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 March 31, 2024 of $187.8 million, an increase
of 15% compared to the first quarter of 2023. The Company reported
net income from continuing operations of $22.8 million, or $0.93
per diluted share, for the first quarter of 2024, compared to net
income from continuing operations of $11.5 million, or $0.47 per
diluted share, for the first quarter of 2023.
FIRST QUARTER 2024 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM
CONTINUING OPERATIONS):
- Rental revenues increased 9% to $120.3 million.
- Total revenues increased 15% to $187.8 million.
- Other income, net for the first quarter 2024 included a
$9.3 million net gain on sale of a property, which increased
earnings per diluted share by $0.28.
- Adjusted EBITDA increased 17% to $72.1 million.
- Dividend rate of $0.475 per share for the first quarter
2024. On an annualized basis, this dividend represents a 1.8% yield
on the April 24, 2024 close price of $108.53 per share.
Joe Hanna, President and CEO of McGrath, made the following
comments:
“We were pleased with our first quarter results. The 9% increase
in companywide rental revenues was driven by strong modular and
portable storage performance. Modular rental revenues grew 19% and
benefited from a full quarter of Vesta Modular contribution in 2024
compared with two months in 2023. Portable storage rental revenues
grew 8%.
“Our modular business was a highlight for the quarter, with
broad based rental strength across commercial and education
customer bases. We maintained our focus on pricing optimization,
rental fleet utilization, and value-added services for our
customers. Growth initiatives for Mobile Modular Plus, Site Related
Services and new modular equipment sales all continued to show
progress.
“TRS-RenTelco experienced continued demand challenges,
particularly for semiconductor related projects, resulting in 13%
lower rental revenues for the quarter, compared to a year ago.
During the quarter we reduced new equipment capital spending and
made progress with reducing the fleet size to better align with
demand conditions.
“I appreciate the strong commitment from the McGrath employee
team as we maintain our independent focus on disciplined execution
during the pending WillScot Mobile Mini transaction.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended March
31, 2024 to the quarter ended March 31, 2023 unless otherwise
indicated.
MOBILE MODULAR
For the first quarter of 2024, the Company’s Mobile Modular
division reported Adjusted EBITDA of $43.3 million, an increase of
$10.9 million, or 34%, when compared to the same quarter in
2023.
- Rental revenues increased 19% to $76.5 million, depreciation
expense increased 14% to $9.9 million, and other direct costs
decreased 6% to $22.7 million, which resulted in an increase in
gross profit on rental revenues of 41% to $43.9 million.
- Rental related services revenues increased 12% to $24.1
million, primarily attributable to higher delivery and pick-up
activities and higher site related services, with associated gross
profit increasing 14% to $8.4 million.
- Sales revenues increased 49% to $25.3 million, primarily from
higher new equipment sales. Gross margin on sales was 31% in 2024,
compared to 37% in 2023, resulting in a 27% increase in gross
profit on sales revenues to $7.9 million. The reduction in gross
margin on sales was primarily attributed to a higher mix of new
versus used sales in 2024.
- Selling and administrative expenses increased $1.6 million to
$40.1 million. Included within selling and administrative expenses
was $5.3 million higher allocated corporate costs, which included
$6.5 million in allocated transaction costs related to the pending
merger with WillScot Mobile Mini.
PORTABLE STORAGE
For the first quarter of 2024, the Company’s Portable Storage
division reported Adjusted EBITDA of $11.5 million, an increase of
$1.5 million, or 15%, when compared to the same quarter in
2023.
- Rental revenues increased 8% to $18.4 million, depreciation
expense increased 23% to $1.0 million, and other direct costs
decreased 18% to $1.5 million, which resulted in an increase in
gross profit on rental revenues of 10% to $16.0 million.
- Rental related services revenues were $4.7 million and gross
profit on rental related services revenues was $0.3 million, which
were both comparable to the first quarter of 2023.
- Sales revenues increased $0.6 million to $1.2 million,
primarily from higher used equipment sales. Gross margin on sales
was 37% compared to 49% in 2023, resulting in a $0.1 million
increase in gross profit on sales revenues to $0.4 million.
- Selling and administrative expenses increased $1.0 million to
$9.0 million, primarily due to higher allocated corporate expenses
and marketing and administrative costs.
TRS-RENTELCO
For the first quarter of 2024, the Company’s TRS-RenTelco
division reported Adjusted EBITDA of $18.5 million, a decrease of
10%, when compared to the same quarter in 2023.
- Rental revenues decreased 13% to $25.4 million, depreciation
expense decreased 7%, and other direct costs decreased 7%,
resulting in a 22% decrease in gross profit on rental revenues to
$9.0 million. The rental revenue decrease was primarily due to
weakness in the semiconductor related end markets, resulting in
lower average rental equipment on rent compared to the prior
year.
- Sales revenues increased 33% to $6.8 million and gross profit
on sales revenues increased 34% to $3.9 million.
- Selling and administrative expenses decreased 6%, to $8.9
million, primarily due to lower allocated corporate expenses.
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 April 4, 2024,
McGrath RentCorp will host a conference call at 5:00 p.m. Eastern
Time (2:00 p.m. Pacific Time) on April 25, 2024 to discuss the
first quarter 2024 results. To participate in the teleconference,
dial 1-800-245-3047 (in the U.S.), or 1-203-518-9765 (outside the
U.S.), or to listen only, access the simultaneous webcast at the
investor relations section of the Company’s website at
https://investors.mgrc.com/. A replay will be available for 7 days
following the call by dialing 1-800-723-5782 (in the U.S.), or
1-402-220-2663 (outside the U.S.). In addition, a live audio
webcast and replay of the call may be found in the investor
relations section of the Company’s website at
https://investors.mgrc.com/events-and-presentations.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March
31,
(in thousands, except per share
amounts)
2024
2023
Revenues
Rental
$
120,332
$
110,247
Rental related services
29,580
27,132
Rental operations
149,912
137,379
Sales
35,069
23,660
Other
2,846
2,679
Total revenues
187,827
163,718
Costs and
Expenses
Direct costs of rental operations:
Depreciation of rental equipment
22,366
21,833
Rental related services
20,786
19,268
Other
29,010
31,135
Total direct costs of rental
operations
72,162
72,236
Costs of sales
22,397
14,115
Total costs of revenues
94,559
86,351
Gross profit
93,268
77,367
Expenses:
Selling and administrative expenses
59,818
57,498
Other income, net
(9,281
)
—
Income from operations
42,731
19,869
Interest expense
12,704
7,464
Foreign currency exchange loss (gain)
132
(226
)
Income from continuing operations before
provision for income taxes
29,895
12,631
Provision for income taxes from continuing
operations
7,047
1,113
Income from continuing operations
22,848
11,518
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
—
58,883
Income from discontinued operations
—
60,139
Net income
$
22,848
$
71,657
Earnings per share from continuing
operations:
Basic
$
0.93
$
0.47
Diluted
$
0.93
$
0.47
Earnings per share from discontinued
operations:
Basic
$
—
$
2.46
Diluted
$
—
$
2.45
Earnings per share:
Basic
$
0.93
$
2.93
Diluted
$
0.93
$
2.92
Shares used in per share calculation:
Basic
24,513
24,416
Diluted
24,564
24,542
Cash dividends declared per share
$
0.475
$
0.465
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
March 31,
December 31,
(in thousands)
2024
2023
Assets
Cash
$
1,912
$
877
Accounts receivable, net of allowance for
credit losses of $2,819 at March 31, 2024 and $2,801 at December
31, 2023
211,950
227,368
Rental equipment, at cost:
Relocatable modular buildings
1,345,919
1,291,093
Portable storage containers
240,517
236,123
Electronic test equipment
370,641
377,587
1,957,077
1,904,803
Less: accumulated depreciation
(588,535
)
(575,480
)
Rental equipment, net
1,368,542
1,329,323
Property, plant and equipment, net
189,166
169,114
Inventories
24,548
15,425
Prepaid expenses and other assets
82,066
87,364
Intangible assets, net
62,020
64,588
Goodwill
323,224
323,224
Total assets
$
2,263,428
$
2,217,283
Liabilities and
Shareholders' Equity
Liabilities:
Notes payable
$
798,561
$
762,975
Accounts payable
57,162
58,760
Accrued liabilities
95,725
108,763
Deferred income
122,696
111,428
Deferred income taxes, net
246,264
241,555
Total liabilities
1,320,408
1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized
40,000 shares
Issued and outstanding - 24,541 shares as
of March 31, 2024 and 24,496 shares as of December 31, 2023
109,249
111,122
Retained earnings
833,820
822,796
Accumulated other comprehensive loss
(49
)
(116
)
Total shareholders’ equity
943,020
933,802
Total liabilities and shareholders’
equity
$
2,263,428
$
2,217,283
MCGRATH RENTCORP
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March
31,
(in thousands)
2024
2023
Cash Flows from
Operating Activities:
Net income
$
22,848
$
71,657
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
27,187
27,590
Deferred income taxes
4,709
(45,496
)
Provision for credit losses
253
744
Share-based compensation
2,209
1,493
Gain on sale of property, plant and
equipment
(9,281
)
—
Gain on sale of discontinued
operations
—
(58,883
)
Gain on sale of used rental equipment
(7,355
)
(3,089
)
Foreign currency exchange loss (gain)
132
(226
)
Amortization of debt issuance costs
2
2
Change in:
Accounts receivable
15,165
16,209
Inventories
(9,123
)
(5,313
)
Prepaid expenses and other assets
5,298
(2,032
)
Accounts payable
9,145
31,559
Accrued liabilities
(13,037
)
(1,722
)
Deferred income
11,268
3,218
Net cash provided by operating
activities
59,420
35,711
Cash Flows from
Investing Activities:
Proceeds from sale of discontinued
operations
—
262,454
Purchases of rental equipment
(78,641
)
(77,731
)
Purchases of property, plant and
equipment
(25,277
)
(6,857
)
Cash paid for acquisition of
businesses
—
(453,592
)
Proceeds from sales of used rental
equipment
13,554
12,197
Proceeds from sales of property, plant and
equipment
12,251
—
Net cash used in investing activities
(78,113
)
(263,529
)
Cash Flows from
Financing Activities:
Net borrowings under bank lines of
credit
35,584
245,033
Taxes paid related to net share settlement
of stock awards
(4,082
)
(6,086
)
Payment of dividends
(11,774
)
(11,400
)
Net cash provided by financing
activities
19,728
227,547
Effect of foreign currency exchange rate
changes on cash
—
4
Net increase (decrease) in cash
1,035
(267
)
Cash balance, beginning of period
877
957
Cash balance, end of period
$
1,912
$
690
Supplemental
Disclosure of Cash Flow Information:
Interest paid, during the period
$
14,184
$
7,817
Net income taxes paid, during the
period
$
479
$
413
Dividends accrued during the period, not
yet paid
$
12,060
$
11,851
Rental equipment acquisitions, not yet
paid
$
5,795
$
5,697
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Three months ended March 31,
2024
(dollar amounts in thousands)
Mobile Modular
Portable Storage
TRS-RenTelco
Enviroplex
Consolidated
Revenues
Rental
$
76,496
$
18,407
$
25,429
$
—
$
120,332
Rental related services
24,133
4,723
724
—
29,580
Rental operations
100,629
23,130
26,153
—
149,912
Sales
25,326
1,212
6,812
1,719
35,069
Other
1,630
418
798
—
2,846
Total revenues
127,585
24,760
33,763
1,719
187,827
Costs and
Expenses
Direct costs of rental operations:
Depreciation
9,874
965
11,527
—
22,366
Rental related services
15,780
4,456
550
—
20,786
Other
22,673
1,468
4,869
—
29,010
Total direct costs of rental
operations
48,327
6,889
16,946
—
72,162
Costs of sales
17,413
768
2,942
1,274
22,397
Total costs of revenues
65,740
7,657
19,888
1,274
94,559
Gross
Profit
Rental
43,949
15,974
9,033
—
68,956
Rental related services
8,353
267
174
—
8,794
Rental operations
52,302
16,241
9,207
—
77,750
Sales
7,913
444
3,870
445
12,672
Other
1,630
418
798
—
2,846
Total gross profit
61,845
17,103
13,875
445
93,268
Selling and administrative expenses
40,087
9,010
8,918
1,803
59,818
Other income, net
(6,220
)
(1,319
)
(1,742
)
—
(9,281
)
Income (loss) from operations
$
27,978
$
9,412
$
6,699
$
(1,358
)
$
42,731
Interest expense
12,704
Foreign currency exchange loss
132
Provision for income taxes
7,047
Net income
$
22,848
Other
Information
Adjusted EBITDA 1
$
43,327
$
11,522
$
18,480
$
(1,261
)
$
72,068
Average rental equipment 2
$
1,174,327
$
223,285
$
372,081
Average monthly total yield 3
2.17
%
2.75
%
2.18
%
Average utilization 4
78.7
%
69.8
%
56.5
%
Average monthly rental rate 5
2.76
%
3.94
%
4.03
%
- 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.
- Average rental equipment represents the cost of rental
equipment, excluding new equipment inventory and accessory
equipment.
- 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 March 31,
2023
(dollar amounts in thousands)
Mobile Modular
Portable Storage
TRS-RenTelco
Enviroplex
Adler Tanks
(Discontinued)
Consolidated
Revenues
Rental
$
64,056
$
17,057
$
29,134
$
—
$
6,520
$
116,767
Rental related services
21,534
4,718
880
—
2,584
29,716
Rental operations
85,590
21,775
30,014
—
9,104
146,483
Sales
16,967
638
5,114
941
269
23,929
Other
1,370
317
992
—
65
2,744
Total revenues
103,927
22,730
36,120
941
9,438
173,156
Costs and
Expenses
Direct costs of rental operations:
Depreciation
8,657
787
12,389
—
1,325
23,158
Rental related services
14,226
4,381
661
—
2,020
21,288
Other
24,127
1,783
5,225
—
1,270
32,405
Total direct costs of rental
operations
47,009
6,952
18,275
—
4,614
76,850
Costs of sales
10,747
327
2,225
816
159
14,274
Total costs of revenues
57,756
7,279
20,500
816
4,773
91,124
Gross
Profit
Rental
31,273
14,486
11,520
—
3,926
61,205
Rental related services
7,308
337
219
—
564
8,428
Rental operations
38,581
14,823
11,739
—
4,490
69,633
Sales
6,220
311
2,889
125
110
9,655
Other
1,370
317
992
—
65
2,744
Total gross profit
46,171
15,451
15,620
125
4,665
82,032
Selling and administrative expenses
38,456
8,058
9,451
1,533
2,582
60,080
Other income, net
—
—
—
—
—
—
Income (loss) from operations
$
7,715
$
7,393
$
6,169
$
(1,408
)
$
2,083
21,952
Interest expense
7,838
Foreign currency exchange gain
(226
)
Provision for income taxes
1,566
Net income
$
12,774
Other
Information
Adjusted EBITDA 1
$
32,425
$
10,020
$
20,635
$
(1,330
)
$
3,682
$
65,432
Average rental equipment 2
$
987,526
$
189,348
$
396,835
Average monthly total yield 3
2.16
%
3.01
%
2.40
%
Average utilization 4
79.4
%
80.8
%
59.2
%
Average monthly rental rate 5
2.72
%
3.71
%
4.14
%
- 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.
- Average rental equipment represents the cost of rental
equipment, excluding new equipment inventory and accessory
equipment.
- 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, non-cash impairment costs, share-based compensation,
transaction costs and gains on property sales. The Company presents
Adjusted EBITDA as a financial measure as management believes it
provides useful information to investors regarding the Company’s
liquidity and financial condition and because management, as well
as the Company’s lenders, use this measure in evaluating the
performance of the Company.
Management uses Adjusted EBITDA as a supplement to GAAP measures
to further evaluate period-to-period operating performance,
compliance with financial covenants in the Company’s revolving
lines of credit and senior notes and the Company’s ability to meet
future capital expenditure and working capital requirements.
Management believes the exclusion of non-cash charges and
non-recurring transactions, including share-based compensation,
transaction costs and gains on property sales is useful in
measuring the Company’s cash available for operations and
performance of the Company. Because management finds Adjusted
EBITDA useful, the Company believes its investors will also find
Adjusted EBITDA useful in evaluating the Company’s performance.
Adjusted EBITDA should not be considered in isolation or as a
substitute for net income, cash flows, or other consolidated income
or cash flow data prepared in accordance with GAAP or as a measure
of the Company’s profitability or liquidity. Adjusted EBITDA is not
in accordance with or an alternative for GAAP and may be different
from non−GAAP measures used by other companies. Unlike EBITDA,
which may be used by other companies or investors, Adjusted EBITDA
does not include share-based compensation charges, transaction
costs and gains on property sales. The Company believes that
Adjusted EBITDA is of limited use in that it does not reflect all
of the amounts associated with the Company’s results of operations
as determined in accordance with GAAP and does not accurately
reflect real cash flow. In addition, other companies may not use
Adjusted EBITDA or may use other non-GAAP measures, limiting the
usefulness of Adjusted EBITDA for purposes of comparison. The
Company’s presentation of Adjusted EBITDA should not be construed
as an inference that the Company will not incur expenses that are
the same as or similar to the adjustments in this presentation.
Therefore, Adjusted EBITDA should only be used to evaluate the
Company’s results of operations in conjunction with the
corresponding GAAP measures. The Company compensates for the
limitations of Adjusted EBITDA by relying upon GAAP results to gain
a complete picture of the Company’s performance. Because Adjusted
EBITDA is a non-GAAP financial measure, as defined by the SEC, the
Company includes in the tables below reconciliations of Adjusted
EBITDA to the most directly comparable financial measures
calculated and presented in accordance with GAAP.
Reconciliation of Income from Continuing Operations to
Adjusted EBITDA
(dollar amounts in thousands)
Three Months Ended
March 31,
Twelve Months Ended
March 31,
2024
2023
2024
2023
Income from continuing operations
$
22,848
$
11,518
$
123,182
$
97,169
Provision for income taxes from continuing
operations
7,047
1,113
43,544
26,981
Interest expense
12,704
7,464
45,800
17,418
Depreciation and amortization
27,187
26,133
108,972
96,489
EBITDA
69,786
46,228
321,498
238,057
Share-based compensation
2,209
1,375
8,991
6,610
Transaction costs 3
9,354
14,147
11,084
18,200
Other income, net 4
(9,281
)
—
(12,899
)
—
Adjusted EBITDA 1
$
72,068
$
61,750
$
328,674
$
262,867
Adjusted EBITDA margin 2
37
%
38
%
38
%
39
%
Reconciliation of Adjusted EBITDA to Net Cash Provided by
Operating Activities
(dollar amounts in thousands)
Three Months Ended
March 31,
Twelve Months Ended
March 31,
2024
2023
2024
2023
Adjusted EBITDA 1
$
72,068
$
65,432
$
328,674
$
297,579
Interest paid
(14,184
)
(7,817
)
(44,970
)
(20,455
)
Income taxes paid, net of refunds
received
(479
)
(413
)
(91,631
)
(27,355
)
Gain on sale of used rental equipment
(7,355
)
(3,089
)
(35,908
)
(35,704
)
Foreign currency exchange loss
132
(226
)
48
165
Amortization of debt issuance costs
2
2
8
14
Change in certain assets and
liabilities:
Accounts receivable, net
15,418
16,953
(36,678
)
(21,506
)
Prepaid expenses and other assets
5,298
(7,345
)
(16,683
)
(28,042
)
Accounts payable and other liabilities
(22,748
)
(31,004
)
(9,570
)
(7,992
)
Deferred income
11,268
3,218
22,144
21,696
Net cash provided by operating
activities
$
59,420
$
35,711
$
115,434
$
178,400
- Adjusted EBITDA is defined as net income before interest
expense, provision for income taxes, depreciation, amortization,
non-cash impairment costs, share-based compensation, transaction
costs and other income, net. Adjusted EBITDA for the three months
ended March 31, 2023, excludes the gain on sale of discontinued
operations from the divestiture of Adler Tanks. Total Adjusted
EBITDA attributed to discontinued operations for the period ended
March 31, 2023 was $3,682.
- Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided
by total revenues for the period.
- Transaction costs include acquisition and divestiture related
legal and professional fees and other costs specific to these
transactions.
- Other income, net consists of net gains on property, plant and
equipment sales that are infrequent in nature and excluded from
Adjusted EBITDA.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240424358321/en/
Keith E. Pratt EVP & Chief Financial Officer
925-606-9200
McGrath RentCorp (NASDAQ:MGRC)
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