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 December 31, 2023 of $221.6 million, an
increase of 21% compared to the fourth quarter of 2022. The Company
reported net income from continuing operations of $32.0 million, or
$1.30 per diluted share, for the fourth quarter of 2023, compared
to net income from continuing operations of $35.0 million, or $1.43
per diluted share, for the fourth quarter of 2022.
Total revenues from continuing operations for the full year
ended December 31, 2023 increased to $831.8 million from $635.7
million in 2022, with adjusted EBITDA increasing $70.8 million, or
28%, to $322.0 million. Net income from continuing operations for
the year ended December 31, 2023 was $111.9 million, or $4.56 per
diluted share, compared to $103.3 million, or $4.21 per diluted
share, in 2022.
The Company also announced that the board of directors declared
a cash dividend of $0.475 per share for the upcoming quarter ending
March 31, 2024, a quarterly increase of $0.01, or 2%, over the
prior year period. The cash dividend will be payable on April 30,
2024 to all shareholders of record on April 16, 2024. This marks 33
consecutive years the Company has increased its annual
dividend.
FOURTH QUARTER 2023 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM
CONTINUING OPERATIONS):
- Rental revenues increased 19% to $123.6 million.
- Total revenues increased 21% to $221.6 million.
- Adjusted EBITDA1 increased 12% to $87.9 million.
- Dividend rate of $0.465 per share for the fourth quarter
2023. On an annualized basis, this dividend represents a 1.4% yield
on the February 20, 2024 close price of $128.65 per share.
Joe Hanna, President and CEO of McGrath, made the following
comments:
“We were pleased with our fourth quarter results. Our 19%
increase in companywide rental revenues was driven by strong
modular and portable storage performance. Modular rental revenues
grew 37%, with approximately two-thirds of the growth attributable
to our Vesta Modular acquisition. Portable storage rental revenues
grew 13%.
Our modular and portable storage businesses saw broad based
rental strength across commercial and education customer bases. We
maintained our focus on pricing optimization, rental fleet
utilization, and value-added services for our customers. Our
initiatives to grow modular sales also showed progress as sales
revenues increased 21% compared to a year ago.
TRS-RenTelco experienced continued softness in semiconductor
related demand, resulting in 11% lower rental revenues for the
quarter, compared to a year ago. During the quarter we reduced new
equipment capital spending and made progress with reducing the
fleet size to better align with demand conditions.
I am very proud of everything we accomplished in 2023. Our full
year revenue and profit growth reflects a diligent focus on
execution. We pursued our strategic growth focus on the modular and
portable storage businesses with significant organic investment in
new fleet, while optimizing pricing and maintaining high fleet
utilization. Our growth initiatives for Mobile Modular Plus, Site
Related Services and new modular equipment sales all showed
significant progress. Vesta Modular was a strong contributor to our
successful year, and we completed all our Vesta integration work on
schedule by year end.
The recently announced transaction with WillScot Mobile Mini
validates the strength of the McGrath business, the hard work and
dedication of our team members and the valuable solutions we
provide to our customers. We will maintain our independent focus on
disciplined operational execution through the transaction
close."
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended
December 31, 2023 to the quarter ended December 31, 2022 unless
otherwise indicated.
MOBILE MODULAR
For the fourth quarter of 2023, the Company’s Mobile Modular
division reported Adjusted EBITDA of $54.1 million, an increase of
$11.6 million, or 27%, when compared to the same quarter in
2022.
- Rental revenues increased 37% to $75.9 million, depreciation
expense increased 37% to $9.7 million, and other direct costs
increased 29% to $18.3 million, which resulted in an increase in
gross profit on rental revenues of 41% to $48.0 million.
- Rental related services revenues increased 50% to $30.7
million, primarily attributable to higher delivery and pick-up
activities and higher site related services, with associated gross
profit increasing 61% to $11.0 million.
- Sales revenues increased 21% to $42.3 million, primarily from
higher new equipment sales. Gross margin on sales was 32% for both
2023 and 2022, resulting in a 20% increase in gross profit on sales
revenues to $13.6 million.
- Selling and administrative expenses increased $12.9 million to
$37.2 million. The increase was primarily attributed to $6.4
million higher salary and benefit costs, mostly related to the
increased headcount from the Vesta Modular acquisition and $3.8
million higher allocated corporate expenses.
PORTABLE STORAGE
For the fourth quarter of 2023, the Company’s Portable Storage
division reported Adjusted EBITDA of $12.8 million, an increase of
$2.2 million, or 20%, when compared to the same quarter in
2022.
- Rental revenues increased 13% to $19.8 million, depreciation
expense increased 30% to $0.9 million, and other direct costs
decreased 6% to $1.7 million, which resulted in an increase in
gross profit on rental revenues of 15% to $17.1 million.
- Rental related services revenues increased 17% to $5.2 million,
primarily attributable to higher delivery and return delivery
activities, with associated gross profit increasing $0.4 million to
$0.5 million.
- Sales revenues increased $0.8 million to $1.7 million,
primarily from higher used equipment sales. Gross margin on sales
was 38% compared to 30% in 2022, resulting in a $0.4 million
increase in gross profit on sales revenues to $0.6 million.
- Selling and administrative expenses increased $1.6 million to
$8.3 million, primarily due to higher allocated corporate
expenses.
TRS-RENTELCO
For the fourth quarter of 2023, the Company’s TRS-RenTelco
division reported Adjusted EBITDA of $20.7 million, a decrease of
18%, when compared to the same quarter in 2022.
- Rental revenues decreased 11% to $27.9 million, depreciation
expense decreased 6%, and other direct costs decreased 18%,
resulting in a 13% decrease in gross profit on rental revenues to
$11.3 million. The rental revenue decrease was primarily due to
weakness in the semiconductor related end markets, resulting in
lower average rental equipment on rent compared to the prior
year.
- Sales revenues decreased 34% to $5.8 million and gross profit
on sales revenues decreased 41% to $3.2 million.
- Selling and administrative expenses increased 1%, to $7.4
million, when compared to the prior year.
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 February 1,
2024, McGrath RentCorp will host a conference call at 5:00 p.m.
Eastern Time (2:00 p.m. Pacific Time) on February 21, 2024 to
discuss the fourth quarter 2024 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 1-800-839-8320
(in the U.S.), or 1-402-220-6072 (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.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended December
31,
Twelve Months Ended December
31,
(in thousands,
except per share amounts)
2023
2022
2023
2022
Revenues
Rental
$
123,563
$
104,075
$
474,336
$
389,663
Rental related services
36,679
25,687
138,160
94,963
Rental operations
160,242
129,762
612,496
484,626
Sales
58,589
52,217
207,165
147,720
Other
2,757
922
12,181
3,319
Total revenues
221,588
182,901
831,842
635,665
Costs and
Expenses
Direct costs of rental operations:
Depreciation of rental equipment
22,413
20,307
88,912
80,425
Rental related services
25,003
18,730
96,628
68,846
Other
24,754
21,785
114,942
104,358
Total direct costs of rental
operations
72,170
60,822
300,482
253,629
Costs of sales
39,296
33,704
137,727
91,828
Total costs of revenues
111,466
94,526
438,209
345,457
Gross profit
110,122
88,375
393,633
290,208
Selling and administrative expenses
(54,506
)
(39,546
)
(207,539
)
(142,914
)
Other income
59
—
3,618
—
Income from operations
55,675
48,829
189,712
147,294
Interest expense
(12,126
)
(4,173
)
(40,560
)
(12,230
)
Foreign currency exchange gain (loss)
144
26
310
(378
)
Income from continuing operations before
provision for income taxes
43,693
44,682
149,462
134,686
Provision for income taxes from continuing
operations
11,676
9,690
37,610
31,377
Income from continuing operations
32,017
34,992
111,852
103,309
Discontinued operations:
Income from discontinued operations before
provision for income taxes
—
5,984
1,709
15,334
Provision for income taxes from
discontinued operations
—
1,335
453
3,505
Gain on sale of discontinued operations,
net of tax
—
—
61,513
—
Income from discontinued operations
—
4,649
62,769
11,829
Net income
$
32,017
$
39,641
$
174,621
$
115,138
Earnings per share from continuing
operations:
Basic
$
1.31
$
1.44
$
4.57
$
4.24
Diluted
$
1.30
$
1.43
$
4.56
$
4.21
Earnings per share from discontinued
operations:
Basic
$
—
$
0.19
$
2.57
$
0.49
Diluted
$
—
$
0.19
$
2.56
$
0.48
Earnings per share:
Basic
$
1.31
$
1.63
$
7.14
$
4.73
Diluted
$
1.30
$
1.62
$
7.12
$
4.70
Shares used in per share calculation:
Basic
24,492
24,384
24,469
24,353
Diluted
24,535
24,527
24,529
24,519
Cash dividends declared per share
$
0.465
$
0.455
$
1.86
$
1.82
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
December 31,
(in
thousands)
2023
2022
Assets
Cash
$
877
$
957
Accounts receivable, net of allowance for
credit losses of $2,801 at December 31, 2023 and $2,300 at December
31, 2022
227,368
169,937
Rental equipment, at cost:
Relocatable modular buildings
1,291,093
938,081
Portable storage containers
236,123
185,187
Electronic test equipment
377,587
398,267
1,904,803
1,521,535
Less: accumulated depreciation
(575,480
)
(531,218
)
Rental equipment, net
1,329,323
990,317
Property, plant and equipment, net
169,114
138,713
Prepaid expenses and other assets
102,789
69,837
Intangible assets, net
64,588
35,431
Goodwill
323,224
106,403
Assets of discontinued operations
—
196,249
Total assets
$
2,217,283
$
1,707,844
Liabilities and
Shareholders' Equity
Liabilities:
Notes payable
$
762,975
$
413,742
Accounts payable and accrued
liabilities
167,523
151,208
Deferred income
111,428
82,417
Deferred income taxes, net
241,555
203,361
Liabilities of discontinued operations
—
53,171
Total liabilities
1,283,481
903,899
Shareholders’ equity:
Common stock, no par value - Authorized
40,000 shares
Issued and outstanding - 24,496 shares as
of December 31, 2023 and 24,388 shares as of December 31, 2022
111,122
110,080
Retained earnings
822,796
693,943
Accumulated other comprehensive loss
(116
)
(78
)
Total shareholders’ equity
933,802
803,945
Total liabilities and shareholders’
equity
$
2,217,283
$
1,707,844
MCGRATH RENTCORP
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended December
31,
(in
thousands)
2023
2022
Cash Flows from
Operating Activities:
Net income
$
174,621
$
115,138
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
109,375
111,344
Deferred income taxes
(16,952
)
4,486
Provision for credit losses
2,633
837
Share-based compensation
8,275
8,009
Gain on sale of property, plant and
equipment
(3,618
)
—
Gain on sale of discontinued
operations
(61,513
)
—
Gain on sale of used rental equipment
(31,642
)
(37,979
)
Foreign currency exchange (gain) loss
(310
)
378
Amortization of debt issuance costs
8
16
Change in:
Accounts receivable
(37,776
)
(31,361
)
Prepaid expenses and other assets
(29,326
)
(16,484
)
Accounts payable and accrued
liabilities
(32,526
)
16,347
Deferred income
14,094
23,701
Net cash provided by operating
activities
95,343
194,432
Cash Flows from
Investing Activities:
Proceeds from sale of discontinued
operations
268,012
—
Purchases of rental equipment
(229,679
)
(187,689
)
Purchases of property, plant and
equipment
(43,989
)
(17,617
)
Cash paid for acquisition of
businesses
(458,315
)
—
Cash paid for acquisition of business
assets
(3,767
)
—
Proceeds from sales of used rental
equipment
66,168
73,879
Proceeds from sales of property, plant and
equipment
9,702
—
Net cash used in investing activities
(391,868
)
(131,427
)
Cash Flows from
Financing Activities:
Net borrowings under bank lines of
credit
274,225
47,275
Borrowings under senior note purchase
agreement
75,000
—
Principal payment of Series C senior
notes
—
(60,000
)
Taxes paid related to net share settlement
of stock awards
(7,233
)
(6,539
)
Payment of dividends
(45,556
)
(44,269
)
Net cash provided by (used in) financing
activities
296,436
(63,533
)
Effect of foreign currency exchange rate
changes on cash
9
(6
)
Net increase (decrease) in cash
(80
)
(534
)
Cash balance, beginning of period
957
1,491
Cash balance, end of period
$
877
$
957
Supplemental
Disclosure of Cash Flow Information:
Interest paid, during the period
$
38,603
$
14,775
Net income taxes paid, during the
period
$
91,565
$
27,362
Dividends accrued during the period, not
yet paid
$
12,010
$
11,227
Rental equipment acquisitions, not yet
paid
$
16,653
$
13,220
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Three months ended December 31,
2023
(dollar amounts in
thousands)
Mobile Modular
Portable Storage
TRS- RenTelco
Enviroplex
Adler Tanks
(Discontinued)
Consolidated
Revenues
Rental
$
75,931
$
19,760
$
27,872
$
—
$
—
$
123,563
Rental related services
30,713
5,150
816
—
—
36,679
Rental operations
106,644
24,910
28,688
—
—
160,242
Sales
42,329
1,696
5,751
8,813
—
58,589
Other
1,686
338
733
—
—
2,875
Total revenues
150,659
26,944
35,172
8,813
—
221,706
Costs and
Expenses
Direct costs of rental operations:
Depreciation
9,725
944
11,744
—
—
22,413
Rental related services
19,689
4,651
663
—
—
25,003
Other
18,256
1,699
4,799
—
—
24,754
Total direct costs of rental
operations
47,670
7,294
17,206
—
—
72,170
Costs of sales
28,718
1,059
2,577
6,942
—
39,296
Total costs of revenues
76,388
8,353
19,783
6,942
—
111,466
Gross
Profit
Rental
47,950
17,117
11,329
—
—
76,396
Rental related services
11,024
499
153
—
—
11,676
Rental operations
58,974
17,616
11,482
—
—
88,072
Sales
13,611
637
3,174
1,871
—
19,293
Other
1,686
338
733
—
—
2,868
Total gross profit
74,271
18,591
15,389
1,871
—
110,122
Selling and administrative expenses
(37,213
)
(8,255
)
(7,386
)
(1,652
)
—
(54,506
)
Other income
38
7
14
—
—
59
Income from operations
$
37,096
$
10,343
$
8,017
$
219
—
$
55,675
Interest expense
(12,126
)
Foreign currency exchange gain
144
Provision for income taxes
(11,676
)
Net income
$
32,017
Other
Information
Adjusted EBITDA 1
$
54,144
$
12,772
$
20,704
$
308
—
$
87,928
Average rental equipment 2
$
1,155,413
$
218,976
$
379,214
Average monthly total yield 3
2.19
%
3.01
%
2.43
%
Average utilization 4
79.7
%
74.8
%
58.9
%
Average monthly rental rate 5
2.75
%
4.02
%
4.16
%
1.
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.
2.
Average rental equipment represents the
cost of rental equipment, excluding new equipment inventory and
accessory equipment.
3.
Average monthly total yield is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment for the period.
4.
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.
5.
Average monthly rental rate is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Three months ended December 31,
2022
(dollar amounts in
thousands)
Mobile Modular
Portable Storage
TRS- RenTelco
Enviroplex
Adler Tanks
(Discontinued)
Consolidated
Revenues
Rental
$
55,230
$
17,460
$
31,385
$
—
$
18,728
$
122,803
Rental related services
20,514
4,390
783
—
8,433
34,120
Rental operations
75,744
21,850
32,168
—
27,161
156,923
Sales
34,923
943
8,726
7,625
698
52,915
Other
337
60
525
—
123
1,045
Total revenues
111,004
22,853
41,419
7,625
27,982
210,883
Costs and
Expenses
Direct costs of rental operations:
Depreciation
7,119
724
12,464
—
4,008
24,315
Rental related services
13,674
4,311
745
—
6,096
24,826
Other
14,150
1,809
5,826
—
2,639
24,424
Total direct costs of rental
operations
34,943
6,844
19,035
—
12,743
73,565
Costs of sales
23,625
663
3,309
6,107
472
34,176
Total costs of revenues
58,568
7,507
22,344
6,107
13,215
107,741
Gross
Profit
Rental
33,961
14,927
13,095
—
12,081
74,064
Rental related services
6,839
80
38
—
2,337
9,294
Rental operations
40,800
15,007
13,133
—
14,418
83,358
Sales
11,298
280
5,417
1,518
226
18,739
Other
337
60
525
—
123
1,045
Total gross profit
52,436
15,346
19,075
1,518
14,767
103,142
Selling and administrative expenses
(24,317
)
(6,672
)
(7,315
)
(1,242
)
(7,786
)
(47,332
)
Other income
—
—
—
—
—
—
Income from operations
$
28,119
$
8,674
$
11,760
$
276
$
6,981
55,810
Interest expense
(5,170
)
Foreign currency exchange gain
26
Provision for income taxes
(11,025
)
Net income
$
39,641
Other
Information
Adjusted EBITDA 1
$
42,528
$
10,617
$
25,333
$
351
$
12,140
$
90,969
Average rental equipment 2
$
863,088
$
181,633
$
395,789
Average monthly total yield 3
2.13
%
3.20
%
2.63
%
Average utilization 4
80.5
%
84.9
%
63.0
%
Average monthly rental rate 5
2.65
%
3.77
%
4.20
%
1.
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.
2.
Average rental equipment represents the
cost of rental equipment, excluding new equipment inventory and
accessory equipment.
3.
Average monthly total yield is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment for the period.
4.
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.
5.
Average monthly rental rate is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Twelve months ended December 31,
2023
(dollar amounts in
thousands)
Mobile Modular
Portable Storage
TRS- RenTelco
Enviroplex
Adler Tanks
(Discontinued)
Consolidated
Revenues
Rental
$
285,553
$
74,536
$
114,247
$
—
$
6,520
$
480,856
Rental related services
114,511
20,510
3,139
—
2,584
140,744
Rental operations
400,064
95,046
117,386
—
9,104
621,600
Sales
155,267
4,587
27,119
20,192
269
207,434
Other
6,905
1,504
3,772
—
65
19,025
Total revenues
562,236
101,137
148,277
20,192
9,438
841,280
Costs and
Expenses
Direct costs of rental operations:
Depreciation
36,921
3,514
48,477
—
1,325
90,237
Rental related services
75,390
18,568
2,670
—
2,020
98,648
Other
86,983
7,317
20,642
—
1,270
116,212
Total direct costs of rental
operations
199,294
29,399
71,789
—
4,614
305,096
Costs of sales
105,021
2,858
13,884
15,964
159
137,886
Total costs of revenues
304,315
32,257
85,673
15,964
4,773
442,982
Gross
Profit
Rental
161,649
63,705
45,128
—
3,926
274,408
Rental related services
39,121
1,942
469
—
564
42,096
Rental operations
200,770
65,647
45,597
—
4,490
316,504
Sales
50,246
1,729
13,235
4,228
110
69,548
Other
6,905
1,504
3,772
—
65
12,246
Total gross profit
257,921
68,880
62,604
4,228
4,665
398,298
Selling and administrative expenses
(138,574
)
(31,537
)
(30,962
)
(6,466
)
(2,582
)
(210,121
)
Other income
2,329
457
832
—
—
3,618
Income (loss) from operations
$
121,676
$
37,800
$
32,474
$
(2,238
)
$
2,083
$
191,795
Interest expense
(40,934
)
Foreign currency exchange loss
310
Provision for income taxes
(38,063
)
Net income
$
113,108
Other
Information
Adjusted EBITDA 1
$
191,990
$
47,147
$
84,736
$
(1,899
)
$
3,682
$
325,656
Average rental equipment 2
$
1,093,086
$
206,095
$
388,679
Average monthly total yield 3
2.18
%
3.01
%
2.43
%
Average utilization 4
79.7
%
77.3
%
58.9
%
Average monthly rental rate 5
2.73
%
3.90
%
4.16
%
1.
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 year ended December
31, 2023, excludes the gain on sale of discontinued operations from
the divestiture of Adler Tanks.
2.
Average rental equipment represents the
cost of rental equipment, excluding new equipment inventory and
accessory equipment.
3.
Average monthly total yield is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment for the period.
4.
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.
5.
Average monthly rental rate is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment on rent for the period.
MCGRATH RENTCORP
BUSINESS SEGMENT DATA
(unaudited)
Twelve months ended December 31,
2022
(dollar amounts in
thousands)
Mobile Modular
Portable Storage
TRS- RenTelco
Enviroplex
Adler Tanks
(Discontinued)
Consolidated
Revenues
Rental
$
206,070
$
62,218
$
121,375
$
—
$
66,366
$
456,029
Rental related services
74,756
17,095
3,112
—
27,654
122,617
Rental operations
280,826
79,313
124,487
—
94,020
578,646
Sales
97,046
2,933
24,571
23,170
2,933
150,653
Other
1,339
260
1,720
—
1,205
4,524
Total revenues
379,211
82,506
150,778
23,170
98,158
733,823
Costs and
Expenses
Direct costs of rental operations:
Depreciation
28,373
2,799
49,253
—
16,004
96,429
Rental related services
49,910
16,344
2,592
—
20,947
89,793
Other
76,819
6,212
21,327
—
12,422
116,780
Total direct costs of rental
operations
155,102
25,355
73,172
—
49,373
303,002
Costs of sales
62,224
1,849
9,707
18,048
2,085
93,913
Total costs of revenues
217,326
27,204
82,879
18,048
51,458
396,915
Gross
Profit
Rental
100,878
53,207
50,795
—
37,940
242,820
Rental related services
24,847
750
520
—
6,707
32,824
Rental operations
125,725
53,957
51,315
—
44,647
275,644
Sales
34,822
1,084
14,864
5,122
848
56,740
Other
1,339
260
1,720
—
1,205
4,524
Total gross profit
161,885
55,302
67,899
5,122
46,700
336,908
Selling and administrative expenses
(85,769
)
(24,465
)
(27,245
)
(5,435
)
(28,428
)
(171,342
)
Other income
—
—
—
—
—
—
Income (loss) from operations
$
76,116
$
30,837
$
40,654
$
(313
)
$
18,272
$
165,566
Interest expense
(15,168
)
Foreign currency exchange loss
(378
)
Provision for income taxes
(34,882
)
Net income
$
115,138
Other
Information
Adjusted EBITDA 1
$
121,831
$
37,393
$
92,007
$
(25
)
$
37,660
$
288,866
Average rental equipment 2
$
855,640
$
169,997
$
383,235
Average monthly total yield 3
2.01
%
3.05
%
2.63
%
Average utilization 4
78.0
%
84.8
%
64.2
%
Average monthly rental rate 5
2.57
%
3.60
%
4.11
%
1.
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.
2.
Average rental equipment represents the
cost of rental equipment, excluding new equipment inventory and
accessory equipment.
3.
Average monthly total yield is calculated
by dividing the averages of monthly rental revenues by the cost of
rental equipment for the period.
4.
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.
5.
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 December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Income from continuing operations
$
32,016
$
34,992
$
111,852
$
103,309
Provision for income taxes from continuing
operations
11,676
9,690
37,610
31,377
Interest expense
12,126
4,173
40,560
12,230
Depreciation and amortization
27,533
23,508
107,918
93,490
EBITDA
83,351
72,363
297,940
240,406
Share-based compensation
3,002
2,503
8,157
6,747
Transaction costs 3
1,575
3,886
15,877
4,053
Adjusted EBITDA 1
$
87,928
$
78,752
$
321,974
$
251,206
Adjusted EBITDA margin 2
40
%
43
%
39
%
40
%
Reconciliation of Adjusted EBITDA to
Net Cash Provided by Operating Activities
(dollar amounts in
thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Adjusted EBITDA 1
$
87,928
$
90,969
$
325,656
$
288,866
Interest paid
(10,785
)
(5,793
)
(38,603
)
(14,775
)
Income taxes paid, net of refunds
received
(82,018
)
(2,477
)
(91,565
)
(27,362
)
Gain on sale of used rental equipment
(8,678
)
(11,274
)
(31,642
)
(37,979
)
Foreign currency exchange loss
(144
)
(26
)
(310
)
378
Amortization of debt issuance costs
2
3
8
16
Change in certain assets and
liabilities:
Accounts receivable, net
(9,204
)
(64
)
(35,143
)
(30,524
)
Prepaid expenses and other assets
(21,936
)
829
(29,326
)
(16,484
)
Accounts payable and other liabilities
15,089
(1,335
)
(17,826
)
8,595
Deferred income
6,186
(9,698
)
14,094
23,701
Net cash (used in) provided by operating
activities
$
(23,560
)
$
61,134
$
95,343
$
194,432
1.
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 twelve months ended
December 31, 2023, excludes the gain on sale of discontinued
operations from the divestiture of Adler Tanks. Total Adjusted
EBITDA attributed to discontinued operations for the years ended
December 31, 2023 and 2022, was $3,682 and $37,660,
respectively.
2.
Adjusted EBITDA Margin is calculated as
Adjusted EBITDA divided by total revenues for the period.
3.
Transaction costs include acquisition and
divestiture related legal and professional fees and other costs
specific to these transactions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240220559341/en/
Keith E. Pratt EVP & Chief Financial Officer
925-606-9200
McGrath RentCorp (NASDAQ:MGRC)
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