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LIVERMORE, Calif., October 28, 2021--(BUSINESS WIRE)--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."
All comparisons presented below are for the quarter ended September 30, 2021 to the quarter ended September 30, 2020 unless otherwise indicated.
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.
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.
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.
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:
$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
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.
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.
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.
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands, except per share amounts)
Rental related services
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
Rental related services
Total direct costs of rental operations
Costs of sales
Total costs of revenues
Selling and administrative expenses
Income from operations
Other income (expense):
Foreign currency exchange (loss) gain
Income before provision for income taxes
Provision for income taxes
Earnings per share:
Shares used in per share calculation:
Cash dividends declared per share
Accounts receivable, net of allowance for doubtful accounts of $2,225 in 2021
and $2,100 in 2020
Rental equipment, at cost:
Relocatable modular buildings
Electronic test equipment
Liquid and solid containment tanks and boxes
Less: accumulated depreciation
Rental equipment, net
Property, plant and equipment, net
Prepaid expenses and other assets
Intangible assets, net
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities
Deferred income taxes, net
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
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
Nine Months Ended September 30,
Cash Flows from Operating Activities:
Adjustments to reconcile net income to net cash provided by
Depreciation and amortization
Provision for doubtful accounts
Gain on sale of used rental equipment
Foreign currency exchange loss
Amortization of debt issuance costs
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Deferred income taxes
Net cash provided by operating activities
Cash Flows from Investing Activities:
Purchases of rental equipment
Purchases of property, plant and equipment
Cash paid for acquisition of businesses
Proceeds from sales of used rental equipment
Net cash used in investing activities
Cash Flows from Financing Activities:
Net borrowing (repayment) under bank lines of credit
Borrowings under note purchase agreement
Principal payment of Series B senior notes
Repurchase of common stock
Taxes paid related to net share settlement of stock awards
Payment of dividends
Net cash provided by (used in) financing activities
Effect of foreign currency exchange rate changes on cash
Net increase (decrease) in cash
Cash balance, beginning of period
Cash balance, end of period
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
Net income taxes paid, during the period
Dividends accrued during the period, not yet paid
Rental equipment acquisitions, not yet paid
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.
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.