MGRC - Earnings call transcript Q3 2017

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Third Quarter 2017 Conference Call. At this time, all conference participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. recorded October being XXXX. is conference today, XX, Tuesday, This

are guarantees that that will statements or company’s not Before Act the of facts differ of results our and factors and XX-K not in Litigation note as performance statements total those These Private and cause company’s matters risks of statements statements company filings. strategies, are targets. the expectations, meaning historical SEC cause XXXX, to are we other begin, well forward-looking Important Reform significant that future uncertainties the the factors from company the our expectations involves the prospects operating statements company’s actual management projected. relating Securities as materially within to today be could that actual of regarding materially including are Form forward-looking could differ XXXX risk discussing which disclosed profit, results to from under

as date obligation only forward-looking to made no are statements. of update assume as statements hereof. otherwise by we the Forward-looking any law, required Except

issued to X-K the XX-Q addition the Form and release on the today, earnings press the with the company also Form quarter. for SEC, the In filed release

Executive Officer; Officer. Speaking today be call Keith Hanna. Joe Hanna, will Go Pratt, Chief Mr. will Financial now to and Chief I over the turn ahead, sir.

Joseph Hanna

quarter performance the us call. I XXXX. today's for on will of our Chelsea. you, joining the comments thank afternoon Good on providing for Thank outlook remainder our you and be for and

XX% performed Mobile company’s Tank increase. compared operating to at I pleased significant TRS-RenTelco year at operating financial Tank and Following Overall, XX% the Modular, XX% that, Rentals. to we and my After will profit Operating profit am delivered XX% a results. Adler we at contributing up to the Mobile results. grew call each and TRS-RenTelco growth Rentals Modular, ago profit the review our will open questions. with Adler comments, Keith well

X.X to the also primarily Irma material revenues rental and increase results. profit for increased, a declined rental Texas million rates in rental Rental Hurricanes rent increase profit and Average profit and but results. from on of the driver impact X.X our X% be by in average strong in was operating increased a increased operations of rates both our Rental contributed regions. year growth education and rental the company business. Modular revenues ago X% no utilization which well as Our equipment increased revenue slightly Mobile slightly. on other gross from to quarter third quarter driven markets, million as sales as while had across Harvey a gross Portable declined growth key in commercial growth. each healthy revenue continued rental was Storage our in

higher regions business to equipment, a quarter partly rental test rental equipment. for by X% increased equipment result test were business decrease communications for General-purpose for activity. as Storage outside Portable grew but X%, in a X% continued in by our the increased offset renal the equipment modular of primarily revenues and test by general-purpose selectively new year-over-year. rental TRS-RenTelco revenues fleet We invest California X%

average from general-purpose average the communications to for test mix rental While utilization increased, the shift business equipment primarily rates activity to quarter, equipment. due declined

utilization vertical equipment reducing XX% communications rental Upstream for at selectively been markets. increased total to the of X% we Adler. Average on natural rental and see from serve year as average shifts. quarter regional and communications revenues was in improved revenues million oil XX%. price Rental result mix from have average growth market ongoing has we’ve investing a declined, demand a competitive from gas Despite growth to increased XX% product in and slightly equipment been for XX% own year at equipment revenue five we markets revenues of As based pressure, rent and our test XXX while amount of six rates to increased test were seven a occurred from ago. we opportunities. ago, to that Adler pleased of XXX of four the across increased rental general-purpose broad We million XX% rental

Our and was this equipment year-over-year the unchanged purchases year. remainder limited very we fleet during size anticipate new of

market some Tank quarter and third conditions TRS-RenTelco. results Our reflect improvement Adler Rentals in at

proud addition, of return each our during improvement on quarter. the execution invested performance by I business. benefited the the capital from across of divisional the In various teams we initiatives good am

selling rental Our teams equipment. optimizing made solid and segments selectively non-core transactions, and rates targeting progress market the right

are and maintaining and risk Hurricanes equipment during quarter. the challenges new on rental We capital Harvey spending. discipline also Irma presented

our of hardship. employees safe, though suffered some are in All the regions impacted

suffered also equipment were who provide who I’m worked material tirelessly operational leaders rental to result all of RentCorp of ending. employees the who proud within of we McGrath operations members employees across most our over a and the of to this days fellow and as and facilities I’m regional period. the each all losses Our no proud storms. really damage our and business $XX,XXX other, contributed our during storms our of team their customers suffered our of to assistance support difficult

culture We have a times in shines like wonderful this. through that

to was XXX,XXX offset to at approximately we hurricanes impact quarter, Modular Adler was Regarding the the financial net had and the so business, storms, preparation not by costs, partly related significant. impact Mobile incremental incremental of the our of which revenue in the some rental third equipment

do to think be company’s Modular, storms TRS-RenTelco the competitive Adler is some as a expect to fourth California not overall and at quarter, limited and we fourth recent continue the opportunities results. the shorter result will rental in substantial Northern and the Entering additional highly of While fires conditions terms of visibility in the sales they transactions. typical Mobile our market to the both currently primarily in result we quarter, rental be and

in some activity Thanksgiving quarter, typical experience at During seasonality and fourth to between both reduction the business expect which Adler year-end. and usually we experience TRS-RenTelco

be expect the are year-to-date our and XX% Keith due higher our year, third operating outlook also Modular quarter XX% similar to of outlook current We total of XXXX costs last to I’d to and the year remainder for to his to above our third prior turn review. now and Mobile Based levels. to activity company healthy a the for results we compared order X% equipment than preparation like to XXXX raising call expectations to increase. quarter to at expect on XX% increase our financial over the financial profit and

Keith Pratt

Joe. you, Thank

divisions total per increased XX% diluted Net third increased to X% rental and Modular. million compared $X.XX XX% the to result X% to to percentage to increased million X.X margins million Mobile to selling million XXX XX.X XX.X million administrative sales. for decreased decreased the X to increased as partly Sales period increased same higher for used was quarter administrative quarter $X.XX. direct For to to starting or X.X XX% higher salaries share XX% allocated each benefit third as other from million sales the with increased from in The result of XX% expenses XX.X or on XXXX, third or XXXX. increased of rents that Total income and revenues. X% to XX.X on equipment offset or expenses million XXXX million rents from profit sales employee on The million rental-related million. XXX.X XX.X revenues Rental XX% million earnings of or percentage and and from X.X of higher services company’s income revenues XX% million, of in and increased rental-related revenues million. primarily a XX.X Reviewing higher higher a from quarter the to XX% the Selling costs rental, profit revenues results Depreciation from on rental to by increased corporate of revenues rental, costs increased and combined XX% in expenses. and increase XX.X a XX%. and and resulted an X% gross rents services X.X as gross million operating XX%.

the decreased XX for fleet Finally, XX.X%. million, of million. XXX XX.X% third increase from quarter an equipment for modular average to quarter Average was utilization the rental

XX% due increased million X% higher increased rental-related margins TRS-RenTelco. increased to revenues million on XX% Total profit X.X revenues decreased to Rental rental to higher rental-related to XX.X revenues partly and as profit and of from and and selling million XX% million. services XX% as employee operating an salaries revenues X%. from million. sales Turning from higher to increased income to administrative lower a in services gross increase increase on rents to offset a increased rents XX% rents net percentage result X Rental and gross a direct X.X XX% XX% gross X.X next impact profit Selling to to X.X by and administrative expenses. costs in rental, percentage other The were was of benefit sales decreased The revenues. expenses million costs. and X.X or on of million depreciation X% XX%. was on as or The or net

original electronics from at XX.X% XXX Finally, of increased XX.X%. rental average cost quarter an Average million. for the utilization for was X million, the equipment increase to quarter third

Turning offset X.X benefit rental-related result revenues and X.X The increased of to and X.X and rental, in partly Rental and percentage to XX.X rental-related profit at million or higher by rents X.X in profit employee sales increased million. XX% margins rents to was a XX% X.X direct net costs XX% operating from a rental Total administrative services to rents next as XX% or from higher services other XX% gross and revenues. costs. increased increased XX% on rental flat an of on percentage to million. to income higher increased X.X administrative and Selling Adler and as million or in The due a resulted revenues Tanks decreased XX% revenues increase XX% expenses gross XX%. selling million depreciation on of to as salaries million rentals. million expenses was to XX% increase

comparable rental X% million consolidated On third interest X net or million. Finally, XXXX. third the to was quarter quarter was partly XX.X%. utilization the from XX.X% debt Higher increased which by XXX expense were to the Average offset for equipment average to XXXX of average interest for levels. average a increased basis, quarter rates for million, X.X lower

based rate XX.X% of XX.X% in provision The effective was income tax an compared XXXX taxes in XXXX. third on for to quarter

the to tax related rate implementation The excess effective of included $XXX,XXX third a tax XXXX-XX. ASU benefit quarter

shareholders X.X borrowings Property, plant increased decreased in in were primarily to million funded our by of Next, I'd XX.X in its debt XX million quarter received year-to-date at was income million The end cash flows the for the the million was to of million XX.X million. refund was from X.X had provided by accounts highlights. other and a EBITDA and accrued for to XXXX. in million invested of lower to balance purchases credit XXX.X Dividend and same actual We liabilities equipment the sheet taxes, and compared third and XXXX. XX.X purchases an deferred changes. increase At the to capacity equipment decrease additional XXXX decrease ratio payable borrow months X.XX lines rental Net XXX.X million compared to period operating XXXX. of adjusted cash X. an XX million the XXXX of XX.X million tax XX.X end million, quarter activities payments a the XXX.X under review to XXXX. XXXX at to to income last attributable Net XX.X company million like to end,

adjusted same EBITDA period XX% million to both the margin Third was EBITDA quarter adjusted XX% XXXX Consolidated to increased in in XXXX. XX.X periods. compared

adjusted may adjusted the lines to the press Our for quarterly and remarks now concludes of release in the net income on of are our questions. you a prepared our included That EBITDA quarter. open results. Chelsea, reconciliation definition EBITDA for

Operator

Thank Instructions]. you. [Operator

line Our comes of with Markets. from question Capital Box KeyBanc first the Joe

Your line is open.

Joe Box

you me Can guys. okay? Hi, hear

Joseph Hanna

Yes.

Keith Pratt

you’re Yes, clear.

Joe Box

okay. Great,

XX million So new obviously from sequentially XX to step guidance implied XQ, is it normal for sequential – years about XX%. has that income math down but my of typical XX% in down be is at it’s your down It operating looks sequentially on cost to million else tune like maybe you guess it, there high-single digits of, Modular than hear the could sequentially, maybe seasonality? anything in I XQ but more normal I flattish that that something inventory is to Mobile in center could call cause XX%.

Keith Pratt

much the the make Joe, looked variability and is as Other is. year at of One third case be and third bank just TRS we it’s they couple last that pretty seasonality fourth held Adler sales quarter. over wouldn’t would quarter not both say another very a of was and a at surprisingly well on quarter for quarter, look when there. know up move normal we’ve to as would the our to lot good being is, comments. that Yes, I We’ve year what That of we in item I pretty fourth typical hard end. this comment projections you from year. can through

sales year. have but pipeline some of some equally next quarter those sales well We of into the slip the in could first

a and see guidance. not we slightly center perfect it’s taking science updated So what into Mobile higher level inventory Modular, with the those at comfortable cost can account but we of feel

Joe Box

you Thanks into And it, for happen Got Keith. utilization more less bit trend? guys I’m Modular. when are down surprised sounds move strategy guys year? aren’t I spending but but bit us really then dig okay. maybe want sequentially next could year, then lot on price, that, because and in I you of little CapEx. little for it’s the may to utilization certainly Mobile prepping utilization And into a a that give at get mean get especially in this you sense equipment to XQ we what a it to a ROIC next year-over-year, it for up ready as like ton Can a talk

Joseph Hanna

here as can And market year-over-year I deals of say we’ve given guidance over overall this work, We’ve few some would what implemented as turn ROIC is of embarked we pricing with have some that we pricing performance. areas And we the many is What Joe. a we’ve and tested our number a we’ve that envelope haven’t areas. a we gotten year we some got that our thought we’ve the done our that business. on our dials that affect Sure, in on that to the pushed changes about we’ve on regions in last in basis. can

do those that dials what And moved we even happy And happen we’re optimize to forward so to has optimize continue very pricing moved. our going to much, to is as hasn’t though increases utilization we expected adjust going we’re utilization we’re forward. and that and pricing going go to

dialed important I back significantly our most the think thing we’ve that is CapEx.

them. have two we both and to we turn real that we can both maximize so maximize of And can terms clarity these we how – of dials need in

improve So over think year that I we’d like overall make we’ll utilization next to happen. the to working see be and

Keith Pratt

remarks a you revenues in Joe, again only the listen we comments, I Joe’s see would year-over-year. Joe, to And the thing prepared slightly did add drop to rental if as region from Texas

is revenue, healthy take a doesn’t step very when overall, have while business region it. large hurts So the that utilization. you like a that back rental It on help

Joe Box

you Keith, was going be And follow to actually of one my know, that ups.

So the something on more you revenue Because small or couple hurricane like it that of on Adler. rental was attribute that the solely sounds that there positives a would solely hurricane? you But else? even to side, was had

Keith Pratt

No. hurricane Actually much not very related.

Joe Box

Okay, got it.

Keith Pratt

Does that answer question? your

Joe Box

does. Yes, it

Keith Pratt

Okay.

Joe Box

rent Can between coming the back where off and really versus Mobile spot Modular. on market units you at delta So maybe rate side, is rates the talk you good at? maybe just rates the to what obviously to

Joseph Hanna

speak progress considered. easy you the focus product team area to, That’s there general types. the number now. transaction in is moving. a quarters rate And business of to been according we metric both And is also a because and Joe term of the pricing significant indicator diversity where some fleet-wide obviously the over it’s average on very rental as metric to a and has a Obviously, has of range know depending made been rent regions for quote it’s then our quite modular and not more an there’s being

year. that and years come rents they went by were that larger If on five going out off delta you’re shorter went something units than can a ago been rent. been see to lower affected be last the term that’s long have significantly rent, of they when Some how on a out out

Joe Box

Of course.

Okay. quarter. All right, Thank guys. Good you.

Joseph Hanna

you. Thank

Operator

next comes of Schneeberger Our Scott with line question the from Oppenheimer.

open. Your line is

Daniel Hultberg

test discuss a for little discussing bit Hi, guys. and visibility Scott. general outlook for TRS test equipment equipment the overall both for please? and It’s you general Daniel test and opportunities the equipment stepping we alluded growth to to communications and switch in in Can

Joseph Hanna

past to bought Sure. over growth. year purpose and support that our general well We’ve executed we’ve fleet additional with equipment this

we market very equipment we’ve spending improved in going Our And up several activity in we expect has growth is is that nicely. purpose those serve segments. up, Defense see segments healthy general semiconductor and market seen those spending sectors two forward. to in

and – As developments don’t far believe that We as that essentially equipment wireless we’ve in I XG. our troughed communications goes, communications business. real still see no really further declines on I think

gave fiber in for the Verizon seen X.X recently Corning XX of million have installation $X news fiber, year next to may of You billion a over for years. contract the per miles

And see go that of got – in. backhaul as support infrastructure to for that somebody’s to so XG is going that’s we testing preparation the

so be And continued not of over decline and our will past that believe as piece the we years. communications business relatively the solid we’ve few in seen a

cautiously we’re optimistic. So

Daniel Hultberg

Got give you to Can well? now of the continued pricing three markets months going competitive across overall us And it. do to Adler alluded the forward you you developing Thanks. Switching that just an see pressures. versus in pricing ago? Thank you. Adler, view as end how environment

Joseph Hanna

Yes.

and right last $XX recently of for are active Utilization rent. well, has situations seeing year. units – now that’s back are pricing more number I we’re improve oil to time industry So The started compared first quite on wide, actually of that and a price few long time There in in additional think rigs hit to has me stabilized same a let up. the time. drilling

should year. It next in wind so that And on the that And increases, show but significant will also stabilize with that cautiously some also over much we optimistic if believe it that these yet as anticipate improvement rates. I being deployed. be again More really be materialized we continue those our will good. sails market and utilization positive equipment’s trends don’t think pricing hasn’t but that’s for a we’re that hopefully segments front.

Daniel Hultberg

Got it. Good Thank you. quarter.

Joseph Hanna

you. Thank

Operator

Thank you.

Our Company. next the with question Riddick & Marc of comes ‎Sidoti line from

is line Your open.

Marc Riddick

evening. Good

Joseph Hanna

Marc. Hi,

Keith Pratt

Marc. Hi,

Marc Riddick

areas? you wanted some you general, maybe if that, if in funding I and seeing the just share damaged general or share on you’re damaged that any to storm could – out you’ve there but seen environment thoughts if also touch – not to in the the some funding higher on of additions could general

Joseph Hanna

that assuming I’m Is referring Sure. California. to you’re correct?

Marc Riddick

Yes.

Joseph Hanna

Okay.

Marc Riddick

And if if well, south extent as in to appropriate. the a lesser

Joseph Hanna

Okay.

have the There’s been education past Let funding – for know we’ve local facilities general we there’s shared that as calls amount environment monies a work. me of bond from conference address significant been that that would. say the are we season been in better now. deployed right from in we XXXX. a flowing than market monies have we had I’ll And thought Those bookings California

flush those so with bond has new money monies bonds of don’t funding business increase have for who provided money already districts the in the for The significant some so spent state past been nicely. our going amount in activity projects. Because risen reimburse going situation the be year. year, to next go million classroom to education, that’s in the XXX levels anticipate in a over somewhat really the available are And of in demand September state we be state quite sold the market has to or and

situation a we that And robust going not XXXX. in significantly so – it’s will I had will don’t be classroom project than booking to think be we different but demand

that’s classroom environment. So funding the

as say. very of far of As in There’s FEMA funding in that has and they any come We’ll to money Texas. flowing early fires those both the advantage here, been still up. as take situations out California for funding

repair. seeing need be districts could online that a we’re repair districts months several funding next state of But out some Texas or no at the school in in either anything dynamics to their to and this are over come goes super some as point level school locations. assessment And state bid bond those in here of projects that and There of that facilities. that to

Marc Riddick

pace but guess and to Do are ones may early you existing do assessment that the too maybe going it’s really maybe that of they just ones assessing? for there, you little localities but facilities this maybe – of hanging a to even you significantly if but accelerating should in any end not I get much you, or have damaged, were answer the than accelerated maybe in sense is that of that will, too the up be through, activity of longer is know may that get early an damage part were that these process this older dated kind it this of

Joseph Hanna

tough the there I to one a would don’t it’s to results. that Yes, – tough that’s impact to down was material a districts believe sure to I our really that I’m damage road be not don’t going answer. significant that that’s – unless school go facilities.

don’t So really driver. that I see a being

Marc Riddick

much. appreciate Thank I Okay. the color. very you

Joseph Hanna

welcome. You’re

Operator

showing questions no turn at to Thank to back now for Joe remarks. would you. I the Hanna Mr. closing this call I’m further like time.

Joseph Hanna

to like look thank in us Thank February quarter you for you speaking We in joining to everyone results. review very again interest and for I’d fourth with our company. much. today on late continuing forward our your call the to

Operator

this today’s your participation. call. and gentlemen, Thank concludes you for Ladies conference

You disconnect. may now

McGrath RentCorp (MGRC) 31 Oct 172017 Q3 Earnings call transcript