MGRC - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Second Quarter 2018 Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer [Operator Instructions] This conference is being recorded today, Tuesday, July 31, 2018.

Before we begin, note that the matters that company management will be discussing today that are not statements of the historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our 2018 total company operating profit as well as statements relating to the company’s expectations, strategies, prospects or targets. project not uncertainties future actual that differ from are significant and results statements materially and risks could the forward-looking guarantees performance of involve to These projected. – cause our company’s XX-K could that factors to from under actual Important SEC expectations company’s filings. factors disclosed Form cause are the other differ results materially the and in risk

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

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

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

Joe Hanna

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

what for Our quarter results the the encouraging. quarter’s the is were second and year, sets pace

verticals the operate a gross on We picture. our driver market businesses performance in, most important gross a profit benefited million in most Operating increase. a demand strong is XX% realized revenues sales. and this in company-wide, through XX% rental providing healthy from to and we million I’d from like on highlight increase grew the increase rental profit of profit quarter. $X.X revenue in a rental all of good we conditions revenue, $X Our

time to provide with positioned sales with we of had execution, capitalize rental-ready to our opportunities. exceptional specifications well strong service. addition, on In required We each products on operational businesses and

improvement focus on disciplined continues. Our performance

as to current return responsibly is get we deliver carefully returns grow to stronger base and Our better from business. the growth capital to allocate objective our a capital

not the operators decisions, be across We a result. to are in leadership could business better our I as and have information systems becoming these assist enterprise more pleased. teams enhanced the

by improvements Now revenue each all to with compared X% Operating pricing, for increased geographies. Mobile the X% summer installations cost primarily of at up look divisions. a Modular’s ago. in year as rental equipment prepare was let’s driven increase was to income

were driven funding first education for the bookings by commercial rental very robust projects. XXXX, and for of half Our both healthy

Our XX% in be to work both was for revenue rates the hard other to increase rental continues in business, success, XG In yield Storage on we TRS-RenTelco strength contributor We business was R&D by to demand financial this in have a robust. achieved our returns environment markets been activity operating variety achieving and end At were as Adler, pool actively the leverage. while we due deepening X%, demand rental bandwidth operating continued by in services. by of strong and utilization. saw to rental demand our to rental Communications see and further strong and growth, Rental XX% make fiber along all primary was revenues and improved grew regions. Portable installations increased increased improvements rate with rental rental needs operating XX%. increased we will purpose revenues to by segment, activity rollout. supported XX% our with followed and general rates pleased XX%. In rates utilization. income income for environmental working the Construction preparations increased improved revenue

market when implementing is and demand in very in appropriate. competitive record this conditions, June division raising and the performance-improvement production initiatives focusing by higher-return segment. industries gas Despite a to the oil Additionally, rates helping U.S., and was for on high customers drive

early the are by realizing. encouraged are successes we We

their for Business for conditions work projects. to funding like and are improved our closing, we to our is customers. on where so we thank our initiatives Looking returns. In would employees is about growth as I execution and hard is good focused ahead, first revenue all ongoing and to important dedication and half is available our business Rental deliver are the strong, of feel the year good, of headed.

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

Keith Pratt

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

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

mentioned in increased commercial operations, business. to million our cost direct other, as continued Storage higher meet material were preparation to higher the million rental let’s $X.X The to performance Now a were to revenues rental market extent services revenues. $XX.X markets be higher by and for revenues on or year in sales. $X.X second primarily from Portable primarily Joe decreased of that XX% equipment Rental million. division lesser review growth revenue healthy XXXX. or or rental driven Sales by X% total to X% education or by the higher Equipment an rates. costs. lower caused costs Rental as healthy earlier compared our and average increased X% quarter $X.X volumes Mobile demand cost improvement and rental ago, new increased revenues million million quarter of a $XX.X production across well Modular driven X% rental-related to on

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

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

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

we to existing average on increased of utilization X% fleet fleet. size on only our average was rent X%., Average While continued focus from better and year-over-year, to increased up XX.X% equipment the utilization XX.X%.

$XX.X and total million. on salaries $X.X company a Higher primarily remainder were or expense the increased million, second division partly complete, of net employee to will Now my basis. million by average $X levels. a basis, consolidated headcount, benefit the with for administrative average and be On comments review interest $X.X costs. X% this XXXX X% offset lower quarter to to expenses increased employee debt million interest due rates increased or Selling

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

earlier, of the decrease discussed the passage tax the act. driver was primary the As of

due million. $XX.X $XXX.X end quarter of Dividend by primarily $XX.X from period primarily activities partly in of Property, million XXXX at equipment purchases to XXXX, by expenses We highlights. $XX.X for invested other Next, XXXX. to in assets. million compared equipment were $XXX.X of the purchases $XX.X an increase end payments income at cash million $XX.X cash Net a XXXX. million $X.X attributable of flow was higher operations, second prepaid and borrowings to million, million for rental increase provided to offset The and X% million $X.X operating shareholders million in to increase a to our the purchases to higher was the $X.X million from XXXX improved plant the TRS-RenTelco. review same decreased at Net XXXX. year-to-date increased compared

under increase the As to an ratio highlighted adjusted debt and lines a to company had this of in was actual $XXX.X the release, quarter-end, EBITDA is our XX-months’ XX% million X.XX:X. of funded At its capacity credit, last press the borrow year-over-year. additional

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

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

now our That open its will remarks company to outlook. concludes to quarterly XX% reconfirms increase our profit financial total XXXX XX% turning the lines that Valerie, prepared results. for you operating XXXX results. company Finally, on may The expectation above questions. the

Operator

question Thank you. Oppenheimer. first Our Instructions] comes from [Operator Schneeberger of Scott

is Sir, Your your line is open. line open.

Scott Schneeberger

hear you can sorry, me? I’m

Keith Pratt

Scott. Yes,

Joe Hanna

can. Yes, now we

Scott Schneeberger

Adler. How future But going good. I’m do there? X% rental Thanks. The the in for in visibility Good. would you is And to start you momentum see rates gauge increased Obviously, the looks that how visibility? quarter. quarters? what with

Joe Hanna

rental you’re us. know, business, it’s Scott that transactions visibility very the as – you assume, short, very pricing are But within business, and Scott, – our I’ll continues go there. I will get pricing for in it so limited about I the mean, in industry talking is think up goes I up our in and think that as that picture better business. to utilization

so modestly. is continue to should immediate that pricing And outlook improve our

Keith Pratt

caveat, mix Yes, and issues. the Scott, always with is

impacted rate between seen sometimes mix the But trends, X% with good between Our in reported uptick second the we tanks boxes. and rental we’ve pleased and quarter. can were the be

Scott Schneeberger

end to markets? same question. Looks bit building about like All to going And basically, see what little it the basis? on and, a the talk momentum turn some a And you Could you there. go-forward right. TRS-RenTelco I’m is then

Joe Hanna

Sure.

with I’ll communications. start First,

more increase as from rollout. work from that’s the section XG purpose the in, comments, business, going one the listened side. is the that we revenue supporting backhaul I think the future more significant a then business rental communications work of to and wired part of had Keith’s you The a communications modest benefiting from general is

driving is a hit the yet bit that there. fiber the haven’t anticipate any and we the of wired ahead. of demand towers little but we in So piece, continuing wireless next work portion And quarters the the for

On for the environment are products seeing good are defense aerospace in businesses pretty pool. that And with now. Semiconductor general right rental right us purpose now. we R&D high-end have our nice side, just there we activity and and good

long doesn’t So and issues government as shut there, should any we continue as have also future. adverse the believe down that that foreseeable also we into

Scott Schneeberger

leave to else. All right. for you more you than be bit little just through quarters, more but And expected? bit someone we little modeled year? anticipated. for than had elevated balance about Modular a elevated think that was the I may is curious, we the going trending was I’m how I’ll that be expense how It a curious, our SG&A

Keith Pratt

customary a portion you higher give people-related. was to a was health the right. up of or was to you’re of the SG&A and X% that it. just in year like, increase quarter Scott, million bit merit The we majority compared vast And second absolutely little $X.X context, our increases, a Yes, costs care have of earlier. that

just done little compensation hiring, of as support performance-related selective we’re in we at bit bit in some few company, the our and accruing which extra have both We of little is divisional also leadership new corporate. have of a positions services well. a very backfill some of that and then a And

costs. were which $XX increase, is, we just primary forward, I So all most second quarter. looking over people-related in reasons three again, the behind the would real million say of

that we’ll I on for that a number know we quarters have think in the in neighborhood based year, today. this remaining what neighborhood of

Scott Schneeberger

over All you. right, turn Thank very it thanks, will helpful. Keith. That’s I guys.

Keith Pratt

Thank you.

Operator

Thank you.

Riddick Marc from comes question Sidoti. next of Our

line is Your open.

Marc Riddick

good afternoon. Hi,

Keith Pratt

Hi, Marc

Marc Riddick

generously, Well, well a Portable opening so bit delve since might given so, Storage. as was into the we

XX%. percentage about details you I you think being around, greater up I mentioned of if it could some we wondering of I are up first all, guess was revenue now. to give what

driving forces what XX%? are the approaching of sort We’re that And performance? of

Keith Pratt

total of X% Portable core total Storage Marc. X%, Yes, revenues, McGrath revenues. rental is – or

Joe Hanna

operate we’re I the of the demand seeing starts May, markets size above were new and $XX we’re basis. up the I co-located construction strong. many Sure, we’re part in construction In X% Modular million that business, year-over-year mean, are we Marc. that – – in as know on of in in, were is a up

– this real these there seen, has in in it. months that So business here there, and healthy been we’ve from activity benefiting is that just

Marc Riddick

great. Okay,

just increases. think little was rate – a greater little and the legs you may time. be far talking bit bit on takes detail wanted could into not that Obviously, getting. the had that you that forward you’ve give of success or you that’s what as going I a Now working if delve But I pushback of if about as some on you of rate some may some could a the on slug have on maybe some wondering were you areas

Joe Hanna

Sure.

As part increase our the and very big company, initiative factor and focus increase to performance-improvement big a for a of us. performance been has the of very rate area

are have over some good the now. months, our to of in the higher to of customers. construction why being good rolling seen site services provided What the rationale some success. the year is We and the And forward, Mobile our well seeing discuss virtually increasing is? the points XX teams permitting, now. rates that we’ve are had equipped very we had Modular, with were were, with have that rates, at expensive rates customers our we’re right rates construction, all last in the end and wondering very day and for is of clock implemented of talking very And increasing questioned more and field we’re in obviously, the particularly Initially, what least that at services, success. Stick-built everything

project. in that provide our of products our big for the So rate projects very increases part we really the a and are customers those not

and so in. was And rates for come success had something higher us in for more that we ask to

success So our that in other we’ve actually kind of businesses. off built

doing more Storage We’re of now. in that Portable

doing We’re rates are teams to their and in cases, customers do of sales our going are in more we’re our in that Adler. them. ability accepting to confident on – more raise becoming that. and, continue And to And many

Keith Pratt

raise when a both think value we’re to And confidence I think, Marc, rates. think of managed providing we’ve just rates, quality lot we And of those equipment we’re having I I from service. of when a these of a at a it’s commercial it level point and lot terms and conversations, of to vote that customer, of in view, can higher win do still business the

Marc Riddick

Okay, great.

customers? the for with but new just, thoughts own maybe lie that thoughts year? conversations things your that the Just were has any not for thoughts, tariffs. about And to been get remainder your from there? you’re If on how I – two One, may your impacts wanted – what And whether of how I of much that – me. where more entering guess, thinking

Keith Pratt

costs the costs. then fleet. other how prepared contracts. mentioned those year-over-year. The part can main of cost to higher some with the that our the primarily preparation area inventory And in we’ve costs We write we as business. in overall to And be inventory as more and the was tariffs up think obviously, price And if that I remarks, seen our of protect in material in say of I there. can And risk on ourselves I potential the arena. in material our increases maintenance were best our our some costs become would manufacturing modular there’s Enviroplex just related extensive, we item impact and more try significant Yes, is increase business, centers, line

We’re not trying companies, impact, we impact. there seeing minimize with are a is commodity of And tariffs. the think some number but that in impacted that see areas, be to working through of But to starting suppliers, all the the by of there’s like all bleed marketplace. which I our may into we, really –

have would again continue some look want see our And up, can prices through. to to if we to customers we’ll of forward. with watchful going certainly edge that if so pass be we And and

Marc Riddick

a for and particularly And could update in piece one strength give great. regional then market. an education me. activity, us Okay, last bit you if on of Wondering the

good. I think I be region in pretty if correctly, buying of you that mentioned looks couple a to renting. seem Though the past remember doing more states than

wondering So could if that. on an give update you

Joe Hanna

doing necessarily not was, region And to for us. we bit the buying. is that referred year, we what central more good believe we’re change was and Texas little the And overall. year believe seeing rental varies I Sure. year, very demand that from that a to still last

in this of really them one in, we’re I at all of an lacking operating from education the Just funding really regions is point. that can’t that perspective think

right And or for bonds modernization now. serve we so bonds local either money right projects available through markets now, is or state in tax that the referendums

we’re so about take that. and advantage very we’re And to of positioned that, happy

Marc Riddick

you gentlemen. sounds Okay, appreciate. I Thank good.

Keith Pratt

you. Thank

Joe Hanna

Thank you.

Operator

you. Instructions] be the appears Thank last and Ladies [Operator gentlemen, to that question.

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

Joe Hanna

All again everyone, joining call for to in results. speaking and right. late quarter you, review our the our look October forward third for Thank We continuing company. today your you in with to interest

Operator

your conclude have gentlemen, that conference. and a for you does today’s Thank Ladies day. participation, you. Thank and wonderful

You may all disconnect.

McGrath RentCorp (MGRC) 4 Aug 182018 Q2 Earnings call transcript