8-K
MCGRATH RENTCORP (MGRC)
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported): April 25, 2024 |
|---|
McGRATH RENTCORP
(Exact name of Registrant as Specified in Its Charter)
| California | 000-13292 | 94-2579843 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
| 5700 Las Positas Road | ||
| Livermore, California | 94551-7800 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
| Registrant’s Telephone Number, Including Area Code: (925) 606-9200 | ||
| --- |
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | MGRC | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 25, 2024, McGrath RentCorp (the “Company”) announced via press release the Company’s results for its first quarter ended March 31, 2024. A copy of the Company’s press release is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are provided under Item 2.02 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission, and shall not be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of McGrath RentCorp, dated April 25, 2024. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| McGRATH RENTCORP | |||
|---|---|---|---|
| Date: | April 25, 2024 | By: | /s/ Keith E. Pratt |
| Keith E. Pratt<br>Executive Vice President and Chief Financial Officer |
EX-99.1
Exhibit 99.1
Contact
Keith E. Pratt
EVP & Chief Financial Officer
925-606-9200
PRESS RELEASE
FOR RELEASE April 25, 2024
McGrath Announces Results for First Quarter 2024
Livermore, CA - April 25, 2024 – 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 March 31, 2024 of $187.8 million, an increase of 15% compared to the first quarter of 2023. The Company reported net income from continuing operations of $22.8 million, or $0.93 per diluted share, for the first quarter of 2024, compared to net income from continuing operations of $11.5 million, or $0.47 per diluted share, for the first quarter of 2023.
FIRST QUARTER 2024 YEAR-OVER-YEAR Company HIGHLIGHTS (FROM CONTINUING OPERATIONS):
• Rental revenues increased 9% to $120.3 million.
• Total revenues increased 15% to $187.8 million.
• Other income, net for the first quarter 2024 included a $9.3 million net gain on sale of a property, which increased earnings per diluted share by $0.28.
• Adjusted EBITDA1 increased 17% to $72.1 million.
• Dividend rate of $0.475 per share for the first quarter 2024. On an annualized basis, this dividend represents a 1.8% yield on the April 24, 2024 close price of $108.53 per share.
Joe Hanna, President and CEO of McGrath, made the following comments:
“We were pleased with our first quarter results. The 9% increase in companywide rental revenues was driven by strong modular and portable storage performance. Modular rental revenues grew 19% and benefitted from a full quarter of Vesta Modular contribution in 2024 compared with two months in 2023. Portable storage rental revenues grew 8%.
Our modular business was a highlight for the quarter, with 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. Growth initiatives for Mobile Modular Plus, Site Related Services and new modular equipment sales all continued to show progress.
TRS-RenTelco experienced continued demand challenges, particularly for semiconductor related projects, resulting in 13% 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 appreciate the strong commitment from the McGrath employee team as we maintain our independent focus on disciplined execution during the pending WillScot Mobile Mini transaction."
Division HIGHLIGHTS:
All comparisons presented below are for the quarter ended March 31, 2024 to the quarter ended March 31, 2023 unless otherwise indicated.
Mobile Modular
For the first quarter of 2024, the Company’s Mobile Modular division reported Adjusted EBITDA of $43.3 million, an increase of $10.9 million, or 34%, when compared to the same quarter in 2023.
• Rental revenues increased 19% to $76.5 million, depreciation expense increased 14% to $9.9 million, and other direct costs decreased 6% to $22.7 million, which resulted in an increase in gross profit on rental revenues of 41% to $43.9 million.
• Rental related services revenues increased 12% to $24.1 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit increasing 14% to $8.4 million.
• Sales revenues increased 49% to $25.3 million, primarily from higher new equipment sales. Gross margin on sales was 31% in 2024, compared to 37% in 2023, resulting in a 27% increase in gross profit on sales revenues to $7.9 million. The reduction in gross margin on sales was primarily attributed to a higher mix of new versus used sales in 2024.
• Selling and administrative expenses increased $1.6 million to $40.1 million. Included within selling and administrative expenses was $5.3 million higher allocated corporate costs, which included $6.5 million in allocated transaction costs related to the pending merger with WillScot Mobile Mini.
Portable storage
For the first quarter of 2024, the Company’s Portable Storage division reported Adjusted EBITDA of $11.5 million, an increase of $1.5 million, or 15%, when compared to the same quarter in 2023.
• Rental revenues increased 8% to $18.4 million, depreciation expense increased 23% to $1.0 million, and other direct costs decreased 18% to $1.5 million, which resulted in an increase in gross profit on rental revenues of 10% to $16.0 million.
• Rental related services revenues were $4.7 million and gross profit on rental related services revenues was $0.3 million, which were both comparable to the first quarter of 2023.
• Sales revenues increased $0.6 million to $1.2 million, primarily from higher used equipment sales. Gross margin on sales was 37% compared to 49% in 2023, resulting in a $0.1 million increase in gross profit on sales revenues to $0.4 million.
• Selling and administrative expenses increased $1.0 million to $9.0 million, primarily due to higher allocated corporate expenses and marketing and administrative costs.
TRS-RenTelco
For the first quarter of 2024, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $18.5 million, a decrease of 10%, when compared to the same quarter in 2023.
• Rental revenues decreased 13% to $25.4 million, depreciation expense decreased 7%, and other direct costs decreased 7%, resulting in a 22% decrease in gross profit on rental revenues to $9.0 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 increased 33% to $6.8 million and gross profit on sales revenues increased 34% to $3.9 million.
• Selling and administrative expenses decreased 6%, to $8.9 million, primarily due to lower allocated corporate expenses.
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 April 4, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on April 25, 2024 to discuss the first 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 1-800-723-5782 (in the U.S.), or 1-402-220-2663 (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 March 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | 2024 | 2023 | ||||
| Revenues | ||||||
| Rental | $ | 120,332 | $ | 110,247 | ||
| Rental related services | 29,580 | 27,132 | ||||
| Rental operations | 149,912 | 137,379 | ||||
| Sales | 35,069 | 23,660 | ||||
| Other | 2,846 | 2,679 | ||||
| Total revenues | 187,827 | 163,718 | ||||
| Costs and Expenses | ||||||
| Direct costs of rental operations: | ||||||
| Depreciation of rental equipment | 22,366 | 21,833 | ||||
| Rental related services | 20,786 | 19,268 | ||||
| Other | 29,010 | 31,135 | ||||
| Total direct costs of rental operations | 72,162 | 72,236 | ||||
| Costs of sales | 22,397 | 14,115 | ||||
| Total costs of revenues | 94,559 | 86,351 | ||||
| Gross profit | 93,268 | 77,367 | ||||
| Expenses: | ||||||
| Selling and administrative expenses | 59,818 | 57,498 | ||||
| Other income, net | (9,281 | ) | — | |||
| Income from operations | 42,731 | 19,869 | ||||
| Interest expense | 12,704 | 7,464 | ||||
| Foreign currency exchange loss (gain) | 132 | (226 | ) | |||
| Income from continuing operations before provision for income taxes | 29,895 | 12,631 | ||||
| Provision for income taxes from continuing operations | 7,047 | 1,113 | ||||
| Income from continuing operations | 22,848 | 11,518 | ||||
| Discontinued operations: | ||||||
| Income from discontinued operations before provision for income taxes | — | 1,709 | ||||
| Provision for income taxes from discontinued operations | — | 453 | ||||
| Gain on sale of discontinued operations, net of tax | — | 58,883 | ||||
| Income from discontinued operations | — | 60,139 | ||||
| Net income | $ | 22,848 | $ | 71,657 | ||
| Earnings per share from continuing operations: | ||||||
| Basic | $ | 0.93 | $ | 0.47 | ||
| Diluted | $ | 0.93 | $ | 0.47 | ||
| Earnings per share from discontinued operations: | ||||||
| Basic | $ | — | $ | 2.46 | ||
| Diluted | $ | — | $ | 2.45 | ||
| Earnings per share: | ||||||
| Basic | $ | 0.93 | $ | 2.93 | ||
| Diluted | $ | 0.93 | $ | 2.92 | ||
| Shares used in per share calculation: | ||||||
| Basic | 24,513 | 24,416 | ||||
| Diluted | 24,564 | 24,542 | ||||
| Cash dividends declared per share | $ | 0.475 | $ | 0.465 |
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, | |||||
|---|---|---|---|---|---|
| (in thousands) | 2023 | ||||
| Assets | |||||
| Cash | 1,912 | $ | 877 | ||
| Accounts receivable, net of allowance for credit losses of 2,819 at March 31, 2024 and 2,801 at December 31, 2023 | 211,950 | 227,368 | |||
| Rental equipment, at cost: | |||||
| Relocatable modular buildings | 1,345,919 | 1,291,093 | |||
| Portable storage containers | 240,517 | 236,123 | |||
| Electronic test equipment | 370,641 | 377,587 | |||
| 1,957,077 | 1,904,803 | ||||
| Less: accumulated depreciation | (588,535 | ) | (575,480 | ) | |
| Rental equipment, net | 1,368,542 | 1,329,323 | |||
| Property, plant and equipment, net | 189,166 | 169,114 | |||
| Inventories | 24,548 | 15,425 | |||
| Prepaid expenses and other assets | 82,066 | 87,364 | |||
| Intangible assets, net | 62,020 | 64,588 | |||
| Goodwill | 323,224 | 323,224 | |||
| Total assets | 2,263,428 | $ | 2,217,283 | ||
| Liabilities and Shareholders' Equity | |||||
| Liabilities: | |||||
| Notes payable | 798,561 | $ | 762,975 | ||
| Accounts payable | 57,162 | 58,760 | |||
| Accrued liabilities | 95,725 | 108,763 | |||
| Deferred income | 122,696 | 111,428 | |||
| Deferred income taxes, net | 246,264 | 241,555 | |||
| Total liabilities | 1,320,408 | 1,283,481 | |||
| Shareholders’ equity: | |||||
| Common stock, no par value - Authorized 40,000 shares | |||||
| Issued and outstanding - 24,541 shares as of March 31, 2024 and 24,496 shares as of December 31, 2023 | 109,249 | 111,122 | |||
| Retained earnings | 833,820 | 822,796 | |||
| Accumulated other comprehensive loss | (49 | ) | (116 | ) | |
| Total shareholders’ equity | 943,020 | 933,802 | |||
| Total liabilities and shareholders’ equity | 2,263,428 | $ | 2,217,283 |
All values are in US Dollars.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2024 | 2023 | |||||||||||||
| Cash Flows from Operating Activities: | |||||||||||||||
| Net income | $ | 22,848 | $ | 71,657 | |||||||||||
| Adjustments to reconcile net income to net cash provided by<br> operating activities: | |||||||||||||||
| Depreciation and amortization | 27,187 | 27,590 | |||||||||||||
| Deferred income taxes | 4,709 | (45,496 | ) | ||||||||||||
| Provision for credit losses | 253 | 744 | |||||||||||||
| Share-based compensation | 2,209 | 1,493 | |||||||||||||
| Gain on sale of property, plant and equipment | (9,281 | ) | — | ||||||||||||
| Gain on sale of discontinued operations | — | (58,883 | ) | ||||||||||||
| Gain on sale of used rental equipment | (7,355 | ) | (3,089 | ) | |||||||||||
| Foreign currency exchange loss (gain) | 132 | (226 | ) | ||||||||||||
| Amortization of debt issuance costs | 2 | 2 | |||||||||||||
| Change in: | |||||||||||||||
| Accounts receivable | 15,165 | 16,209 | |||||||||||||
| Inventories | (9,123 | ) | (5,313 | ) | |||||||||||
| Prepaid expenses and other assets | 5,298 | (2,032 | ) | ||||||||||||
| Accounts payable | 9,145 | 31,559 | |||||||||||||
| Accrued liabilities | (13,037 | ) | (1,722 | ) | |||||||||||
| Deferred income | 11,268 | 3,218 | |||||||||||||
| Net cash provided by operating activities | 59,420 | 35,711 | |||||||||||||
| Cash Flows from Investing Activities: | |||||||||||||||
| Proceeds from sale of discontinued operations | — | 262,454 | |||||||||||||
| Purchases of rental equipment | (78,641 | ) | (77,731 | ) | |||||||||||
| Purchases of property, plant and equipment | (25,277 | ) | (6,857 | ) | |||||||||||
| Cash paid for acquisition of businesses | — | (453,592 | ) | ||||||||||||
| Proceeds from sales of used rental equipment | 13,554 | 12,197 | |||||||||||||
| Proceeds from sales of property, plant and equipment | 12,251 | — | |||||||||||||
| Net cash used in investing activities | (78,113 | ) | (263,529 | ) | |||||||||||
| Cash Flows from Financing Activities: | |||||||||||||||
| Net borrowings under bank lines of credit | 35,584 | 245,033 | |||||||||||||
| Taxes paid related to net share settlement of stock awards | (4,082 | ) | (6,086 | ) | |||||||||||
| Payment of dividends | (11,774 | ) | (11,400 | ) | |||||||||||
| Net cash provided by financing activities | 19,728 | 227,547 | |||||||||||||
| Effect of foreign currency exchange rate changes on cash | — | 4 | |||||||||||||
| Net increase (decrease) in cash | 1,035 | (267 | ) | ||||||||||||
| Cash balance, beginning of period | 877 | 957 | |||||||||||||
| Cash balance, end of period | $ | 1,912 | $ | 690 | |||||||||||
| Supplemental Disclosure of Cash Flow Information: | |||||||||||||||
| Interest paid, during the period | $ | 14,184 | $ | 7,817 | |||||||||||
| Net income taxes paid, during the period | $ | 479 | $ | 413 | |||||||||||
| Dividends accrued during the period, not yet paid | $ | 12,060 | $ | 11,851 | |||||||||||
| Rental equipment acquisitions, not yet paid | $ | 5,795 | $ | 5,697 | |||||||||||
| MCGRATH RENTCORP | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| BUSINESS SEGMENT DATA (unaudited) | |||||||||||||||
| Three months ended March 31, 2024 | |||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | Portable Storage | TRS-RenTelco | Enviroplex | Consolidated | ||||||||||
| Revenues | |||||||||||||||
| Rental | $ | 76,496 | $ | 18,407 | $ | 25,429 | $ | — | $ | 120,332 | |||||
| Rental related services | 24,133 | 4,723 | 724 | — | 29,580 | ||||||||||
| Rental operations | 100,629 | 23,130 | 26,153 | — | 149,912 | ||||||||||
| Sales | 25,326 | 1,212 | 6,812 | 1,719 | 35,069 | ||||||||||
| Other | 1,630 | 418 | 798 | — | 2,846 | ||||||||||
| Total revenues | 127,585 | 24,760 | 33,763 | 1,719 | 187,827 | ||||||||||
| Costs and Expenses | |||||||||||||||
| Direct costs of rental operations: | |||||||||||||||
| Depreciation | 9,874 | 965 | 11,527 | — | 22,366 | ||||||||||
| Rental related services | 15,780 | 4,456 | 550 | — | 20,786 | ||||||||||
| Other | 22,673 | 1,468 | 4,869 | — | 29,010 | ||||||||||
| Total direct costs of rental operations | 48,327 | 6,889 | 16,946 | — | 72,162 | ||||||||||
| Costs of sales | 17,413 | 768 | 2,942 | 1,274 | 22,397 | ||||||||||
| Total costs of revenues | 65,740 | 7,657 | 19,888 | 1,274 | 94,559 | ||||||||||
| Gross Profit | |||||||||||||||
| Rental | 43,949 | 15,974 | 9,033 | — | 68,956 | ||||||||||
| Rental related services | 8,353 | 267 | 174 | — | 8,794 | ||||||||||
| Rental operations | 52,302 | 16,241 | 9,207 | — | 77,750 | ||||||||||
| Sales | 7,913 | 444 | 3,870 | 445 | 12,672 | ||||||||||
| Other | 1,630 | 418 | 798 | — | 2,846 | ||||||||||
| Total gross profit | 61,845 | 17,103 | 13,875 | 445 | 93,268 | ||||||||||
| Selling and administrative expenses | 40,087 | 9,010 | 8,918 | 1,803 | 59,818 | ||||||||||
| Other income, net | (6,220 | ) | (1,319 | ) | (1,742 | ) | — | (9,281 | ) | ||||||
| Income (loss) from operations | $ | 27,978 | $ | 9,412 | $ | 6,699 | $ | (1,358 | ) | $ | 42,731 | ||||
| Interest expense | 12,704 | ||||||||||||||
| Foreign currency exchange loss | 132 | ||||||||||||||
| Provision for income taxes | 7,047 | ||||||||||||||
| Net income | $ | 22,848 | |||||||||||||
| Other Information | |||||||||||||||
| Adjusted EBITDA 1 | $ | 43,327 | $ | 11,522 | $ | 18,480 | $ | (1,261 | ) | $ | 72,068 | ||||
| Average rental equipment 2 | $ | 1,174,327 | $ | 223,285 | $ | 372,081 | |||||||||
| Average monthly total yield 3 | 2.17 | % | 2.75 | % | 2.18 | % | |||||||||
| Average utilization 4 | 78.7 | % | 69.8 | % | 56.5 | % | |||||||||
| Average monthly rental rate 5 | 2.76 | % | 3.94 | % | 4.03 | % |
-
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net. -
Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. -
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. -
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. -
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
| MCGRATH RENTCORP | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BUSINESS SEGMENT DATA (unaudited) | |||||||||||||||||
| Three months ended March 31, 2023 | |||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | Portable Storage | TRS-RenTelco | Enviroplex | Adler Tanks (Discontinued) | Consolidated | |||||||||||
| Revenues | |||||||||||||||||
| Rental | $ | 64,056 | $ | 17,057 | $ | 29,134 | $ | — | $ | 6,520 | $ | 116,767 | |||||
| Rental related services | 21,534 | 4,718 | 880 | — | 2,584 | 29,716 | |||||||||||
| Rental operations | 85,590 | 21,775 | 30,014 | — | 9,104 | 146,483 | |||||||||||
| Sales | 16,967 | 638 | 5,114 | 941 | 269 | 23,929 | |||||||||||
| Other | 1,370 | 317 | 992 | — | 65 | 2,744 | |||||||||||
| Total revenues | 103,927 | 22,730 | 36,120 | 941 | 9,438 | 173,156 | |||||||||||
| Costs and Expenses | |||||||||||||||||
| Direct costs of rental operations: | |||||||||||||||||
| Depreciation | 8,657 | 787 | 12,389 | — | 1,325 | 23,158 | |||||||||||
| Rental related services | 14,226 | 4,381 | 661 | — | 2,020 | 21,288 | |||||||||||
| Other | 24,127 | 1,783 | 5,225 | — | 1,270 | 32,405 | |||||||||||
| Total direct costs of rental operations | 47,009 | 6,952 | 18,275 | — | 4,614 | 76,850 | |||||||||||
| Costs of sales | 10,747 | 327 | 2,225 | 816 | 159 | 14,274 | |||||||||||
| Total costs of revenues | 57,756 | 7,279 | 20,500 | 816 | 4,773 | 91,124 | |||||||||||
| Gross Profit | |||||||||||||||||
| Rental | 31,273 | 14,486 | 11,520 | — | 3,926 | 61,205 | |||||||||||
| Rental related services | 7,308 | 337 | 219 | — | 564 | 8,428 | |||||||||||
| Rental operations | 38,581 | 14,823 | 11,739 | — | 4,490 | 69,633 | |||||||||||
| Sales | 6,220 | 311 | 2,889 | 125 | 110 | 9,655 | |||||||||||
| Other | 1,370 | 317 | 992 | — | 65 | 2,744 | |||||||||||
| Total gross profit | 46,171 | 15,451 | 15,620 | 125 | 4,665 | 82,032 | |||||||||||
| Selling and administrative expenses | 38,456 | 8,058 | 9,451 | 1,533 | 2,582 | 60,080 | |||||||||||
| Other income, net | — | — | — | — | — | — | |||||||||||
| Income (loss) from operations | $ | 7,715 | $ | 7,393 | $ | 6,169 | $ | (1,408 | ) | $ | 2,083 | 21,952 | |||||
| Interest expense | 7,838 | ||||||||||||||||
| Foreign currency exchange gain | (226 | ) | |||||||||||||||
| Provision for income taxes | 1,566 | ||||||||||||||||
| Net income | $ | 12,774 | |||||||||||||||
| Other Information | |||||||||||||||||
| Adjusted EBITDA 1 | $ | 32,425 | $ | 10,020 | $ | 20,635 | $ | (1,330 | ) | $ | 3,682 | $ | 65,432 | ||||
| Average rental equipment 2 | $ | 987,526 | $ | 189,348 | $ | 396,835 | |||||||||||
| Average monthly total yield 3 | 2.16 | % | 3.01 | % | 2.40 | % | |||||||||||
| Average utilization 4 | 79.4 | % | 80.8 | % | 59.2 | % | |||||||||||
| Average monthly rental rate 5 | 2.72 | % | 3.71 | % | 4.14 | % |
-
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net. -
Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment. -
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. -
Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment. -
Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.
Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures
To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and gains on property sales. 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 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 and non-recurring transactions, including share-based compensation, transaction costs and gains on property sales 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, transaction costs and gains on property sales. 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<br>March 31, | Twelve Months Ended<br>March 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Income from continuing operations | $ | 22,848 | $ | 11,518 | $ | 123,182 | $ | 97,169 | ||||
| Provision for income taxes from continuing operations | 7,047 | 1,113 | 43,544 | 26,981 | ||||||||
| Interest expense | 12,704 | 7,464 | 45,800 | 17,418 | ||||||||
| Depreciation and amortization | 27,187 | 26,133 | 108,972 | 96,489 | ||||||||
| EBITDA | 69,786 | 46,228 | 321,498 | 238,057 | ||||||||
| Share-based compensation | 2,209 | 1,375 | 8,991 | 6,610 | ||||||||
| Transaction costs 3 | 9,354 | 14,147 | 11,084 | 18,200 | ||||||||
| Other income, net 4 | (9,281 | ) | — | (12,899 | ) | — | ||||||
| Adjusted EBITDA 1 | $ | 72,068 | $ | 61,750 | $ | 328,674 | $ | 262,867 | ||||
| Adjusted EBITDA margin 2 | 37 | % | 38 | % | 38 | % | 39 | % |
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
| (dollar amounts in thousands) | Three Months Ended<br>March 31, | Twelve Months Ended<br>March 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Adjusted EBITDA 1 | $ | 72,068 | $ | 65,432 | $ | 328,674 | $ | 297,579 | ||||
| Interest paid | (14,184 | ) | (7,817 | ) | (44,970 | ) | (20,455 | ) | ||||
| Income taxes paid, net of refunds received | (479 | ) | (413 | ) | (91,631 | ) | (27,355 | ) | ||||
| Gain on sale of used rental equipment | (7,355 | ) | (3,089 | ) | (35,908 | ) | (35,704 | ) | ||||
| Foreign currency exchange loss | 132 | (226 | ) | 48 | 165 | |||||||
| Amortization of debt issuance costs | 2 | 2 | 8 | 14 | ||||||||
| Change in certain assets and liabilities: | ||||||||||||
| Accounts receivable, net | 15,418 | 16,953 | (36,678 | ) | (21,506 | ) | ||||||
| Prepaid expenses and other assets | 5,298 | (7,345 | ) | (16,683 | ) | (28,042 | ) | |||||
| Accounts payable and other liabilities | (22,748 | ) | (31,004 | ) | (9,570 | ) | (7,992 | ) | ||||
| Deferred income | 11,268 | 3,218 | 22,144 | 21,696 | ||||||||
| Net cash provided by operating activities | $ | 59,420 | $ | 35,711 | $ | 115,434 | $ | 178,400 |
Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net. Adjusted EBITDA for the three months ended March 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 period ended March 31, 2023 was $3,682.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.
Other income, net consists of net gains on property, plant and equipment sales that are infrequent in nature and excluded from Adjusted EBITDA.