McGrath Announces Results for Third Quarter 2022

Rhea-AI Summary

McGrath RentCorp (Nasdaq: MGRC) reported a strong performance for Q3 2022, showing total revenues of $200.5 million, up 16% year-over-year. Net income rose to $30.6 million, translating to $1.25 per diluted share. Rental revenues grew 15% to $118.4 million, with Mobile Modular rental revenues increasing by 17%. Adjusted EBITDA reached $74.7 million, a 13% increase. The dividend rate also saw a 5% rise to $0.455 per share, indicating strong shareholder returns. The company has raised its full-year revenue expectations to $720-$735 million.

Positive

• Total revenues increased by 16% to $200.5 million.
• Net income rose to $30.6 million, up from $23.3 million.
• Rental revenues improved 15% to $118.4 million.
• Adjusted EBITDA grew by 13% to $74.7 million.
• Dividend rate increased 5% to $0.455 per share.

Negative

• Other direct costs in Mobile Modular increased by 38%, impacting profit margins.

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 September 30, 2022 of $200.5 million, an increase of 16%, compared to the third quarter of 2021. The Company reported net income of $30.6 million, or $1.25 per diluted share, for the third quarter of 2022, compared to net income of $23.3 million, or $0.95 per diluted share, for the third quarter of 2021.

THIRD QUARTER 2022 YEAR-OVER-YEAR COMPANY HIGHLIGHTS:

• Rental revenues increased 15% to $118.4 million.
• Total revenues increased 16% to $200.5 million.
• Adjusted EBITDA¹ increased 13% to $74.7 million.
• Dividend rate increased 5% to $0.455 per share for the third quarter of 2022. On an annualized basis, this dividend represents a 2.1% yield on the October 26, 2022 close price of $85.85 per share.

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

“We delivered strong third quarter results. Our 16% 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 17%, reflecting strong organic growth from our modular operations. Rental revenue growth was also strong at TRS-RenTelco and Adler Tanks, which grew 9% and 18%, respectively.

Mobile Modular had an impressive quarter. We saw broad-based strength across our commercial, education and portable storage customer bases. Education rental revenues increased 9%, representing the highest growth since the first quarter of 2020 and demonstrating post-pandemic recovery in this important customer base. We addressed strong demand conditions with disciplined fleet management and achieved average fleet utilization of 80.1%, a level not seen since 2008, and ended the quarter at 81.2% utilization. This substantial utilization improvement was accomplished while growing our fleet and increasing average rental rates. Our initiatives to grow modular sales also showed progress as sales revenues increased by 10% compared to a year ago.

At TRS-RenTelco and Adler Tanks the positive trends we experienced in the first half of this year continued in the third 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, ending the quarter at 58.3% utilization, a level last achieved in 2018.

We are pleased with our year-to-date performance, and we have entered the fourth quarter with good momentum across the business. As a result, we are increasing our financial outlook for the full year.”

DIVISION HIGHLIGHTS:

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

MOBILE MODULAR

For the third quarter of 2022, the Company’s Mobile Modular division reported income from operations of $27.8 million, an increase of $4.3 million, or 18%, with Adjusted EBITDA increasing $3.6 million, or 10%, to $39.7 million. Rental revenues increased 17% to $69.1 million, depreciation expense increased 3% to $7.7 million and other direct costs increased 38% to $22.8 million, which resulted in an increase in gross profit on rental revenues of 10% to $38.5 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 12% to $27.4 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers with associated gross profit increasing 24% to $7.4 million. Sales revenues increased 10% to $28.9 million, primarily from higher used equipment sales. Gross margin on sales was 35% compared to 31% in 2021, resulting in a 24% increase in gross profit on sales revenues to $10.2 million. Selling and administrative expenses increased 10% to $28.8 million, primarily due to $1.6 million higher allocated corporate expenses and increased employee salaries and benefit costs totaling $1.2 million.

TRS-RENTELCO

For the third quarter of 2022, the Company’s TRS-RenTelco division reported income from operations of $11.3 million, an increase of $1.8 million, or 19%, with Adjusted EBITDA increasing $1.9 million, or 9%, to $23.9 million. Rental revenues increased 9% to $31.8 million, depreciation expense increased 2% to $12.4 million and other direct costs increased 7% to $5.4 million, which resulted in a 16% increase in gross profit on rental revenues to $14.0 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 16% to $5.5 million and gross profit on sales revenues increased 12% to $3.4 million. Selling and administrative expenses increased 12% to $6.7 million, primarily due to higher allocated corporate expenses.

ADLER TANKS

For the third quarter of 2022, the Company’s Adler Tanks division reported income from operations of $5.5 million, an increase of $2.6 million, with Adjusted EBITDA increasing $2.5 million, or 32%, to $10.2 million. Rental revenues increased $2.6 million, or 18%, to $17.5 million, depreciation expense decreased 3% to $4.0 million and other direct costs increased 11% to $3.5 million, which resulted in an increased gross profit on rental revenues of 32%, to $10.0 million. The rental revenue increase was broad based across regions and vertical markets served. Rental related services revenues increased 13% to $7.2 million, with gross profit on rental related services increasing 52%, to $1.8 million. Selling and administrative expenses increased 13% to $7.1 million primarily due to higher allocated corporate expenses and higher employee 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:	$695 to $720 million	$720 to $735 million
●	Adjusted EBITDA1, 2:	$266 to $276 million	$274 to $280 million
●	Gross rental equipment capital expenditures:	$145 to $155 million	$168 to $174 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:

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, and its Adler Tank Rentals business provides environmental containment solutions for hazardous and nonhazardous liquids and solids. 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 September 29, 2022, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 27, 2022 to discuss the third 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 healthy demand across each of our rental segments and the expectation of good momentum in the following quarter, 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 any 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 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 September 30,								Nine Months Ended September 30,
(in thousands, except per share amounts)		2022				2021				2022				2021
Revenues
Rental		$	118,361			$	103,269			$	333,226			$	283,937
Rental related services			35,361				31,513				88,497				73,870
Rental operations			153,722				134,782				421,723				357,807
Sales			45,391				37,636				97,738				80,503
Other			1,423				874				3,479				2,612
Total revenues			200,536				173,292				522,940				440,922
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			24,176				23,802				72,114				68,216
Rental related services			25,971				24,356				64,967				56,236
Other			31,708				24,711				92,356				67,696
Total direct costs of rental operations			81,855				72,869				229,437				192,148
Costs of sales			29,241				24,618				59,737				50,021
Total costs of revenues			111,096				97,487				289,174				242,169
Gross profit			89,440				75,805				233,766				198,753
Selling and administrative expenses			44,095				39,907				124,010				109,305
Income from operations			45,345				35,898				109,756				89,448
Other expense:
Interest expense			(4,177	)			(3,168	)			(9,998	)			(7,208	)
Foreign currency exchange loss			(236	)			(128	)			(404	)			(185	)
Income before provision for income taxes			40,932				32,602				99,354				82,055
Provision for income taxes			10,365				9,350				23,857				20,797
Net income		$	30,567			$	23,252			$	75,497			$	61,258
Earnings per share:
Basic		$	1.25			$	0.96			$	3.10			$	2.53
Diluted		$	1.25			$	0.95			$	3.08			$	2.50
Shares used in per share calculation:
Basic			24,379				24,245				24,342				24,209
Diluted			24,504				24,507				24,516				24,506
Cash dividends declared per share		$	0.455			$	0.435			$	1.365			$	1.305

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
		September 30,				December 31,
(in thousands)		2022				2021
Assets
Cash		$	1,561			$	1,491
Accounts receivable, net of allowance for credit losses of $2,125 in 2022 and 2021			189,959				159,499
Rental equipment, at cost:
Relocatable modular buildings			1,085,060				1,040,094
Electronic test equipment			396,068				361,391
Liquid and solid containment tanks and boxes			309,607				309,908
			1,790,735				1,711,393
Less: accumulated depreciation			(690,913	)			(646,169	)
Rental equipment, net			1,099,822				1,065,224
Property, plant and equipment, net			139,203				135,325
Prepaid expenses and other assets			72,258				54,945
Intangible assets, net			42,607				47,049
Goodwill			132,305				132,393
Total assets		$	1,677,715			$	1,595,926
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	419,464			$	426,451
Accounts payable and accrued liabilities			154,942				136,313
Deferred income			92,115				58,716
Deferred income taxes, net			238,126				242,425
Total liabilities			904,647				863,905
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,382 shares as of September 30, 2022 and 24,260 shares as of December 31, 2021			107,463				108,610
Retained earnings			665,530				623,465
Accumulated other comprehensive income (loss)			75				(54	)
Total shareholders’ equity			773,068				732,021
Total liabilities and shareholders’ equity		$	1,677,715			$	1,595,926

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
		Nine Months Ended September 30,
(in thousands)		2022				2021
Cash Flows from Operating Activities:
Net income		$	75,497			$	61,258
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			83,272				79,047
Deferred income taxes			(4,299	)			15,403
Provision for doubtful accounts			307				193
Share-based compensation			5,106				5,302
Gain on sale of used rental equipment			(26,705	)			(17,788	)
Foreign currency exchange loss			404				185
Amortization of debt issuance costs			13				11
Change in:
Accounts receivable			(30,767	)			(33,471	)
Prepaid expenses and other assets			(17,313	)			(11,409	)
Accounts payable and accrued liabilities			14,384				17,428
Deferred income			33,399				20,128
Net cash provided by operating activities			133,298				136,287
Cash Flows from Investing Activities:
Purchases of rental equipment			(130,395	)			(90,379	)
Purchases of property, plant and equipment			(10,594	)			(969	)
Cash paid for acquisition of businesses			—				(285,624	)
Proceeds from sales of used rental equipment			54,193				41,556
Net cash used in investing activities			(86,796	)			(335,416	)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit			(7,000	)			176,758
Borrowings under note purchase agreement			—				100,000
Principal payment of Series B senior notes			—				(40,000	)
Taxes paid related to net share settlement of stock awards			(6,253	)			(4,847	)
Payment of dividends			(33,175	)			(31,635	)
Net cash (used in) provided by financing activities			(46,428	)			200,276
Effect of foreign currency exchange rate changes on cash			(4	)			(5	)
Net increase in cash			70				1,142
Cash balance, beginning of period			1,491				1,238
Cash balance, end of period		$	1,561			$	2,380
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	8,982			$	6,477
Net income taxes paid, during the period		$	24,885			$	8,074
Dividends accrued during the period, not yet paid		$	11,167			$	10,002
Rental equipment acquisitions, not yet paid		$	9,555			$	2,199

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2022
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	69,111			$	31,760			$	17,490			$	—			$	118,361
Rental related services			27,353				845				7,163				—				35,361
Rental operations			96,464				32,605				24,653				—				153,722
Sales			28,922				5,514				977				9,978				45,391
Other			452				408				563				—				1,423
Total revenues			125,838				38,527				26,193				9,978				200,536
Costs and Expenses
Direct costs of rental operations:
Depreciation			7,747				12,427				4,002				—				24,176
Rental related services			19,973				603				5,395				—				25,971
Other			22,837				5,366				3,505				—				31,708
Total direct costs of rental operations			50,557				18,396				12,902				—				81,855
Costs of sales			18,696				2,133				693				7,719				29,241
Total costs of revenues			69,253				20,529				13,595				7,719				111,096
Gross Profit
Rental			38,527				13,967				9,983				—				62,477
Rental related services			7,380				242				1,768				—				9,390
Rental operations			45,907				14,209				11,751				—				71,867
Sales			10,226				3,381				284				2,259				16,150
Other			452				408				563				—				1,423
Total gross profit			56,585				17,998				12,598				2,259				89,440
Selling and administrative expenses			28,798				6,726				7,141				1,430				44,095
Income from operations		$	27,787			$	11,272			$	5,457			$	829				45,345
Interest expense																			(4,177	)
Foreign currency exchange loss																			(236	)
Provision for income taxes																			(10,365	)
Net income																		$	30,567
Other Information
Adjusted EBITDA 1		$	39,734			$	23,894			$	10,192			$	900			$	74,720
Average rental equipment 2		$	1,030,792			$	389,675			$	307,153
Average monthly total yield 3			2.23	%			2.71	%			1.90	%
Average utilization 4			80.1	%			65.3	%			54.9	%
Average monthly rental rate 5			2.79	%			4.16	%			3.46	%

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 September 30, 2021
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	59,223			$	29,204			$	14,842			$	—			$	103,269
Rental related services			24,468				699				6,346				—				31,513
Rental operations			83,691				29,903				21,188				—				134,782
Sales			26,362				4,773				960				5,541				37,636
Other			341				398				135				—				874
Total revenues			110,394				35,074				22,283				5,541				173,292
Costs and Expenses
Direct costs of rental operations:
Depreciation			7,544				12,151				4,107				—				23,802
Rental related services			18,508				663				5,185				—				24,356
Other			16,533				5,015				3,163				—				24,711
Total direct costs of rental operations			42,585				17,829				12,455				—				72,869
Costs of sales			18,145				1,743				680				4,050				24,618
Total costs of revenues			60,730				19,572				13,135				4,050				97,487
Gross Profit
Rental			35,146				12,038				7,572				—				54,756
Rental related services			5,960				36				1,161				—				7,157
Rental operations			41,106				12,074				8,733				—				61,913
Sales			8,217				3,030				280				1,491				13,018
Other			341				398				135				—				874
Total gross profit			49,664				15,502				9,148				1,491				75,805
Selling and administrative expenses			26,138				6,010				6,333				1,426				39,907
Income from operations		$	23,526			$	9,492			$	2,815			$	65				35,898
Interest expense																			(3,168	)
Foreign currency exchange loss																			(128	)
Provision for income taxes																			(9,350	)
Net income																		$	23,252
Other Information
Adjusted EBITDA 1		$	36,160			$	21,967			$	7,708			$	128			$	65,963
Average rental equipment 2		$	975,119			$	362,104			$	311,876
Average monthly total yield 3			2.02	%			2.69	%			1.59	%
Average utilization 4			76.5	%			66.9	%			48.1	%
Average monthly rental rate 5			2.65	%			4.02	%			3.30	%

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)
Nine months ended September 30, 2022
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	195,598			$	89,990			$	47,638			$	—			$	333,226
Rental related services			66,947				2,329				19,221				—				88,497
Rental operations			262,545				92,319				66,859				—				421,723
Sales			64,113				15,845				2,235				15,545				97,738
Other			1,202				1,195				1,082				—				3,479
Total revenues			327,860				109,359				70,176				15,545				522,940
Costs and Expenses
Direct costs of rental operations:
Depreciation			23,329				36,789				11,996				—				72,114
Rental related services			48,269				1,847				14,851				—				64,967
Other			67,072				15,501				9,783				—				92,356
Total direct costs of rental operations			138,670				54,137				36,630				—				229,437
Costs of sales			39,785				6,398				1,613				11,941				59,737
Total costs of revenues			178,455				60,535				38,243				11,941				289,174
Gross Profit
Rental			105,197				37,700				25,859				—				168,756
Rental related services			18,678				482				4,370				—				23,530
Rental operations			123,875				38,182				30,229				—				192,286
Sales			24,328				9,447				622				3,604				38,001
Other			1,202				1,195				1,082				—				3,479
Total gross profit			149,405				48,824				31,933				3,604				233,766
Selling and administrative expenses			79,245				19,930				20,642				4,193				124,010
Income (loss) from operations		$	70,160			$	28,894			$	11,291			$	(589	)			109,756
Interest expense																			(9,998	)
Foreign currency exchange loss																			(404	)
Provision for income taxes																			(23,857	)
Net income																		$	75,497
Other Information
Adjusted EBITDA 1		$	105,912			$	66,675			$	25,520			$	(377	)		$	197,730
Average rental equipment 2		$	1,019,105			$	379,181			$	307,731
Average monthly total yield 3			2.13	%			2.63	%			1.72	%
Average utilization 4			78.5	%			64.8	%			51.7	%
Average monthly rental rate 5			2.72	%			4.07	%			3.33	%

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)
Nine months ended September 30, 2021
(dollar amounts in thousands)		Mobile Modular				TRS- RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	159,118			$	84,340			$	40,479			$	—			$	283,937
Rental related services			54,726				2,149				16,995				—				73,870
Rental operations			213,844				86,489				57,474				—				357,807
Sales			48,766				14,679				2,161				14,897				80,503
Other			1,004				1,292				316				—				2,612
Total revenues			263,614				102,460				59,951				14,897				440,922
Costs and Expenses
Direct costs of rental operations:
Depreciation			20,437				35,429				12,350				—				68,216
Rental related services			40,384				2,061				13,791				—				56,236
Other			45,309				14,267				8,120				—				67,696
Total direct costs of rental operations			106,130				51,757				34,261				—				192,148
Costs of sales			32,127				5,836				1,523				10,535				50,021
Total costs of revenues			138,257				57,593				35,784				10,535				242,169
Gross Profit
Rental			93,373				34,643				20,009				—				148,025
Rental related services			14,340				90				3,204				—				17,634
Rental operations			107,713				34,733				23,213				—				165,659
Sales			16,640				8,842				638				4,362				30,482
Other			1,004				1,292				316				—				2,612
Total gross profit			125,357				44,867				24,167				4,362				198,753
Selling and administrative expenses			67,977				18,381				18,853				4,094				109,305
Income from operations		$	57,380			$	26,486			$	5,314			$	268				89,448
Interest expense																			(7,208	)
Foreign currency exchange loss																			(185	)
Provision for income taxes																			(20,797	)
Net income																		$	61,258
Other Information
Adjusted EBITDA 1		$	89,634			$	63,378			$	20,144			$	456			$	173,612
Average rental equipment 2		$	906,633			$	348,749			$	312,928
Average monthly total yield 3			1.95	%			2.69	%			1.44	%
Average utilization 4			76.0	%			67.4	%			44.0	%
Average monthly rental rate 5			2.57	%			3.98	%			3.26	%

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 September 30,								Nine Months Ended September 30,								Twelve Months Ended September 30,
	2022				2021				2022				2021				2022				2021
Net income	$	30,567			$	23,252			$	75,497			$	61,258			$	103,944			$	92,433
Provision for income taxes		10,365				9,350				23,857				20,797				35,111				28,931
Interest expense		4,177				3,168				9,998				7,208				13,245				9,191
Depreciation and amortization		27,917				28,488				83,272				79,047				110,920				102,441
EBITDA		73,026				64,258				192,624				168,310				263,220				232,996
Share-based compensation		1,694				1,705				5,106				5,302				7,470				5,957
Adjusted EBITDA 1	$	74,720			$	65,963			$	197,730			$	173,612			$	270,690			$	238,953
Adjusted EBITDA margin 2		37	%			38	%			38	%			39	%			39	%			41	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,								Twelve Months Ended September 30,
	2022				2021				2022				2021				2022				2021
Adjusted EBITDA 1	$	74,720			$	65,963			$	197,730			$	173,612			$	270,690			$	238,953
Interest paid		(3,161	)			(2,490	)			(8,982	)			(6,477	)			(12,831	)			(8,698	)
Income taxes paid, net of refunds received		(7,807	)			(1,084	)			(24,885	)			(8,074	)			(25,898	)			(18,273	)
Gain on sale of used rental equipment		(10,612	)			(5,918	)			(26,705	)			(17,788	)			(34,358	)			(23,007	)
Foreign currency exchange loss (gain)		236				128				404				185				429				(82	)
Amortization of debt issuance costs		4				5				13				11				17				14
Change in certain assets and liabilities:
Accounts receivable, net		(22,630	)			(27,922	)			(30,460	)			(33,278	)			(21,128	)			(27,161	)
Prepaid expenses and other assets		(6,458	)			(2,024	)			(17,313	)			(11,409	)			(12,720	)			(6,288	)
Accounts payable and other liabilities		12,399				(1,023	)			10,097				19,377				6,201				22,248
Deferred income		14,564				12,670				33,399				20,128				22,353				7,548
Net cash provided by operating activities	$	51,255			$	38,305			$	133,298			$	136,287			$	192,755			$	185,254

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/20221026006087/en/

Keith E. Pratt

EVP & Chief Financial Officer

925-606-9200

Source: McGrath RentCorp

FAQ

What were McGrath RentCorp's total revenues for Q3 2022?

McGrath RentCorp reported total revenues of $200.5 million for Q3 2022.

How much did McGrath RentCorp's net income increase in Q3 2022?

Net income increased to $30.6 million in Q3 2022, compared to $23.3 million in Q3 2021.

What is the adjusted EBITDA for McGrath RentCorp in Q3 2022?

Adjusted EBITDA for Q3 2022 was $74.7 million, a 13% increase year-over-year.

What changes were made to McGrath RentCorp's financial outlook for 2022?

The company raised its full-year 2022 revenue outlook to $720-$735 million.

How much will McGrath RentCorp's dividend increase for Q3 2022?

The dividend rate increased by 5% to $0.455 per share for Q3 2022.