MGRC - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp’s First Quarter 2018 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] This conference is being recorded today, Tuesday, May 01, 2018.

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

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

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

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

Joe Hanna

off you, on call greater afternoon Grace. you start thank joining with on his financial Keith in Thank detail comments. today’s performance will I some outlook and us comments and quarter our call. provide first for then Good the will and review

end revenue Sales reflected to primarily as divisions. rental company-wide was our growth up strength of year The good the business. Our in first was rental start growth a quarter revenues were in revenue X%. modular our market each

our we XXXX. established the categories, operating enhanced attractive. in effort are markets We less maintaining used in product performance, non-core our optimize are returns more assets have put To financial where into selling disciplines or

as in capital industry segments increase We are maintaining XX% was investing X% CapEx total increase was markets and return invested achieved base. fleet. our in the operating only I pleased profit for our it with thresholds more with new and targeting attractive

delivered improved divisions first the of in the quarter. operating All income

pricing are gains. for the revenue with more discipline, of through cost the growth utilization and fall realizing own revenue seeing line. already bottom most Combined from gains the are We our of fleet we we

to efforts focused challenging work. we this results returns and profitability positive showing are remain Our on optimize will financial and

our Let’s Modular XX%. of with a revenues utilization in the is divisions. income each California healthy education look continued Rate both for operating upgraded commercial that saw country improved demand in improvement rest improvement by strategy at based were and broad of of projects. and initiated slightly, saw XX% Mobile up and pricing in was and the continued Bookings XXXX. rates by result we the rental a

our While and can on somewhat to lumpiness equipment. saw basis, unpredictable sales for used sales we performance of both year-over-year add also and new are a opportunities

X%. rental rates and healthy by realized purpose communications the XX% rent and storage our a average increasing During demand income portable test business TRS-RenTelco growth revenue on increased quarter, utilization rental rental saw by XX%. Pricing operating equipment modestly. by X% both a and improved equipment, and general favorable improved rental with slightly revenue for

demand purpose saw a in general as we side, healthy. of the markets On strength was variety

projects. anticipate invested XX% to testing XG the oil and Upstream from activity Communications that improved healthy. don’t Construction best quarter We X% operating in rental market Adler, infrastructure equipment total the we yet maybe and not also the the work on on was XX%. some projects and by the stronger quarter, test we and have mix that to earliest in happening and revenues and Wireless specifications as until improved commenced a be At of has will for We XG realized during gas income initial for we fleet activity the activities. are of the some is XXXX densification opportunities to from precursor still oil take that current continue of on for Adler to by X% at to XG uncertain exploration provide. activity demands. demand and rental required. was tune increased the products fleet supported advantage drilling of by the gas first demand revenues amount

rental still XX%, the improved may utilization While that under rental rates utilization hope pressure. We improving rates industry, in are with stabilize.

Adler a market highly said the transactions. That conditions be markets is in the of a as terms of continue visibility majority of appear to demand limited shorter year the result Looking part for serve. we competitive promising first of typical our and and rental the underlying conditions ahead TRS-RenTelco

upon positioned working will well are the to start businesses and our be year. we build Our favorable hard to

Let me our financial Keith who review. you now, turn to the call take will over to

Keith Pratt

Thank profit. increase XX% operations XXXX gross from sales $XXX.X income XX% to for an company's earnings driven by million of $XX.X you, increased $X.X the and in revenues rental first a Joe. share the was $X.XX diluted from operating profit and for million same in million million for $XX.X to increase increase increased profit to million additional from XXXX. from Net $X the million $X per $X.XX. Total XX% increased quarter gross quarter period The in

The reduced rate first or with statutory a The XX%, federal which Act XXXX. first was to the XX% contributed December quarter Tax the $X.XX net share in earnings Act from enacted U.S. quarter Tax corporate benefit of the Act Cuts per income diluted the Tax XXXX. and in to includes XXXX associated that Jobs

Rental by X% gross higher Mobile the in used profit increase margins sales compared from revenues the ago The sales. primarily rental XX% revenues portable XX% healthy rates. Sales revenues and storage as equipment business. be well Now rental driven million improvement in growth revenue a our XX% to million on combined as Rental let’s a on $X.X million to performance XX% markets increased or $X.X education increased total continued from Modular to Rental was increased year increased review commercial XXXX. of rents. first across or quarter our rental in average result XX% and $XX.X quarter for higher to division revenues. on XX%.

We storage new business. portable in and primarily continued for modular in our selectively to rental regions invest California equipment outside

rental equipment As or for quarter million, of Rental revenues. respectively. combined general and revenues driven increased communications fleet increase for a quarter X% a by margins $X.X first rents. higher and in $X was increased XX%. $XX equipment XX% to for rental to TRS-RenTelco X% the improved rental gross XX% by million, result Rental Test average increase million. result profit primarily increased quarter the purpose was XX.X% Average XX% on increased average total rental an $XXX sales increased and from utilization the X% to The revenues for XX%, from on modular XX.X%. million utilization. equipment higher and revenues

invest We for in test opportunities. growth equipment continue to general purpose

quarter for Adler revenues was $XXX increase $XX and services million X% Tank increased partly gas the by increase and rental lower rates. for was million. equipment oil total Adler's by environment. The a rents. average Finally, by by higher result to of the or electronics general XX%. an improved revenues XX.X% X% and driven million, offset XX% utilization in Rentals was XX% $XX.X average for Average from margins XX% to offset industrial utilization, slightly lower partly higher an related was rental activity combined primarily from sales increased quarter which revenue growth Rental increased quarter revenues XX.X%. rental average upstream the rental revenues. to first profit rental improved on $X.X million Rental driven gross construction increased on X% and

revenues total from With rental to revenues upstream rental at oil Adler. market increased these favorable XX% X% conditions, and of gas natural

utilization While our average up we fleet the on fleet. only better was X% year-over-year, size of focus to existing continued

equipment a increased quarter will total With average were the administrative basis. million, division benefit from be offset X% and levels. million average of on to $X.X of a primarily to rates utilization rent company lower Higher $XX.X Finally, Selling XXXX to interest million. On due basis, from net expense review by consolidated average XX.X% and employee average for or partly comments increased our salaries debt first the million increased interest to complete increased $X.X XX% costs. my remainder on expenses and slightly increased $XX.X XX.X%.

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

the the Tax the was Federal Act. primary earlier, of of decrease discussed As the passage driver

capacity company same review flow $XX.X to increase significant plant and to The equipment last by were shareholders from the additional X.XX:X. million XX% decreased was sheet at the credit. increase for the XXXX end cash funded ratio attributable decreases operating $X.X had of XX of payments $XXX.X balance million an activities $X.X million changes. million in income decreased debt XXXX, to XXXX. $X.X higher from purchases equipment $XXX.X the of to the for under operations, net XXXX in actual now million in $XXX.X receivable primarily $XX.X period million, its quarter other We At was accounts at provided months And lines EBITDA due the XXXX. $X.X highlights, end primarily was to borrowings million million improved XXXX. Turning and borrow to $X.X million. our quarter million to adjusted compared Property, cash the to at purchases, Net TRS-RenTelco. $XX.X first end, of of purchases Dividend more invested to compared of rental an to million

quarters adjusted was period in adjusted XX% XX% the increased margin XXXX EBITDA the same first XXXX to and million, of XXXX and respectively. XX% quarter $XX.X in First compared Consolidated to XXXX. EBITDA

EBITDA Our our adjusted net EBITDA are for reconciliation adjusted included income quarter. a in press of release definition and of to the

current are Finally, outlook to raising turning financial XXXX the XXXX, total year, our you the X% prior the expect results. increase. upon to increase for now an the XX% the year-to-date XX% for open prepared based may the XX% quarterly outlook, profit to operating company of our remarks of results above remainder and financial to lines we Grace Company's That on and expectation compared XXXX questions. concludes to outlook our

Operator

is our comes Schneeberger first with you. your Scott from [Operator line Instructions] question now Thank And open. Oppenheimer,

Scott Schneeberger

said Thanks, California could and in outside portables, please Keith, good if talking sounds investing to afternoon. Modular. I Mobile you that me. in start guess logical all of we

year? the you an of Thanks. and on investment you're update if us just the Remind the – seasonality right and Just wondering to balance the us year. is over – California this increasing investment of perhaps could business giving now, in in your in capital dynamic modular any early the give consideration the

Keith Pratt

those been some you're the California We've as in the looking Southern to well. of looking improvement were We've extra in the more would in nice in forward Yes, a made business northern view seen to of the comments. progress mirror, particularly also we say fleet efforts, California California improve right Scott, rear absolutely the country. but market. investing conditions lot And utilize around I that fleet. with in had

California the get in well So some returns. we and see market, is incrementally do positioned, more demand And opportunities we're happy there to our we and prepared to if can if target apply robust that. capital, we're

Scott Schneeberger

following-up broad where just geographies? on expansion, padding perhaps how Could And expanding? your now? Or are? of you're geographically address are you you Thanks. are actually portables, kind locations you And that your you

Joe Hanna

Storage the But to Sure. growing we business focused in Portable prior And overlaps markets plus are are few footprint concentrated area. on our We're the extra business the at we this and really Jersey, geographically. with ones, current be modular of actually that and located point. our that Chicago a York with the expanding would rest markets our serve New New and

Scott Schneeberger

Thanks. to how the portables this to relative the in is year Joe, say would relative that? year capital a you year prior investment ago And

Joe Hanna

similar. It’s

We’re investing. Utilization fairly now. good is right

And so the and to there, we'll been that. continue do buying and we've equipment, is demand

Scott Schneeberger

you you pick perhaps then that one more point specific utilization, still move to and addressed patch just in contagion curious going over lifts, because and seems impact it and gas obviously, up little dynamic inflection oil Thanks. because and are the Adler, it others? what improving. just trend. to And about If we're or could stabilization I’m thanks. of think is I'm provide oil be curious, just kind bit price on soon out are getting the of granularity what a from to an is if negative. now I'm of that's nice very me, the just you still oil Alright, And and get going a you past. with assets to pricing, kind to of seeing a tank the versus it

Joe Hanna

been think you've with across competitors has industry, looking us, utilization it I up. Yes, our and mean going if at improving I and the been

of that's the that around. special equipment, with is have, and hope at equipment run-of-the-mill least to we'll hoping our We'd pressure. better turn around less stabilize in that's where area and I We're see pretty And that. There's pieces continued tank. There so there. is a for those most much pieces the that see of been equipment. the And line, pricing to very everyone, to like which are I good tank or utilization will see further pricing – think that we've of once XXK But for begin general, that. comes more the specialty we change really has think

Keith Pratt

rental I operating of you certain if the also rent you Joe as tanks our of think factor then mix an of rate add, statistic. many fleet equipment. is that publish When the how would rate get into we Scott, each and by know I look segments, case and Adler, are the detail, between versus mentioned, on specialty And in impacted can categories boxes, the this. of for aggregate fleet that

categories, in the flattish in quarter, mix factor lowering would issues more say, But the a recent were in product of periods. while published rate the X% individual factor first So published the pricing by down was rate. I was in that

Scott Schneeberger

Thanks will turn over. guys. color. a helpful That’s it I

Keith Pratt

Thanks, Scott.

Operator

Thank you.

next Marc Sidoti. Our with question comes from Riddick

Your line now is open.

Marc Riddick

Hi good afternoon.

Joe Hanna

Marc. Hi

Keith Pratt

Hi Marc.

Marc Riddick

I could the around seeing country. a little you that the classroom was market if bit you're touch about wondering

board. think we things the – the that guess, one last I I seemed pretty strong to spoke, the things be when of across

as think it I you because actually some Texas were renting. was mention too opposed almost in buying did that folks maybe to strong

classroom update there? if So wondering I could give was on you us just an the market

Keith Pratt

very than we normal. for I'll have we alarming, that year that are the this but is folks last buying decided by the focus Texas. us, and that. typically on wasn't the And were we're folks encouraged Actually, for purchase. Sure, year, opportunities we and of transact stronger, an rental transactions to better It with was interesting Texas. more just pipeline seeing in some year did And

better education year should a Texas for bookings. I So think have we in

Marc Riddick

I maybe great. back should then I you. And Okay, things the one circle on guess of

was on You'd in to Storage? of pricing kind as general just One sort pricing sort is covered several that. things you mentioned in I on thing Portable know about general a how feeling with Storage. can general, overview of just the California I us prior questions dynamic whether you the view curious bring – about of are the you in specific but Portable where see you strength up-to-date to

Joe Hanna

that. all Yes there is it’s say actually That's slightly. to improved, about but on

stronger. actually are We

Keith Pratt

the the office I the in the success point from business, a do of what think of pricing we've vast had view more and of modular modular is majority we side which classroom in segment.

Operator

question. Ladies and gentlemen, that appears to be the last

Let closing me Hanna any back over the call Mr. turn for remarks. to

Joe Hanna

to Alright. Thank much, your quarter I'd today with call in for look and to like the forward July interest joining company. Grace. thank late in again second review everybody for to results. our you continued speaking our you We on very us

Operator

you. This gentlemen today’s thank and Ladies concludes program.

disconnect. all may You

McGrath RentCorp (MGRC) 1 May 182018 Q1 Earnings call transcript