MGRC - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Fourth 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, February 25, 2020.

of that are company facts or including not statements to the expectations, note discussing will are company's statements begin, Litigation the well within that Securities as total targets. today statements meaning outlook regarding we our the of prospects company management matters be forward-looking Reform XXXX Before Act Private financial XXXX, as the strategies, of relating historical statements

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

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

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

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

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

Joe Hanna

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

very we XXth annual my increases. into to the year are that launching comments today Before happy consecutive highlight a I on of performance, our increase also announce our marking dividend, in XX% should

to allowed performance shareholders business value us return pleased especially the that has are the We in this manner. to of

of distinction listed rare the as currently publicly has XXX dividend companies champions. RentCorp of being known McGrath one The

we increased XX All dividends look more which than of to continuing. whom forward years, consecutive have

Adler were deliver operating performance the and increased shareholders. So Enviroplex steadfast performance to Tank now by Company-wide income year XXXX we growth profitable our very TRS-RenTelco Rentals. year strong full to executed at XX% our improvement pleased another teams focus Throughout of year for performance. We from well. our remain turn Mobile our let's challenges XX% and and revenues Modular, driven offsetting on

performance, increased X% and by were and of a fourth by fourth strong quarter. operating the company-wide by we rental Modular Mobile the XXXX addressing to compared primary declines TRS-RenTelco Specifically quarter offset X% increases Adler. at drivers income revenues

better full Our performance a on more company-wide invested improvement more were and on efforts XX% We lower and of favorable drivers increase the fleet with focus from a year Primary X.X%, was capital in term numbers. sold the prior realized returns. a materialized pricing, the product increase year. generating mix a of transactions profitable return that we

rentals, across student and serve. We the significant business, fueled projects classroom space were most rental revenue healthy chips devices population rentals A needs vertical semiconductor funding saw infrastructure a environment of classroom strong general supported growth rentals. swing purpose driver. markets generating satellites, XG activity a new modular and commercial modernization electronics building with our to coupled test we backlog In equipment

connecting be earnings we number testing. to requiring sophisticated of Internet increase As calls more during will that to wirelessly shared the prior have the devices continues

We are requirements. well-positioned to support these

soft Our year quarter was during at Adler. spot the and

our rental cash valuable for but the the the significantly gas and generated EBITDA minimal for X% the made We and capital generator at throughout and decreased fleet were challenged progressed. becoming of a Adler and discipline quarter With revenues, the more affected This the enterprise. spending for investments, for oil landscape they year as XX% year Adler year. exploration maintained significant which

right the other and Other at investments. TRS-RenTelco growth capital $XXX purchases new purchased rental businesses, to see At to increase We rental fleet to to million, fleet investment pleased the than XXXX totaled the Adler strategically we of grow gross yes with year-end, a demand was in strong demand. were XX% our meet over opportunities provide year our where paramount. a say environment Mobile allocating numerous markets XXXX, is and to Modular, for

are pace. positive for economic at our ahead Looking reduced a growth XXXX, to expectations

anticipating and TRS-RenTelco, level the and at investments Modular although conservative CapEx will Adler. same in are likely We Mobile at healthy remain we XXXX not as

season prepared Importantly, us. teams we have that and that business customers engaged and doing with are enjoy

further working We will be realize XXXX. hard to success in

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

Keith Pratt

the were we Thank you, quarter what up just year Picking Joe with full fourth and Joe. on very said, pleased results.

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

I'll X% sales quarter a increased XX% higher down XXXX. the revision reviewing revenues performance of $XX.X revenues. increased year Rental million, XX% from which X% by to average Modular revenues rent. the in or quarter Now, fourth million results rental equipment break driven ago, average compared and $XX.X services to higher rates improvement on the total rental-related by an Mobile rental, on was for and

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

support higher workload other cost our in material re-rent of labor from rental $X.X and costs, direct volumes Equipment costs commercial preparation and million, increased to in included or equipment. operations and markets, million. demand higher $XX.X education costs XX% rental to resulted costs increased increased of higher The

slightly rental result, decreased margins As XX% from a to XX%.

offset for utilization Average of fourth XX.X%. was for higher profit the equipment was as of rents rental Gross lower quarter increase rental $XX increased million. fleet XX.X% Average million, partly to which quarter XX% increased margin. by the from on a result rental modular the revenue, $XXX the an slightly

$X.X quarter driven on average rental primarily equipment higher a purpose by X% general million sales on rental more higher rates by The or revenues revenues rates. lower rent, XX% average $XX.X to equipment TRS-RenTelco, towards revenues, XX%, increased million, At offset increased partly longer-term rental lower for by revenues. Rental total average and rentals mix transactions. partly X% shift reflect offset some lower the

and Rental revenues margins result rental to new and was invest XX%, the both profit XX% equipment, communications to for gross rental from opportunities. in growth general in combined test decreased saw XX% growth on equipment and We increase we in rents. continue from purpose a

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

rent, by lower which Rental revenues equipment impacted partly from oil monthly demand in and primarily believe negatively on also higher decreased which for weaker was rental offset XX% average we rental reflected gas upstream the average rates. segments. The X% quarter other XX%, revenue decrease market

our on of a margins quarter. revenues, markets Rental six fourth XX% The XX% to rents. result year's XX%. to last gross decrease strong was compared All rental profit decreased in lower combined from end had

from just was Adler's average utilization fourth $XXX XX%. which million, the of rental increase quarter to equipment million. an quarter for $X Average the XX% was for decreased

be administrative division Now complete, basis. my comments the increased to and company increased costs. and total Selling on X% primarily $X.X will remainder of expenses and employee million $XX.X due a review benefit with million, to this or salaries

The of earlier. a a result of lower X% was on Interest $X.X interest XX.X% was X% quarter fourth year average for as expense based a X% debt compared million, tax provision for rate XX.X%, levels. the income decrease an fourth rates effective XXXX and quarter of average XXXX net to taxes lower

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

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

purchases borrowings equipment end $X.X to for same shareholders $XXX.X million, plant XXXX. to of the Property, $XX.X at million $XX.X to a period compared Dividend decreased and payments were million were Net million. year ago. the million $XX.X

its XX months last At company to an $XXX.X under EBITDA borrow million the And additional adjusted capacity credit. of the to X.XX quarter lines had end, actual to the debt funded was of ratio X.

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

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

Finally, XXXX turning to financial outlook. our

$XXX to million Adjusted million For in year million million $XXX and million $XXX revenue $XXX million compared between million $XXX compared and $XXX total full XXXX, $XXX expenditures we $XXX Net to XXXX. compared million $XXX XXXX. expect between to between EBITDA in the capital XXXX. and in million

following our there of Visibility Rentals. in limited softer TRS-RenTelco mind regarding outlook XXXX in Market Adler Adler appears Tank the is market Tank both Please Rentals greater for while keep for and demand Modular entering terms demand for the and Mobile businesses. is and healthy uncertainty TRS-RenTelco the year. at short because rental

in unusually high classroom modular margins. manufacturer, sales exceptional gross achieved our that Enviroplex, XXXX a At project volume we permanent drove mix and

financial an as performance in While XXXX currently sales we strong XXXX. outstanding total do building will the during be volume XXXX, be year or to expect and despite for either XXXX. some good the we focused success that year that anticipate on we was company's on not a margin headwinds as

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

Operator

question comes [Operator Our first Scott Instructions] Schneeberger Oppenheimer. with from

Your line open. now is

Scott Schneeberger

Hi, evening. Good Joe, hi, Keith. much. very Thanks

Joe Hanna

Scott. Hi,

Keith Pratt

Scott Hi,

Scott Schneeberger

to a off I as I'm just with around of into are months couple going Year. to here New go and modular do the the horns starting like we

overview XXXX? and is how Joe some you still you're it's at I you feel? curious background the but of your early on feel look just and out point on kind how funding think this to nice market thoughts that education what the seeing? know backdrop you I Just modular Thanks. year the strong as of in but

Joe Hanna

as we is the highlight and early the is that is facilities backdrop just ballot of it's and the virtually bond which are March it the voting on only all pass. [ph] that's that ballot, the I'll funding on of California operate on should In favorable in. CrossXX $XX indicators which billion the better bond that good and said and you presence particular, in the Yes Sure. markets measure it's

So that's the be keep California. in going flow very to going of to funds good

to but that support presence we're other seeing that's in But California that I'll to only a that and also the local in markets passed seeing that and are we facilities it bonds we're just markets too not in. good place in are the in mention in addition operate of

funding turn for and for facilities just good And in is opportunities growth us modernization. so that both

favorable anticipating we're we're And enter as pleased bookings the year very has and so how here. season we with really started the

Scott Schneeberger

Thanks. end Real how's on been and quick storage, through that into this developing, year. portable Great, the year the of

Just see curious, momentum? if continued to the, you're we're going -- same going

Joe Hanna

pleased Very We announced that for is into rental growing. year We the last did tuck-ins. how XX%. revenues that, increased about, markets. we of a quarter, couple new business expanded some And Yeah. geographically,

with pleased keep able very And we're we being XXXX. nice into anticipate, business So, a is how to pace, the growing.

Scott Schneeberger

revenue you percent In about to what could you of of segment Thanks. there then, to? outside somehow is tied And TRS, seeing, are XG? XG XG, say you other that end-market would follow-up question is, what drivers Thanks. speak the the total

Joe Hanna

back XXXX a out a lot happened towers. and The in difference I can work was one to the That's -- Yeah. Sure. XG breakout. between, quantify, take saw of like, a of that XXXX place to we say the is on that tough kind what that's

that different lines, was category. wireless so, product in of couple And within a our

at time, in seeing happening things we're is what with more Now the least present right at the XG, lab. now,

equipment to design, wirelessly that to things our like general products, the And chip and are more communication focused is on, that like and network. standards, that, purpose, companies things line. designing And connect

in merger year. so, to kind that T-Mobile will field. later we more know Sprint hard forward, approved. things tower is. there some in exactly, anticipate of breakout believe been and that has the in result it's The And work out moving probably the be We will And that, place, do where taking

which anticipating good. which -- are that, is be we So should

In has the always verticals terms markets some seeing of us Semiconductor good strength that has defense too. we're for there in, the us. for I aerospace been and and been of mean

two those And in. market segments so we're those been -- seeing have are growth that good

Scott Schneeberger

that I've you're that. appreciate -- understand Adler have I Thanks. was rental now. the rates well conditions the we The to seem trended -- obviously that to Adler pretty monthly But fourth tough I quarter. go -- in facing.

there? seeing the what you're Could you, I'll pricing kind follow-up. of environment? speak And And then, to

Joe Hanna

question. good utilization. on of doing I not is, seen a influencing the than with would that we've Really pricing the business the significantly And Yeah. -- pricing. Sure. that we've our say side, gains that impact Okay. That's anything we're that, is despite demand had that more

with in of said they of accounts, terms the the able right transactions and kinds last raise Having making to business, of comp that made that, we're very focus and the for and the being in we happy types price, right teams had progress there. the has the resulted some strides customers, we've on that in ROIC out program the right the and us year, rolled at that

the We a is a to softer But area a right price. focus line fine really -- may it pace. in us. see, we'll able XXXX. not maintain We'll driving between, utilization, be perhaps at it environment, in But the right is for be that

in a way, because going not pricing. business big to we're from of walk away And

watching keeping close very a very that, on we're eye much and So, it.

Scott Schneeberger

Adler, one the probably, utilization now? asset you there? are gas are you very and mix Thanks. soft upstream Thanks. is what oil And the on -- And handling, allocation handling, the just oilfields. are upstream How you how in more obviously,

Joe Hanna

of revenues. I rental gas our is oil Well, think, and XX%

think don't I that's So changed.

Keith Pratt

X% in, QX.

Joe Hanna

to fleet that point. at for movements on right here the needed assets little yeah, I And historically. eye than, a move and see in opportunities. horizon been on bit it's as that's significant we'll in We'll terms any and reposition allocation, and asset But that keep the the QX, so X% to. of don't close we as do transactions this a need less we'll

Scott Schneeberger

turn of last I'll type How why? for Which it year? then me, next segments relative about for to are year? number CapEx thinking over. What this you And then

Keith Pratt

give Mobile CapEx investment Modular. of $XX mentioned heavy you just million to last $XXX close million XXXX few This less is at than the very that, little We Yes. color over gross look additions. years, if for Keith. Scott at to a you big some was on a ads earlier TRS-RenTelco year that

really I So Joe's look in economy. we comments a at it's as the positive we to prepared remarks, XXXX, go back think

we Just not saw last as as robust of environment a growth year.

a we point be look is XXXX you this to we I we last at the then at year. CapEx probably So better had CapEx think will would and guidepost spend what spend did lower, point the than

was than XXXX last year. And XX% about lower

Clearly we gross as sort way or CapEx we lower either we're subtract the And thinking the planning that's thinking the of can so sort outline year we're plays out, about as to that of it. enter we similar but a XX% react year. to add how number, from number XXXX is about

Joe Hanna

to lower that Yes that even add number it's a I'll though for us. just still too it's XX% strong very

historically a mean If you us. spend prior what done we've to I it's for in big look years,

Scott Schneeberger

organization Keith both whole And best the Congrats to really XXXX. Great. XXXX nice you of and wishes for and

Keith Pratt

Scott. you Thank

Joe Hanna

Thank you.

Operator

with Our next England Berenberg. Sam question from comes

Your Thanks. line is now open.

Sam England

couple a Just me. from

reduced allocation tuck-in in us a year? Should on around guidance slightly CapEx dividend an into just expect how deleveraging? increases side capital and just The said first the heading this thinking around further more give given we one can you the idea or XXXX what we've you're CapEx about for

Keith Pratt

question Yes it's try it's to and Sam get frequently right. the return a topic balance a great we and to

you've already speak capital for As new the us the equipment to heard adds year.

looking the as ahead. said, We in in we the asset. for Joe healthy for the return market. over try disciplined got of We're go good And be planned we to that life after still year the the opportunities spend a a

will view business. So big those we're be the decisions, make taking when growth but in the for year organic long investment we still a it

sort the done We're of market there, We for that in with we last buyer we've opportunities but couple do some engage years. tuck-in the a of to value-conscious M&A. continue

XXXX do to in that I think we'll and beyond. continue

in XX% dividend mention we heard that You and that's be announced today that increase active will us April the a increase.

we cash needs. Buybacks down available the for of opportunistic if and bank tend will measure another we'll value debt a all we'll and all own And future from where but absorb we think really and business for to wait to patient view good more back toolkit. that buying there's the as capital be in tool I if be don't more our items you those some our flow for a pay interim times stock that's

Sam England

from you're and next XXXX. like Okay, around modular on Was great. was Is guidance EBITDA that looks expecting TRS guiding anything that into going then just the of you're margins side else The progress in to one in the margins. flattish set Adler? from It there guidance?

Joe Hanna

say very when those it's comments. The that that would occur Yes equipment very what I margins think with item additional business nice face of agree year get used speaking rental fleet. we I every we're sales from our in I And is level observed. we the generally would equipment only selling well

as And example some do Enviroplex And top heard on the made as new get do division equipment we margin where unused and also get our comments the well. segment then new an have year well. modular don't on it's that typically through as sales of we equipment on we high that, through new as of I some of during we some sales you a equipment sales

a that's mix at looking I guide forecast. your think we're comments are to the a original post harder So of to it. how part But good

Sam England

and for then last And on me XXXX. Great. Okay. just Adler expectations one for the

that said obviously relatively is low business. You visibility in

whether it's their same lines & I said a business of think just return expecting the Pump half? second are HX. for a I along will in you're bit or the thinking to to Tank early wondered just too demand recovery many whether really in whether the say

Keith Pratt

too early – now it's it's we'll on it's -- but at us, at get that going And say it's and this lot in point. a There's this very for to early point. Yeah. hope too unpredictable right economy just oh, the better, and things

a outlook. taking So cautious we're

Sam England

guys. Thanks Great. Okay.

Keith Pratt

you. Thank

Joe Hanna

You’re welcome.

Operator

with question comes from our And Marc next Sidoti. Riddick

open. now is line Your

Marc Riddick

evening Good gentlemen. Hi.

Keith Pratt

Marc.

Joe Hanna

Hi, Marc.

Marc Riddick

a as shift go wondering like far Or to time has changed some whether you've wondering to look could years? seen it's -- bit was historically the you mix you couple seeing? much more that -- that back -- what if little over spend as classroom could it's maybe be similar last positive. I may if I at you're was a of little over mix backlog all on what what if looking a you bit mentioned if So

Joe Hanna

across mix much. the the modernization to Sure. -- teachers, I with is I'm and change And don't of I'm going -- believe behind classrooms needs parents districts school way to are money student that funding teachers administrators those referring is now. modernizing. the country. are school in And typically backlog to the And in more modernizing chronically Folks the at put essentially is the it behind environment classrooms. sorry, backlog and willing are

And backlog remain so good is good while. that a will and for it

as there, to there's long done. be As the to funding work be going that needs always is

Marc Riddick

And do refresh you your memory. --

just I states. the and think you -- not off-season I'm of normal and you or little if that little a in expect go XXX some timing wondering there was sort on orders think in situations clarify certain remind whether I sort of timing sorry, bit took to ordering I issue, it's could place those of normalization was of a as far a year the but a the us timing that as pattern? back of to earlier bit of

Joe Hanna

they when it of you're Yeah. QX, ironed going how is some really districts just out Yeah, many knowing early get classrooms year year bookings around these get to had their and in need. recalling think some on different. each And I depends to and they're we last plans

this that experienced healthy. is in anticipating real but demand orders we XXXX robust be QX point, overall we're at in year -- any each the And so didn't necessarily And different. will

Marc Riddick

the could last then wondering an was of a update you landscape. me. And I around acquisition one Great. bit give Okay. for if

of availability of touch could there you reaching of with I out multiples growth did the and just seeing market give portable wondering the was as out storage on you're sort like? an opportunities And on You far some a as bit. and if sort update what

Joe Hanna

Yeah.

we're Every it operate. businesses It's selective. continues quarter at there take got availability fit routine I that we think to like opportunities look fairly of I be are think already there the opportunities. to to with seems a a stream

to a it's up Sometimes a geography presence way further or new open us. for our

we open to the core today. we're businesses it so And well that with that operate if fits

a cases think years. some over build do We've valuations expectations sellers that I of the in can high. from seen little couple last be

point us circumstances, So, those And we in but what's to to growing -- markets. the in have it's in progress engage of business. that some the further already beachhead or create -- us further willing And geography we to absolutely again right we're clearly give in either markets do density a new with we're right a under from opportunities. make view a for way

Keith Pratt

we're the in in also there enterprises. mean quality the of Marc for add Yes very concerned too. that I'll about sale are I assets these

all that great. And sometimes they're not

for only you not want have we've we quality assets also. valuation, so and the a hurdle got the at that to fleet into that's to bring us And do but bar look a

Marc Riddick

most Okay. to a last feeling maybe recent the segue to that finally? some great how is And to And since as was about thoughts of sort acquisition? question way updated that completed Thanks. my seems which you're be

Joe Hanna

Sure. integrated into fleet running. And those the I believe we about with you're the and customer talking business that good business assets and in The our a the very tuck-in and We right base. one was nice a -- off young Oklahoma. that got was did --

how So, very we're started. with that happy

Marc Riddick

very you Thank Great. much.

Joe Hanna

You're welcome.

Operator

the last be back to turn question. for Hanna appears to over I'd the call like Mr. That remarks. to closing

Joe Hanna

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

Operator

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

now may disconnect. You

McGrath RentCorp (MGRC) 25 Feb 202019 Q4 Earnings call transcript