McGrath Announces Results for Fourth Quarter 2022 and Announces 32nd Annual Dividend Increase

Rhea-AI Summary

McGrath RentCorp (Nasdaq: MGRC) reported robust financial results for the fourth quarter and full year ended December 31, 2022. Total revenues surged 20% to $210.9 million, while net income climbed to $39.6 million, or $1.62 per diluted share. The annual revenue reached $733.8 million, up from $616.8 million in 2021, with adjusted EBITDA increasing to $288.9 million. The board declared a cash dividend of $0.465 per share, marking a 2% increase over the prior year. Highlights include strong rental revenues across divisions, with Mobile Modular reporting an 18% increase. Looking ahead, the company anticipates total revenue between $780 and $810 million for 2023.

Positive

• Total revenues for Q4 2022 rose 20% to $210.9 million.
• Net income for Q4 2022 was $39.6 million, a 39% increase year-over-year.
• Adjusted EBITDA for the year grew by 16% to $288.9 million.
• Cash dividend increased to $0.465 per share, reflecting 32 consecutive years of dividend growth.
• Mobile Modular rental revenues increased 18%, driven by strong demand.

Negative

• Selling and administrative expenses rose 26% to $31.0 million in Q4 2022.

LIVERMORE, Calif.--(BUSINESS WIRE)-- McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues for the quarter ended December 31, 2022 of $210.9 million, an increase of 20%, compared to the fourth quarter of 2021. The Company reported net income of $39.6 million, or $1.62 per diluted share, for the fourth quarter of 2022, compared to net income of $28.4 million, or $1.16 per diluted share, for the fourth quarter of 2021.

Total revenues for the year ended December 31, 2022 increased to $733.8 million from $616.8 million in 2021, with adjusted EBITDA increasing $40.2 million, or 16%, to $288.9 million. Net income for the year ended December 31, 2022 was $115.1 million, or $4.70 per diluted share, compared to $89.7 million, or $3.66 per diluted share, in 2021.

The Company also announced that the board of directors declared a cash dividend of $0.465 per share for the upcoming quarter ending March 31, 2023, a quarterly increase of $0.01, or 2%, over the prior year period. The cash dividend will be payable on April 28, 2023 to all shareholders of record on April 14, 2023. This marks 32 consecutive years the Company has increased its annual dividend.

FOURTH QUARTER 2022 YEAR-OVER-YEAR COMPANY HIGHLIGHTS:

• Rental revenues increased 16% to $122.8 million.
• Total revenues increased 20% to $210.9 million.
• Adjusted EBITDA¹ increased 23% to $91.0 million.
• Dividend rate of $0.455 per share for the fourth quarter of 2022. On an annualized basis, this dividend represents a 1.7% yield on the February 21, 2023 close price of $105.86 per share.

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

“We delivered strong fourth quarter results. Our 20% growth in total company revenues was a result of robust performance in both rental operations and sales revenues. Demand was healthy across each of our rental segments. Mobile Modular rental revenues grew 18%, reflecting strong organic growth from modular operations. Our initiatives to grow modular sales also showed progress as sales revenues increased by 77% compared to a year ago. Rental revenue growth was also strong at TRS-RenTelco and Adler Tanks, which grew 8% and 20%, respectively.

I am very proud of everything we accomplished in 2022. Our full year revenue and profit growth reflects a diligent focus on execution as we made the most of healthy market conditions across each of our segments. We pursued our strategic growth focus on the modular segment with significant organic investment in new fleet, while managing pricing to higher rates and improving fleet utilization. We also made progress with our modular growth initiatives for additional services and new equipment sales. In addition to our operational accomplishments, we continued our strategic work to explore options to accelerate and strengthen our long-term growth momentum. This work culminated in the Vesta Modular acquisition and Adler divestiture, which we announced on February 1, 2023.

Looking forward to 2023, I believe we will continue to make progress in expanding our businesses. We will maintain our focus on disciplined operational execution, while also working on the successful integration of Vesta. Demand conditions continue to be healthy and we are well positioned for further business growth in 2023.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2022 to the quarter ended December 31, 2021 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2022, the Company’s Mobile Modular division reported income from operations of $36.8 million, an increase of $10.7 million, or 41%, with Adjusted EBITDA increasing $14.0 million, or 36%, to $53.1 million. Rental revenues increased 18% to $72.7 million, depreciation expense increased 3% to $7.8 million and other direct costs increased 6% to $16.0 million, which resulted in an increase in gross profit on rental revenues of 26% to $48.9 million. The rental revenue increase was primarily attributed to higher average rental equipment on rent and higher average monthly rental rates. Rental related services revenues increased 41% to $24.9 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers with associated gross profit increasing 39% to $6.9 million. Sales revenues increased 77% to $35.9 million, primarily from higher used and new equipment sales. Gross margin on sales was 32% compared to 33% in 2021, resulting in a 76% increase in gross profit on sales revenues to $11.6 million. Selling and administrative expenses increased 26% to $31.0 million, primarily due to $3.7 million higher allocated corporate expenses and $2.2 million increased marketing and administrative costs.

TRS-RENTELCO

For the fourth quarter of 2022, the Company’s TRS-RenTelco division reported income from operations of $11.8 million, an increase of $2.0 million, or 21%, with Adjusted EBITDA increasing $3.0 million, or 13%, to $25.3 million. Rental revenues increased 8% to $31.4 million, depreciation expense increased 4% to $12.5 million and other direct costs increased 19% to $5.8 million, which resulted in a 7% increase in gross profit on rental revenues to $13.1 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 15% to $8.7 million and gross profit on sales revenues increased 42% to $5.4 million. Selling and administrative expenses increased 8% to $7.3 million, primarily due to higher allocated corporate expenses.

ADLER TANKS

For the fourth quarter of 2022, the Company’s Adler Tanks division reported income from operations of $7.0 million, an increase of $4.1 million, with Adjusted EBITDA increasing $4.3 million, or 55%, to $12.1 million. Rental revenues increased $3.2 million, or 20%, to $18.7 million, depreciation expense decreased 2% to $4.0 million and other direct costs decreased 22% to $2.6 million, which resulted in an increased gross profit on rental revenues of 49%, to $12.1 million. The rental revenue increase was broad-based across regions and vertical markets served. Rental related services revenues increased 44% to $8.4 million, with gross profit on rental related services increasing $1.2 million to $2.3 million, compared to $1.1 million in the fourth quarter of 2021. Selling and administrative expenses increased 16% to $7.8 million primarily due to higher allocated corporate expenses and higher employee salaries and benefit costs.

FINANCIAL OUTLOOK:

For the full-year 2023, the Company expects:

		2023 Outlook	2022 Actual
●	Total revenue:	$780 to $810 million	$734 million
●	Adjusted EBITDA1, 2:	$294 to $309 million	$289 million
●	Gross rental equipment capital expenditures:	$190 to $210 million	$188 million

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

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.

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 January 19, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 22, 2023 to discuss the fourth quarter 2022 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 1-800-839-6980 (in the U.S.), or 1-402-220-6062 (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 making progress to expand the Company's businesses in 2023, the Company's strategic focus to explore options to accelerate and strengthen long-term growth, healthy demand conditions and being well positioned for further business growth in 2023, the successful integration of Vesta, as well as the statements regarding the full year 2023 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 continued economic impact of the COVID-19 pandemic; the health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta acquisition; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the 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)		2022				2021				2022				2021
Revenues
Rental		$	122,803			$	106,076			$	456,029			$	390,013
Rental related services			34,120				24,191				122,617				98,061
Rental operations			156,923				130,267				578,646				488,074
Sales			52,915				44,732				150,653				125,235
Other			1,045				912				4,524				3,524
Total revenues			210,883				175,911				733,823				616,833
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			24,315				23,671				96,429				91,887
Rental related services			24,826				18,020				89,793				74,256
Other			24,424				23,373				116,780				91,069
Total direct costs of rental operations			73,565				65,064				303,002				257,212
Costs of sales			34,176				28,579				93,913				78,600
Total costs of revenues			107,741				93,643				396,915				335,812
Gross profit			103,142				82,268				336,908				281,021
Selling and administrative expenses			47,332				39,295				171,342				148,600
Income from operations			55,810				42,973				165,566				132,421
Other (expense) income:
Interest expense			(5,170	)			(3,247	)			(15,168	)			(10,455	)
Foreign currency exchange (loss) gain			26				(25	)			(378	)			(210	)
Income before provision for income taxes			50,666				39,701				150,020				121,756
Provision for income taxes			11,025				11,254				34,882				32,051
Net income		$	39,641			$	28,447			$	115,138			$	89,705
Earnings per share:
Basic		$	1.63			$	1.17			$	4.73			$	3.70
Diluted		$	1.62			$	1.16			$	4.70			$	3.66
Shares used in per share calculation:
Basic			24,384				24,252				24,353				24,220
Diluted			24,527				24,537				24,519				24,515
Cash dividends declared per share		$	0.455			$	0.435			$	1.82			$	1.74

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
		December 31,
(in thousands)		2022				2021
Assets
Cash		$	957			$	1,491
Accounts receivable, net of allowance for credit losses of $2,300 in 2022 and $2,125 in 2021			190,023				159,499
Rental equipment, at cost:
Relocatable modular buildings			1,123,268				1,040,094
Electronic test equipment			398,267				361,391
Liquid and solid containment tanks and boxes			308,396				309,908
			1,829,931				1,711,393
Less: accumulated depreciation			(701,877	)			(646,169	)
Rental equipment, net			1,128,054				1,065,224
Property, plant and equipment, net			143,945				135,325
Prepaid expenses and other assets			71,429				54,945
Intangible assets, net			41,131				47,049
Goodwill			132,305				132,393
Total assets		$	1,707,844			$	1,595,926
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	413,742			$	426,451
Accounts payable and accrued liabilities			160,829				136,313
Deferred income			82,417				58,716
Deferred income taxes, net			246,911				242,425
Total liabilities			903,899				863,905
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,388 shares as of December 31, 2022 and 24,260 shares as of December 31, 2021			110,080				108,610
Retained earnings			693,943				623,465
Accumulated other comprehensive loss			(78	)			(54	)
Total shareholders’ equity			803,945				732,021
Total liabilities and shareholders’ equity		$	1,707,844			$	1,595,926

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
		Twelve Months Ended December 31,
(in thousands)		2022				2021
Cash Flows from Operating Activities:
Net income		$	115,138			$	89,704
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			111,344				106,695
Deferred income taxes			4,486				26,348
Provision for credit losses			837				451
Share-based compensation			8,009				7,666
Gain on sale of used rental equipment			(37,979	)			(25,441	)
Foreign currency exchange loss			378				210
Amortization of debt issuance costs			16				15
Change in:
Accounts receivable			(31,361	)			(24,397	)
Prepaid expenses and other assets			(16,484	)			(6,816	)
Accounts payable and accrued liabilities			16,347				12,226
Deferred income			23,701				9,082
Net cash provided by operating activities			194,432				195,743
Cash Flows from Investing Activities:
Purchases of rental equipment			(187,689	)			(114,145	)
Purchases of property, plant and equipment			(17,617	)			(2,680	)
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			73,879				57,337
Net cash used in investing activities			(131,427	)			(351,696	)
Cash Flows from Financing Activities:
Net borrowings borrowings under bank lines of credit			47,275				143,729
Borrowings under note purchase agreement			—				100,000
Principal payment of Series C senior notes			(60,000	)			—
Principal payment of Series B senior notes			—				(40,000	)
Taxes paid related to net share settlement of stock awards			(6,539	)			(5,345	)
Payment of dividends			(44,269	)			(42,182	)
Net cash (used in) provided by financing activities			(63,533	)			156,202
Effect of foreign currency exchange rate changes on cash			(6	)			4
Net (decrease) increase in cash			(534	)			253
Cash balance, beginning of period			1,491				1,238
Cash balance, end of period		$	957			$	1,491
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	14,775			$	10,326
Net income taxes paid, during the period		$	27,362			$	9,087
Dividends accrued during the period, not yet paid		$	11,227			$	11,280
Rental equipment acquisitions, not yet paid		$	13,220			$	5,750

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2022
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	72,690			$	31,385			$	18,728			$	—			$	122,803
Rental related services			24,904				783				8,433				—				34,120
Rental operations			97,594				32,168				27,161				—				156,923
Sales			35,866				8,726				698				7,625				52,915
Other			397				525				123				—				1,045
Total revenues			133,857				41,419				27,982				7,625				210,883
Costs and Expenses
Direct costs of rental operations:
Depreciation			7,843				12,464				4,008				—				24,315
Rental related services			17,985				745				6,096				—				24,826
Other			15,959				5,826				2,639				—				24,424
Total direct costs of rental operations			41,787				19,035				12,743				—				73,565
Costs of sales			24,288				3,309				472				6,107				34,176
Total costs of revenues			66,075				22,344				13,215				6,107				107,741
Gross Profit
Rental			48,888				13,095				12,081				—				74,064
Rental related services			6,919				38				2,337				—				9,294
Rental operations			55,807				13,133				14,418				—				83,358
Sales			11,578				5,417				226				1,518				18,739
Other			397				525				123				—				1,045
Total gross profit			67,782				19,075				14,767				1,518				103,142
Selling and administrative expenses			30,989				7,315				7,786				1,242				47,332
Income from operations		$	36,793			$	11,760			$	6,981			$	276			$	55,810
Interest expense																			(5,170	)
Foreign currency exchange gain																			26
Provision for income taxes																			(11,025	)
Net income																		$	39,641
Other Information
Adjusted EBITDA 1		$	53,145			$	25,333			$	12,140			$	351			$	90,969
Average rental equipment 2		$	1,044,751			$	395,789			$	307,398
Average monthly total yield 3			2.32	%			2.63	%			2.03	%
Average utilization 4			81.2	%			63.0	%			58.0	%
Average monthly rental rate 5			2.86	%			4.20	%			3.50	%

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.
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 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		$	39,144			$	22,345			$	7,817			$	4,386			$	73,692
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	%

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.
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)
Twelve months ended December 31, 2022
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	268,288			$	121,375			$	66,366			$	—			$	456,029
Rental related services			91,851				3,112				27,654				—				122,617
Rental operations			360,139				124,487				94,020				—				578,646
Sales			99,979				24,571				2,933				23,170				150,653
Other			1,599				1,720				1,205				—				4,524
Total revenues			461,717				150,778				98,158				23,170				733,823
Costs and Expenses
Direct costs of rental operations:
Depreciation			31,172				49,253				16,004				—				96,429
Rental related services			66,254				2,592				20,947				—				89,793
Other			83,031				21,327				12,422				—				116,780
Total direct costs of rental operations			180,457				73,172				49,373				—				303,002
Costs of sales			64,073				9,707				2,085				18,048				93,913
Total costs of revenues			244,530				82,879				51,458				18,048				396,915
Gross Profit
Rental			154,085				50,795				37,940				—				242,820
Rental related services			25,597				520				6,707				—				32,824
Rental operations			179,682				51,315				44,647				—				275,644
Sales			35,906				14,864				848				5,122				56,740
Other			1,599				1,720				1,205				—				4,524
Total gross profit			217,187				67,899				46,700				5,122				336,908
Selling and administrative expenses			110,234				27,245				28,428				5,435				171,342
Income (loss) from operations		$	106,953			$	40,654			$	18,272			$	(313	)		$	165,566
Interest expense																			(15,168	)
Foreign currency exchange loss																			(378	)
Provision for income taxes																			(34,882	)
Net income																		$	115,138
Other Information
Adjusted EBITDA 1		$	159,224			$	92,007			$	37,660			$	(25	)		$	288,866
Average rental equipment 2		$	1,025,637			$	383,235			$	307,651
Average monthly total yield 3			2.18	%			2.63	%			1.80	%
Average utilization 4			79.1	%			64.2	%			53.1	%
Average monthly rental rate 5			2.75	%			4.11	%			3.38	%

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.
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)
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		$	130,089			$	85,723			$	27,961			$	4,844			$	248,617
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	%

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.
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, share-based compensation and transaction costs. 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 and transaction costs, 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 and transaction costs. 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,
	2022				2021				2022				2021
Net income	$	39,641			$	28,447			$	115,138			$	89,705
Provision for income taxes		11,025				11,254				34,882				32,051
Interest expense		5,170				3,247				15,168				10,455
Depreciation and amortization		28,072				27,648				111,344				106,695
EBITDA		83,908				70,596				276,532				238,906
Share-based compensation		2,903				2,364				8,009				7,666
Transaction costs 3		4,158				732				4,325				2,045
Adjusted EBITDA 1	$	90,969			$	73,692			$	288,866			$	248,617
Adjusted EBITDA margin 2		43	%			41	%			39	%			40	%

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,
	2022				2021				2022				2021
Adjusted EBITDA 1	$	90,969			$	73,692			$	288,866			$	248,617
Interest paid		(5,793	)			(3,849	)			(14,775	)			(10,326	)
Income taxes paid, net of refunds received		(2,477	)			(1,013	)			(27,362	)			(9,087	)
Gain on sale of used rental equipment		(11,274	)			(7,653	)			(37,979	)			(25,441	)
Foreign currency exchange (gain) loss		(26	)			25				378				210
Amortization of debt issuance costs		3				4				16				15
Change in certain assets and liabilities:
Accounts receivable, net		(64	)			9,332				(30,524	)			(23,946	)
Prepaid expenses and other assets		829				4,593				(16,484	)			(6,816	)
Accounts payable and other liabilities		(1,335	)			(4,628	)			8,595				13,435
Deferred income		(9,698	)			(11,046	)			23,701				9,082
Net cash provided by operating activities	$	61,134			$	59,457			$	194,432			$	195,743

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.
2.		Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
3.		Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230221005895/en/

Keith E. Pratt

EVP & Chief Financial Officer

925-606-9200

Source: McGrath RentCorp

FAQ

What were McGrath RentCorp's total revenues for Q4 2022?

Total revenues for Q4 2022 were $210.9 million.

What is the cash dividend amount declared by McGrath RentCorp?

The cash dividend is $0.465 per share for the upcoming quarter.

When is the dividend payment date for McGrath RentCorp's latest dividend?

The dividend will be payable on April 28, 2023.

How much did McGrath RentCorp's net income grow in Q4 2022?

Net income for Q4 2022 grew to $39.6 million, a 39% increase from the previous year.

What is McGrath RentCorp's revenue forecast for 2023?

The revenue forecast for 2023 is between $780 million and $810 million.