MGRC - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp First Quarter 2021 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 call is being recorded today, Wednesday, April 28, 2021.

meaning that that the historical prospects XXXX, are forward-looking relating within company’s note be management facts the including begin, Securities to as statements today Private targets. well full or discussing not the financial statements we regarding the Act strategies, year company matters will are Litigation our Before Reform the XXXX of outlook of expectations, statements statements of as involve not differ These and of projected. guarantees significant forward-looking and our to risks that performance results are materially cause could statements uncertainties future those actual from Furthermore, that to COVID-XX evolve. should impact continues pandemic of it the be noted company on the the

financial The expected future full management As of the have the company’s impact condition, such, following about of future the is that condition company’s ongoing will COVID-XX liquidity of results discussion effects uncertainty continued the and regarding by operations. the to subject magnitude pandemic financial the remains on pandemic.

risks COVID-XX risk SEC factors materially company’s addition expectations under from disclosed associated differ In XX-K and are Form with the to factors the pandemic, that in cause results the filings. to company’s actual could other important the

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

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

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

Joe Hanna

outlook some Keith additional as will performance, us thank start for our first quarter well and I XXXX on comments. detail financial call. Good look comments Olivia. Thank our afternoon, joining and everyone review his provide ahead. on you, the in will call with as today’s you

rental the quarter The began we the some strong down unfolded. typically quarter were of and X% year-over-year headwinds, Most as decline progressed quarter now improved progressed and and quarter we school was Tank finished the mix we pandemic growth start the in only pace electronics Company-wide pleased but levels, in to education and business the Education need to and we still rental more the was the districts modernization slower as our from At I’m pre-pandemic very customers. the Modular, weather-related quarter seats, of physically activity our see X% task having Mobile a Since compared improved lingering with Adler Due first a down that to division year. with as and XXXX business. were the of last of facilities only to and revenue students quarter continue. the Modular sets expect temporary projects. for are pleased the we year turning commercial good for how bookings to effects X%. to revenues were pace. much activity rental for first on a Our of were our

their prime calls, growth facilities past requiring Many demand and projects modernization past support on remains reviewed facilities a I’ve As repairs. opportunity. classroom are to

there be we the in population addition, In serve. of growth continues student many to states that

terms Rescue American making state federal trillion are the their the outlook, Act way budgets. from In of funds Plan $X.X into funding

how be see have and However, education we yet to will the portion allocated. when

increasing more also frequency. and are commercial positive project Our to starts be appear with customers occurring

We demand saw almost have pre-pandemic on month been healthy overall each Portable utilization with gains. Storage were overall start board business from increased rental of consistent solid starts Storage and like of and Portable the our metrics business. Storage. our to to still uptrend And would year. a this I are levels, revenue markets the pricing While from nice acknowledge Portable part they of a construction all below off for recently this the is We year across also business. the very

demand Storage purpose rentals We company XG Portable invest, meaningful into projects research work contributor due TRS-RenTelco, wireless At continued. profitability. to weather to slow defense, aerospace Field for grow quarter, and equipment more general pandemic development was in for was related delays. equipment and and semiconductor, for the a and to continue healthy as mostly

for during back investments stable managing while We was key are to off Equipment strong effectively in hearing remained haul selling to making via as months work healthy to continuing communications technologies that quarter. pricing from demand the utilized was the from is fleet expected fiber ahead. lesser bandwidth assets. improve installations. our and were very support customers pick in increased We’ve up rentals testing carriers the utilization been by wired Overall

and At We that at future demand work of the work slow. than normal Adler, Maintenance customers. business. gas returns repair quarter are project in also needs activity completions the was the the through in resulted meet to in We part work to and that oil until damage benefited as refineries cash from continued Coast, are of preserve freeze experienced to equipment improves. slower our We last that Gulf from were over year some quarter. upstream well-positioned companies related was course operating

forward. national permanent and Our April the announced our Kitchens government, go-to and customers To facilities. both This the coupled opportunities service for supplier Kitchens will higher partner to outlook service industries provider food acquisition be of to our cautiously combined a over Go’s others. offerings healthcare us for level. have is our projects solutions Modular To national a modular our of market on optimistic with Go with has Go, temporary Typical projects for hospitality we education, the expertise, include are X, reach, we industry years. business clients expecting expands food on business several a among conditions been Kitchens customers. geographic and move acquisition our To improved the On as and we With

years business. acquisition solutions capabilities is together. a We to latest team few are years further expanded Two and Modular This site Three growing ago, have over hazardous needing work our custom protection fleet been offerings the and added organically our for impressed resistant our with blast extra to customers the step modulars solutions. expand forward years in of operating this related the past looking business modular to we ago, environments. we to in services support our

a to services the related successful a they need customers outside a provide everything for site one-stop begin inside when by solution and Our rental new they providing building. project

a and to with time. to Customer feedback these design I’m lead year. Our costs who I’m solution with time strategic unique custom expanded purchase customers by have shorter modular attractive or have and offerings or to permanent facility supports to benefits pleased have forward reactions conventional by the turnkey on and field underway, considerations over of we our the construction. positive, and want project start activity. To to we conclude, compared new recent look them excited the potential encouraged we growing are customer initiatives been

capitalize take on be Keith, will financial to the call over through you review. continues. hard working as positive this year I’m turn who that, to We With momentum our will to going the

Keith Pratt

trends rental of Thank Joe. solid very over the comments to a encouraged quarter. by business of you, demand we our quarter Joe’s improving from were Echoing year start overall and the course XXXX, we the businesses, core to strong a had compared first

revenues majority services at will to for decreased total at XXXX, rental revenue of Modular revenues I The quarter first Mobile and of the million. $XXX.X Adler, rental related which X% the of decline For services both in for related operating The million for the $X.X the of was discuss of million revenues. decline and gross profit company’s the revenues further reviews. primarily rental from declines segment $X.X rental $X.X result quarter profit million was from

a included In million expenses, addition, expense. million higher legal we a had and which $X.X $X.X administrative non-operating selling

First a and quarter adjusted year to ago. compared decreased $XX.X adjusted year EBITDA a XX% to consolidated was XXXX margin million to XX% EBITDA XX% compared ago

million will million. by performance results primary $X.X driver or XXXX. the total operating results revenues reviewing lower Modular revenues. the related first I decreased quarter break down X% to $XX.X Now rental services was division Mobile compared The million to of rental and $X.X

the $X.X to and total Rental test costs Sales new be communications Storage from work to the fleet utilization equipment, the rentals, quarters. Average had continued primarily sometimes lower for XXXX. a Rental a XX% were quarter reflecting XXXX the as a decreased communications. the $X.X to general rental X.XX%, strength quarter the the were related stable. for a rental ongoing compared Average purpose total declined decreased revenues revenues average rental the and and and rental revenues million towards our in to test we size was to which all was in The longer XX%. The to reflecting The on At higher $X first XX.X% saw or on to rental equipment lower at to Communications average compared lower revenues revenues rental a certain X% in X.XX%, revenues. The pricing decreased Overall offset market and rate and with site the million. lower compared XX.X%, regions, winter to equipment year to in average pricing purpose only coupled first monthly revenues revenues for demand the softer quarter markets Average a decreased were utilization utilization conditions rate for conditions business continued decreased generally XX% last rental education first XX% or At to for on shift continued compared XX% general be resulted million We revenues $X.X cold and caused weaker revenues Lower and and longer with disruptions related asset year of Rental preparation having the million TRS-RenTelco, reflecting year timing margins down rental mix comparable year communications caused conditions XX.X% lives dropping a XX%. ago to related rental rental services year the year’s Portable reflects field grew a unusually rental more quarter transactions X% revenues. ago. such rental monthly rentals ago. the year-over-year decreased projects impacted increased both rentals ago. $XX.X a effects equipment to to X%, XXXX This earlier. quarter the tend term As pandemic. of revenues in XX% commercial conditions. revenues increased Tank XX.X% rentals, quarter due an XX% first to across rate stable to down partly from that end for year from equipment competitive. quarter X% rental $X.X by rental $XX.X services work was pandemic monthly compared decreased geographies with Sales market X%. earlier, major million margins comparable X.XX% continued for the decreased by fewer rental quarter. lower XX.X%, Overall which XX% revenues to for delays and by was related to the which sales. uneven demand to X% margins quarter from for Adler by compared pricing services compared for increased quarter ago. from million average infrastructure from less of quarter from of compared to first market have by generally rate reflecting XX.X% higher pandemic. rental market year result of million

expense, a lower offset decrease average $X.X meeting million, partly quarter remainder $XX of and which of and lower expenses administrative non-operating legal total meals basis. my increased $X.X first comments expense $X.X million lower interest the on, by million, debt and Selling result XX%, on average rates. the company of was Interest will expenses. included million X% or levels be a to travel, Moving

to tax provision quarter XXXX earlier. income a on part effective first benefits stock-based due compared to in tax of rate lower excess was for was rate compensation. from The taxes XX.X% an The XX.X% based year in increased

full we expect an XX%. year rate and the between For effective of XXXX, currently XX% tax

sheet from million, and the operations a We provided down was of purchase Go to XX $XX price pay transaction million, acquisition consistent $XX.X under operating quarter turn to $XX.X an the credit. The equipment generation million, of Next, million capacity net cash to in a changes. funded during attributable first working by $XX our the $X.X was end, lines of an company million activities cash lower borrow fleet ratio Net million and segments. EBITDA highlights. from debt to of reduce dividends of additional across our to $XX.X To borrowings net lower Kitchens was most million. adjusted to I’d XXXX capital Healthy with by utilization to and us months to million. X. The primarily reduced allowed quarter last balance cash purchases debt $XXX rental decrease flow had like its in of At income million $XXX cash quarter all with to X.XX actual $XX.X XXXX

full For total revenue $X.X approximately revenues approximately expected reach result of in And the XXXX, XXXX EBITDA sales margin year accretive transaction this the had that is should adjusted longer combined of to be $XX modestly business million. and million and believe term expansion. to we capabilities and The growth results.

capital million, million adjusted Finally, expenditures to contributions million. $XXX Go revenue We EBITDA the EBITDA. of unchanged. our account and our turning between $XXX million, revenue rest equipment currently $XX between gross we Kitchens $XXX updated is business of expect financial total rental full to $XXX million our outlook, and outlook to and million between To for expected have Outlook $XXX the and year for

market uncertain for year start lines activity of pandemic, the prepared business encouraged overall from the by the now Olivia, the have concludes recover questions. may the environment we our to we you as remarks. impact remains seen. open improving are recently the levels and While That we our

Operator

is Instructions] Schneeberger Scott the you. of coming line first with Oppenheimer. [Operator Our Thank question from

Your line is open.

Scott Schneeberger

go much. from you obviously, challenges. heard a Adler, weather order On going cautiously a very lot so I say afternoon, Good quarter optimistic for tough to Thanks guys. of I’m here, around and bouncing in Joe, in it’s sure, tough today. seasonally

what Just more if around Thanks. put ahead. could bit seeing a you little color you’re

Joe Hanna

looking they’re that point increasing the are the of and next for that us customers not they that’s is you’re complete of at and coupled year. And XXXX, looking with all demand part deferred refineries did and What in some that the of if part this just at market and and oil telling in the gas, business. downstream that Scott. to projects actually Hi, this fund accomplish Sure.

to So they and more hearing doing year. be hearing projects we’re news going just more positive that than folks last we’re are actually did

And giving at so that’s really us things this our our viewpoint that’s – on optimistic point.

Scott Schneeberger

All right. Thanks. Great.

keep I’ll brief ask On that To just Modular, Go. the and on Kitchens

the To guidance First is off, Go. in Kitchens the solely change

the you said I about liked that’s it portfolio and provide to in be about think I what sure Keith, but case. missed want bit the if in then just depth how and it, a you them? most you could And fit more I little secondly, they Thanks.

Keith Pratt

first change prepared outlook bit start that Go. for correct, the take no adjusted To financial the in as even we I’ll and is business the Sure. and the in are Scott, we the underlying in to full part. And Kitchens a for though the you the incremental there’s had EBITDA remarks increase slower little of tied year discussed revenue a

Joe Hanna

folks providing part space for had Go a And Scott, second years an and introduced needed of To as We additional example. hall to were I Kitchens of the finish that your can ago question. they they when number a facility use they project where dining and food were a service was to as temporary a

them do got project that and introduced is a we and a can this to do serve and on did them of we realized, fit projects there’s lot a so to that with because nice customers. cross-selling teaming hey, And really we up can

customer for have I able to that we’ll us. leads provide nationally. introduce them. modular And they So serve quality we be a of to great a already we’re The customers. able And more too, nice Kitchens there we think communicating a To to, company. the thing reputation, be add customers a we’re them are thought believe buildings this to has right going great to Go cross They portfolio. and our is be base going nice with was I And to

pleased. good for us, really fit So really

Scott Schneeberger

do Okay, great. Mobile have into the one Thanks. space. I broader more actually Modular

a You move? Thanks. were just behind mentioned more Or a confidence you What the the of Portable share bit do gave you context Storage company little little pricing in seeing more that. industry it increase. specific that? that? a to that Can was Just you about

Joe Hanna

we’ve utilization feel through we has now pandemic, Yes, think competitors I is very so pricing. us environment increasing in right to with there and pricing allowing the Sure. got nicely increase held demand the and disciplined and

that’s exactly and as we’re March when the to along so We do. increase going we’ll itself presents year if and passed in what unfolds. continue that to And price as do a opportunity the

the and part healthy overall, So of business very we’re pleased.

Keith Pratt

those at Scott, would in the I fleet, increasing. acquiring for costs the keep mind, have price conditions are only thing points add you that assets to look new gone is, when up recently. equipment also Industry new

take appropriate to steps described. so sure And be of make that kind overall and disciplined to business returns it’s and get the reason the in we Joe another

Scott Schneeberger

How utilization specifically? year above area Storage Portable the be would Keith. this in for or Thanks, And CapEx that in your space? is capacity average below

Keith Pratt

It’s Yes. It’s important years, have over we have covered and more an of funding growth area want And many a the to share and there’s area markets. fund. for few go. geographies we presence, those building geographies We’ve even been will continue we in to us. an in places still where last we’re more the our

will we to area be we’ll for very of be It’s been it the up, have a continue to that edging healthy. part to still priority equipment a it. utilization to us adding fund. fleet of and continue amount good of So but And is

Joe Hanna

say. That’s Yes, thanks, I going exactly Keith. what was to

Scott Schneeberger

Keith, little was could It’s legal I’ll last Thanks. for what in, call. onto sneak just right. two is? that or common minute not All on then the and expense, elaborate this Thanks. a pass or late all, on one charge you please legal bit the one – I it a along. the you

Keith Pratt

a really it’s item. this details non-operating really I can’t Again, Yes. provide extra any at time.

in into build accordingly, of your the million would that So first $X.X run when and run I quarter I SG&A, adjust rate that SG&A, rate. it wouldn’t was you look at the

Scott Schneeberger

pass much. along. very Thanks I’ll Okay. it

Operator

our question of And from the coming England Sam Capital. with next is Berenberg line

Your line is open.

Unidentified Analyst

the for Hi, that Does [ph] acquisition. to And this do My that you other is specialty might Sam. any there rental Kitchens modular Alex you To guys. suggest first more is enter? around M&A niches to forward? Go This going on are looking tuck-on question are look guys

Joe Hanna

we’re Well, we have an active at looking always pipeline and M&A.

are want those the We culture. those want we that the realize do, And for a and have continue products. have but don’t good very they accretive. choosy while, be themselves, always think to followed be we have when who We interested. certainly it we and we’re interested it folks it will want companies to to I right to company present

To that Kitchens case more So out there. we there’s was with like the Go. opportunities And hope that

Keith Pratt

hard. It’s said Yes. it, we’ve to for the to things described to a easy be fit I has value good to And to those and have avenue many find. continue strategic fair be And for parties. both business. just very us build times, as the to They’re the as think not Joe to look you has right are

Unidentified Analyst

Thanks. guys well a administration? Sure. much increased you from proposed see infrastructure benefit And as the of how from as other spending policies

Joe Hanna

There’s exactly different know hard a That’s point, proposed. happening. what’s that to good really this at many It’s question, being Sam. packages are Yes. so

spend for want money into we open just in what money that these has I states. think its there started for that we however us understand in make said there’s Plan they was And the was $XXX at – Rescue Act, as two ability I billion potential for my areas. prepared One a this to. education. this comments, to roughly from American fairly in there it’s point, to states But allocated way

they’re after belief into that classroom and students seats will I we And back going like the will, for it districts opening. for to that are population we into point. makes able when going meet they that a happens student My their thing and of year really what and from upgrades have. happen chances important is the realize it’s know thought we’re are actually not once is well students be in they kids their it’s was into at a very it to call. most what going that, and this like but kids as for prepared And as classrooms, to funding so to know what of that we’re things number enable districts going the yes, quick PPE that’s year what that’s way is, going to of to schools. good think try facilities, that accounts things think school and But really don’t its they to emergency get that if off is and that really having to be back because that way districts the those is and do off typically needs from the us And get some calibrate to is HVAC roles, they how get things are. to that be is going their think I right just And

the place deployed. environment. So And for kids and projects is now. a I and They’re real all of about more continue to worry and everything facilities their course a I focused for that’s virtual there still us. I us. think modernization be to for we’ll funding on to plus in And that’s think in that’s think that going opportunity now And less the been like be as going educators more are teaching things

infrastructure, because I for just will that the be McGrath of administration this that had on is The definitely the early that the point, I about part question you but gets very benefit RentCorp. infrastructure at thing, proposing passed any think for monies believe other funding other only a

Unidentified Analyst

Great. Thanks guys.

Joe Hanna

Thank Sam. you,

Operator

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

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

Joe Hanna

forward wish us speaking I’d call second July again late thank joining We results. And All interest to the and company. our to all the health like your in safety today our we to review continuing you for months look in XXXX right. in and you with on ahead. quarter everyone for

Operator

today’s conference participation. Thank your call. you gentlemen, Ladies and for concludes this

You may disconnect. now

McGrath RentCorp (MGRC) 29 Apr 212021 Q1 Earnings call transcript