McGrath RentCorp Announces Results for Fourth Quarter 2021
McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2021 of $175.9 million, an increase of 18%, compared to the fourth quarter of 2020. The Company reported net income of $28.4 million, or $1.16 per diluted share, for the fourth quarter of 2021, compared to net income of $31.2 million, or $1.27 per diluted share, for the fourth quarter of 2020.
Total revenues for the year ended December 31, 2021 increased to $616.8 million from $572.6 million in 2020, with adjusted EBITDA increasing $5.6 million, or 2%, to $246.6 million. Net income for the year ended December 31, 2021 was $89.7 million, or $3.66 per diluted share, compared to $102.0 million, or $4.16 per diluted share, in 2020.
The Company also announced that the board of directors declared a quarterly cash dividend of $0.455 per share for the quarter ending March 31, 2022, an increase of $0.02, or 5%, over the prior year period. The cash dividend will be payable on April 29, 2022 to all shareholders of record on April 15, 2022. This marks 31 consecutive years the Company has increased its annual dividend.
FOURTH QUARTER 2021 COMPANY HIGHLIGHTS:
Rental revenues increased 20% year-over-year to $106.1 million. Total revenues increased 18% year-over-year to $175.9 million. Adjusted EBITDA1 increased 12% year-over-year to $73.0 million. Dividend rate increased 4% year-over-year to $0.435 per share for the fourth quarter of 2021. On an annualized basis, this dividend represents a 2.4% yield on the February 22, 2022 close price of $72.98 per share.Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“We were pleased with our fourth quarter results. Improved end market conditions in each of our three rental business segments enabled us to deliver a 20% increase in companywide rental revenues in the fourth quarter, compared to the prior year. Modular rental revenues grew 29%, with approximately three quarters of the growth attributable to our Design Space and Kitchens To Go acquisitions. Rental revenues at TRS-RenTelco and Adler Tanks grew 4% and 19%, respectively. We were also pleased with the high volume of modular new equipment sales during the quarter, as some previously delayed projects were completed by year end.
"2021 was a year of strategic growth investments, with particular emphasis on the modular acquisitions. We expanded our geographic coverage, added new customers and welcomed new team members. I am extremely grateful to our team members who worked tirelessly throughout 2021 to serve our customers and integrate our new acquisitions. With the major integration steps now complete we are very focused on revenue and profit growth, as reflected by our 12% adjusted EBITDA growth in the fourth quarter.
"We are encouraged by the positive rental demand trends since the start of the year. Year to date new order bookings at Mobile Modular are up significantly from a year ago. We are well positioned to continue growing this business as demand conditions continue to strengthen.
"Our strategic priorities for the next few years are centered on our modular business. We see significant opportunities to further expand our geographic coverage and to broaden the value we bring to customers with rental solutions, site related services and new modular equipment sales. As we demonstrated in 2021, we expect to utilize a disciplined combination of organic investments and acquisitions to deploy growth capital and accelerate these priorities. With an experienced leadership team, track record of execution, strong balance sheet and healthy free cash flow generation we are well positioned for long term growth.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended December 31, 2021 to the quarter ended December 31, 2020 unless otherwise indicated.
MOBILE MODULAR
The Company’s Mobile Modular division reported income from operations of $26.1 million, an increase of $3.6 million, or 16%, with Adjusted EBITDA increasing $8.4 million, or 28%, to $38.4 million. Rental revenues increased 29% to $61.5 million, depreciation expense increased 32% to $7.6 million and other direct costs increased 38% to $15.1 million, which resulted in an increase in gross profit on rental revenues of 26% to $38.7 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 8% to $17.6 million, primarily attributable to services performed during the lease and increased delivery and return delivery revenues at Portable Storage, with associated gross profit increasing 9% to $5.0 million. Sales revenues increased 68% to $20.2 million, due to increased new and used equipment sales. Gross margin on sales was 33% compared to 27% in 2020, resulting in an increase in gross profit on sales revenues of $3.3 million. Selling and administrative expenses increased $8.2 million, or 50%, primarily due to increased employee salaries and benefit costs totaling $2.7 million, mostly from the addition of Design Space and Kitchens To Go employees, $2.4 million higher allocated corporate expenses and $1.7 million higher amortization of intangible assets associated with the Design Space and Kitchens To Go acquisitions.
TRS-RENTELCO
The Company’s TRS-RenTelco division reported income from operations of $9.8 million, a decrease of $1.1 million, or 10%, with Adjusted EBITDA decreasing $0.4 million, or 2%, to $22.3 million. Rental revenues increased 4% to $29.1 million, depreciation expense increased 5% to $11.9 million and other direct costs increased 12% to $4.9 million, which resulted in gross profit on rental revenues comparable to the prior year. Rental revenue increases were primarily from increased demand for general purpose equipment. Sales revenues decreased 13% to $7.6 million while gross margin on sales improved to 51% in 2021 from 47% in 2020, which together resulted in a 7% decrease in gross profit on sales revenues to $3.8 million. Selling and administrative expenses increased 11% to $6.8 million, primarily due to increased marketing and administrative expenses and higher allocated corporate expenses.
ADLER TANKS
The Company’s Adler Tanks division reported income from operations of $2.8 million, an increase of 29%, with Adjusted EBITDA increasing $0.8 million, or 12%, to $7.8 million. Rental revenues increased 19% to $15.5 million, as a result of broad based regional and end market demand. Depreciation expense was comparable to the prior year and other direct costs increased 47% to $3.4 million, which resulted in an increased gross profit on rental revenues of 21%, to $8.1 million. Rental related services revenues increased 10% to $5.9 million, with gross profit on rental related services decreasing 13%, to $1.1 million. Selling and administrative expenses increased 16% to $6.7 million primarily due to increased employee salaries and benefit costs and higher allocated corporate expenses.
FINANCIAL OUTLOOK:
For the full-year 2022, the Company expects:
2022 Outlook
2021 Actual
•
Total revenue:
$675 million to $705 million
$616.8 million
•
Adjusted EBITDA 1, 2:
$260 million to $275 million
$246.6 million
•
Gross rental equipment capital expenditures:
$117 million to $127 million
$114.1 million
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. 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 January 20, 2022, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2022 to discuss the fourth 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 8842099. 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 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, to further expand geographic coverage through the utilization of organic investments and acquisitions, and that the Company is positioned for long term growth, 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 ongoing COVID-19 pandemic and its economic impact, the extent and length of the restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.
Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended December 31,
Twelve Months Ended December 31,
(in thousands, except per share amounts)
2021
2020
2021
2020
Revenues
Rental
$
106,076
$
88,517
$
390,013
$
351,790
Rental related services
24,191
22,367
98,061
92,393
Rental operations
130,267
110,884
488,074
444,183
Sales
44,732
37,238
125,235
124,604
Other
912
858
3,524
3,767
Total revenues
175,911
148,980
616,833
572,554
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
23,671
21,226
91,887
85,866
Rental related services
18,020
16,345
74,256
68,105
Other
23,373
17,647
91,069
73,818
Total direct costs of rental operations
65,064
55,218
257,212
227,789
Costs of sales
28,579
23,108
78,600
81,019
Total costs of revenues
93,643
78,326
335,812
308,808
Gross profit
82,268
70,653
281,021
263,746
Selling and administrative expenses
39,295
29,628
148,600
122,993
Income from operations
42,973
41,025
132,421
140,753
Other income (expense):
Interest expense
(3,247
)
(1,983
)
(10,455
)
(8,787
)
Foreign currency exchange (loss) gain
(25
)
267
(210
)
78
Income before provision for income taxes
39,701
39,309
121,756
132,044
Provision for income taxes
11,254
8,133
32,051
30,060
Net income
$
28,447
$
31,176
$
89,705
$
101,984
Earnings per share:
Basic
$
1.17
$
1.29
$
3.70
$
4.22
Diluted
$
1.16
$
1.27
$
3.66
$
4.16
Shares used in per share calculation:
Basic
24,252
24,119
24,220
24,157
Diluted
24,537
24,453
24,515
24,531
Cash dividends declared per share
$
0.435
$
0.420
$
1.74
$
1.68
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31,
(in thousands)
2021
2020
Assets
Cash
$
1,491
$
1,238
Accounts receivable, net of allowance for doubtful accounts of $2,125 in 2021 and $2,100 in 2020
159,499
123,316
Rental equipment, at cost:
Relocatable modular buildings
1,040,094
882,115
Electronic test equipment
361,391
333,020
Liquid and solid containment tanks and boxes
309,908
315,706
1,711,393
1,530,841
Less: accumulated depreciation
(646,169
)
(592,725
)
Rental equipment, net
1,065,224
938,116
Property, plant and equipment, net
135,325
136,210
Prepaid expenses and other assets
54,945
41,549
Intangible assets, net
47,049
7,118
Goodwill
132,393
28,197
Total assets
$
1,595,926
$
1,275,744
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
426,451
$
222,754
Accounts payable and accrued liabilities
136,313
108,334
Deferred income
58,716
45,975
Deferred income taxes, net
242,425
216,077
Total liabilities
863,905
593,140
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,260 shares as of December 31, 2021 and 24,128 shares as of December 31, 2020
108,610
106,289
Retained earnings
623,465
576,419
Accumulated other comprehensive loss
(54
)
(104
)
Total shareholders’ equity
732,021
682,604
Total liabilities and shareholders’ equity
$
1,595,926
$
1,275,744
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended December 31,
(in thousands)
2021
2020
Cash Flows from Operating Activities:
Net income
$
89,705
$
101,984
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
106,695
94,643
Deferred income taxes
26,348
(2,193
)
Provision for doubtful accounts
451
1,343
Share-based compensation
7,666
5,549
Gain on sale of used rental equipment
(25,441
)
(19,329
)
Foreign currency exchange loss (gain)
210
(78
)
Amortization of debt issuance costs
15
11
Change in:
Accounts receivable
(24,397
)
3,440
Prepaid expenses and other assets
(6,816
)
3,807
Accounts payable and accrued liabilities
12,226
316
Deferred income
9,082
(8,989
)
Net cash provided by operating activities
195,744
180,504
Cash Flows from Investing Activities:
Purchases of rental equipment
(114,145
)
(86,329
)
Purchases of property, plant and equipment
(2,680
)
(13,724
)
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
57,337
47,052
Net cash used in investing activities
(351,697
)
(53,001
)
Cash Flows from Financing Activities:
Net borrowing (repayment) under bank lines of credit
143,729
(70,689
)
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
(5,345
)
(4,376
)
Payment of dividends
(42,182
)
(39,769
)
Net cash provided by (used in) financing activities
156,202
(128,451
)
Effect of foreign currency exchange rate changes on cash
4
(156
)
Net increase (decrease) in cash
253
(1,104
)
Cash balance, beginning of period
1,238
2,342
Cash balance, end of period
$
1,491
$
1,238
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
10,326
$
9,050
Net income taxes paid, during the period
$
9,087
$
34,903
Dividends accrued during the period, not yet paid
$
11,280
$
10,083
Rental equipment acquisitions, not yet paid
$
5,750
$
4,373
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. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended 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
$
38,412
$
22,345
$
7,817
$
4,386
$
72,960
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
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. 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. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2020
(dollar amounts in thousands)
Mobile
Modular
TRS-
RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
47,548
$
27,916
$
13,054
$
—
$
88,518
Rental related services
16,236
784
5,347
—
22,367
Rental operations
63,784
28,700
18,401
—
110,885
Sales
12,016
8,675
426
16,121
37,238
Other
351
438
68
—
857
Total revenues
76,151
37,813
18,895
16,121
148,980
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,790
11,343
4,093
—
21,226
Rental related services
11,688
583
4,074
—
16,345
Other
10,989
4,371
2,287
—
17,647
Total direct costs of rental operations
28,467
16,297
10,454
—
55,218
Costs of sales
8,737
4,573
478
9,320
23,108
Total costs of revenues
37,204
20,870
10,932
9,320
78,326
Gross Profit
Rental
30,769
12,202
6,674
—
49,645
Rental related services
4,548
201
1,273
—
6,022
Rental operations
35,317
12,403
7,947
—
55,667
Sales
3,279
4,102
(52
)
6,801
14,130
Other
351
438
68
—
857
Total gross profit
38,947
16,943
7,963
6,801
70,654
Selling and administrative expenses
16,456
6,108
5,766
1,298
29,628
Income from operations
$
22,491
$
10,835
$
2,197
$
5,503
41,026
Interest expense
(1,983
)
Foreign currency exchange gain
267
Provision for income taxes
(8,134
)
Net income
$
31,176
Other Information
Adjusted EBITDA 1
$
30,024
$
22,767
$
6,983
$
5,567
$
65,341
Average rental equipment 2
$
834,599
$
333,505
$
314,647
Average monthly total yield 3
1.90
%
2.74
%
1.38
%
Average utilization 4
76.2
%
67.1
%
42.6
%
Average monthly rental rate 5
2.49
%
4.08
%
3.25
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. 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. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
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
$
128,044
$
85,723
$
27,961
$
4,844
$
246,572
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
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. 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. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Twelve months ended December 31, 2020
(dollar amounts in thousands)
Mobile
Modular
TRS-
RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
188,719
$
109,083
$
53,988
$
—
$
351,790
Rental related services
67,527
3,080
21,786
—
92,393
Rental operations
256,246
112,163
75,774
—
444,183
Sales
63,863
26,618
1,386
32,737
124,604
Other
1,415
2,030
322
—
3,767
Total revenues
321,524
140,811
77,482
32,737
572,554
Costs and Expenses
Direct costs of rental operations:
Depreciation
22,967
46,472
16,427
—
85,866
Rental related services
48,910
2,419
16,776
—
68,105
Other
47,762
17,133
8,923
—
73,818
Total direct costs of rental operations
119,639
66,024
42,126
—
227,789
Costs of sales
46,011
13,923
1,277
19,808
81,019
Total costs of revenues
165,650
79,947
43,403
19,808
308,808
Gross Profit
Rental
117,990
45,478
28,638
—
192,106
Rental related services
18,617
661
5,010
—
24,288
Rental operations
136,607
46,139
33,648
—
216,394
Sales
17,852
12,695
109
12,929
43,585
Other
1,415
2,030
322
—
3,767
Total gross profit
155,874
60,864
34,079
12,929
263,746
Selling and administrative expenses
68,470
24,306
24,764
5,453
122,993
Income from operations
$
87,404
$
36,558
$
9,315
$
7,476
$
140,753
Interest expense
(8,787
)
Foreign currency exchange gain
78
Provision for income taxes
(30,060
)
Net income
$
101,984
Other Information
Adjusted EBITDA 1
$
119,202
$
85,082
$
29,010
$
7,729
$
241,023
Average rental equipment 2
$
825,614
$
336,399
$
314,797
Average monthly total yield 3
1.88
%
2.70
%
1.43
%
Average utilization 4
77.2
%
66.2
%
44.6
%
Average monthly rental rate 5
2.47
%
4.08
%
3.21
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. 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. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization 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
December 31,
Twelve Months Ended
December 31,
2021
2020
2021
2020
Net income
$
28,447
$
31,175
$
89,705
$
101,984
Provision for income taxes
11,254
8,134
32,051
30,060
Interest expense
3,247
1,983
10,455
8,787
Depreciation and amortization
27,648
23,394
106,695
94,643
EBITDA
70,596
64,686
238,906
235,474
Share-based compensation
2,364
655
7,666
5,549
Adjusted EBITDA 1
$
72,960
$
65,341
$
246,572
$
241,023
Adjusted EBITDA margin 2
41
%
44
%
40
%
42
%
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,
2021
2020
2021
2020
Adjusted EBITDA 1
$
72,960
$
65,341
$
246,572
$
241,023
Interest paid
(3,849
)
(2,221
)
(10,326
)
(9,050
)
Income taxes paid, net of refunds received
(1,013
)
(10,199
)
(9,087
)
(34,903
)
Gain on sale of used rental equipment
(7,653
)
(5,219
)
(25,441
)
(19,329
)
Foreign currency exchange loss (gain)
25
(267
)
210
(78
)
Amortization of debt issuance costs
4
3
15
11
Change in certain assets and liabilities:
Accounts receivable, net
9,332
6,117
(23,946
)
4,783
Prepaid expenses and other assets
4,593
5,121
(6,816
)
3,807
Accounts payable and other liabilities
(3,896
)
2,871
15,481
3,229
Deferred income
(11,046
)
(12,580
)
9,082
(8,989
)
Net cash provided by operating activities
$
59,457
$
48,967
$
195,744
$
180,504
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
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