MGRC - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Third 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, October 29, 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 involve 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. go now ahead, call Please sir. Mr. turn

Joe Hanna

I you with quarter Thank financial and Chris. afternoon additional in today's the provide and detail then joining performance, some his XXXX review. start thank Good on us call. comments you, on third will call for our Keith will

Overall, multiple serving wide and finish as from our were pleased economic markets year. an rental tailwinds, start did typically job had quarter range projects, XX% of the This with our and customers our us operating third revenues in marks modular The executing. across great summer quarter, profit. we a a increase benefited teams we for and favorable customers increase portfolio education diversified time a active XX% year, in busy school prior year especially very the of to projects of

funding for growth into Mobile healthy modular prior and had at Modular, way state projects and local Activity levels modernization XX%. in income operating as districts. classrooms the both XX% At and at grew was quarters grew their school rental the made revenues

commercial Additionally, space, for up and both customers needs their increased private rentals temporary sectors. in were public as

We continue improvement business increase placing able accomplishment consistently on initiatives the reflects rent. has and quarter, rates X% during improve were grow to utilization the more and while to and that committed team a responsibly performance our equipment to delivered results. This is focus

environment to Permanent that record provide a our We Enviroplex, for favorable children in modular bonds. an Typically, modular Company-wide environment well. classroom by of XX%. with the permanent exceptional quarter contributing performed levels education help increase very a construction. a supported project funding conventional more completions revenue than school through state and classrooms were California year. manufacturer, team third business dedicated of and the in delivered occur local of quality had districts Enviroplex majority quarter, sales committed a economically

focus We strategic business. have the calls of and expansion smart in previous shared initiatives our on

geographies jumpstart nice expanded of new base Previous operations. acquisition, portable this positives. with a provides our operator and near-term During new acquisition Oklahoma to portable and the on markets quarter, for in acquisition two both storage fleet, a customers City $X.X big storage and into relatively the to These shortlist a other enter, closed we of an markets Greenfield this were year million. broad Tulsa of also as geographies this

and to in both new pleased markets. business this legacy are We see expanding

we picture R&D rental operating activity revenue favorable nicely product revenues XX%. segments lab general and to income continue rental the developing broad based. robust in grew see the and increased XG. work Both product XX% TRS-RenTelco, At Testing the demand and very segment purpose by was for needs communications as around grew were

the to skillfully, quarter. of many enable we previous rental have is managed in taking that connect benefits the shared needs more quarters, their fleet XG will many wirelessly TRS and in team offers those The customer and place now. Development the very at we network. were products products the performance with As to pleased

softening of X% gas industry X% saw decrease we reduction ago. which upstream conditions, the Rentals, revenues we Tank today, saw a income as operations, price a to and as Typically, third The play strong expected. activity in quarter, we oil we challenging on direct the rental other an oil rates quarter. but and out did normal past. in Considering of quarter related market increasing more in indirectly and contributed rental in challenging a part not shared to the not and a environment. and additional oil lift delivering nice this gas view is and this compared We job this Adler that weaker end-markets, is of revenues simply see the cyclicality did only and the At also basis year have affects business affects more operating softness Visibility in we services the the industry. quarter-over-quarter we a in

some To work. third the team finish impressive about our Despite both fourth experiences activity the are business healthy remain job around providing remarkable members portfolio. the McGrath And to with done uncertainty, our with customers quarter. levels our fundamentals overall our RentCorp. exceptional up, the We associate deliver momentum ability all economic positive a and It have reflects good. our performance our many year-to-date results that quarter takes hard and remain entering

focus close. as We to XXXX bring our a we successful maintain will

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

Keith Pratt

you, Thank Joe.

the quarter's up Picking said, we just what on pleased Joe very were with results.

million increased of million operating profit quarter Company's The was XX% revenues, revenues and related on $X.X year $X.X $XXX.X on ago. service gross million, in quarter increase million increase rental a in in gross third for driven a gross rental by increase the a from increase sales. $XXX.X total the $X.X a For XX% profit million from profit profit XXXX, to revenues,

a $XX.X increased from $XX.X $X.XX. and earnings million, also share diluted from XX% million to increased Net $X.XX per to income XX%

down the rental compared to reviewing the performance division I'll quarter results by Now, XXXX. of third break

Mobile revenues, and lower million partly for services XX% million, and $XX.X quarter was Modular which by by rental higher average ago, sales a or $XX.X revenues primarily in related increased improvement total rental average revenues. XX% a on the rates Rental offset increased driven from on revenues rental to X% X% year higher rent. equipment

portable education million Sales new revenues in X% equipment business. on decreased to continued Rental as as lower growth $X.X our or be well commercial markets, across our revenue healthy storage sales. and

increased rental $XXX Equipment our XX.X% markets, education and was revenue gross million increase margins comparable higher at result to of re-rent combined labor volumes quarter Rental or million, increase equipment. fleet commercial increased other demand profit The preparation an the from resulted operations costs from $XX rental million. increased cost costs, material rental and Average third of modular rents. the and and in XX.X%. higher workload $X.X in utilization to $XX.X in margin higher XX% direct a included The of higher costs million. costs, increased for were XX% of which for was Average XX%. was rental on rental to comparable equipment support quarter

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

for equipment rental the which $XX.X revenues decreased electronics on Average XX.X% the utilization $XXX rental which for sales from of Average partly increase was to X% million, million lower quarter quarter $X.X and or Adler XX.X%. Rentals, At the services. related an increased higher $XX offset million rental Tank by revenues, was million. was to total

XX% of X%, lower offset for was rates. revenues from rent gross average equipment software a quarter. margins year’s five in The decrease X% XX% result markets average on to revenue that the by end was strong the quarter to partly combined due was our Rental last to six rental profit across XX% on decreased decrease monthly XX%, from compared third rents. higher rental primarily Rental decrease demand

the Company this basis. division remainder complete, total will my comments Now, on be of a review with

sales $XX.X majority increase Total at a California. Enviroplex, strong reflecting $XX.X for year this ago. in due from increased equipment of The million million demand sales projects revenues Company education revenues higher to was to

year-to-year, addition, availability depending sales In on sale a timing projects and requirements, margins Enviroplex fluctuate and increased sales favorable at mix factors. The for customer of equipment quarter-to-quarter revenues other from for used of can quarter. the of

total and percentage lower than sales quarter high third quarter, revenues in already XXXX. a than the end by sales of fourth completed projects new sales currently be be to to expect year we a the ago, the expected With higher of full-year

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

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

an XXXX. attributable The by other and Next, operating liabilities $XXX.X income cash sheet and compared I increased primarily year-to-date was $XX.X cash payable changes. to million, activities would operations, like accounts to increase XXXX increase improved flow highlights. Net review our from of to provided million accrued was balance

same for Mobile period million at $XXX.X XXXX, compared to rental purchases, and the in invested mostly on million Modular purchases for $XX.X TRS-RenTelco. We higher equipment

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

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

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

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

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

Operator

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

Your line open. is now

Scott Schneeberger

new Good curious Thanks an sort storage City. is afternoon. huge, that I'm you, of curious, ask the portable -- in much. establish just for very just I not containers? a adjacency, acquisition it's but your about footprint first. does And, to market Tulsa, want Oklahoma that of

Joe Hanna

us. for as potential in my market Sure, it's year found or I on one shortlist the Scott. And a business, that. market can was with jumpstart. us two. operator it I to new And had this who the in was was for good get markets answer Yes, fleet, a the for that thought comments, it young broad said customers, there next this option of expansion that in we well-established base we great of us a the fact

we up And list. moved in it so, the

Scott Schneeberger

it with years Thanks, ask we've to up. to growth ago, that's some storage somewhat I'll and were Joe. And How a is with your portable on of regard footprint broader had footprint weight pause Obviously, tailwinds few picked containers. your with modular -- guess, spending. I relative you

guess, particularly the the segment, Just I forward? the about strategy, curious Thanks. Mobile in two-parter there. Modular going

Joe Hanna

that the started with initially the expand we for do Mobile in. in that strategy business markets that to then, will legacy we was decided Well, operating first continue to we sure. modular our we of outside and followed years, business And open business, the was markets serve that. Yes, and Modular, of number to

now the -- as actual Nashville this served markets the Louisiana, that this kind are acquisition capacity. and in that of modular Greenfields went as are Lake we really by big really this so, And business year, in not Charles, in two well any

take just allow to to in a so, continue do really few that We breadth and ago some a producing of expanding that, definitely outside made did we'll we And interested take a years so. investments pause of for the us. start and to we're

how And these well we and do grows grows This profitability depends open could that. on as we well so, how locations. our new the business

Scott Schneeberger

a more less modular? or good And the XXX% still XXX% penetration bit so, overlapping portable Joe, is with of than

Joe Hanna

it's say Yes. a much would XXX%. I pretty

Scott Schneeberger

enough. just clear I Fair wanted that. be to on Okay.

Okay.

you on equivalent from more on slowdown mentioned. the have funding been Just impact? watching on in if a specifically that to spending, economy, I'm now, local things what one educational the you're we has would of solid most and the with I modular? parallels want there end that. can education reaping just happen market, to market, but may and clearly the Obviously, I about talk state we in draw other how all most thinking think to benefit

Joe Hanna

-- is years believe question, to capacity is on local in will as sell it’s and as and there here my Well, bond long place here thoughts continue economies have so. bonds, good it. prior passages a that economies do in state the is to taken I

stability And news is, ballot. there to through wouldn’t would XXXX approval make some immunity, recently less And state going just construction it so, legislators I the and I'll think, funding. AB received say but for the we I support onto there it. campaign in cycles passage construction in that And because but is the on of passage as is school very to I impact from good of state that the say California, -- support add the governor, market, got well who's the good of that's the $XX XX, which March not it bond a or California as billion

another for number a really of bond years. facilities is nice us give this a that substantial runway will So,

should pretty And so, we environment as just continue this for us. stable that view funding a

Scott Schneeberger

the Thanks. nicely. quite XG A One for on along little more me. is TRS-RenTelco it like detail looks more moving update,

few if XG what mix? seeing on a Just into could deep take layers you us you're

Joe Hanna

are test particular So, both true is those and supporting purpose devices being connect seeing for XG for work products and of we via we're to General manufacturers done and the -- labs what is equipment, automotive and before industrial as what manufacturers purpose product and in that’s segments holds in are that test equipment medical said both this communications general demand developing network. the XG work. to quarter

seeing expansion work communication take we're on pipe And for so, that fiber place. requires the bandwidth improvements to we're towers, work also through then, the backhaul, And that the side seeing all testing.

also. buildout that demand And There's also XG so, actually some we're seeing that's continuing.

tower there's that us. that's rental some so for And there. And done filtered good is into being work all demand

Operator

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

open. line is Your

Sam England

was in a Just quarter? one a couple the the the anything look growth? we XXXX, back at should first business of And just couple to ahead the assume you sustainable business the could strength the bit we color just more on been last reset that over And the to was years, little more level me. it's for Enviroplex give there as in in

Keith Pratt

as This environment of Joe's for Keith. a some of reminder product is market. as again, Enviroplex would really that And is And And just I on the piggyback seen demand education. education for of comments key driver about a that business California manufacturer funding for we've the a business. the

an that Even revenue high end business So, all-time for at in on quarter from part basis, of business compared had September. -- essentially at million strong $XX revenue the business last year full million the that's million, of quarter, even $XX very in to third the the a the $XX third and a year. the of is year-to-date already, for

been a very the and great outlook it's year for number obviously. So, year-to-date strong

business is businesses And third clarify, to couple some in of most One quarter, of is very is in the comments. just the the seasonal, fourth. that

For quarter us, a nicely. full-year a up strong as fourth fourth ago. not of year quarter basis, this still the as will be But on year, the

at good. demand completed level, kind kind say we they a the It done. things But, year and to would projects this have, I executed, of a the won year, next demand next team did when get profile, and there. to benefit from our mix into environment come determination of job really details actually which looks what very and ahead margin year, of projects, to very Looking very attractive gets high environment, all did and executing of good too it's them a of make we mix out really of very three far what excellent they getting

land -- think actually on land will during we [ph] see We opportunity just of be today. be what based mix what capitalizing then, have win. executing have determined it's again, to of whatever know well the and like. strong job be It what we going we XXXX. So, projects we'll next always to the to year, looks And on will

Sam England

Great, one business. Adler the thanks. the Then, around next was

there markets your persist in there's quarters where that comments, Could other over oil oil and were the or nature? think said the were, do you outside part temporary that and touch some in prepared few those areas driven weakness were will market. whether by of any more are You in sort of weakness next in what the weak gas gas you just the and

Joe Hanna

tried power been and to not and the in comments what Sure. then there's has Sam, less be was growth that. the demand the other to explorations general flow overall, and on and to some as due can past that robust for drilling just some If that some I in provide than has my product -- feel going I it been that segments following. slowdown, allude activity oil us. in can When economic going upstream see what to of happens And is to that, upstream ways. as for several there's kind you're global we different into can weakness,

As refinery a out called tank into a would an cleaning environmental or company at an services be something. example,

to if demand so, is push And them. those going projects, just do weaker, they're not they’ll

segments, out And really in for that's so feel those of played then, the us. and kind that how of other weakness we product quarter kind

that Does make sense?

Sam England

around last then, And great. CapEx That's just Yes. question was the Thanks. plans.

early and XXXX? You’ve you've in are fleet, quarters for reasonably CapEx sort obviously side. What had the particularly invested modular the the on QX heavily of couple where plans a of

Keith Pratt

spent year in demand the electronics to compared $XX months the by Yes. very the demand for We year last TRS-RenTelco, in spent million business, similarly first nine year-to-date million we've good opportunity modular Sam, this business. driven year. $XXX really great heavily this

We'll planning QX. and be neighborhood can not identify that look in to comment an the assessment I that macro financial And think returns get normal before we will a the every this of is, would expect environment what the and make the the off run the and bit tell across competitive into I full-year both really fund. of doing environment would we decide year. we to I $XXX will somewhere too as year year, our other a we of later It's through, taper think On the work then, throttle early in In far down, all opportunities ability number for instances, most basis, that or an in committed next we're in million. we'll be our them our we funding on business, we're too and environment. have based advance. seeing the really to up what process comfort

Operator

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

Marc Riddick

detail give and evening. of -- seeing a the wanted Good bit you if about I Hi. detail to me, storage. country? talk around Mobile it that, performance around little could I performance And portable geographic if as sorry could little Modular, you a about if wonder the around the you kind spot give was across around were and far as [ph] a little the footprint what excuse

Joe Hanna

Mid-Atlantic had actually year. is performers -- was good demand back last to with and We each Marc. this years over returns. been for in that year. it's of And covers Texas heavy just lot I’d have in have of give the area our But of to do get perspective, that -- put prior And us past this characterize over education good. been demand got There both can the markets. returns I modular weak we we commercial the say, Florida large fairly we each a and business some pretty course say of essentially. rent. I'll a actually fairly have in projects the year. it. just out have that been regions the what the let's California, And some out those the Sure, that product on from And and you

Keith Pratt

and clarify Texas, a I basis. just Florida all revenues Marc, is Mid-Atlantic, the that would year-over-year rental in growth those And all regions experienced California, on

strength as an show about increase. talked much, percentage so, but relative a did not up when we it basis on Texas, And was

Marc Riddick

then, projects? should it to moment. about how And great. Okay, to was the we Enviroplex you're is orders? sort coming sort I or from back shift I it how if think a there quarter played maybe of and sort how forward a at or you think for seeing there, is should -- that wanted out that How multiple was the look order patterns of -- wondering that in future we orders, big about of going two the three for

Keith Pratt

basis or project business. It's a a project Yes. --

projects. need projects weighted Enviroplex, work is the then bid the during So, remarks, we winter to mentioned and heavily do with the win for of them his the execute, quarter And on the we projects If getting installed. them, tends summer next period and to education we installed to through receive the to fourth then, as opportunity that Joe months those we in probably break be in those busiest completing some schools. get it at

as timing to any particular by year issue is in actually completed are and recognized So, projects an when us. always

Joe Hanna

say, Yes. and several then I This what of little to where could be And projects close the three quarter prior land in contributed add in in can had we project that's to Enviroplex. lumpiness bit. say third from a fall out I the exceptional Marc, dollar on that there. we during year we particular to depending that to indicates the can that million some would school project that anything had quarter, business a the year, you an large that project. quarter a start that they $XXX,XXX get ranges would get for to I

Marc Riddick

if going give that great. market, a on thoughts may and shift -- the the what on we of, if of at targeted looking updated might given a and acquisition I what And what Okay, look, of bit valuations you're what maybe could see forward and pipeline to there? then, those update completion over an have to maybe sort wanted you you some

Joe Hanna

look And have we active I and different not will opportunities. Marc. choosy a we very we're to mean, overpay. at process Yes,

that the from financial going we is we're what it on so, it whether of just And depends to that it and or how not. as pencils do kind returns it opportunity would out to get

Keith Pratt

with M&A, tricky makes and are right echo any things opportunities. Marc, we're comments, engaging in monitoring the the that sense. all in business acquisition Joe's financial As potential get marketplace always would The I to

You're future years. And looking and In a we make always bringing look fair our need And quality good then have rental team sure factor. is important for for a us, are business, things longer able we us assets price most be obviously, for with our very is on important lived hard. very to another fleet like of those business. where any all to particularly fit to I'm the business, return are to cultural at members, we companies over

see, success by at it's to in and control organic we it the business. opportunities quality activities few lets It feature I investment over look lets been differentiation. equipment some the if you last for that of lets appropriate heavily market us look think, in pace instances driven the the some our years, our our us new us

lot pretty us been we've operating, tilt good we've a a we've pricing, that's very So, our pleased organic, and improved to the utilization, for of it's well and done our with with fleet, added far. worked way been has work so we've been we've towards recipe it's a

Joe Hanna

our acquisition. our does product that It's I onto do specified goodwill new add Yes. for want we And we not too, sheet the bring fleet. too an might it balance when

attractive very organic to us it's growth. do for so, And

Operator

remarks. this will Mr. to ladies and turn the gentlemen, to the back further now And I appears you. last any be Thank for Hanna call question.

Joe Hanna

for your interest look to with All you, results. to right. you. you review We XXXX quarter on in like speaking February again us thank the our I'd Thank fourth for in Company. today And Thank Chris. continuing joining late forward everyone call to XXXX our

Operator

gentlemen, concludes conference participating. today's Ladies Thank and you call. for this

now may disconnect. You

McGrath RentCorp (MGRC) 29 Oct 192019 Q3 Earnings call transcript