McGrath Announces Results for Third Quarter 2023
McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues from continuing operations for the quarter ended September 30, 2023 of $243.5 million, an increase of 40% compared to the third quarter of 2022. The Company reported net income from continuing operations of $40.4 million, or $1.65 per diluted share, for the third quarter of 2023, compared to net income from continuing operations of $27.1 million, or $1.11 per diluted share, for the third quarter of 2022.
THIRD QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS):
Rental revenues increased 22% to $122.7 million. Total revenues increased 40% to $243.5 million. Other income for the third quarter 2023 includes a $3.6 million net gain on sale of two properties, which increased earnings per diluted share by $0.11. Adjusted EBITDA1 increased 47% to $95.3 million. Dividend rate of $0.465 per share for the third quarter of 2023. On an annualized basis, this dividend represents a 1.9% yield on the October 25, 2023 close price of $97.06 per share.Joe Hanna, President and CEO of McGrath, made the following comments regarding these results and future expectations:
“We were very pleased with our third quarter results. Our 22% increase in companywide rental revenues was driven by strong modular segment performance. Modular rental revenues grew 36%, with over half of the growth attributable to our Vesta Modular and several smaller Portable Storage acquisitions completed earlier this year. Before acquisitions, the modular segment rental revenues grew organically by a robust 13%.
Our modular business saw broad based rental strength across commercial, education and portable storage customer bases. We maintained our focus on pricing optimization, rental fleet utilization, and value-added services for our modular customers. Our initiatives to grow modular sales also showed progress as sales revenues doubled compared to a year ago.
TRS-RenTelco experienced continued softness in semiconductor related demand, resulting in 10% lower rental revenues for the quarter, compared to a year ago. During the quarter we reduced new equipment capital spending, made progress with sales of underutilized equipment, and improved rental fleet utilization to above 60% at quarter-end.
We made good progress with the Vesta integration. Our organization work is complete and the Vesta team is fully integrated into the McGrath organization. I am very pleased with the team collaboration and commercial successes that have been achieved.
We are very pleased with our year-to-date performance, and 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, 2023 to the quarter ended September 30, 2022 unless otherwise indicated.
MOBILE MODULAR
For the third quarter of 2023, the Company’s Mobile Modular division reported Adjusted EBITDA of $73.0 million, an increase of $33.1 million, or 83%.
Rental revenues increased 36% to $94.0 million, depreciation expense increased 30% to $10.0 million, and other direct costs increased 2% to $23.4 million, which resulted in an increase in gross profit on rental revenues of 57% to $60.6 million. Vesta Modular contributed $14.8 million and $10.2 million in rental revenues and gross profit during the quarter, respectively. Rental related services revenues increased 45% to $39.7 million, primarily attributable to higher delivery and pick up activities and higher site related services, with associated gross profit increasing 60% to $11.8 million. Vesta Modular contributed $4.0 million and $1.8 million in rental related services revenues and gross profit during the quarter, respectively. Sales revenues increased $29.9 million to $58.9 million, primarily from higher new equipment sales. Gross margin on sales was 32% compared to 35% in 2022, resulting in a 86% increase in gross profit on sales revenues to $19.0 million. Vesta Modular contributed $16.2 million and $5.1 million in sales revenues and gross profit during the quarter, respectively. Selling and administrative expenses increased $11.0 million to $39.8 million. The addition of Vesta Modular increased selling and administrative expenses by $6.0 million, which included $1.2 million higher amortization of intangibles. In addition, allocated corporate expenses increased $2.7 million.TRS-RENTELCO
For the third quarter of 2023, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $21.9 million, a decrease of 9%, when compared to the same quarter in 2022.
Rental revenues decreased 10% to $28.7 million, depreciation expense decreased 3%, and other direct costs decreased 4%, resulting in a 18% decrease in gross profit on rental revenues to $11.5 million. The rental revenue decrease was primarily the result of lower average rental equipment on rent compared to the prior year and comparable average monthly rental rates. Sales revenues increased 58% to $8.7 million and gross profit on sales revenues decreased 9% to $3.1 million. The higher sales revenues and lower gross profit on sales can be attributed to the mix of equipment sold, which can fluctuate quarterly depending on customer requirements, equipment availability and funding. Selling and administrative expenses increased $0.3 million, or 4%, to $7.0 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 revising its financial outlook. For the full-year 2023, the Company expects:
Previous
(Continuing Operations)
Current
(Continuing Operations)
•
Total revenue:
$805 to $830 million
$820 to $830 million
•
Adjusted EBITDA1, 2:
$306 to $320 million
$312 to $320 million
•
Gross rental equipment capital expenditures:
$190 to $200 million
$190 to $200 million
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release. Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.ABOUT MCGRATH:
McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies.
McGrath is headquartered in Livermore, California. Additional information about McGrath and its businesses is available at mgrc.com and investors.mgrc.com.
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.
CONFERENCE CALL NOTE:
As previously announced in its press release of September 28, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 26, 2023 to discuss the third quarter 2023 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 1-800-839-5685 (in the U.S.), or 1-402-220-2567 (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 (i) progress with sales of underutilized TRS equipment, (ii) focus on solid execution for the remainder of the year, and (iii) statements regarding the full year 2023 in the “Financial Outlook” section, are forward-looking.
These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta, Brekke Storage, Dixie Storage and Inland Storage acquisitions; competition within the modular business; the activity levels in the semiconductor and general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the other 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)
2023
2022
2023
2022
Revenues
Rental
$
122,686
$
100,871
$
350,773
$
285,588
Rental related services
40,492
28,198
101,481
69,276
Rental operations
163,178
129,069
452,254
354,864
Sales
77,115
44,414
148,576
95,503
Other
3,213
860
9,424
2,397
Total revenues
243,506
174,343
610,254
452,764
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
22,069
20,174
66,499
60,118
Rental related services
28,532
20,576
71,625
50,116
Other
28,493
28,203
90,188
82,573
Total direct costs of rental operations
79,094
68,953
228,312
192,807
Costs of sales
52,878
28,548
98,431
58,124
Total costs of revenues
131,972
97,501
326,743
250,931
Gross profit
111,534
76,842
283,511
201,833
Selling and administrative expenses
48,508
36,954
153,032
103,368
Other income
(3,559
)
—
(3,559
)
—
Income from operations
66,585
39,888
134,038
98,465
Interest expense
(11,025
)
(3,355
)
(28,434
)
(8,057
)
Foreign currency exchange (loss) gain
(42
)
(236
)
166
(404
)
Income from continuing operations before provision for Income taxes
55,518
36,297
105,770
90,004
Provision for income taxes from continuing operations
15,152
9,182
25,934
21,687
Income from continuing operations
40,366
27,115
79,836
68,317
Discontinued operations:
Income from discontinued operations before provision for Income taxes
—
4,635
1,709
9,350
Provision for income taxes from discontinued operations
—
1,183
453
2,170
Gain on sale of discontinued operations, net of tax
—
—
61,513
—
Income from discontinued operations
—
3,452
62,769
7,180
Net income
$
40,366
$
30,567
$
142,605
$
75,497
Earnings per share from continuing operations:
Basic
$
1.65
$
1.11
$
3.26
$
2.81
Diluted
$
1.65
$
1.11
$
3.26
$
2.79
Earnings per share from discontinued operations:
Basic
$
—
$
0.14
$
2.57
$
0.29
Diluted
$
—
$
0.14
$
2.56
$
0.29
Earnings per share:
Basic
$
1.65
$
1.25
$
5.83
$
3.10
Diluted
$
1.65
$
1.25
$
5.81
$
3.08
Shares used in per share calculation:
Basic
24,487
24,379
24,461
24,342
Diluted
24,525
24,504
24,527
24,516
Cash dividends declared per share
$
0.465
$
0.455
$
1.395
$
1.365
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30,
December 31,
(in thousands)
2023
2022
Assets
Cash
$
1,946
$
957
Accounts receivable, net of allowance for credit losses of $2,683 in 2023 and $2,300 in 2022
224,269
169,937
Rental equipment, at cost:
Relocatable modular buildings
1,474,359
1,123,268
Electronic test equipment
383,006
398,267
1,857,365
1,521,535
Less: accumulated depreciation
(565,497
)
(531,218
)
Rental equipment, net
1,291,868
990,317
Property, plant and equipment, net
146,484
138,713
Prepaid expenses and other assets
80,853
69,837
Intangible assets, net
67,480
35,431
323,771
106,403
Assets of discontinued operations
—
196,249
Total assets
$
2,136,671
$
1,707,844
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
667,640
$
413,742
Accounts payable and accrued liabilities
223,010
151,208
Deferred income
105,534
82,417
Deferred income taxes, net
229,115
203,361
Liabilities of discontinued operations
—
53,171
Total liabilities
1,225,299
903,899
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,489 shares as of September 30, 2023 and 24,388 shares as of December 31, 2022
109,253
110,080
Retained earnings
802,161
693,943
Accumulated other comprehensive loss
(42
)
(78
)
Total shareholders’ equity
911,372
803,945
Total liabilities and shareholders’ equity
$
2,136,671
$
1,707,844
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
(in thousands)
2023
2022
Cash Flows from Operating Activities:
Net income
$
142,605
$
75,497
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
81,842
83,272
Deferred income taxes
(30,018
)
(4,299
)
Provision for credit losses
1,794
307
Share-based compensation
5,273
5,106
Gain on sale of property, plant and equipment
(3,559
)
—
Gain on sale of discontinued operations
(61,513
)
—
Gain on sale of used rental equipment
(22,964
)
(26,705
)
Foreign currency exchange (gain) loss
(166
)
404
Amortization of debt issuance costs
6
13
Change in:
Accounts receivable
(27,733
)
(30,767
)
Prepaid expenses and other assets
(7,390
)
(17,313
)
Accounts payable and accrued liabilities
32,818
14,384
Deferred income
7,908
33,399
Net cash provided by operating activities
118,903
133,298
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations
268,012
—
Purchases of rental equipment
(171,322
)
(130,395
)
Purchases of property, plant and equipment
(16,448
)
(10,594
)
Cash paid for acquisition of businesses
(458,315
)
—
Cash paid for acquisition of business assets
(3,474
)
—
Proceeds from sales of used rental equipment
49,405
54,193
Proceeds from sales of property, plant and equipment
595
—
Net cash used in investing activities
(331,547
)
(86,796
)
Cash Flows from Financing Activities:
Net borrowings (payments) under bank lines of credit
178,892
(7,000
)
Borrowings under note purchase agreement
75,000
—
Taxes paid related to net share settlement of stock awards
(6,100
)
(6,253
)
Payment of dividends
(34,168
)
(33,175
)
Net cash provided by (used in) financing activities
213,624
(46,428
)
Effect of foreign currency exchange rate changes on cash
9
(4
)
Net increase in cash
989
70
Cash balance, beginning of period
957
1,491
Cash balance, end of period
$
1,946
$
1,561
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
27,818
$
8,982
Net income taxes paid, during the period
$
9,547
$
24,885
Dividends accrued during the period, not yet paid
$
12,014
$
11,167
Rental equipment acquisitions, not yet paid
$
5,765
$
9,555
Proceeds to be received on the sale of property, plant and equipment
$
6,370
$
—
Business acquisition payments withheld
$
293
$
—
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2023
(dollar amounts in thousands)
Mobile
Modular
TRS-RenTelco
Enviroplex
Adler Tanks
(Discontinued)
Consolidated
Revenues
Rental
$
94,028
$
28,658
$
—
$
—
$
122,686
Rental related services
39,716
776
—
—
40,492
Rental operations
133,744
29,434
—
—
163,178
Sales
58,867
8,733
9,515
—
77,115
Other
2,271
942
—
—
3,213
Total revenues
194,882
39,109
9,515
—
243,506
Costs and Expenses
Direct costs of rental operations:
Depreciation
10,037
12,032
—
—
22,069
Rental related services
27,927
605
—
—
28,532
Other
23,353
5,140
—
—
28,493
Total direct costs of rental operations
61,317
17,777
—
—
79,094
Costs of sales
39,821
5,651
7,406
—
52,878
Total costs of revenues
101,138
23,428
7,406
—
131,972
Gross Profit
Rental
60,638
11,486
—
—
72,124
Rental related services
11,789
171
—
—
11,960
Rental operations
72,427
11,657
—
—
84,084
Sales
19,046
3,082
2,109
—
24,237
Other
2,271
942
—
—
3,213
Total gross profit
93,744
15,681
2,109
—
111,534
Selling and administrative expenses
39,832
6,999
1,677
—
48,508
Other income
(2,740
)
(819
)
—
—
(3,559
)
Income from operations
$
56,652
$
9,501
$
432
$
—
66,585
Interest expense
(11,025
)
Foreign currency exchange loss
(42
)
Provision for income taxes
(15,152
)
Net income
$
40,366
Other Information
Adjusted EBITDA 1
$
72,953
$
21,858
$
517
$
—
$
95,328
Average rental equipment 2
$
1,350,562
$
385,353
Average monthly total yield 3
2.32
%
2.46
%
Average utilization 4
79.4
%
59.4
%
Average monthly rental rate 5
2.92
%
4.17
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the quarter ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2022
(dollar amounts in thousands)
Mobile
Modular
TRS-RenTelco
Enviroplex
Adler Tanks (Discontinued)
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
9,978
977
45,391
Other
452
408
—
563
1,423
Total revenues
125,838
38,527
9,978
26,193
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
7,719
693
29,241
Total costs of revenues
69,253
20,529
7,719
13,595
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
2,259
284
16,150
Other
452
408
—
563
1,423
Total gross profit
56,585
17,998
2,259
12,598
89,440
Selling and administrative expenses
28,798
6,726
1,430
7,141
44,095
Other income
—
—
—
—
—
Income from operations
$
27,787
$
11,272
$
829
$
5,457
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
$
39,901
$
23,894
$
900
$
10,192
$
74,887
Average rental equipment 2
$
1,030,792
$
389,675
Average monthly total yield 3
2.23
%
2.71
%
Average utilization 4
80.1
%
65.3
%
Average monthly rental rate 5
2.79
%
4.16
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2023
(dollar amounts in thousands)
Mobile
Modular
TRS-RenTelco
Enviroplex
Adler Tanks (Discontinued)
Consolidated
Revenues
Rental
$
264,398
$
86,375
$
—
$
6,520
$
357,293
Rental related services
99,158
2,323
—
2,584
104,065
Rental operations
363,556
88,698
—
9,104
461,358
Sales
115,829
21,368
11,379
269
148,845
Other
6,416
3,008
—
65
9,489
Total revenues
485,801
113,074
11,379
9,438
619,692
Costs and Expenses
Direct costs of rental operations:
Depreciation
29,766
36,733
—
1,325
67,824
Rental related services
69,618
2,007
—
2,020
73,645
Other
74,345
15,843
—
1,270
91,458
Total direct costs of rental operations
173,729
54,583
—
4,614
232,926
Costs of sales
78,102
11,307
9,022
159
98,590
Total costs of revenues
251,831
65,890
9,022
4,773
331,516
Gross Profit
Rental
160,287
33,799
—
3,926
198,012
Rental related services
29,540
316
—
564
30,420
Rental operations
189,827
34,115
—
4,490
228,432
Sales
37,727
10,061
2,357
110
50,255
Other
6,416
3,008
—
65
9,489
Total gross profit
233,970
47,184
2,357
4,665
288,176
Selling and administrative expenses
124,642
23,576
4,814
2,582
155,614
Other income
(2,740
)
(819
)
—
—
(3,559
)
Income (loss) from operations
$
112,068
$
24,427
$
(2,457
)
$
2,083
136,121
Interest expense
(28,808
)
Foreign currency exchange loss
166
Provision for income taxes
(26,387
)
Net income
$
81,092
Other Information
Adjusted EBITDA 1
$
172,222
$
64,031
$
(2,207
)
$
3,682
$
237,728
Average rental equipment 2
$
1,275,330
$
391,993
Average monthly total yield 3
2.30
%
2.43
%
Average utilization 4
79.5
%
59.0
%
Average monthly rental rate 5
2.90
%
4.15
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2022
(dollar amounts in thousands)
Mobile
Modular
TRS-RenTelco
Enviroplex
Adler Tanks (Discontinued)
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
15,545
2,235
97,738
Other
1,202
1,195
—
1,082
3,479
Total revenues
327,860
109,359
15,545
70,176
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
11,941
1,613
59,737
Total costs of revenues
178,455
60,535
11,941
38,243
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
3,604
622
38,001
Other
1,202
1,195
—
1,082
3,479
Total gross profit
149,405
48,824
3,604
31,933
233,766
Selling and administrative expenses
79,245
19,930
4,193
20,642
124,010
Other income
—
—
—
—
—
Income (loss) from operations
$
70,160
$
28,894
$
(589
)
$
11,291
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
$
106,156
$
66,675
$
(377
)
$
25,443
$
197,897
Average rental equipment 2
$
1,019,105
$
379,181
Average monthly total yield 3
2.13
%
2.63
%
Average utilization 4
78.5
%
64.8
%
Average monthly rental rate 5
2.72
%
4.07
%
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, share-based compensation and transaction costs. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.
Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation and transaction costs, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges and transaction costs. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Reconciliation of Income from Continuing Operations to Adjusted EBITDA
(dollar amounts in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Twelve Months Ended
September 30,
2023
2022
2023
2022
2023
2022
Income from continuing operations
$
40,366
$
27,115
$
79,836
$
68,317
$
114,828
$
95,182
Provision for income taxes from continuing operations
15,152
9,182
25,934
21,687
35,624
32,331
Interest expense
11,025
3,355
28,434
8,057
32,607
10,653
Depreciation and amortization
26,884
23,491
80,385
69,982
104,043
93,065
EBITDA
93,427
63,143
214,589
168,043
287,102
231,231
Share-based compensation
1,891
1,461
5,155
4,244
7,658
6,278
Transaction costs 3
10
167
14,302
167
18,188
899
Adjusted EBITDA 1
$
95,328
$
64,771
$
234,046
$
172,454
$
312,948
$
238,408
Adjusted EBITDA margin 2
39
%
37
%
38
%
38
%
39
%
39
%
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,
2023
2022
2023
2022
2023
2022
Adjusted EBITDA 1
$
95,328
$
74,887
$
237,728
$
197,897
$
328,697
$
271,589
Interest paid
(11,016
)
(3,161
)
(27,818
)
(8,982
)
(33,611
)
(12,831
)
Income taxes paid, net of refunds received
(2,616
)
(7,807
)
(9,547
)
(24,885
)
(12,024
)
(25,898
)
Gain on sale of used rental equipment
(8,714
)
(10,612
)
(22,964
)
(26,705
)
(34,238
)
(34,358
)
Foreign currency exchange loss
42
236
(166
)
404
(192
)
429
Amortization of debt issuance costs
2
4
6
13
9
17
Change in certain assets and liabilities:
Accounts receivable, net
(26,223
)
(22,630
)
(25,939
)
(30,460
)
(26,003
)
(21,128
)
Prepaid expenses and other assets
1,114
(6,458
)
(7,390
)
(17,313
)
(6,561
)
(12,720
)
Accounts payable and other liabilities
917
12,232
(32,915
)
9,930
(34,250
)
5,302
Deferred income
(1,382
)
14,564
7,908
33,399
(1,790
)
22,353
Net cash provided by operating activities
$
47,452
$
51,255
$
118,903
$
133,298
$
180,037
$
192,755
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the nine months ended September 30, 2023 and 2022, was $3,682 and $25,443, respectively. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period. Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.
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