McGrath Announces Results for Third Quarter 2024

Oct 24 2024 21:01 BST

LIVERMORE, Calif.--(BUSINESS WIRE)--Oct. 24, 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 September 30, 2024 of $266.8 million, an increase of 10% compared to the third quarter of 2023. The Company reported net income from continuing operations of $149.3 million, or $6.08 per diluted share, for the third quarter of 2024, compared to net income from continuing operations of $40.4 million, or $1.65 per diluted share, for the third quarter of 2023. Excluding the $180.0 million merger termination payment received from WillScot Mobile Mini and $39.4 million in transaction costs incurred during the quarter, net of provision for income taxes, the Company reported net income from continuing operations of $45.9 million, or $1.87 per diluted share.

THIRD QUARTER 2024 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS):

Rental revenues increased 1% to $124.2 million.
Total revenues increased 10% to $266.8 million.
Payment on merger termination from WillScot Mobile Mini provided for $180.0 million in proceeds received by the Company, partly offset by $39.4 million in transaction costs and an increase in provision for income taxes, resulted in a $103.5 million net income contribution during the quarter, or $4.21 per diluted share.
Adjusted EBITDA¹ increased 13% to $104.0 million.
Dividend rate of $0.475 per share for the third quarter 2024. On an annualized basis, this dividend represents a 1.8% yield on the October 23, 2024 close price of $106.23 per share.

Joe Hanna, President and CEO of McGrath, made the following comments:

“We were very pleased with our third quarter results. The 10% increase in companywide revenues was driven by higher rental operations and sales revenues.

Our modular business was the highlight for the quarter, with 9% rental revenue growth. Rental revenues grew across our 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.

Portable storage demand conditions were weak, resulting in 11% lower rental revenues for the quarter, compared to a year ago. The weaker demand was broad-based across regions and was primarily a result of lower commercial construction project activity.

TRS-RenTelco experienced continued demand challenges, resulting in 10% lower rental revenues for the quarter, compared to a year ago. During the quarter we maintained disciplined 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 who maintained their focus on disciplined execution throughout the quarter. Looking ahead, I am excited about our multi-year opportunity to increase our customer base, geographic coverage and value-added service offerings in our Modular and Portable Storage businesses."

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended September 30, 2024 to the quarter ended September 30, 2023 unless otherwise indicated.

MOBILE MODULAR

For the third quarter of 2024, the Company’s Mobile Modular division reported Adjusted EBITDA of $71.4 million, an increase of $13.3 million, or 23%, when compared to the same quarter in 2023.

Rental revenues increased 9% to $81.5 million, depreciation expense increased 11% to $10.1 million, and other direct costs decreased 3% to $20.5 million, which resulted in an increase in gross profit on rental revenues of 14% to $50.8 million.
Rental related services revenues increased 23% to $42.4 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit increasing 32% to $15.0 million.
Sales revenues increased 14% to $66.0 million, primarily from higher new equipment sales. Gross margin on sales was 34% in 2024, compared to 32% in 2023, resulting in a 20% increase in gross profit on sales revenues to $22.4 million. The increase in gross profit on sales was primarily attributed to the higher new sales revenues during the quarter.
Selling and administrative expenses increased $2.2 million, or 7%, to $34.0 million.

PORTABLE STORAGE

For the third quarter of 2024, the Company’s Portable Storage division reported Adjusted EBITDA of $10.8 million, a decrease of $1.3 million, or 10%, when compared to the same quarter in 2023.

Rental revenues decreased 11% to $17.0 million, depreciation expense increased 10% to $1.0 million, and other direct costs decreased 38% to $1.3 million, which resulted in a decrease in gross profit on rental revenues of 9% to $14.7 million.
Rental related services revenues were $4.4 million and gross profit on rental related services revenues was $0.1 million, which was down from $0.3 million in the third quarter of 2023.
Sales revenues increased $0.3 million to $1.4 million, primarily from higher used equipment sales. Gross margin on sales was 36%, compared to 32% in 2023, resulting in a $0.1 million increase in gross profit on sales revenues to $0.5 million.
Selling and administrative expenses decreased $1.2 million, or 15%, to $6.8 million during the quarter.

TRS-RENTELCO

For the third quarter of 2024, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $18.9 million, a decrease of 10%, when compared to the same quarter in 2023.

Rental revenues decreased 10% to $25.7 million, depreciation expense decreased 10%, and other direct costs increased 5%, resulting in an 18% decrease in gross profit on rental revenues to $9.4 million. The rental revenue decrease was primarily due to continued weakness in end markets, resulting in lower average rental equipment on rent compared to the prior year.
Sales revenues decreased 13% to $7.6 million, primarily due to lower used equipment sales. Gross margin on sales was 52%, compared to 35% in 2023, resulting in a 27% increase in gross profit on sales revenues to $3.9 million.
Selling and administrative expenses decreased 5%, to $6.6 million.

FINANCIAL OUTLOOK:

Based upon the Company's year-to-date results and current outlook for the remainder of the year, for the full-year 2024 the Company expects:

		(Continuing Operations)
•	Total revenue:	$910 to $920 million
•	Adjusted EBITDA^{1, 2}:	$345 to $351 million
•	Gross rental equipment capital expenditures:	$180 to $190 million

1.		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, other income, net and non-operating transactions. 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. Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, excludes the income from discontinued operations from the divestiture of Adler Tanks. The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA.

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:

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-RenTelcobusiness 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 September 26, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 24, 2024 to discuss the third 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 1-800-753-9146 (in the U.S.), or 1-402-220-2705 (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.

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, (i) Mr. Hanna’s statements about the Company’s multi-year opportunity to increase its customer base, geographic coverage and value-added service offerings in its Modular and Portable Storage businesses, and (ii) statements regarding the full year 2024 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: health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta, Brekke Storage, Dixie Storage and Inland Storage acquisitions; any adverse impact of the termination of the merger with WillScot Mobile Mini; competition within the modular business; the activity levels in the semiconductor and general purpose and communications test equipment markets at TRS-RenTelco; the activity levels in commercial construction projects and impact on Portable Storage segment; continued execution of our strategic 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 other 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)	2024			2023			2024			2023
Revenues
Rental	$	124,203		$	122,686		$	365,708		$	350,773
Rental related services		47,701			40,492			111,640			101,481
Rental operations		171,904			163,178			477,349			452,254
Sales		92,508			77,115			181,992			148,576
Other		2,346			3,213			7,855			9,424
Total revenues		266,758			243,506			667,196			610,254
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		21,981			22,069			66,512			66,499
Rental related services		32,439			28,532			78,215			71,625
Other		27,252			28,493			84,182			90,188
Total direct costs of rental operations		81,672			79,094			228,909			228,312
Costs of sales		61,107			52,878			117,625			98,431
Total costs of revenues		142,779			131,972			346,534			326,743
Gross profit		123,979			111,534			320,661			283,511
Expenses:
Selling and administrative expenses		49,297			48,508			148,764			153,032
Other income, net		—			(3,559	)		(9,281	)		(3,559	)
Income from operations		74,682			66,585			181,178			134,038
Interest expense		12,641			11,025			38,383			28,434
Foreign currency exchange (gain) loss		(216	)		42			(53	)		(166	)
Gain on merger termination from WillScot Mobile Mini		(180,000	)		—			(180,000	)		—
WillScot Mobile Mini transaction costs		39,436			—			61,157			—
Income from continuing operations before provision for income taxes		202,821			55,518			261,691			105,770
Provision for income taxes from continuing operations		53,504			15,152			68,913			25,934
Income from continuing operations		149,317			40,366			192,778			79,836

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		—			—			—			61,513
Income from discontinued operations		—			—			—			62,769

Net income	$	149,317		$	40,366		$	192,778		$	142,605

Earnings per share from continuing operations:
Basic	$	6.08		$	1.65		$	7.86		$	3.26
Diluted	$	6.08		$	1.65		$	7.85		$	3.26
Earnings per share from discontinued operations:
Basic	$	—		$	—		$	—		$	2.57
Diluted	$	—		$	—		$	—		$	2.56
Earnings per share:
Basic	$	6.08		$	1.65		$	7.86		$	5.83
Diluted	$	6.08		$	1.65		$	7.85		$	5.81
Shares used in per share calculation:
Basic		24,551			24,487			24,538			24,461
Diluted		24,567			24,525			24,564			24,527
Cash dividends declared per share	$	0.475		$	0.465		$	1.425		$	1.395

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
	September 30,			December 31,
(in thousands)	2024			2023
Assets
Cash	$	4,056		$	877
Accounts receivable, net of allowance for credit losses of $2,866 at September 30, 2024 and $2,801 at December 31, 2023		224,529			227,368
Rental equipment, at cost:
Relocatable modular buildings		1,398,422			1,291,093
Portable storage containers		241,620			236,123
Electronic test equipment		356,979			377,587
		1,997,021			1,904,803
Less: accumulated depreciation		(605,339	)		(575,480	)
Rental equipment, net		1,391,682			1,329,323
Property, plant and equipment, net		195,593			169,114
Inventories		22,285			15,425
Prepaid expenses and other assets		67,376			87,364
Intangible assets, net		56,891			64,588
Goodwill		323,224			323,224
Total assets	$	2,285,636		$	2,217,283
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	608,562		$	762,975
Accounts payable		76,240			58,760
Accrued liabilities		109,367			108,763
Deferred income		123,925			111,428
Deferred income taxes, net		273,482			241,555
Total liabilities		1,191,576			1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,551 shares as of September 30, 2024 and 24,496 shares as of December 31, 2023		113,989			111,122
Retained earnings		980,244			822,796
Accumulated other comprehensive loss		(173	)		(116	)
Total shareholders’ equity		1,094,060			933,802
Total liabilities and shareholders’ equity	$	2,285,636		$	2,217,283

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
	Nine Months Ended September 30,
(in thousands)	2024			2023
Cash Flows from Operating Activities:
Net income	$	192,778		$	142,605
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		80,824			81,842
Deferred income taxes		31,927			(30,018	)
Provision for credit losses		1,437			1,794
Share-based compensation		6,949			5,273
Gain on sale of property, plant and equipment		(9,281	)		(3,559	)
Gain on sale of discontinued operations		—			(61,513	)
Gain on sale of used rental equipment		(25,185	)		(22,964	)
Foreign currency exchange gain		(53	)		(166	)
Amortization of debt issuance costs		6			6
Change in:
Accounts receivable		1,402			(27,733	)
Inventories		(6,860	)		(1,988	)
Prepaid expenses and other assets		19,988			(5,402	)
Accounts payable		30,562			22,513
Accrued liabilities		605			10,305
Deferred income		12,497			7,908
Net cash provided by operating activities		337,596			118,903
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations		—			268,012
Purchases of rental equipment		(167,269	)		(171,322	)
Purchases of property, plant and equipment		(36,070	)		(16,448	)
Cash paid for acquisition of businesses		—			(458,315	)
Cash paid for acquisition of business assets		—			(3,474	)
Proceeds from sales of used rental equipment		50,270			49,405
Proceeds from sales of property, plant and equipment		12,251			595
Net cash used in investing activities		(140,818	)		(331,547	)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit		(154,420	)		178,892
Borrowings under term note agreement		—			75,000
Taxes paid related to net share settlement of stock awards		(4,082	)		(6,100	)
Payment of dividends		(35,097	)		(34,168	)
Net cash (used in) provided by financing activities		(193,599	)		213,624
Effect of foreign currency exchange rate changes on cash		—			9
Net increase in cash		3,179			989
Cash balance, beginning of period		877			957
Cash balance, end of period	$	4,056		$	1,946
Supplemental Disclosure of Cash Flow Information:
Gain on merger termination, net of transaction costs, presented under net cash provided by operating activities	$	118,843		$	—
Interest paid, during the period	$	40,338		$	27,818
Net income taxes (refunded) paid, during the period	$	(3,826	)	$	9,547
Dividends accrued during the period, not yet paid	$	12,241		$	12,014
Rental equipment acquisitions, not yet paid	$	3,333		$	5,765

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2024
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex		Consolidated
Revenues
Rental	$	81,508		$	17,040		$	25,655		$	—	$	124,203
Rental related services		42,396			4,405			900			—		47,701
Rental operations		123,904			21,445			26,555			—		171,904
Sales		65,994			1,411			7,604			17,499		92,508
Other		1,509			195			642			—		2,346
Total revenues		191,407			23,051			34,801			17,499		266,758

Costs and Expenses
Direct costs of rental operations:
Depreciation		10,124			1,006			10,851			—		21,981
Rental related services		27,366			4,280			793			—		32,439
Other		20,549			1,327			5,376			—		27,252
Total direct costs of rental operations		58,039			6,613			17,020			—		81,672
Costs of sales		43,595			906			3,688			12,918		61,107
Total costs of revenues		101,634			7,519			20,708			12,918		142,779

Gross Profit
Rental		50,835			14,707			9,428			—		74,970
Rental related services		15,030			125			107			—		15,262
Rental operations		65,865			14,832			9,535			—		90,232
Sales		22,399			505			3,916			4,581		31,401
Other		1,509			195			642			—		2,346
Total gross profit		89,773			15,532			14,093			4,581		123,979
Selling and administrative expenses ⁶		34,028			6,790			6,627			1,851		49,296
Other income		—			—			—			—		—
Income from operations	$	55,745		$	8,742		$	7,466		$	2,730		74,683
Interest expense													(12,641	)
Foreign currency exchange gain													216
Gain on merger termination from WillScot Mobile Mini													180,000
WillScot Mobile Mini transaction costs													(39,436	)
Provision for income taxes													(53,504	)
Net income												$	149,317

Other Information
Adjusted EBITDA ¹	$	71,420		$	10,796		$	18,945		$	2,822	$	103,983
Average rental equipment ²	$	1,240,950		$	229,231		$	362,431
Average monthly total yield ³		2.19	%		2.48	%		2.36	%
Average utilization ⁴		77.1	%		62.8	%		57.3	%
Average monthly rental rate ⁵		2.84	%		3.94	%		4.12	%

1.		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.
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.
6.		During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company has separately reported these transaction costs in the Company's Corporate segment and excluded such costs from Selling and administrative expenses.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended September 30, 2023
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex		Consolidated
Revenues
Rental	$	74,796		$	19,232		$	28,658		$	—	$	122,686
Rental related services		34,429			5,287			776			—		40,492
Rental operations		109,225			24,519			29,434			—		163,178
Sales		57,723			1,144			8,733			9,515		77,115
Other		1,908			363			942			—		3,213
Total revenues		168,856			26,026			39,109			9,515		243,506

Costs and Expenses
Direct costs of rental operations:
Depreciation		9,123			914			12,032			—		22,069
Rental related services		23,033			4,894			605			—		28,532
Other		21,222			2,131			5,140			—		28,493
Total direct costs of rental operations		53,378			7,939			17,777			—		79,094
Costs of sales		39,039			782			5,651			7,406		52,878
Total costs of revenues		92,417			8,721			23,428			7,406		131,972

Gross Profit
Rental		44,451			16,187			11,486			—		72,124
Rental related services		11,395			394			171			—		11,960
Rental operations		55,846			16,581			11,657			—		84,084
Sales		18,684			362			3,082			2,109		24,237
Other		1,908			363			942			—		3,213
Total gross profit		76,438			17,306			15,681			2,109		111,534
Selling and administrative expenses		31,813			8,019			6,999			1,677		48,508
Other income		(2,290	)		(450	)		(819	)		—		(3,559	)
Income from operations	$	46,915		$	9,737		$	9,501		$	432		66,585
Interest expense													(11,025	)
Foreign currency exchange loss													(42	)
Provision for income taxes													(15,152	)
Net income												$	40,366

Other Information
Adjusted EBITDA ¹	$	58,166		$	12,047		$	21,039		$	517	$	91,769
Average rental equipment ²	$	1,137,675		$	212,888		$	385,353
Average monthly total yield ³		2.19	%		3.01	%		2.46	%
Average utilization ⁴		79.9	%		76.5	%		59.4	%
Average monthly rental rate ⁵		2.74	%		3.94	%		4.17	%

1.		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.
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)
Nine months ended September 30, 2024
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex		Consolidated
Revenues
Rental	$	236,040		$	53,270		$	76,398		$	—	$	365,708
Rental related services		95,450			13,768			2,422			—		111,640
Rental operations		331,490			67,039			78,820			—		477,349
Sales		127,251			3,889			20,261			30,591		181,992
Other		4,795			907			2,153			—		7,855
Total revenues		463,536			71,835			101,234			30,591		667,196

Costs and Expenses
Direct costs of rental operations:
Depreciation		29,994			2,971			33,547			—		66,512
Rental related services		62,974			13,212			2,029			—		78,215
Other		64,487			4,322			15,373			—		84,182
Total direct costs of rental operations		157,455			20,505			50,949			—		228,909
Costs of sales		83,180			2,390			9,346			22,709		117,625
Total costs of revenues		240,635			22,895			60,295			22,709		346,534

Gross Profit
Rental		141,559			45,977			27,478			—		215,014
Rental related services		32,476			556			393			—		33,425
Rental operations		174,035			46,533			27,871			—		248,439
Sales		44,071			1,499			10,915			7,882		64,367
Other		4,795			907			2,153			—		7,855
Total gross profit		222,901			48,939			40,939			7,882		320,661
Selling and administrative expenses ⁶		100,882			22,064			20,450			5,368		148,764
Other income		(6,220	)		(1,319	)		(1,742	)		—		(9,281	)
Income from operations	$	128,239		$	28,194		$	22,231		$	2,514		181,178
Interest expense													(38,383	)
Foreign currency exchange gain													53
Gain on merger termination from WillScot Mobile Mini													180,000
WillScot Mobile Mini transaction costs													(61,157	)
Provision for income taxes													(68,913	)
Net income												$	192,778

Other Information
Adjusted EBITDA ¹	$	168,165		$	33,333		$	55,426		$	2,799	$	259,723
Average rental equipment²	$	1,206,361		$	226,373		$	367,137
Average monthly total yield ³		2.17	%		2.61	%		2.31	%
Average utilization ⁴		78.0	%		66.1	%		56.8	%
Average monthly rental rate ⁵		2.79	%		3.95	%		4.07	%

1.		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.
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.
6.		During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company has separately reported these transaction costs in the Company's Corporate segment and excluded such costs from Selling and administrative expenses.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Nine months ended September 30, 2023
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex			Consolidated
Revenues
Rental	$	209,622		$	54,776		$	86,375		$	—		$	350,773
Rental related services		83,799			15,359			2,323			—			101,481
Rental operations		293,421			70,135			88,698			—			452,254
Sales		112,939			2,890			21,368			11,379			148,576
Other		5,249			1,167			3,008			—			9,424
Total revenues		411,609			74,192			113,074			11,379			610,254

Costs and Expenses
Direct costs of rental operations:
Depreciation		27,196			2,570			36,733			—			66,499
Rental related services		55,702			13,916			2,007			—			71,625
Other		68,726			5,619			15,843			—			90,188
Total direct costs of rental operations		151,624			22,105			54,583			—			228,312
Costs of sales		76,303			1,799			11,307			9,022			98,431
Total costs of revenues		227,927			23,904			65,890			9,022			326,743

Gross Profit
Rental		113,700			46,587			33,799			—			194,086
Rental related services		28,097			1,443			316			—			29,856
Rental operations		141,797			48,030			34,115			—			223,942
Sales		36,636			1,091			10,061			2,357			50,145
Other		5,249			1,167			3,008			—			9,424
Total gross profit		183,682			50,288			47,184			2,357			283,511
Selling and administrative expenses		101,360			23,282			23,576			4,814			153,032
Other income		(2,290	)		(450	)		(819	)		—			(3,559	)
Income (loss) from operations	$	84,612		$	27,456		$	24,427		$	(2,457	)		134,038
Interest expense														(28,434	)
Foreign currency exchange gain														166
Provision for income taxes														(25,934	)
Net income													$	79,836

Other Information
Adjusted EBITDA ¹	$	135,107		$	34,375		$	63,212		$	(2,207	)	$	230,487
Average rental equipment ²	$	1,073,384		$	201,946		$	391,993
Average monthly total yield ³		2.17	%		3.01	%		2.43	%
Average utilization ⁴		79.7	%		78.4	%		59.0	%
Average monthly rental rate ⁵		2.72	%		3.84	%		4.15	%

1.		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.
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, non-cash impairment costs, share-based compensation, transaction costs, gains on property sales and non-operating transactions. The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA. 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, gains on property sales and non-operating transactions, 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, gains on property sales and non-operating transactions. 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 September 30,						Nine Months Ended September 30,						Twelve Months Ended September 30,
	2024			2023			2024			2023			2024			2023
Income from continuing operations	$	149,317		$	40,366		$	192,778		$	79,836		$	224,799		$	114,828
Provision for income taxes from continuing operations		53,502			15,152			68,913			25,934			80,586			35,624
Interest expense		12,642			11,025			38,383			28,434			50,509			32,607
Depreciation and amortization		26,693			26,884			80,824			80,385			108,357			103,893
EBITDA		242,154			93,427			380,898			214,589			464,249			286,952
Share-based compensation		2,393			1,891			6,949			5,155			9,951			7,658
Transaction costs ³		39,436			10			61,157			14,302			62,732			18,188
Other income, net ⁴		—			(3,559	)		(9,281	)		(3,559	)		(9,340	)		(3,559	)
Gain on merger termination from WillScot Mobile Mini ⁵		(180,000	)		—			(180,000	)		—			(180,000	)		—
Adjusted EBITDA ¹	$	103,983		$	91,769		$	259,723		$	230,487		$	347,592		$	309,239
Adjusted EBITDA margin ²		39	%		39	%		38	%		38	%		39	%		39	%

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,
	2024			2023			2024			2023			2024			2023
Adjusted EBITDA ¹	$	103,983		$	91,769		$	259,723		$	234,169		$	347,592		$	325,138
Interest paid		(13,944	)		(11,016	)		(40,338	)		(27,818	)		(51,123	)		(33,611	)
Income taxes paid, net of refunds received		(773	)		(2,616	)		3,826			(9,547	)		(78,192	)		(12,024	)
Gain on sale of used rental equipment		(9,648	)		(8,714	)		(25,185	)		(22,964	)		(33,863	)		(34,238	)
Foreign currency exchange loss		(216	)		42			(53	)		(166	)		(197	)		(192	)
Amortization of debt issuance costs		2			2			6			6			8			9
Change in certain assets and liabilities:
Accounts receivable, net		(7,150	)		(26,223	)		2,839			(25,939	)		(6,365	)		(26,003	)
Prepaid expenses and other assets		14,171			1,114			19,988			(7,390	)		(1,948	)		(6,561	)
Accounts payable and other liabilities		123,241			4,476			104,293			(29,356	)		119,382			(30,691	)
Deferred income		(10,699	)		(1,382	)		12,497			7,908			18,683			(1,790	)
Net cash provided by operating activities	$	198,967		$	47,452		$	337,596		$	118,903		$	313,977		$	180,037

1.		Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, other income, net and non-operating transactions. Adjusted EBITDA for the nine months ended September 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the nine month period ended September 30, 2023 was $3,682.
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.
4.		Other income, net consists of net gains on property, plant and equipment sales that are infrequent in nature and excluded from Adjusted EBITDA.
5.		The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241023857571/en/

Keith E. Pratt
EVP & Chief Financial Officer
925-606-9200

Source: McGrath RentCorp

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