22,649				6,485				144,682
Gross Profit
Rental			58,227				22,605				12,437				—				93,269
Rental related services			8,380				54				2,043				—				10,477
Rental operations			66,607				22,659				14,480				—				103,746
Sales			8,423				5,812				358				2,871				17,464
Other			663				894				181				—				1,738
Total gross profit			75,693				29,365				15,019				2,871				122,948
Selling and administrative expenses			41,839				12,371				12,520				2,668				69,398
Income from operations		$	33,854			$	16,994			$	2,499			$	203				53,550
Interest expense																			(4,040	)
Foreign currency exchange loss																			(57	)
Provision for income taxes																			(11,447	)
Net income																		$	38,006
Other Information
Adjusted EBITDA 1		$	53,473			$	41,411			$	12,436			$	329			$	107,649
Average rental equipment 2		$	876,529			$	342,526			$	313,498
Average monthly total yield 3			1.90	%			2.68	%			1.36	%
Average utilization 4			75.7	%			67.7	%			42.1	%
Average monthly rental rate 5			2.44	%			3.96	%			3.24	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. 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.
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 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 June 30,								Six Months Ended June 30,								Twelve Months Ended June 30,
	2022				2021				2022				2021				2022				2021
Net income	$	26,137			$	20,608			$	44,930			$	38,006			$	96,629			$	97,282
Provision for income taxes		7,730				6,739				13,492				11,447				34,096				26,976
Interest expense		3,001				2,257				5,821				4,040				12,236				7,991
Depreciation and amortization		27,771				27,099				55,355				50,559				111,491				97,539
EBITDA		64,639				56,703				119,598				104,052				254,452				229,788
Share-based compensation		1,652				1,820				3,412				3,597				7,481				5,922
Adjusted EBITDA 1	$	66,291			$	58,523			$	123,010			$	107,649			$	261,933			$	235,710
Adjusted EBITDA margin 2		37	%			40	%			38	%			40	%			39	%			41	%

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,
	2022				2021				2022				2021				2022				2021
Adjusted EBITDA 1	$	66,291			$	58,523			$	123,010			$	107,649			$	261,933			$	235,710
Interest paid		(3,684	)			(2,362	)			(5,821	)			(3,987	)			(12,160	)			(8,006	)
Income taxes paid, net of refunds received		(16,658	)			(6,618	)			(17,078	)			(6,990	)			(19,175	)			(39,740	)
Gain on sale of used rental equipment		(10,729	)			(7,076	)			(16,093	)			(11,870	)			(29,664	)			(21,597	)
Foreign currency exchange loss (gain)		181				2				168				57				321				(340	)
Amortization of debt issuance costs		5				3				9				6				18				12
Change in certain assets and liabilities:
Accounts receivable, net		(15,765	)			(6,464	)			(7,830	)			(5,356	)			(26,420	)			(2,732	)
Prepaid expenses and other assets		(15,068	)			(9,291	)			(10,855	)			(9,385	)			(8,286	)			(3,937	)
Accounts payable and other liabilities		12,115				30,785				(2,302	)			20,400				(7,221	)			28,940
Deferred income		13,612				2,871				18,835				7,458				20,459				(7,346	)
Net cash provided by operating activities	$	30,300			$	60,373			$	82,043			$	97,982			$	179,805			$	180,964

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation.
2. 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/20220727006128/en/

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

Source: McGrath RentCorp