MGRC - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Second Quarter 2022 Earnings 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, Thursday, July 28, 2022.

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

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

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

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

Joseph Hanna

Thank thank Good afternoon, for everyone us today's Chelsea. call. you on you, joining and

benefit took our our tailwinds we conditions initiatives and all move revenues our XX%. business XX% the positive Market of For strategy we advantage quarter, very delivered to growth previously excellent our is improved we together driving our stakeholders. business for continued business to forward growth to favorable second results across performance with sales A on execution company-wide strategic quarter and that of were the our rental we a highlighted the remain focus results, of in basis, quarter and second continuing show energized on into strong corresponding first in momentum translated and On units. fruition.

specific each of Turning observation now business divisions. to our to

education acquisitions we legacy for business our the grew the and completed in business of our pricing all First, our Units on quarter. revenues in and reflected companies. strength we many healthy fire to our needs highlight and segment. I XXXX. projects XX% business as units bases, Infrastructure continued Both supplied business was and customers. projects, exploration diversified rent, performed largest Construction space large Rental activity modular, will and serve diverse government deployment mobile to levels, as serving fleet for and results at grew new quarter. in commercial well robust commercial stations the continue including end and applications military

as be both to fueled both strong all selling projects type. the good rental point able and of Our project customers to levels activity serve combination depending and any a sales capabilities we across need continued on and geographies. our Funding commercial was markets and these are to fulfill across education of

the projects on geographies business customers us and with particular continue increases Student both district be growth as modernization proceed education growth build depending cannot needs. Our and high fast areas. enough drivers population for of facilities in districts to school continued to considerable

also continued state, demand can while demands districts enrollment counties Additionally, drove modernization in population growth. States In California student there gaining like no be orders. in with growth in any students, shifts

portable our Turning delivered operation total the second in in within storage to business. XX% quarter. a Modular the increase particular segment revenues This

see Our branches growth as legacy continued scale healthy. was newer all and locations, as to we well pricing as gained

to adding selectively fleet been organically this have grow We segment.

in rentals, were very as rental in the of focus pleased in with on executed which continue reflected customers and was an TRS-RenTelco, aerospace well the by by by we companies, business. R&D the major continued major our creating in generally experience each exceptional have to Our sales and general for Rental performance repeat continue longer second we At defense. investment the see providing projects business companies broad-based teams to technology for second growth the revenues grew Demand quarter our X%, terms. again purpose healthy well quarter. and transaction, as

also rentals communications and fiber demand grew XG. support by in work optic such cable infrastructure the to implement continued and installation field Our as telecom efforts Both nicely work carriers the to drove primary quarter.

ordering of quarter, fulfill Our some fleet the first delays proactive chain us supply in during requirements enable the quarter customer increased suppliers. second to despite from

keeping growth quarter. Adler an experienced team was highly up does Tank broad-based Demand orders. XX% At both fulfill Rentals, in tank management strong, to-date services, revenue and plant technologically Industrial Our be activity we serve the box positively the product work locations. translated customer for of job vertical excellent the the for to positioned geographic realized as fleet and such environmental we needs during quarter. our into and which markets to continued which affected maintenance rental all

allow branch responsive to able locations meet national all to advantage and take Our of sizes and of us customers projects needs. help their to be quickly

have our modular business been strategic you we to focusing remind would divisions on are so to opportunities efforts. see firing work grow we three about I business, and Our year-to-date, we continue our the now our all where like cylinders as

serving solutions-based building Beginning gain we can use container, to continue a the approach on or with We traction with our sale the customer modular customers. to needs of core modular the building. to our rental provide or everything

commercial can buildings, when infrastructure finished we customer larger, project buildings, and buildings, to airport meeting the walkways, an include assistance customer plants electrical ancillary projects such connections like If from over of turnkey provide options and provide expansions. on including On is more. other ramps, We covers larger hand the the outside provide for administrative needs, inside, This the overhead also and can installations units as the of items. chairs, power and we tables array can complete. to military the project for can and the desks, stairs, government

quarter. encouraged I early would have the in the company this effort are in We our of a job team, and far. we deliver have Congratulations progress thank relationships for innings type dedicated we enthusiasm they each other. not like this and they the are for very of performance-oriented done. could made also in our the so customers and to everyone by realized well everyone we with our show the Without results

half build runway. to a including of have we first performance strong from, a foundation year ahead, good the Looking

are healthy indicates bookings and positive Our feedback a outlook. customer

As to am we second such, very increasing full-year our performance as our half execute continue I pleased in with XXXX, and quarter are strategy. we guidance. our first

Now let me turn the call over to Keith.

Keith Pratt

you, Joe, Thank and afternoon, everyone. good

performance upfront, performance As with the positive in delivered Joe highlighted we continued the excellent second board. quarter across

and organically strategic last business. incremental Our rental of containers businesses acquisitions expansion from were our completed contributions with core Space year Storage modular Design as healthy our of part for the Titan objectives along

million. increase was for operations increased total revenue business with primarily and quarter, corporate and Mobile results second to improved higher revenues each rental revenues reflecting demand TRS-RenTelco from at conditions. overall Tanks, Looking the growing $XXX year-over-year, revenues. along rental Adler healthy With increased sales XX% The Modular,

offset to EBITDA by Second operating XX% Storage million half Approximately compared rental were the $XXX.X well division, to revenue increased million in $XX.X by Average rental increased services containers monthly of a related materials revenues performance modular from utilization was initiatives The Modular increased to business XX% the inventory in were quarter Breaking all second of rental equipment a increases adjusted XX% the XX% higher used ago. both XX%. with revenues, reflecting of order our fleet activity was quarter labor compared increase higher XX% $XX.X particular meet to strength higher the sales to Commercial quarter XXXX. pressures expense, for center higher conditions. as rental X.XX%, Titan to million million a Design as revenues, from of costs to for some education market and XX% revenues demand across and a new rents, sales Space the activity levels streams, both more and revenues. conditions. commercial. modular core continued costs partly Sales center $XX ago, or increased acquired XX% capture in $XX.X in rental prepared XX%. increased There Mobile sales year inventory improved and The total increased addition for down increased levels, million. average reflects and XX.X% was we adjusted higher rate year and XX%, quarter healthy was consolidated higher margin revenues the pricing X% higher to inflation rental and fleet, businesses, organic margins more total resulting Higher we strong which EBITDA revenues as even revenues acquisitions, added consistent depreciation projects. from ago as XX.X% rental XX% while year and costs. than fleet the the higher with the equipment improvement including reflect equipment

incurred, average X%, rentals. saw revenues up $X.X rental period a rental revenues sales that revenues pricing strength the ago, included communications increased million XX% revenues total in increased year to and note for the coupled profit up the million to experienced a the general for equipment higher with resulting increased related services quarter average some to million. Adler but total million. increased monthly gross is communication prepare for million that $X.X which on saw revenues Rentals, $X.X rental of and X% XX% over with XX% purpose This equipment quarter of compared rate ago. increases XX.X%, Tank general are was for and revenues in revenues a pressure revenues. $X.X improved it compared year to rentals price for At for lease. equipment Rental increased demand realized X%, rate compared to million. we rental good the X%, increases purpose second revenues Average quarter to in quarter, in XX% in $XX.X margins rental on the utilization increasing Rental continued realized rent year rental, increased in year. million the ago. TRS-RenTelco, revenues the rental higher quarter to million We unchanged and year-over-year XX.X% both increasing previous rentals, rental or $XX.X X.XX% At As the expenses with higher XX%. to to term offsetting rental demand increasing are and reflects $X.X XX% are margin important average $X.X was from X% equipment or Sales sales The we and

in GAAP margins and demand for second from rental markets. quarter a regions average recovery remainder million. $XX.X The a comments to to from expenses Average average year stable total reflecting driver pandemic million higher Interest five of demand increase X.XX%, broad-based and was increased compared on margins of million, quarter XX% and increase (ph) million XX.X% Design rates average XX% ago, will million second increased quarter of and the an was attributable improved last of improved to and We The XX% improvement, primarily lows average employees. Space monthly generally rates. our result which continue for environment. be to reflecting of the our the increased to a primary across the expense strategic year administrative in $X.X salaries pricing my -- interest and employee XX%, verticals Selling benefit average rental utilization higher conditions. $X.X adolescent The to to was further the see six costs, basis. to levels acquisitions due industry increase reflects addition $X or an company X% geographic [$X.X]

from provision The tax to to primarily stock rate higher reduced compared benefit effective earlier. income XX.X%, on excess tax a second XX.X% based was an of year compensation. due was for year quarter this The taxes rate

$XX interest rate $XX increase to compared the expense million. we capital growth, our increases for interest rental to spending total $XX Given debt, to million, expect in incrementally and million approximately April million full-year $XX.X our now equipment outlook, which higher of to recent estimate be

million to XX-months in the reflecting Turning debt decrease $XXX income increased (ph). our million for that to investment Net July to adjusted credit in extension compared activities us by XX we also completed continue in an $XXX.X portable $XX.X the We organic provided end, facility year, million, announce growth of under corresponding At flow to year $XXX investment we capacity deferred million increasing borrowing of a credit and strategic last were demand, equipment our [X.XX:X] offset of while from year-to-date our us in business. of million borrowing $XX.X The $XXX working cash makes fleet. were purchases well outstanding to ratio XXXX, $XX in and as to our borrowings cash had $XX.X taxes. comprised modular funded $XX was higher and Rental on income our shareholder allowed net of million, million, EBITDA actual Healthy million. to of capacity compared July to changes quarter dividends. by capital prior to $XXX.X a increased operating was million pleased cash positioned million increased facility. highlights. was generation our This storage and pay ago notes net

we financial across the previously each Finally, segments encouraging. April. raising continue February was and in positive rental outlook and The in demand provided to business are trends be of that our confirmed sale

the between and million between gross million, now $XXX $XXX $XXX total concludes capital revenue For open $XXX we may million. you adjusted for expect remarks. and EBITDA Chelsea, lines million full-year, That currently rental million expenditures between questions. $XXX the and $XXX and our prepared equipment million

Operator

from our [Operator first come sir. with questions And you, Instructions] Schneeberger Thank Scott Oppenheimer.

line now Your open. is

Scott Schneeberger

segments. around I'd to I afternoon. very hey Thanks Good the like us like -- take guess I’d take to much.

time some supply acquisition. constraints year you and kicking this were So overall involved year, around in chain first off, in with last module, the of mobile just

things improved believe that segment? you And know give comfortable the want how thoughts like persist in it it guidance, sounds year-end. you're through can time Thanks. something sustainability that period? thereafter? on XXXX the overall have you're curious strength seeing you Is Just to for don't I your but

Joseph Hanna

things this working them been significant have I continue through say we've way. abated in and acute definite that in to Number to a like ahead. experienced, found price Scott. to steps the really various been we different planned the how it processes, different that we and and increases Also terms But talking price right, Yes, suppliers, business think make one, like something ordering taken we've we've chain to It's rate number about supply you're deal it. be that about to We've affected they've increases business. some work question, that address I and rental surcharges it, that. we've wouldn't implemented issues last the have take the just started year parts was less I'll those time our in delays. through ordered of better we've of able any with increases of

better we under we've much feel in year. that we're control. I were And got think shape I time that So than last this good

part we're business, still of the that's Number a have your seeing, are out point in the like In one, have of couple are that that that question now a lot terms the of the in funding they to different dynamics second in we about places business and there's them. passed. the front where part momentum lot we right we have lot work bond a is enthusiastic I'd the have of that education of that of customers money a resiliency. been of business very strong, of And

if you get and still in really business we've cylinders. anywhere to continue continue technology in going bonds less XG off across in be where economic it's we stable still things we're quite just the come a bandwidth, way And conditions, those selling lows are economic we push turn a on I that it that that softer. that so even that's matter We've of we of rollout, really but firing and all think to a long continues conditions increasing Adler, could go. bit, even business And The good. to so business TRS of then those have to typically pandemic improved was not the if see terms when

significantly, things off if because point. of that even don't that So low just we're get really a soft, coming see affecting I business just

And that we explains yet, at planning and in So ahead you're next but done that's October haven't we'll right, our be in least hopefully months little bit November. doing and helpful a XXXX, sentiment the about here. that

Scott Schneeberger

mentioned in the Thanks. or past? that education or it And availability vertical, funding better average historically? speed is the this things you you Could Joe, it with sufficient certainly potentially worse and of seeing up horizon? that to And regard curious Thanks. kind you're could vertical just there. environment down now slow to what on this in compare contrast historical periods the Okay. time

Joseph Hanna

pretty in now trying bit pre-pandemic. the kids And just districts to of it during Actually, turning when seeing new a I would hit that we've educate were it's attention to We slow think turned pandemic a sure. of completely equivalent good. I are in I period little environment. their back Yes, a the kids good, compare classrooms, And back momentum and the seen we're believe attention there is the facilities. what to pretty to the

And so the feel of good I about that part business.

Scott Schneeberger

thanks. appreciate color. Great, that I

very do ballgame would process? before. last TRS it, as You early inning it at and you cadence that years in you however we XG in in all many, go? hone on a to wanted on we want Are accelerate us curious penetration, with few would I Have the still where bit where the Just touched term seen often you us put on from activity or Thanks. you put many to what there? quarters?

Joseph Hanna

Sure. a three. Yes, do or have don't that just I two number point. lot know would don't phone even people I really say personal XG a I and mean, we're this in I perspective, a I inning mean, at of from

whole the rolled real in manner serious out been here. network So hasn't really a

so of all the the And backhaul, is that's needs there there, to increase that all continue. the need bandwidth work to going all to installed and And a of completed. the centers, lot then still infrastructure, cables data those optic fiber are be of field that being

will see I be or So us. XG going don't from continue very very we're gradual to of that a nice we'll to nice and business. spike huge I that it's increase that of think see I a upside a in going think for part think that to think it's continue we're But early, deliver to the business I anything. part

sentiment So there. overall positive

Scott Schneeberger

out important it, exactly is than you you've but pandemic will it momentum you've Thanks. seen? quarters persist, just obviously, you which the pattern seen of recent more the think building that And in forecast that's

Joseph Hanna

Yes, yes.

Scott Schneeberger

Excellent. all served And might quite in the everything the oil the seeing a Could you any All then market that end and you sounded category particularly segment, any lagging? seeing? on there on Or growth of of markets just are particular Thanks right. and Adler, are anecdotes, Thanks. bit be serve? good. you gas confirm, that few that. what touched you Last end across a you

Joseph Hanna

Yes.

in our think I of seeing much we're all pretty locations. growth

It's mean, now, quarter-to-quarter that to we I not more they be need projects sometimes, of worked it. indicative But the the on less activity address. out more was any the maintenance has impact construction that But right nicely. when have and from business gas, turning high and just have type there's Adler, revenues small the issue people cyclicality to a ones now. oil come we we've little plants. the I what's on it's that situation, It's would think construction. off like have be the of there X% that quarter that's the the that I of slower basis. need a us they bit a there's more us business I of necessarily might something And of in on when because that of And the really that to and There's of in it's and creates for all. that it's really like running case that say thing other for full rental price this we in and oil think closely, very good see in driving price that capacity. in of kind grown gas or so the a and everything we one monitor business, was -- very at part us happening in an plants of a strong But have business and at are regular cycle to a for just rent the slowdown

that demand that word. we're on And is depending gas so good particular to And always us. for that environment to type really I business of use said oil before, very fuel a and like not

really happy of in we're business, which from see might So us insulates across verticals. to we that issues the demand broad-based one that any really have

Scott Schneeberger

sounds And your the two about with containers? just particular your cyclical obviously bit your little well? the serving of there, storage like concerned of is that's liquid and patterns enjoyed saying that, that that of a kind construction, kind The Is comment two-fold is that unique I curious going of, where a clarification to it's view that in modulars about? there. ton a anything -- Just dynamic construction those projects overall difference just question, of in just that Joe. in with Thanks. Thanks, construction a the anything are Adler, and businesses? dynamic you're

Joseph Hanna

cycle when business a Yes, ebb of off flow come no concern. just in projects and It’s on normal and that rent.

concerned I'm about we're not So it. --

Scott Schneeberger

construction Okay. otherwise you're And confident non-residential from seeing? about what

Joseph Hanna

yes. Correct,

Scott Schneeberger

Between modular?

Joseph Hanna

Yes.

Scott Schneeberger

Excellent.

Joseph Hanna

Yes.

Scott Schneeberger

that. all Great, I I Thanks over. appreciate it filling Thanks. will turn for those.

Joseph Hanna

Thanks, Scott.

Operator

question Our come Instructions] thank from Sidoti. right, All with next Marc you. [Operator will Riddick

Your line open. is now

Marc Riddick

everyone. afternoon good Hi,

Joseph Hanna

Hi, Marc.

Keith Pratt

Hey, Marc.

Marc Riddick

than the So talk on to if pricing played the hone that that's and that's was sort past? you dive was pricing that able that pretty visibility whether seeing it the you're I out something sort of advantage of bit the of to sort as take little maybe wanted just maybe how the you its little about, into dynamic or were quarter, now could the had of wanted you but board, across that execution in had strength a a of, much of was to bit greater to -- in something along this sort the went just through

Joseph Hanna

I the to business a the think that let very And will focused sophisticated -- been very that. tools wherever I do done help that we've improve the to start can. to tell Well, we've us deliberate we don't have quarterly effort and work in me business off prior I and you shared we some on you in calls whenever and in Marc, Keith, pricing if chime there. want that know we've has

the the too. in increases opportunity, whenever pricing cost The that healthy we're stepping very seeing been is business and but and possible, in closely. effects pricing the So up see interested we've wherever that only we not of we're we it environment mitigating watch our very because

and focused that. very our So effort deliberate on part watch to again, very

Keith Pratt

a I'll pressure increased have no It's nice that And deliver costs Yes, area Yes, of Speakers] couple in them made that a retain Adler lot appropriately and really business customers, sure reviewed we really Marc. work margins. portable we're on the a of we're of of really to really when of and One where work a the part to areas for and making was we're from [Multiple done for our seeing adjustments is to done fuel business work. and the last surprise service pressed that really lot the highlight that, teams product And in in the there. challenge will pricing of storage facing years everybody's first of make compensation find challenge. over sure results we've the that we drivers, increases couple this maintain also drivers. part strategically and really and year good so seeing be good healthy

some calls equipment opportunity. the as inflation look at our point hard of rate get is beginning of ready pricing moderated say year, to really adjusting that impacts of since inflation focus margin these and some material that The of of the had from number I cost make to some increase transactions view, the on particularly in deliver repair inventory about challenge we've the talked labor over that the period economics term. pandemic our and that's and price this to equipment the the of paused made full centers the rental a it and we're that during sure a offset of -- help money a and it challenge, some or area inflation pricing spending healthy for area will what a the other a of we material There secondarily would cost next modular rental we've particularly

work got a a and actions we've of picture, doing but on work I dynamic and is think of it again think we're last lot a few still good the approach. So attention the being lot being paying what right in fairly a team implemented done to of is lot close our I months,

Marc Riddick

I the to That's you're great. the as what some touch continues me there little pipeline, And Thank there potential last thing targets. on you as soon much for so continues is to far as wanted seeing, bit you that. for a be then just as though, acquisition

maybe and just specifically talk pipeline your currently, appetite, we're Thank overall So general U.S. within the seeing I’ll about [indiscernible]? you. what

Joseph Hanna

very answer healthy can to -- pipeline as last strategy. one in and our going I looking of do the we we'll part we're part an it's our that. to interested to Yes, evidenced Yes, and did year, continue that. is that that at are opportunities is it growth and important It's We transactions we pursue. by continue

excited encouraged that out did we're we're ourselves So and more by do activity that. about positioning refinancing so we the as you some Are we're you see, seeing there. and to And we're there, Marc?

Operator

last you. Thank right. the question. All be Ladies and gentlemen, to appears that

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

Joseph Hanna

Thank very much. you right. All

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

Operator

you Ladies now may for and participation conference. disconnect. gentlemen, concludes today's this Thank your you and

McGrath RentCorp (MGRC) 28 Jul 222022 Q2 Earnings call transcript