McGrath RentCorp Announces Results for Third Quarter 2021
McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended September 30, 2021 of $173.3 million, an increase of 11%, compared to the third quarter of 2020. The Company reported net income of $23.3 million, or $0.95 per diluted share, for the third quarter of 2021, compared to net income of $28.1 million, or $1.15 per diluted share, for the third quarter of 2020.
THIRD QUARTER 2021 COMPANY HIGHLIGHTS:
Rental revenues increased 17% year-over-year to $103.3 million. Total revenues increased 11% year-over-year to $173.3 million. Adjusted EBITDA1 increased 5% to $66.0 million. Dividend rate increased 4% year-over-year to $0.435 per share for the third quarter of 2021. On an annualized basis, this dividend represents a 2.3% yield on the October 27, 2021 close price of $75.24 per share.Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“Our third quarter results reflect improved end market conditions in each of our three rental business segments. Companywide rental revenues increased 17% year over year. Modular rental revenues grew 26%, with the majority of the growth attributable to our Design Space and Kitchens To Go acquisitions. Rental revenues at TRS and Adler grew 6% and 11%, respectively.
Our teams continued working through the integration of Design Space and Kitchens To Go during the quarter and I am very pleased with their progress. These acquisitions will provide additional long-term growth opportunities, as we expect to deploy more rental equipment capital in our expanded geographic coverage and to expand the breadth of products and services we bring to our customers.
We continued to see some cost pressures from elevated material and labor expenses, and some project delays, reflecting supply chain challenges. As business activity level increased, these factors pressured modular rental and sales margins during the quarter, and pushed completion of some modular sales projects to later in the current year, and in to next year. Partly offsetting these pressures, we are increasing pricing as demand improves.
The overall positive rental demand trends that we have seen in recent months have continued into the fourth quarter. We are fully focused on solid execution for the remainder of the year.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended September 30, 2021 to the quarter ended September 30, 2020 unless otherwise indicated.
MOBILE MODULAR
For the third quarter of 2021, the Company’s Mobile Modular division reported income from operations of $23.5 million, a decrease of $1.4 million, or 5%. Rental revenues increased 26% to $59.2 million, depreciation expense increased 31% to $7.5 million and other direct costs increased 40% to $16.5 million, which resulted in an increase in gross profit on rental revenues of 19% to $35.1 million. The rental revenue increase reflects in part the new Design Space and Kitchens To Go customers that contributed approximately three quarters of the increase. Rental related services revenues increased 31% to $24.5 million, primarily attributable to higher amortization of modular building delivery and return delivery and dismantle revenues, higher site related and other services performed during the lease and increased delivery and return delivery revenues at Portable Storage, with associated gross profit increasing 15% to $6.0 million. Sales revenues decreased 10% to $26.4 million, primarily due to lower new equipment sales. Gross margin on sales was 31% compared to 26% in 2020, resulting in a 9% increase in gross profit on sales revenues to $8.2 million. Selling and administrative expenses increased 47% to $26.1 million, primarily due to increased employee salaries and benefit costs totaling $2.5 million, mostly due to the addition of Design Space and Kitchens To Go employees, $2.4 million higher amortization of intangible assets associated with the Design Space and Kitchens To Go acquisitions and $1.4 million higher allocated corporate expenses.
TRS-RENTELCO
For the third quarter of 2021, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $0.5 million, or 5%. Rental revenues increased 6% to $29.2 million, depreciation expense increased 5% to $12.2 million and other direct costs increased 4% to $5.0 million, which resulted in a 7% increase in gross profit on rental revenues to $12.0 million. The rental revenue increase was primarily the result of increased demand for general purpose equipment compared to the prior year. Sales revenues decreased 31% to $4.8 million. Gross margin on sales was 63% in 2021 compared to 44% in 2020, resulting in a 1% decrease in gross profit on sales revenues to $3.0 million. Selling and administrative expenses increased 1% to $6.0 million.
ADLER TANKS
For the third quarter of 2021, the Company’s Adler Tanks division reported income from operations of $2.8 million, an increase of 4% compared to the prior year. Rental revenues increased 11% to $14.8 million, depreciation expense was comparable to the prior year and other direct costs increased 62% to $3.2 million, which resulted in an increased gross profit on rental revenues of 3%, to $7.6 million. Rental related services revenues increased 14% to $6.3 million, with gross profit on rental related services increasing 2%, to $1.2 million. Selling and administrative expenses increased 9% to $6.3 million primarily due to higher allocated corporate expenses.
FINANCIAL OUTLOOK:
Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is updating its financial outlook.
For the full-year 2021, the Company expects:
Previous
Current
Total revenue: Adjusted EBITDA: Gross rental equipment capital expenditures:$610 million to $640 million
$245 million to $260 million
$100 million to $120 million
$618 million to $628 million
$245 million to $249 million
$108 million to $118 million
1.
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
2.
Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.
ABOUT MCGRATH RENTCORP:
Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. For more information on McGrath RentCorp and its operating units, please visit our websites:
Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.
CONFERENCE CALL NOTE:
As previously announced in its press release of October 1, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 28, 2021 to discuss the third quarter 2021 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the conference call replay is 5485029. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.
FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about the Design Space and Kitchens To Go acquisitions providing additional long-term growth opportunities and the expectation to deploy more rental equipment capital and to expand the breadth of products and services to the Company’s customers, optimism about the overall positive rental demand trends, as well as the statements regarding the full year 2021 in the “Financial Outlook” section, are forward-looking.
These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the duration of the COVID-19 pandemic and its economic impact, the extent and length of the restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the ability to obtain the synergies expected from the Design Space and Kitchens To Go acquisitions and the success of integrating such acquisitions; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.
Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands, except per share amounts)
2021
2020
2021
2020
Revenues
Rental
$
103,269
$
88,138
$
283,937
$
263,273
Rental related services
31,513
25,040
73,870
70,026
Rental operations
134,782
113,178
357,807
333,299
Sales
37,636
42,331
80,503
87,366
Other
874
939
2,612
2,909
Total revenues
173,292
156,448
440,922
423,574
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
23,802
21,419
68,216
64,640
Rental related services
24,356
18,603
56,236
51,760
Other
24,711
18,553
67,696
56,171
Total direct costs of rental operations
72,869
58,575
192,148
172,571
Costs of sales
24,618
29,669
50,021
57,911
Total costs of revenues
97,487
88,244
242,169
230,482
Gross profit
75,805
68,204
198,753
193,093
Selling and administrative expenses
39,907
30,871
109,305
93,365
Income from operations
35,898
37,333
89,448
99,728
Other income (expense):
Interest expense
(3,168
)
(1,968
)
(7,208
)
(6,804
)
Foreign currency exchange (loss) gain
(128
)
130
(185
)
(189
)
Income before provision for income taxes
32,602
35,495
82,055
92,735
Provision for income taxes
9,350
7,394
20,797
21,926
Net income
$
23,252
$
28,101
$
61,258
$
70,809
Earnings per share:
Basic
$
0.96
$
1.17
$
2.53
$
2.93
Diluted
$
0.95
$
1.15
$
2.50
$
2.88
Shares used in per share calculation:
Basic
24,245
24,097
24,209
24,170
Diluted
24,507
24,443
24,506
24,558
Cash dividends declared per share
$
0.435
$
0.420
$
1.305
$
1.260
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30,
December 31,
(in thousands)
2021
2020
Assets
Cash
$
2,380
$
1,238
Accounts receivable, net of allowance for doubtful accounts of $2,225 in 2021
and $2,100 in 2020
168,831
123,316
Rental equipment, at cost:
Relocatable modular buildings
1,023,344
882,115
Electronic test equipment
363,799
333,020
Liquid and solid containment tanks and boxes
311,677
315,706
1,698,820
1,530,841
Less: accumulated depreciation
(635,358
)
(592,725
)
Rental equipment, net
1,063,462
938,116
Property, plant and equipment, net
135,055
136,210
Prepaid expenses and other assets
59,523
41,549
Intangible assets, net
48,715
7,118
Goodwill
132,387
28,197
Total assets
$
1,610,353
$
1,275,744
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
459,475
$
222,754
Accounts payable and accrued liabilities
137,308
108,334
Deferred income
69,634
45,975
Deferred income taxes, net
231,480
216,077
Total liabilities
897,897
593,140
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,247 shares as of September 30, 2021 and 24,128 shares as of December 31, 2020
106,744
106,289
Retained earnings
605,754
576,419
Accumulated other comprehensive loss
(42
)
(104
)
Total shareholders’ equity
712,456
682,604
Total liabilities and shareholders’ equity
$
1,610,353
$
1,275,744
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
(in thousands)
2021
2020
Cash Flows from Operating Activities:
Net income
$
61,258
$
70,809
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
79,047
71,249
Provision for doubtful accounts
193
1,227
Share-based compensation
5,302
4,894
Gain on sale of used rental equipment
(17,788
)
(14,110
)
Foreign currency exchange loss
185
189
Amortization of debt issuance costs
11
8
Change in:
Accounts receivable
(33,471
)
(2,561
)
Prepaid expenses and other assets
(11,409
)
(1,314
)
Accounts payable and accrued liabilities
17,428
(582
)
Deferred income
20,128
3,591
Deferred income taxes
15,403
(1,863
)
Net cash provided by operating activities
136,287
131,537
Cash Flows from Investing Activities:
Purchases of rental equipment
(90,379
)
(65,661
)
Purchases of property, plant and equipment
(969
)
(9,639
)
Cash paid for acquisition of businesses
(285,624
)
—
Proceeds from sales of used rental equipment
41,556
33,837
Net cash used in investing activities
(335,416
)
(41,463
)
Cash Flows from Financing Activities:
Net borrowing (repayment) under bank lines of credit
176,758
(43,460
)
Borrowings under note purchase agreement
100,000
—
Principal payment of Series B senior notes
(40,000
)
—
Repurchase of common stock
—
(13,617
)
Taxes paid related to net share settlement of stock awards
(4,847
)
(3,930
)
Payment of dividends
(31,635
)
(29,642
)
Net cash provided by (used in) financing activities
200,276
(90,649
)
Effect of foreign currency exchange rate changes on cash
(5
)
(224
)
Net increase (decrease) in cash
1,142
(799
)
Cash balance, beginning of period
1,238
2,342
Cash balance, end of period
$
2,380
$
1,543
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
6,477
$
6,829
Net income taxes paid, during the period
$
8,074
$
24,704
Dividends accrued during the period, not yet paid
$
10,002
$
10,355
Rental equipment acquisitions, not yet paid
$
2,199
$
5,827
1.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2021
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
59,223
$
29,204
$
14,842
$
—
$
103,269
Rental related services
24,468
699
6,346
—
31,513
Rental operations
83,691
29,903
21,188
—
134,782
Sales
26,362
4,773
960
5,541
37,636
Other
341
398
135
—
874
Total revenues
110,394
35,074
22,283
5,541
173,292
Costs and Expenses
Direct costs of rental operations:
Depreciation
7,544
12,151
4,107
—
23,802
Rental related services
18,508
663
5,185
—
24,356
Other
16,533
5,015
3,163
—
24,711
Total direct costs of rental operations
42,585
17,829
12,455
—
72,869
Costs of sales
18,145
1,743
680
4,050
24,618
Total costs of revenues
60,730
19,572
13,135
4,050
97,487
Gross Profit
Rental
35,146
12,038
7,572
—
54,756
Rental related services
5,960
36
1,161
—
7,157
Rental operations
41,106
12,074
8,733
—
61,913
Sales
8,217
3,030
280
1,491
13,018
Other
341
398
135
—
874
Total gross profit
49,664
15,502
9,148
1,491
75,805
Selling and administrative expenses
26,138
6,010
6,333
1,426
39,907
Income from operations
$
23,526
$
9,492
$
2,815
$
65
35,898
Interest expense
(3,168
)
Foreign currency exchange loss
(128
)
Provision for income taxes
(9,350
)
Net income
$
23,252
Other Information
Average rental equipment 1
$
975,119
$
362,104
$
311,876
Average monthly total yield 2
2.02
%
2.69
%
1.59
%
Average utilization 3
76.5
%
66.9
%
48.1
%
Average monthly rental rate 4
2.65
%
4.02
%
3.30
%
1.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2020
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
47,134
$
27,619
$
13,385
$
—
$
88,138
Rental related services
18,684
800
5,556
—
25,040
Rental operations
65,818
28,419
18,941
—
113,178
Sales
29,275
6,912
230
5,914
42,331
Other
320
525
94
—
939
Total revenues
95,413
35,856
19,265
5,914
156,448
Costs and Expenses
Direct costs of rental operations:
Depreciation
5,771
11,547
4,101
—
21,419
Rental related services
13,510
673
4,420
—
18,603
Other
11,780
4,820
1,953
—
18,553
Total direct costs of rental operations
31,061
17,040
10,474
—
58,575
Costs of sales
21,726
3,853
251
3,839
29,669
Total costs of revenues
52,787
20,893
10,725
3,839
88,244
Gross Profit (Loss)
Rental
29,583
11,252
7,331
—
48,166
Rental related services
5,174
127
1,136
—
6,437
Rental operations
34,757
11,379
8,467
—
54,603
Sales
7,549
3,059
(21
)
2,075
12,662
Other
320
525
94
—
939
Total gross profit
42,626
14,963
8,540
2,075
68,204
Selling and administrative expenses
17,739
5,962
5,821
1,349
30,871
Income from operations
$
24,887
$
9,001
$
2,719
$
726
37,333
Interest expense
(1,968
)
Foreign currency exchange income
130
Provision for income taxes
(7,394
)
Net income
$
28,101
Other Information
Average rental equipment 1
$
829,460
$
336,015
$
314,933
Average monthly total yield 2
1.89
%
2.74
%
1.42
%
Average utilization 3
76.3
%
67.1
%
44.1
%
Average monthly rental rate 4
2.48
%
4.08
%
3.21
%
1.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2021
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
159,118
$
84,340
$
40,479
$
—
$
283,937
Rental related services
54,726
2,149
16,995
—
73,870
Rental operations
213,844
86,489
57,474
—
357,807
Sales
48,766
14,679
2,161
14,897
80,503
Other
1,004
1,292
316
—
2,612
Total revenues
263,614
102,460
59,951
14,897
440,922
Costs and Expenses
Direct costs of rental operations:
Depreciation
20,437
35,429
12,350
—
68,216
Rental related services
40,384
2,061
13,791
—
56,236
Other
45,309
14,267
8,120
—
67,696
Total direct costs of rental operations
106,130
51,757
34,261
—
192,148
Costs of sales
32,127
5,836
1,523
10,535
50,021
Total costs of revenues
138,257
57,593
35,784
10,535
242,169
Gross Profit
Rental
93,373
34,643
20,009
—
148,025
Rental related services
14,340
90
3,204
—
17,634
Rental operations
107,713
34,733
23,213
—
165,659
Sales
16,640
8,842
638
4,362
30,482
Other
1,004
1,292
316
—
2,612
Total gross profit
125,357
44,867
24,167
4,362
198,753
Selling and administrative expenses
67,977
18,381
18,853
4,094
109,305
Income from operations
$
57,380
$
26,486
$
5,314
$
268
89,448
Interest expense
(7,208
)
Foreign currency exchange loss
(185
)
Provision for income taxes
(20,797
)
Net income
$
61,258
Other Information
Average rental equipment 1
$
906,633
$
348,749
$
312,928
Average monthly total yield 2
1.95
%
2.69
%
1.44
%
Average utilization 3
76.0
%
67.4
%
44.0
%
Average monthly rental rate 4
2.57
%
3.98
%
3.26
%
1.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2020
(dollar amounts in thousands)
Mobile Modular
TRS-RenTelco
Adler Tanks
Enviroplex
Consolidated
Revenues
Rental
$
141,172
$
81,167
$
40,934
$
—
$
263,273
Rental related services
51,291
2,296
16,439
—
70,026
Rental operations
192,463
83,463
57,373
—
333,299
Sales
51,847
17,943
960
16,616
87,366
Other
1,063
1,592
254
—
2,909
Total revenues
245,373
102,998
58,587
16,616
423,574
Costs and Expenses
Direct costs of rental operations:
Depreciation
17,177
35,129
12,334
—
64,640
Rental related services
37,222
1,836
12,702
—
51,760
Other
36,773
12,762
6,636
—
56,171
Total direct costs of rental operations
91,172
49,727
31,672
—
172,571
Costs of sales
37,274
9,350
799
10,488
57,911
Total costs of revenues
128,446
59,077
32,471
10,488
230,482
Gross Profit
Rental
87,222
33,276
21,964
—
142,462
Rental related services
14,069
460
3,737
—
18,266
Rental operations
101,291
33,736
25,701
—
160,728
Sales
14,573
8,593
161
6,128
29,455
Other
1,064
1,592
254
—
2,910
Total gross profit
116,928
43,921
26,116
6,128
193,093
Selling and administrative expenses
52,014
18,198
18,998
4,155
93,365
Income from operations
$
64,914
$
25,723
$
7,118
$
1,973
99,728
Interest expense
(6,804
)
Foreign currency exchange loss
(189
)
Provision for income taxes
(21,926
)
Net income
$
70,809
Other Information
Average rental equipment 1
$
822,723
$
337,330
$
314,859
Average monthly total yield 2
1.89
%
2.67
%
1.44
%
Average utilization 3
77.5
%
65.6
%
45.5
%
Average monthly rental rate 4
2.46
%
4.08
%
3.18
%
1.
Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3.
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4.
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.
Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including share-based compensation, is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Reconciliation of Net Income to Adjusted EBITDA
(dollar amounts in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Twelve Months Ended
September 30,
2021
2020
2021
2020
2021
2020
Net income
$
23,252
$
28,101
$
61,258
$
70,809
$
92,433
$
97,210
Provision for income taxes
9,350
7,394
20,797
21,926
28,931
30,979
Interest expense
3,168
1,968
7,208
6,804
9,191
9,728
Depreciation and amortization
28,488
23,587
79,047
71,249
102,441
94,765
EBITDA
64,258
61,050
168,310
170,788
232,996
232,682
Share-based compensation
1,705
1,670
5,302
4,894
5,957
6,690
Adjusted EBITDA 1
$
65,963
$
62,720
$
173,612
$
175,682
$
238,953
$
239,372
Adjusted EBITDA margin 2
38
%
40
%
39
%
41
%
41
%
42
%
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Twelve Months Ended
September 30,
2021
2020
2021
2020
2021
2020
Adjusted EBITDA 1
$
65,963
$
62,720
$
173,612
$
175,682
$
238,953
$
239,372
Interest paid
(2,490
)
(1,798
)
(6,477
)
(6,829
)
(8,698
)
(9,945
)
Income taxes paid, net of refunds received
(1,084
)
(22,551
)
(8,074
)
(24,704
)
(18,273
)
(32,202
)
Gain on sale of used rental equipment
(5,918
)
(4,508
)
(17,788
)
(14,110
)
(23,007
)
(20,251
)
Foreign currency exchange loss (gain)
128
(130
)
185
189
(82
)
59
Amortization of debt issuance costs
5
3
11
8
14
11
Change in certain assets and liabilities:
Accounts receivable, net
(27,922
)
(3,493
)
(33,278
)
(1,334
)
(27,161
)
8,630
Prepaid expenses and other assets
(2,024
)
327
(11,409
)
(1,314
)
(6,288
)
(3,110
)
Accounts payable and other liabilities
(1,023
)
5,669
19,377
358
22,248
2,315
Deferred income
12,670
(2,224
)
20,128
3,591
7,548
(2,217
)
Net cash provided by operating activities
$
38,305
$
34,015
$
136,287
$
131,537
$
185,254
$
182,662
1.
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-based compensation.
2.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
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