MGRC - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Second Quarter 2019 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, July 30, 2019.

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 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 to uncertainties that other and guarantees the and projected. forward-looking involving our expectations and not These filings. actual differ SEC statements factors risks performance that Company’s in the Company’s actual are significant are Form results Important from cause could results from disclosed XX-K cause materially Factors could under to differ those Risk

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

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

and today Officer; Hanna, be Pratt, Chief Joe Chief Executive Officer. will Financial Speaking Keith

I will the to over Hanna. ahead, now sir. call Go Mr. turn

Joe Hanna

will to and business with stuck very core in healthy, second quarter for fundamental our some XXXX Thank improving afternoon, details we our were Good and call. as thank markets then financial Keith call comments and performance, pleased the us review. were his end you, on additional overall today’s strategy you I on performance. our Sydney. We quarter start with joining second the provide a will of

operating XX% and growth revenue in rental XX% realized we profit. Company-wide, improvement

the and Mobile as education equipment revenues communications for well drivers as TRS. were quarter significant and in purpose both Modular at rental test rental general revenues most commercial Our

a completed now of year foundation the XXXX. into solid remainder of a and pace have heading the first the good We with half

season, we This districts and year, orders earlier revenues operating we grew the for At XX% growth in place materialized rental for pipeline quarter, rental into and school quarter. had Mobile revenue Modular, overall, the our income XX%. the

were grew result and continued activity markets rentals In improvement. rates and addition, project as good. a commercial pricing on Rental was our focus robust of healthy our end X%

utilization Additionally, in were project we remains full quarter year revenues while this lower timing, increasing added rental healthy. to Sales due but growth division-wide. geographies, fleet the new outlook

Turning on Storage. to demand. Portable grew Rental revenues XX% broad-based

growth grew We Due are income opened two as considerably our and filled on increased orders to the greenfield XX% utilization we equipment. operating of At with both operations increased new strategy schedule general test TRS-RenTelco, X%. rental demand, strong execution the for quarter. revenues purpose during and and rental communications

due product utilization Our growth sold part equipment increase. spanned several the market this less quarter in We and segments. to

right and with division. been We not XX%. operating has opportunities. we demand in revenues market continue effective the attractive At have segments. vertical and revenues meet and the type at balance have performance of the successfully, five income of to be six pleased rental X%, increased Rental our grew lose been increased amount Adler, to and available this managing customer ensuring equipment team TRS The very of we

to transactions, continue strategy our year-over-year. to profitable sales allowing We our to implement force directing of us rental rates improve more

has hauling process the my of in In past senior area a Additionally, planning for outlined our been – years. leadership rental-related gains in shareholder focus I my profitability year, to resulted transportation rates improve over a this in work to division-wide and services. strategic shareholders two that letter

and nice rentals. calls, initiatives our our In have around been implementing core to performance some divisions. these strides our also journey focused on readily growing initiatives, best, what on important in teams growth that results. strategic It addition grasp through at as business-to-business discussed made an we adjacent concepts valuable These we’ve has opportunities, that are our extremely to to some we initiatives our business improvement prior flowing focused do are see

are success remain value there. attention through shareholder and will these our efforts, in building realizing We

results full year. in increase pleased important Our so we spending I’m on earnings we that long-term have financial are most time the and far for XXXX the and increased outlook effectively. initiatives our are to responsibly encouraging,

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

Keith Pratt

Thank the just you, Joe Joe. we very Reiterating were said, with what pleased results. quarter’s

increase revenues, million quarter revenues driven a quarter was second total million on sales. rental-related a year million $X.X $XXX gross a XX% increase of $XXX.X XX% operating revenues XXXX, to from from The gross in XX% increase in by to $X.XX. increased a the increased share income $X.X million by increased million services from and and on $X.X from earnings million $X.XX in profit to million, per X% decrease $XX.X for Company’s ago. Net which offset partly profit were rental For diluted profit the profit gross $XX.X

XXXX. Now let’s or services $X.X million XX% improvement revenues, the $XX.X million quarter rates division XX% ago, partly higher and average break revenues the for from rental total quarter revenues in reviewing second of Mobile to sales increased Rental offset primarily rental driven rental-related Modular down X% higher and year rent. by on equipment results by performance rental increased a by to revenues. on average the lower an X% compared

our Rental we $XX.X commercial new demand Storage rental our labor increased direct costs. to well higher education operations, increased revenue and as which costs other volumes as healthy $X.X from and on million and direct $X.X used costs, The XX% increased material other our as million or lower of Equipment resulted markets continued rental commercial workload costs equipment and refer across support higher business. million. or growth in to to markets education to preparation be decreased revenues sales. in Sales and XX% Portable

fleet XX%. Average in XX% gross XX.X%. the Average million. was to was was and from quarter revenue for increase of which $XXX increased higher increase increased margin rental XX.X% the for utilization rental margins on combined rental second result Rental The quarter from a equipment to rents. modular an profit $XX million, XX% of higher

million for XX%, equipment increased rental to on in higher primarily X% revenues. increased on million driven million rent. $XX.X by total partly quarter $X or TRS-RenTelco margins higher Rental by XX%. the average purpose a XX% offset both revenues, rents. Rental were gross at rental $X.X lower sales revenues new for increase opportunities. comparable communications in we from on growth growth and general combined XX% rental invest profit revenues saw We in in test The result was to balanced equipment, continued and equipment revenues

of the was $XX and for higher revenues lower for or from primarily which X%, to quarter driven quarter million, increased offset increased $X.X equipment the rental on quarter $XX.X X% electronics rent. Tank revenues Rental by Average Adler total million X% for sales on XX.X% which by million. the higher million rental, an rentals utilization increased XX% was Average equipment increase to second $XXX rental services rates, average revenues. partly average rental-related were XX.X%.

as favorable The in and higher from product was decreased margins with mix. as X% rental revenue combined pricing broad-based gross rents. vertical rental of the XX%, a six Adler’s five profit increases rates market Rental to result markets. a better well result increase on growth of were XX% our a was in

for million total customer fluctuate requirements, availability of equipment of the sales division be revenues sale to from a quarter-to-quarter Now equipment can timing and $XX.X factors. of my and $XX.X a sales used The on complete, will review ago. other basis. company million year company depending revenues comments on from remainder Total with decreased this year-to-year

by $X.X to expenses offset net X% costs. rates employee the $XX.X partly administrative increased XXXX interest were quarter million debt and or and Interest Higher was increased for salaries million, $X.X levels. Selling average lower benefit to primarily expense due second million. average

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

accrued I increase operating accounts liabilities. of XXXX. and purchases income was cash highlights. rental ago, Net and million The million invested $XX.X would million, was primarily Modular attributable higher an to increased improved review Mobile to We for XXXX our Next, flow in purchases compared operations, income million to equipment compared at changes year like TRS-RenTelco. provided $XX.X $XX increase primarily deferred a cash by from to and activities $XX.X due year-to-date payable to

borrow increased compared $X.X million Dividend $X to of end X.XX:X. the at equipment funded the million were year purchases borrowings $XXX.X million ratio of end and of quarter a the were at XXXX had to the million end, $XXX.X capacity Property, shareholders the million company million Net to At $XXX.X $X.X of plant payments additional under and XX $XX.X the to million. an XXXX. to EBITDA second ago. debt months quarter was from credit, of adjusted last lines its actual

XX% adjusted margin EBITDA Second XX% to year And ago. adjusted compared a XX% to increased consolidated to EBITDA quarter year $XX.X a compared XXXX was ago. million

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

are the profit increase expect of upon the Based the our turning outlook increase. and our prior raising XXXX outlook and results financial X% our of to to to year-to-date Finally, a outlook. XXXX we for operating total to remainder expectation current financial above as to compared company’s XX% results XX% year, X% XXXX

concludes quarterly may now open our you results. the remarks Sydney, questions. for That prepared the on lines

Operator

question our Thank Schneeberger you. of first comes from [Operator Instructions] line Scott with And the Oppenheimer.

Your line open. now is

Scott Schneeberger

said, for first guidance Keith, Certainly to I you. quarter outlook I’ll guys. half. outperformance? the I’ll attribute you I outlook one it second guess, much The of factors afternoon, would a see. address you And How quarter. – to of your for the increase, Good or to either Thanks. would guess, much swing I go it you, quarter, the then, much meant is the two start, top fine-looking first how an that the some half? the first you improved end, high end of low to you how maybe I three or if want to And attribute towards

Keith Pratt

Scott. and question. happy you I’d with that try help be to Sure,

we is, year. so a I that’s well, second balance at keep in of year, at had first certainly the and for think the as the factor was look very we good for outlook really the we XXXX, as the half half of when strong the XXXX mind, the increase a in look of us. big mind in comment Keep first

when look of do we tougher have some year. comps the So remainder we at this

people, it to does we challenging is the quickly. rental over with TRS much the turn we shorter try the business and outlook, when where as And forecast reassess terms both and more and always Adler remind are

part of things And year of when some at the keep at are those the seasonality the November year, the period look obviously, those later in a end of businesses. and is particularly factor both So between we to mind.

year, or XXXX the sometimes they in project margin we when land they year. specific land projects the following associated also slide the whether of updated revenues, exactly comes put and first sales outlook, that that or can for size the higher us lower we those factors expect thing sales Some in could of to are the mind of that half the second have timing into completions, both of gross the that and

Adler out Seasonality, I we and later we the behavior, as sentiment those and consider some year, in that customer all really precise that’s general hard mentioned, do at that well. get TRS costs and customer have further range important. are things We are are to wide. why impacts very how the fairly conditions, Obviously, as keep be to around economic

look we’ve heavily particularly our at cost fairly operations, you invested side. in half, the rental in our If of modular first direct

making year, the right So we if between continue strong typically when we’re through in looking rental-ready following we earlier or is much see spending get how we equipment later year-end. in demand the year, may trade-offs

we pluses second there’s but still are a footing. half the keep we’ve the of reasons first lot range the good pleased of And on Joe and fairly with I we That’s know as the a really minuses really wide this entered said, at there. one point, half. So

Scott Schneeberger

like competitive little rate, the each thanks. talk next just I Great, how Appreciate question. well. broad very segments, it’s going three sounds rate Thanks. Keith. how for in you very to of are each on things bit, how than mix, but guess, get that, yield rates, is more it and kind the environment, segments? a It the primary ability are three but you of could to overall of is But a – touched

Joe Hanna

for has been Scott, Rate and Yes. businesses all focus the area of across us. rate a Joe. them of is improvement in this

business. the very while hand. at that at dynamically And get Storage sales engine on We pricing first. And has able – A so deal us just I’ll we we we’ve the better the Modulars to been, Portable needle to move considerably actually really installed rates improving helping which helped back, and pricing and believe, for talk effectively. about force our a according in

so helped look look us. into we can at prior can utilization, at that customer And has which gotten rates had that we we the deal, and with price can we that

improve looked at steered work profitable us really customers more everything towards has improvement sales that done as force performance to our we’ve customers the we’ve the more from with trying helped that all get those addition, and In rate deals. we’ve transactions our profitable and

happy runway Modulars, in would pretty that improve goes for tone. but more focus more rates, and back the fleet, communications to with, so for particularly have at TRS, and It – us, do kind our And flattish mix than general those out area keeping I is purpose that comes bit gotten, a to to a us little of equipment we’re as a we has rates steady. we’ve equipment continue on at still rates say off see market we rates in been prices. typically is rent cycle that dynamic those so the as are at lower equipment, and the rates

more sales force and we’ve our like and like deals all changed right enabled has things that plans done comp things more and us some then to again, to to the folks customers our to And Adler, rates. to profitable raise steering on incent rates, raise help profitable do focus things at the

been still us. there’s think we’ve we there and for So more out runway pleased, that

Scott Schneeberger

that. appreciate I Thanks.

questions. I’m going in one and But clear, else let someone two more TRS. one Adler, steer Modular. tackle in Just to

Let’s TRS do first.

comprehensive I saw in Just on curious little be to the the your release, XG, update. would press was more update it get Thanks. cited but

Joe Hanna

Sure.

handset. done that, more of XG and XG. We’re a like more Internet, of many communications there tower to really than which we work But it talked excited purpose is of and there’s connecting on general the a that your to a with is feel, design this really the the with – rollout was XG things the in at chip going prospect before. advent lot concentrated are the equipment And and little and more the be, different We’ve with things need. about rollout, labs

be equipment see we that to not that going had has that excited have literally are begun that, connecting are things we are to So to these as starting manufacturers design before. them wirelessly

first that’s So thing. the

be to that much towers, And but a seen We’re sure we on determined. to It have of business very And there how the been happen starting optimistic the hasn’t that we’re we rollout haven’t that going to on of see on yet. that we’re requirements see are yet that much come. the may carriers yet because business. not much testing some and depends has towers

this for is of us, to And benefit of good. will encompass so – really it longer-term is be we feel more overall our and two going a both product segments, which

Scott Schneeberger

I trends then that’s has of And to on would Excellent. what touch been Thanks. there is, you grew. which the each. curious mentioned us verticals And one in addressing then be lastly, take you could curious just five around six hear and upstream, on Adler if and the you’re past, I seeing how these volatile think just doing?

Joe Hanna

in really all us, I’ll a for it’s Those the for it us and and at were this I’ll quarter, I’ll the QX and the kind on strong on really of were was touch upstream that for probably downstream. say highlights point. ones couple. Sure. focus both

Scott Schneeberger

the not grow? one was what that And did

Keith Pratt

showed lot grow Yes. a down but other Construction a end begin slightly. we bit. from depend in do five was as was quarter, particular noted, high all construction or the this just a year-over-year periods when which that level the at comparison. And down of on we of But track you segments again, the can projects

Scott Schneeberger

in you’re trend? So that it. it quarter. the was about doesn’t too that just been sound or – has like It concerned the Is unique

Joe Hanna

That’s correct.

We’re not overly concerned.

Scott Schneeberger

guys. much, very Thanks over. it turn I’ll

Joe Hanna

Thanks, Scott.

Operator

with comes Thank England from line question of our you. the And next Berenberg. Sam

is line Your open. now

Sam England

Hi, guys.

second markets the are backlogs that strong of particularly And segments? any that to order that you are half. to with Does any apply for healthy led that? looking there all say the segments mentioned You

Joe Hanna

Yes. I can answer that.

year. Our is in all education the season typically first in the the Modular booked business of half

we those So anything second there related happening all and be the real good strong equipment that general has side, say I area for too. test areas communications broad-based for that at and are the But ranges construction and also strong half, petrochemical TRS, virtually demand our purpose work, that’s on some the been us. that typically to Coast, not to And over on commercial commercial as things us. equipment plant will is mentioned, continues Gulf it and XG outlook good, are from to business strong a

Sam England

Okay, then the Modular. thanks. And in the continued one pretty Mobile running second is high rate just despite Obviously, in utilization fleet. investment

bump running given you’ve side into second that up the that sort utilization? the Just or you’re wondering, more half that commercial CapEx on do year, in to utilization? seen And to there at XX% of any side you of is setting this the plans have increase close education

Joe Hanna

a like both a Sure. commercial. of I at We’d year. us say little we’ve on it is education been to has pretty that significantly And segments, always great bit both those clip. number and the half for the XX% been in demand second see I good higher. wouldn’t a us. accelerating that of be would And healthy buying

We they’re sure rates equipment. right have invest before the hurdle need look at to hit our we forward and financial that. if we’ll the make to of year. do to brought remainder carefully for that, the in opportunities continue We invest we we that the we’re for And that going

Keith Pratt

just build on to Sam that. And

of that’s up at we’ve look ago. year $XX a million CapEx, you spent If on side $XX equipment year-to-date, the million new rental from actually the on business Modular and

are and spending we positioned. pretty significantly, So well we’re

to in our grow job. fact team. we’re managing that overall something just is doing They’re increase utilization with pleased improvement rental the the a very rates that of. The really proud fleet, obviously are they’re get phenomenal We and

Sam England

one. And then one Great, other thanks. just

near-term opening in? quarter. want you forward? any this for sites additional to Are sites? going there plans How Are are new greenfield the thinking opening areas sites add about about talked still there You you

Joe Hanna

our talking about Storage suppose business. Portable I mostly you’re Sure.

we look are we’re on – We – glad opening two a kind we as locations, and are evaluate we year where passes, annual the yes, are that and that basis. an opportunities business each of

– there’s at those, a and present we’re expand good business. this of continue not at places there’s the not and where the backdrop, We’re going are to if have country point, lot good we look activity, to we in economic a financial they

Sam England

Okay, much. very great. Thanks

Operator

Riddick And the of our Marc question Sidoti. line from you. following Thank comes with

line Your open. is

Marc Riddick

afternoon. good Hey,

Joe Hanna

Hi, Marc.

Marc Riddick

pacing backdrop can was the wondering was the education bit you’ve if sort about seen earlier I of what being comments historically. you coming I little put why a a if on have place wondering maybe of quick around than or touch little you on I couple that maybe one can to more taking of as a that’s where And that’s from currently? then follow-ups.

Joe Hanna

each to had unfolds, because school Sure. based are in and where place sometimes projects and where year sometimes This earlier was we find year on year as districts a ready. a they’re not. in number were school It’s we just their the more organized interesting are prepared particular, districts that orders year, of

the in market where with came this districts of it get earlier. more aware orders together are I utilization think things availability those activity and I their and influenced to of year of And is their want they sometimes think activity. too, the in classrooms all of I and of kind kind think

than – received And usual. so orders we just we earlier

terms than of in to billing earlier certainly but Aside outstanding see from that, nothing install, in because other and ship years. their can and we’re start we glad we that particularly behavior,

Marc Riddick

a with a some were? was Thank And Adler touch if as delve having you. to could product very as maybe certainly think well forces into wanted as driving that of favorable mix far I helpful. mentioned bit what I you being helpful rentals. on and those little – you’d wondering That’s then – Okay.

Keith Pratt

Yes.

have the is really would is about at I and at we and the quarter at areas a rentals second is our area we is related several and an roughly and job mix. as increase you up expanded in compared say then specifically year-to-date. remaining balance, the of But rental better services our on the between look that’s other of to do of improvement box you rate thing, Adler One rental was the that have in ago. and ancillary to rent rentals to X% box rental-related say, in that a pricing had, essentially well if two-thirds year business tank the where rentals if third the that then getting related mix nice partly we activity rates, on some the thing, the the margins. our we’ve products team and grown the business as I’d it about the mix. overall details, First done And tank look

Marc Riddick

me benefit of on was little what back sort as far of And of Okay, looking back the wondering could you wondering our I refresh or was weather far because for year bit look maybe half. just at to for great. that on half sort remind there was memory remember then – a thing you the is, last if a of last of us as the I sort if as correctly, as I to flooding. if comparison as you. could the Thank

Keith Pratt

in of I up, we’ve the snow, both issues the and off when the there’s year-end, turn in Adler certain tend projects impact parts business, business again the certainly get before at country. to you beginning in much I If weather-related got where Sure. Adler the terms those to rental over wrap think projects quiet And new commented always with shorter at just the as ground particularly kick rapidly, And tricky a of year. we or make and can period divisions. to business of forecast call, specifically frozen quite the TRS just

on depending the with hit, weather timing to the of the very they it parts country makes just know rental difficult to happen issues, what’s so revenues. which going And of

Year. there’s year-end kick something projects begin equipment, business, project in sometimes customers, they say, Thanksgiving electronics where sometimes the if and even wait renting a they’re completed off reluctant and, and between new about just period for that to New sometimes they’ve And with until our Christmas,

than of both So both mean, TRS, those had we businesses, But just rental might finish for fourth in I healthy primarily in very Adler, divisions an XXXX, it’s can quarter both again is, to at What sort will those projects. it a strong revenues year-end. say average had it’s in tricky the year. be we of forecast. in the of of very With they with expect cycling I weather-related. more

in it fourth this So us a of the for quarter make year. the does comp little higher

Marc Riddick

Thank Thanks for the great. color. you much very Okay, gentlemen.

Keith Pratt

Thank you.

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

Joe Hanna

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

Operator

day. gentlemen, Ladies disconnect. conference. participating and may thank Everyone, program, in you you the great concludes for and have today’s a all This

McGrath RentCorp (MGRC) 30 Jul 192019 Q2 Earnings call transcript