McGrath RentCorp Announces Results for Third Quarter 2021

Rhea-AI Summary

McGrath RentCorp (NASDAQ: MGRC) reported Q3 2021 revenues of $173.3 million, an 11% increase from the previous year. Net income was $23.3 million, or $0.95 per share, down from $28.1 million, or $1.15 per share, in Q3 2020. Rental revenues surged 17% to $103.3 million, with notable growth from recent acquisitions. Adjusted EBITDA rose 5% to $66.0 million, and dividends increased by 4% to $0.435 per share. Challenges included elevated material and labor costs, affecting margins, though pricing adjustments are underway.

Positive

• Total revenues increased 11% year-over-year to $173.3 million.
• Rental revenues grew 17% to $103.3 million, with a 26% rise in modular rental revenues.
• Adjusted EBITDA increased by 5% to $66.0 million.
• Dividend rate raised 4% year-over-year to $0.435 per share.

Negative

• Net income decreased to $23.3 million from $28.1 million year-over-year.
• Increased selling and administrative expenses by 47% to $26.1 million.
• Challenges from elevated material and labor costs impacting margins.

LIVERMORE, Calif.--(BUSINESS WIRE)-- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended September 30, 2021 of $173.3 million, an increase of 11%, compared to the third quarter of 2020. The Company reported net income of $23.3 million, or $0.95 per diluted share, for the third quarter of 2021, compared to net income of $28.1 million, or $1.15 per diluted share, for the third quarter of 2020.

THIRD QUARTER 2021 COMPANY HIGHLIGHTS:

• Rental revenues increased 17% year-over-year to $103.3 million.
• Total revenues increased 11% year-over-year to $173.3 million.
• Adjusted EBITDA¹ increased 5% to $66.0 million.
• Dividend rate increased 4% year-over-year to $0.435 per share for the third quarter of 2021. On an annualized basis, this dividend represents a 2.3% yield on the October 27, 2021 close price of $75.24 per share.

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

“Our third quarter results reflect improved end market conditions in each of our three rental business segments. Companywide rental revenues increased 17% year over year. Modular rental revenues grew 26%, with the majority of the growth attributable to our Design Space and Kitchens To Go acquisitions. Rental revenues at TRS and Adler grew 6% and 11%, respectively.

Our teams continued working through the integration of Design Space and Kitchens To Go during the quarter and I am very pleased with their progress. These acquisitions will provide additional long-term growth opportunities, as we expect to deploy more rental equipment capital in our expanded geographic coverage and to expand the breadth of products and services we bring to our customers.

We continued to see some cost pressures from elevated material and labor expenses, and some project delays, reflecting supply chain challenges. As business activity level increased, these factors pressured modular rental and sales margins during the quarter, and pushed completion of some modular sales projects to later in the current year, and in to next year. Partly offsetting these pressures, we are increasing pricing as demand improves.

The overall positive rental demand trends that we have seen in recent months have continued into the fourth quarter. We are fully focused on solid execution for the remainder of the year.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended September 30, 2021 to the quarter ended September 30, 2020 unless otherwise indicated.

MOBILE MODULAR

For the third quarter of 2021, the Company’s Mobile Modular division reported income from operations of $23.5 million, a decrease of $1.4 million, or 5%. Rental revenues increased 26% to $59.2 million, depreciation expense increased 31% to $7.5 million and other direct costs increased 40% to $16.5 million, which resulted in an increase in gross profit on rental revenues of 19% to $35.1 million. The rental revenue increase reflects in part the new Design Space and Kitchens To Go customers that contributed approximately three quarters of the increase. Rental related services revenues increased 31% to $24.5 million, primarily attributable to higher amortization of modular building delivery and return delivery and dismantle revenues, higher site related and other services performed during the lease and increased delivery and return delivery revenues at Portable Storage, with associated gross profit increasing 15% to $6.0 million. Sales revenues decreased 10% to $26.4 million, primarily due to lower new equipment sales. Gross margin on sales was 31% compared to 26% in 2020, resulting in a 9% increase in gross profit on sales revenues to $8.2 million. Selling and administrative expenses increased 47% to $26.1 million, primarily due to increased employee salaries and benefit costs totaling $2.5 million, mostly due to the addition of Design Space and Kitchens To Go employees, $2.4 million higher amortization of intangible assets associated with the Design Space and Kitchens To Go acquisitions and $1.4 million higher allocated corporate expenses.

TRS-RENTELCO

For the third quarter of 2021, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $0.5 million, or 5%. Rental revenues increased 6% to $29.2 million, depreciation expense increased 5% to $12.2 million and other direct costs increased 4% to $5.0 million, which resulted in a 7% increase in gross profit on rental revenues to $12.0 million. The rental revenue increase was primarily the result of increased demand for general purpose equipment compared to the prior year. Sales revenues decreased 31% to $4.8 million. Gross margin on sales was 63% in 2021 compared to 44% in 2020, resulting in a 1% decrease in gross profit on sales revenues to $3.0 million. Selling and administrative expenses increased 1% to $6.0 million.

ADLER TANKS

For the third quarter of 2021, the Company’s Adler Tanks division reported income from operations of $2.8 million, an increase of 4% compared to the prior year. Rental revenues increased 11% to $14.8 million, depreciation expense was comparable to the prior year and other direct costs increased 62% to $3.2 million, which resulted in an increased gross profit on rental revenues of 3%, to $7.6 million. Rental related services revenues increased 14% to $6.3 million, with gross profit on rental related services increasing 2%, to $1.2 million. Selling and administrative expenses increased 9% to $6.3 million primarily due to higher allocated corporate expenses.

FINANCIAL OUTLOOK:

Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is updating its financial outlook.

For the full-year 2021, the Company expects:

		Previous		Current
Total revenue: Adjusted EBITDA: Gross rental equipment capital expenditures:		$610 million to $640 million $245 million to $260 million $100 million to $120 million		$618 million to $628 million $245 million to $249 million $108 million to $118 million

1.

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.

2.

Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.

ABOUT MCGRATH RENTCORP:

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

Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

CONFERENCE CALL NOTE:

As previously announced in its press release of October 1, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 28, 2021 to discuss the third quarter 2021 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the conference call replay is 5485029. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about the Design Space and Kitchens To Go acquisitions providing additional long-term growth opportunities and the expectation to deploy more rental equipment capital and to expand the breadth of products and services to the Company’s customers, optimism about the overall positive rental demand trends, as well as the statements regarding the full year 2021 in the “Financial Outlook” section, are forward-looking.

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the duration of the COVID-19 pandemic and its economic impact, the extent and length of the restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the ability to obtain the synergies expected from the Design Space and Kitchens To Go acquisitions and the success of integrating such acquisitions; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except per share amounts)		2021				2020				2021				2020
Revenues
Rental		$	103,269			$	88,138			$	283,937			$	263,273
Rental related services			31,513				25,040				73,870				70,026
Rental operations			134,782				113,178				357,807				333,299
Sales			37,636				42,331				80,503				87,366
Other			874				939				2,612				2,909
Total revenues			173,292				156,448				440,922				423,574
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment			23,802				21,419				68,216				64,640
Rental related services			24,356				18,603				56,236				51,760
Other			24,711				18,553				67,696				56,171
Total direct costs of rental operations			72,869				58,575				192,148				172,571
Costs of sales			24,618				29,669				50,021				57,911
Total costs of revenues			97,487				88,244				242,169				230,482
Gross profit			75,805				68,204				198,753				193,093
Selling and administrative expenses			39,907				30,871				109,305				93,365
Income from operations			35,898				37,333				89,448				99,728
Other income (expense):
Interest expense			(3,168	)			(1,968	)			(7,208	)			(6,804	)
Foreign currency exchange (loss) gain			(128	)			130				(185	)			(189	)
Income before provision for income taxes			32,602				35,495				82,055				92,735
Provision for income taxes			9,350				7,394				20,797				21,926
Net income		$	23,252			$	28,101			$	61,258			$	70,809
Earnings per share:
Basic		$	0.96			$	1.17			$	2.53			$	2.93
Diluted		$	0.95			$	1.15			$	2.50			$	2.88
Shares used in per share calculation:
Basic			24,245				24,097				24,209				24,170
Diluted			24,507				24,443				24,506				24,558
Cash dividends declared per share		$	0.435			$	0.420			$	1.305			$	1.260

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		September 30,				December 31,
(in thousands)		2021				2020
Assets
Cash		$	2,380			$	1,238
Accounts receivable, net of allowance for doubtful accounts of $2,225 in 2021 and $2,100 in 2020			168,831				123,316
Rental equipment, at cost:
Relocatable modular buildings			1,023,344				882,115
Electronic test equipment			363,799				333,020
Liquid and solid containment tanks and boxes			311,677				315,706
			1,698,820				1,530,841
Less: accumulated depreciation			(635,358	)			(592,725	)
Rental equipment, net			1,063,462				938,116
Property, plant and equipment, net			135,055				136,210
Prepaid expenses and other assets			59,523				41,549
Intangible assets, net			48,715				7,118
Goodwill			132,387				28,197
Total assets		$	1,610,353			$	1,275,744
Liabilities and Shareholders' Equity
Liabilities:
Notes payable		$	459,475			$	222,754
Accounts payable and accrued liabilities			137,308				108,334
Deferred income			69,634				45,975
Deferred income taxes, net			231,480				216,077
Total liabilities			897,897				593,140
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,247 shares as of September 30, 2021 and 24,128 shares as of December 31, 2020			106,744				106,289
Retained earnings			605,754				576,419
Accumulated other comprehensive loss			(42	)			(104	)
Total shareholders’ equity			712,456				682,604
Total liabilities and shareholders’ equity		$	1,610,353			$	1,275,744

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Nine Months Ended September 30,
(in thousands)		2021				2020
Cash Flows from Operating Activities:
Net income		$	61,258			$	70,809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			79,047				71,249
Provision for doubtful accounts			193				1,227
Share-based compensation			5,302				4,894
Gain on sale of used rental equipment			(17,788	)			(14,110	)
Foreign currency exchange loss			185				189
Amortization of debt issuance costs			11				8
Change in:
Accounts receivable			(33,471	)			(2,561	)
Prepaid expenses and other assets			(11,409	)			(1,314	)
Accounts payable and accrued liabilities			17,428				(582	)
Deferred income			20,128				3,591
Deferred income taxes			15,403				(1,863	)
Net cash provided by operating activities			136,287				131,537
Cash Flows from Investing Activities:
Purchases of rental equipment			(90,379	)			(65,661	)
Purchases of property, plant and equipment			(969	)			(9,639	)
Cash paid for acquisition of businesses			(285,624	)			—
Proceeds from sales of used rental equipment			41,556				33,837
Net cash used in investing activities			(335,416	)			(41,463	)
Cash Flows from Financing Activities:
Net borrowing (repayment) under bank lines of credit			176,758				(43,460	)
Borrowings under note purchase agreement			100,000				—
Principal payment of Series B senior notes			(40,000	)			—
Repurchase of common stock			—				(13,617	)
Taxes paid related to net share settlement of stock awards			(4,847	)			(3,930	)
Payment of dividends			(31,635	)			(29,642	)
Net cash provided by (used in) financing activities			200,276				(90,649	)
Effect of foreign currency exchange rate changes on cash			(5	)			(224	)
Net increase (decrease) in cash			1,142				(799	)
Cash balance, beginning of period			1,238				2,342
Cash balance, end of period		$	2,380			$	1,543
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period		$	6,477			$	6,829
Net income taxes paid, during the period		$	8,074			$	24,704
Dividends accrued during the period, not yet paid		$	10,002			$	10,355
Rental equipment acquisitions, not yet paid		$	2,199			$	5,827

1.		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.
2.		Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.		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.
4.		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
Average rental equipment 1		$	975,119			$	362,104			$	311,876
Average monthly total yield 2			2.02	%			2.69	%			1.59	%
Average utilization 3			76.5	%			66.9	%			48.1	%
Average monthly rental rate 4			2.65	%			4.02	%			3.30	%

1.		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.
2.		Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.		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.
4.		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, 2020
(dollar amounts in thousands)		Mobile Modular				TRS-RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	47,134			$	27,619			$	13,385			$	—			$	88,138
Rental related services			18,684				800				5,556				—				25,040
Rental operations			65,818				28,419				18,941				—				113,178
Sales			29,275				6,912				230				5,914				42,331
Other			320				525				94				—				939
Total revenues			95,413				35,856				19,265				5,914				156,448
Costs and Expenses
Direct costs of rental operations:
Depreciation			5,771				11,547				4,101				—				21,419
Rental related services			13,510				673				4,420				—				18,603
Other			11,780				4,820				1,953				—				18,553
Total direct costs of rental operations			31,061				17,040				10,474				—				58,575
Costs of sales			21,726				3,853				251				3,839				29,669
Total costs of revenues			52,787				20,893				10,725				3,839				88,244
Gross Profit (Loss)
Rental			29,583				11,252				7,331				—				48,166
Rental related services			5,174				127				1,136				—				6,437
Rental operations			34,757				11,379				8,467				—				54,603
Sales			7,549				3,059				(21	)			2,075				12,662
Other			320				525				94				—				939
Total gross profit			42,626				14,963				8,540				2,075				68,204
Selling and administrative expenses			17,739				5,962				5,821				1,349				30,871
Income from operations		$	24,887			$	9,001			$	2,719			$	726				37,333
Interest expense																			(1,968	)
Foreign currency exchange income																			130
Provision for income taxes																			(7,394	)
Net income																		$	28,101
Other Information
Average rental equipment 1		$	829,460			$	336,015			$	314,933
Average monthly total yield 2			1.89	%			2.74	%			1.42	%
Average utilization 3			76.3	%			67.1	%			44.1	%
Average monthly rental rate 4			2.48	%			4.08	%			3.21	%

1.		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.
2.		Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.		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.
4.		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
Average rental equipment 1		$	906,633			$	348,749			$	312,928
Average monthly total yield 2			1.95	%			2.69	%			1.44	%
Average utilization 3			76.0	%			67.4	%			44.0	%
Average monthly rental rate 4			2.57	%			3.98	%			3.26	%

1.		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.
2.		Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.		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.
4.		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, 2020
(dollar amounts in thousands)		Mobile Modular				TRS-RenTelco				Adler Tanks				Enviroplex				Consolidated
Revenues
Rental		$	141,172			$	81,167			$	40,934			$	—			$	263,273
Rental related services			51,291				2,296				16,439				—				70,026
Rental operations			192,463				83,463				57,373				—				333,299
Sales			51,847				17,943				960				16,616				87,366
Other			1,063				1,592				254				—				2,909
Total revenues			245,373				102,998				58,587				16,616				423,574
Costs and Expenses
Direct costs of rental operations:
Depreciation			17,177				35,129				12,334				—				64,640
Rental related services			37,222				1,836				12,702				—				51,760
Other			36,773				12,762				6,636				—				56,171
Total direct costs of rental operations			91,172				49,727				31,672				—				172,571
Costs of sales			37,274				9,350				799				10,488				57,911
Total costs of revenues			128,446				59,077				32,471				10,488				230,482
Gross Profit
Rental			87,222				33,276				21,964				—				142,462
Rental related services			14,069				460				3,737				—				18,266
Rental operations			101,291				33,736				25,701				—				160,728
Sales			14,573				8,593				161				6,128				29,455
Other			1,064				1,592				254				—				2,910
Total gross profit			116,928				43,921				26,116				6,128				193,093
Selling and administrative expenses			52,014				18,198				18,998				4,155				93,365
Income from operations		$	64,914			$	25,723			$	7,118			$	1,973				99,728
Interest expense																			(6,804	)
Foreign currency exchange loss																			(189	)
Provision for income taxes																			(21,926	)
Net income																		$	70,809
Other Information
Average rental equipment 1		$	822,723			$	337,330			$	314,859
Average monthly total yield 2			1.89	%			2.67	%			1.44	%
Average utilization 3			77.5	%			65.6	%			45.5	%
Average monthly rental rate 4			2.46	%			4.08	%			3.18	%

1.		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.
2.		Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.		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.
4.		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,
		2021				2020				2021				2020				2021				2020
Net income		$	23,252			$	28,101			$	61,258			$	70,809			$	92,433			$	97,210
Provision for income taxes			9,350				7,394				20,797				21,926				28,931				30,979
Interest expense			3,168				1,968				7,208				6,804				9,191				9,728
Depreciation and amortization			28,488				23,587				79,047				71,249				102,441				94,765
EBITDA			64,258				61,050				168,310				170,788				232,996				232,682
Share-based compensation			1,705				1,670				5,302				4,894				5,957				6,690
Adjusted EBITDA 1		$	65,963			$	62,720			$	173,612			$	175,682			$	238,953			$	239,372
Adjusted EBITDA margin 2			38	%			40	%			39	%			41	%			41	%			42	%

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,
		2021				2020				2021				2020				2021				2020
Adjusted EBITDA 1		$	65,963			$	62,720			$	173,612			$	175,682			$	238,953			$	239,372
Interest paid			(2,490	)			(1,798	)			(6,477	)			(6,829	)			(8,698	)			(9,945	)
Income taxes paid, net of refunds received			(1,084	)			(22,551	)			(8,074	)			(24,704	)			(18,273	)			(32,202	)
Gain on sale of used rental equipment			(5,918	)			(4,508	)			(17,788	)			(14,110	)			(23,007	)			(20,251	)
Foreign currency exchange loss (gain)			128				(130	)			185				189				(82	)			59
Amortization of debt issuance costs			5				3				11				8				14				11
Change in certain assets and liabilities:
Accounts receivable, net			(27,922	)			(3,493	)			(33,278	)			(1,334	)			(27,161	)			8,630
Prepaid expenses and other assets			(2,024	)			327				(11,409	)			(1,314	)			(6,288	)			(3,110	)
Accounts payable and other liabilities			(1,023	)			5,669				19,377				358				22,248				2,315
Deferred income			12,670				(2,224	)			20,128				3,591				7,548				(2,217	)
Net cash provided by operating activities		$	38,305			$	34,015			$	136,287			$	131,537			$	185,254			$	182,662

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/20211028005936/en/

Keith E. Pratt

EVP & Chief Financial Officer

925-606-9200

Source: McGrath RentCorp

FAQ

What were McGrath RentCorp's revenues for Q3 2021?

McGrath RentCorp reported total revenues of $173.3 million for Q3 2021.

How much did net income decline for MGRC in Q3 2021?

Net income for MGRC decreased to $23.3 million in Q3 2021, down from $28.1 million in Q3 2020.

What was the dividend rate declared by McGrath RentCorp in Q3 2021?

The dividend rate increased by 4% year-over-year to $0.435 per share.

How did rental revenues perform in Q3 2021 for MGRC?

Rental revenues increased by 17% year-over-year to $103.3 million in Q3 2021.

What were the main challenges faced by McGrath RentCorp in Q3 2021?

Challenges included elevated material and labor costs, affecting sales margins.