McGrath RentCorp Announces Results for Second Quarter 2021
McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2021 of $146.4 million, an increase of 6%, compared to the second quarter of 2020. The Company reported net income of $20.6 million, or $0.84 per diluted share, for the second quarter of 2021, compared to net income of $22.5 million, or $0.92 per diluted share, for the second quarter of 2020.
SECOND QUARTER 2021 COMPANY HIGHLIGHTS:
Rental revenues increased 10% year-over-year to $94.6 million. Total revenues increased 6% year-over-year to $146.4 million. Excluding $2.6 million Design Space and Kitchens To Go transaction related costs and amortization of newly acquired intangible assets, net income for the second quarter was $22.5 million, or $0.92 per share, which was comparable to second quarter of 2020. Adjusted EBITDA1 increased $0.4 million to $58.5 million. Dividend rate increased 4% year-over-year to $0.435 per share for the second quarter of 2021. On an annualized basis, this dividend represents a 2.2% yield on the August 2, 2021 close price of $78.90 per share. The Company raised full year 2021 guidance for total revenue to $610 million to $640 million and for adjusted EBITDA to $245 million to $260 million.Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“Our second quarter results reflect improved end market conditions in each of our three business segments. Companywide rental revenues increased 10% year over year. Modular rental revenues grew 14%, with just over half the growth attributable to our Design Space and Kitchens To Go acquisitions during the quarter. Rental revenues at TRS and Adler grew 7% and 4% respectively. Sequential rental revenue growth in each segment reflected improving business conditions as we enter seasonally busier months of the year.
Our teams have been busy working through the integration of Design Space and Kitchens To Go, acquired during the second quarter. I am grateful for their exceptional support and very pleased with their progress. I am excited about the long-term potential from both of these acquisitions. Just in the first few months we have begun to realize opportunities from our combined selling resources and we expect many more opportunities to come.
While business activity levels have increased, we have also seen some impact from current economic realities in the new equipment sales portion of our modular business. Supply chain delays, labor shortages and higher costs for materials and labor are starting to extend project timelines and cause some new sales to push out to later in the year, or into next year. Consequently, our outlook for new modular equipment sales in 2021, while still higher than 2020, is not as strong as it was a few months ago.
The second half of the year is typically the most substantial contributor to our annual results. While the potential for COVID-19 related disruption remains, we will be fully focused on solid execution to make the most of the improved business conditions that we have recently seen.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended June 30, 2021 to the quarter ended June 30, 2020 unless otherwise indicated.
MOBILE MODULAR
For the second quarter of 2021, the Company’s Mobile Modular division reported income from operations of $18.2 million, a decrease of $2.4 million, or 12%. Rental revenues increased 14% to $53.2 million, depreciation expense increased 23% to $7.1 million and other direct costs increased 28% to $15.9 million, which resulted in an increase in gross profit on rental revenues of 6% to $30.3 million. The rental revenue increase was due in part to approximately $4.0 million revenues earned during the quarter from new Design Space and Kitchens To Go customers acquired during the quarter. Rental related services revenues increased 12% to $16.2 million, primarily due to increased delivery and return delivery revenues at Portable Storage and higher amortization of modular building delivery and return delivery and dismantle revenues, with associated gross profit increasing 7% to $4.4 million. Sales revenues decreased 3% to $14.8 million, primarily due to lower new equipment sales. Gross margin on sales was 39% compared to 29% in 2020, resulting in a 29% increase in gross profit on sales revenues to $5.8 million. Selling and administrative expenses increased 34% to $22.6 million, primarily due to increased employee salaries and benefit costs totaling $2.0 million, mostly due to the addition of Design Space and Kitchens To Go employees during the quarter, $1.7 million higher amortization of intangible assets due to the Design Space and Kitchens To Go acquisitions and $0.9 million acquisition related transaction costs in 2021.
TRS-RENTELCO
For the second quarter of 2021, the Company’s TRS-RenTelco division reported income from operations of $8.5 million, an increase of $0.2 million, or 3%. Rental revenues increased 7% to $27.9 million, depreciation expense increased 1% to $11.9 million and other direct costs increased 32% to $4.7 million, which resulted in a 5% increase in gross profit on rental revenues to $11.2 million. The rental revenue increase was primarily due to increased demand for general purpose equipment compared to the prior year. Sales revenues decreased 20% to $4.8 million. Gross margin on sales was 62% in 2021 compared to 49% in 2020, resulting in a 3% increase in gross profit on sales revenues to $3.0 million. Selling and administrative expenses increased 3% to $6.1 million.
ADLER TANKS
For the second quarter of 2021, the Company’s Adler Tanks division reported income from operations of $1.7 million, which was comparable to the prior year. Rental revenues increased 4% to $13.5 million, depreciation expense increased 2% to $4.2 million and other direct costs increased 19% to $2.7 million, which resulted in a comparable gross profit on rental revenues to $6.7 million in 2021 and 2020. Rental related services revenues increased 8% to $5.8 million, with gross profit on rental related services decreasing $0.3 million, or 21%, to $1.0 million. Selling and administrative expenses decreased 2% to $6.3 million.
FINANCIAL OUTLOOK:
Based upon the Company’s year-to-date results, current outlook for the remainder of the year, and the previously announced acquisition of Design Space, the Company is raising its financial outlook.
For the full-year 2021, the Company expects:
Previous
Current
●
Total revenue:
$570 million to $610 million
$610 million to $640 million
●
Adjusted EBITDA:
$232 million to $247 million
$245 million to $260 million
●
Gross rental equipment capital expenditures:
$90 million to $110 million
$100 million to $120 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 July 7, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on August 3, 2021 to discuss the second 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 5573645. 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 being excited about the long-term potential from both of the Design Space and Kitchens To Go acquisitions, the expectation of the realization of more opportunities from the combined selling resources, the impact supply chain delays, labor shortages and higher costs of materials and labor are having on project timelines and the Company’s outlook for new equipment sales in 2021, the potential for COVID-19 related disruption and keeping fully focused on solid execution and improved business conditions, 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 shelter-in and other 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 acquisition, 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; 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 June 30,
Six Months Ended June 30,
(in thousands, except per share amounts)
2021
2020
2021
2020
Revenues
Rental
$
94,581
$
85,629
$
180,668
$
175,135
Rental related services
22,688
20,475
42,357
44,986
Rental operations
117,269
106,104
223,025
220,121
Sales
28,256
30,669
42,867
45,035
Other
910
900
1,738
1,970
Total revenues
146,435
137,673
267,630
267,126
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
23,159
21,583
44,414
43,221
Rental related services
17,276
14,894
31,880
33,157
Other
23,278
18,165
42,985
37,618
Total direct costs of rental operations
63,713
54,642
119,279
113,996
Costs of sales
16,855
19,799
25,403
28,242
Total costs of revenues
80,568
74,441
144,682
142,238
Gross profit
65,867
63,232
122,948
124,888
Selling and administrative expenses
36,261
30,540
69,398
62,494
Income from operations
29,606
32,692
53,550
62,394
Other expense:
Interest expense
(2,257
)
(2,184
)
(4,040
)
(4,836
)
Foreign currency exchange (loss) gain
(2
)
117
(57
)
(319
)
Income before provision for income taxes
27,347
30,625
49,453
57,239
Provision for income taxes
6,739
8,076
11,447
14,531
Net income
$
20,608
$
22,549
$
38,006
$
42,708
Earnings per share:
Basic
$
0.85
$
0.93
$
1.57
$
1.76
Diluted
$
0.84
$
0.92
$
1.55
$
1.74
Shares used in per share calculation:
Basic
24,229
24,121
24,191
24,207
Diluted
24,494
24,471
24,505
24,612
Cash dividends declared per share
$
0.435
$
0.420
$
0.870
$
0.840
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30,
December 31,
(in thousands)
2021
2020
Assets
Cash
$
2,412
$
1,238
Accounts receivable, net of allowance for doubtful accounts of $2,225 in 2021 and $2,100 in 2020
140,909
123,316
Rental equipment, at cost:
Relocatable modular buildings
1,019,697
882,115
Electronic test equipment
360,720
333,020
Liquid and solid containment tanks and boxes
313,677
315,706
1,694,094
1,530,841
Less accumulated depreciation
(621,039
)
(592,725
)
Rental equipment, net
1,073,055
938,116
Property, plant and equipment, net
138,590
136,210
Prepaid expenses and other assets
57,499
41,549
Intangible assets, net
51,169
7,118
Goodwill
132,393
28,197
Total assets
$
1,596,027
$
1,275,744
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
472,696
$
222,754
Accounts payable and accrued liabilities
144,901
108,334
Deferred income
56,964
45,975
Deferred income taxes, net
223,345
216,077
Total liabilities
897,906
593,140
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,245 shares as of June 30, 2021 and 24,128 shares as of December 31, 2020
105,058
106,289
Retained earnings
593,132
576,419
Accumulated other comprehensive loss
(69
)
(104
)
Total shareholders’ equity
698,121
682,604
Total liabilities and shareholders’ equity
$
1,596,027
$
1,275,744
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
(in thousands)
2021
2020
Cash Flows from Operating Activities:
Net income
$
38,006
$
42,708
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
50,559
47,663
Provision for doubtful accounts
138
833
Share-based compensation
3,597
3,224
Gain on sale of used rental equipment
(11,870
)
(9,602
)
Foreign currency exchange loss
57
319
Amortization of debt issuance costs
6
5
Change in:
Accounts receivable
(5,494
)
1,326
Prepaid expenses and other assets
(9,385
)
(1,641
)
Accounts payable and accrued liabilities
17,642
6,389
Deferred income
7,458
5,815
Deferred income taxes
7,268
483
Net cash provided by operating activities
97,982
97,522
Cash Flows from Investing Activities:
Purchases of rental equipment
(58,902
)
(57,564
)
Purchases of property, plant and equipment
(2,272
)
(6,893
)
Cash paid for acquisition of businesses
(284,341
)
—
Proceeds from sales of used rental equipment
24,674
21,921
Net cash used in investing activities
(320,841
)
(42,536
)
Cash Flows from Financing Activities:
Net borrowing (repayment) under bank lines of credit
189,983
(21,288
)
Borrowing under private placement
60,000
—
Repurchase of common stock
—
(13,501
)
Taxes paid related to net share settlement of stock awards
(4,828
)
(2,340
)
Payment of dividends
(21,089
)
(19,526
)
Net cash provided by (used in) financing activities
224,066
(56,655
)
Effect of foreign currency exchange rate changes on cash
(33
)
21
Net increase (decrease) in cash
1,174
(1,648
)
Cash balance, beginning of period
1,238
2,342
Cash balance, end of period
$
2,412
$
694
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
3,987
$
5,031
Net income taxes paid, during the period
$
6,990
$
2,153
Dividends accrued during the period, not yet paid
$
9,918
$
10,255
Rental equipment acquisitions, not yet paid
$
8,502
$
6,654
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2021
(dollar amounts in thousands)
Mobile
Modular
TRS-
RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
53,238
$
27,860
$
13,483
$
—
$
94,581
Rental related services
16,207
710
5,771
—
22,688
Rental operations
69,445
28,570
19,254
—
117,269
Sales
14,784
4,757
593
8,122
28,256
Other
343
456
111
—
910
Total revenues
84,572
33,783
19,958
8,122
146,435
Costs and Expenses
Direct costs of rental operations:
Depreciation
7,074
11,916
4,169
—
23,159
Rental related services
11,804
745
4,727
—
17,276
Other
15,901
4,718
2,659
—
23,278
Total direct costs of rental operations
34,779
17,379
11,555
—
63,713
Costs of sales
9,034
1,792
427
5,602
16,855
Total costs of revenues
43,813
19,171
11,982
5,602
80,568
Gross Profit
Rental
30,264
11,225
6,655
—
48,144
Rental related services
4,401
(33
)
1,044
—
5,412
Rental operations
34,665
11,192
7,699
—
53,556
Sales
5,751
2,964
166
2,520
11,401
Other
343
456
111
—
910
Total gross profit
40,759
14,612
7,976
2,520
65,867
Selling and administrative expenses
22,602
6,073
6,253
1,333
36,261
Income from operations
$
18,157
$
8,539
$
1,723
$
1,187
29,606
Interest expense
(2,257
)
Foreign currency exchange gain
(2
)
Provision for income taxes
(6,739
)
Net income
$
20,608
Other Information
Average rental equipment 1
$
906,653
$
349,480
$
313,108
Average monthly total yield 2
1.96
%
2.66
%
1.44
%
Average utilization 3
75.5
%
67.7
%
44.0
%
Average monthly rental rate 4
2.59
%
3.93
%
3.27
%
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 June 30, 2020
(dollar amounts in thousands)
Mobile
Modular
TRS-
RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
46,628
$
26,012
$
12,989
$
—
$
85,629
Rental related services
14,463
670
5,342
—
20,475
Rental operations
61,091
26,682
18,331
—
106,104
Sales
15,316
5,922
232
9,199
30,669
Other
355
475
70
—
900
Total revenues
76,762
33,079
18,633
9,199
137,673
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,737
11,750
4,096
—
21,583
Rental related services
10,362
517
4,015
—
14,894
Other
12,376
3,562
2,227
—
18,165
Total direct costs of rental operations
28,475
15,829
10,338
—
54,642
Costs of sales
10,845
3,049
228
5,677
19,799
Total costs of revenues
39,320
18,878
10,566
5,677
74,441
Gross Profit
Rental
28,514
10,700
6,666
—
45,880
Rental related services
4,101
153
1,327
—
5,581
Rental operations
32,615
10,853
7,993
—
51,461
Sales
4,471
2,873
4
3,522
10,870
Other
356
475
70
—
901
Total gross profit
37,442
14,201
8,067
3,522
63,232
Selling and administrative expenses
16,857
5,875
6,353
1,455
30,540
Income from operations
$
20,585
$
8,326
$
1,714
$
2,067
32,692
Interest expense
(2,184
)
Foreign currency exchange gain
117
Provision for income taxes
(8,076
)
Net income
$
22,549
Other Information
Average rental equipment 1
$
822,743
$
338,919
$
314,780
Average monthly total yield 2
1.89
%
2.56
%
1.38
%
Average utilization 3
77.7
%
63.9
%
44.3
%
Average monthly rental rate 4
2.43
%
4.00
%
3.10
%
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)
Six months ended June 30, 2021
(dollar amounts in thousands)
Mobile
Modular
TRS-
RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
99,895
$
55,136
$
25,637
$
—
$
180,668
Rental related services
30,258
1,450
10,649
—
42,357
Rental operations
130,153
56,586
36,286
—
223,025
Sales
22,404
9,906
1,201
9,356
42,867
Other
663
894
181
—
1,738
Total revenues
153,220
67,386
37,668
9,356
267,630
Costs and Expenses
Direct costs of rental operations:
Depreciation
12,893
23,278
8,243
—
44,414
Rental related services
21,876
1,398
8,606
—
31,880
Other
28,776
9,252
4,957
—
42,985
Total direct costs of rental operations
63,545
33,928
21,806
—
119,279
Costs of sales
13,982
4,093
843
6,485
25,403
Total costs of revenues
77,527
38,021
22,649
6,485
144,682
Gross Profit
Rental
58,227
22,605
12,437
—
93,269
Rental related services
8,380
54
2,043
—
10,477
Rental operations
66,607
22,659
14,480
—
103,746
Sales
8,423
5,812
358
2,871
17,464
Other
663
894
181
—
1,738
Total gross profit
75,693
29,365
15,019
2,871
122,948
Selling and administrative expenses
41,839
12,371
12,520
2,668
69,398
Income from operations
$
33,854
$
16,994
$
2,499
$
203
53,550
Interest expense
(4,040
)
Foreign currency exchange loss
(57
)
Provision for income taxes
(11,447
)
Net income
$
38,006
Other Information
Average rental equipment 1
$
876,529
$
342,526
$
313,498
Average monthly total yield 2
1.90
%
2.68
%
1.36
%
Average utilization 3
75.7
%
67.7
%
42.1
%
Average monthly rental rate 4
2.44
%
3.96
%
3.24
%
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)
Six months ended June 30, 2020
(dollar amounts in thousands)
Mobile
Modular
TRS-
RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
94,038
$
53,548
$
27,549
$
—
$
175,135
Rental related services
32,607
1,496
10,883
—
44,986
Rental operations
126,645
55,044
38,432
—
220,121
Sales
22,572
11,031
730
10,702
45,035
Other
743
1,067
160
—
1,970
Total revenues
149,960
67,142
39,322
10,702
267,126
Costs and Expenses
Direct costs of rental operations:
Depreciation
11,406
23,582
8,233
—
43,221
Rental related services
23,712
1,163
8,282
—
33,157
Other
24,993
7,942
4,683
—
37,618
Total direct costs of rental operations
60,111
32,687
21,198
—
113,996
Costs of sales
15,548
5,497
548
6,649
28,242
Total costs of revenues
75,659
38,184
21,746
6,649
142,238
Gross Profit
Rental
57,638
22,024
14,633
—
94,295
Rental related services
8,895
333
2,601
—
11,829
Rental operations
66,533
22,357
17,234
—
106,124
Sales
7,024
5,534
182
4,053
16,793
Other
744
1,067
160
—
1,971
Total gross profit
74,301
28,958
17,576
4,053
124,888
Selling and administrative expenses
34,275
12,236
13,177
2,806
62,494
Income from operations
$
40,026
$
16,722
$
4,399
$
1,247
62,394
Interest expense
(4,836
)
Foreign currency exchange gain
(319
)
Provision for income taxes
(14,531
)
Net income
$
42,708
Other Information
Average rental equipment 1
$
819,212
$
338,066
$
314,823
Average monthly total yield 2
1.90
%
2.64
%
1.46
%
Average utilization 3
78.2
%
64.7
%
45.9
%
Average monthly rental rate 4
2.45
%
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
June 30,
Six Months Ended
June 30,
Twelve Months Ended
June 30,
2021
2020
2021
2020
2021
2020
Net income
$
20,608
$
22,549
$
38,006
$
42,708
$
97,282
$
101,577
Provision for income taxes
6,739
8,076
11,447
14,531
26,976
34,571
Interest expense
2,257
2,184
4,040
4,836
7,991
10,921
Depreciation and amortization
27,099
23,801
50,559
47,663
97,539
94,052
EBITDA
56,703
56,610
104,052
109,738
229,788
241,121
Share-based compensation
1,820
1,501
3,597
3,224
5,922
6,370
Adjusted EBITDA 1
$
58,523
$
58,111
$
107,649
$
112,962
$
235,710
$
247,491
Adjusted EBITDA margin 2
40
%
42
%
40
%
42
%
41
%
42
%
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
Twelve Months Ended
June 30,
2021
2020
2021
2020
2021
2020
Adjusted EBITDA 1
$
58,523
$
58,111
$
107,649
$
112,962
$
235,710
$
247,491
Interest paid
(2,362
)
(2,172
)
(3,987
)
(5,031
)
(8,006
)
(11,296
)
Income taxes paid, net of refunds received
(6,618
)
(1,790
)
(6,990
)
(2,153
)
(39,740
)
(13,508
)
Gain on sale of used rental equipment
(7,076
)
(4,814
)
(11,870
)
(9,602
)
(21,597
)
(21,743
)
Foreign currency exchange loss (gain)
2
(117
)
57
319
(340
)
321
Amortization of debt issuance costs
3
2
6
5
12
11
Change in certain assets and liabilities:
Accounts receivable, net
(6,464
)
(106
)
(5,356
)
2,159
(2,732
)
(4,149
)
Prepaid expenses and other assets
(9,291
)
(2,004
)
(9,385
)
(1,641
)
(3,937
)
6,075
Accounts payable and other liabilities
30,785
5,858
20,400
(5,311
)
28,940
(3,717
)
Deferred income
2,871
(1,128
)
7,458
5,815
(7,346
)
(5,956
)
Net cash provided by operating activities
$
60,373
$
51,840
$
97,982
$
97,522
$
180,964
$
193,529
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.
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