- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Third 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, October 27, 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 September 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

doing revenues Total rental results third third strength the company very increased were by in business quarter by during questions Good Keith look aspects for thank you sales our all on I which in revenues reflected quarter units. us earning and of of We today. with after your we and progress our I each XX% prepared pleased XX%. you forward McGrath’s remarks. are all joining to call and will hope our afternoon, McGrath’s everyone well. highlight increased

as market strategic and reflects priorities conditions. performance third The as execution effective year-to-date, strong of our quarter our favorable well continued

from again very modernization as our post education our districts revenues regions. Mobile our all pandemic, recovery projects modular quarter. had performance and segment with XX% to each Rental business noteworthy we where in seeing units. increased of Turning are a of grew by school impressive once continue

needed rentals, expansion population as since student of rentals business XX% building markets, robust increased I products. accommodate a growth multi demand are enough the districts units, the continued in specific cannot projects. fast the improvement presence XXXX. quarter is account by by industrial We enough where typically and equipment those in floor was many investment to students utilization of healthy configurations are mix X%, as refurbishment, that Education requirements. this. the also of drove third modular our in is second a increasing, complexes, again grow Commercial strong end in construction which I did in and the division Our we cannot for achieved which facilities. for the also the at We also while customized adding and by permanent grew municipal increase pricing, significance pandemic datacenters, our include was driven rentals first excel contractors trifecta fleet. market to what that large and Examples stress new describe as the which in beginning of largest providing quarter different in

decline; to in constructive. success utilization strive increase increase continually drop. effective to cause be is for outcome cause would to to of both utilization. the of Turning and aggressive can smart management those Overly and dials a capital. actions neither Overly to actions positive price a strategy challenge pricing to positive gains always We aggressive price fleet, utilization of deployment and which can equates pricing

quarter level XX% has on same strong to the and modular the very pricing maintain So return we third our capital our tried execution thoughtful XXXX. up achieved over utilization time, deliveries the quarter At XX%. in by a from on on since finished division to fleet investments. in focus not be a We at were

we as XX% grew revenues equipment front, strong benefited sales used from the sales. On

For of to had and in a We volume. level of spot strength a our nice storage demand portable and we are Round portable the and offices both they demand. the business, subcontractors opportunity. all in a delivering financial markets. balance in business, bright industrial contributed growth rental our customers also support realized of continue saw these and both XX% a Construction verticals be high product robust return as storage pricing and our who delivered growth growth revenue to fleet storage for represent portable high in growth,

efficiently the TRS-RenTelco reflecting We’re At rental centers X% of modular around most favorable these production able grew market units conditions. in revenues high with produce standards. to country quality our consistent

very market revenues At spending in by in new rates XX% at grew equipment led Both increased technology, billing of customer filling orders can been the Utilization for strong capital projects and in strength bandwidth We we the pleased drive we’ve help prior considerably in continued quarter. in The rental as performance the regions own improved quarter, of to R&D communications Adler quickly healthy. to were work. and by by the related all performance more wired business. and purpose verticals fleet. Rental growth buy in and deploy continuing aerospace from for and major quarter are with the our rentals without and Our fuel Investment very general trend already units year-to-date. historic continued has were equipment for defense. firms rentals the XG highs. wireless

comments continues as level momentum. in improved to to the demand performance. nicely with progress steadily regaining execution further to I’d as modular contributed about like the Adler’s division, operating strategic and well and now is the pricing our as business overall leverage company to initiatives. Additionally, demonstrated quarter higher third macro picture improve turn

conversations leadership are any projects, sense macro Currently, team outlook, gather track been field I’ve I about uncertain of we managers demand intelligence the and business. my our sales what I say customers weakness. to the of managers intelligence momentum, to get current one a our to In project metrics sales in in healthy customers longer and in appear commercial activity working every also Given our with more our closely outlook. remains timeframes. economic division, pleased demand the the my environment was remain with cost of modular at higher healthy. adept jobs identify customer very pricing very Many am the and inflationary very from to monitor operating an across and trends shared signs reflect they recent frontline positive. saying

is in We to are have country. locations across live areas to operating dynamic advantage. that And fortunate the an desirable

already activity expectations. with on are And booking XXXX. for We is projects this par

we slowdowns. to modular to to our turn are seeing like next based traction. signs broad of So which I’d continue not currently gain any initiatives

focus since have we these communicating know, now three areas for several of as been have quarters. you We

mobile modular is provide inside First the fixtures we furniture plus, through and which building.

outside are the modular such our with related overhead which sales and not our as for covers, services solutions, more of we custom are Next, but larger plumbing electrical services other outdoor and modular and custom last building, buildings connections, least, provide walkways, features. site And projects.

in these at revenue long currently digit initiatives represents all rates grown have and XXXX small, term significant While of double three potential.

modular our still are very We our about in growing business is within of as innings progress, excited these our leadership. modular the I’m and early initiatives

quarter would Looking the highlight as we tagline. like during also logo I at and a to updated third McGrath our corporate whole, that

listed among unique enabling as a modular of our we our customers rare do focused peers. of customers. term distinction is dividend reflects great McGrath do what among growth, tagline, The evidenced contemporary and publicly and is the company’s that our reflects our logo total long years new growing on which by competitive to momentum, companies, acknowledgement our strategically things It business. also for Our says XX symbol a

boxes learn, to a Our are to to delivered teams for enablers. modular to and meet makes aid commercial classrooms functional to and buildings our that quickly come children or the electronic equipment or a tanks test true all provide waste or contain are space satellite environmental of customer that that construction

and play of in the are touch the best in our many be the in We the business proud we strive to role which ways customers. we

our of growing company the our happen show every for each best ahead the that day. a looking quarter, could at and and to dedication year-to-date our and in I All teams my to customers would one you the and sincere successes strong up like delivering members a quarter very and our showing your results. to years, of year-to-date, company team third every the third not across every each over and care without day other as express thank for

heels of outlook. we financial third year-to-date the performance, and On strong full this our quarter, are year increasing

let Now, turn to Keith. me the call over

Keith Pratt

Joe. everyone. And you, afternoon, Thank good

quarter As results the with continued we delivered in board. across third positive performance up the Joe highlighted front, excellent

Our broad based results businesses. rental of our core across strength organic all reflect

and TRA-RenTelco and million. sales revenues tanks along from conditions. results at quarter, Looking XX% year-over-year improved healthy revenues revenue revenues to total business third sustained operations, The the XXX.X momentum increased higher overall growing each with mobile increase reflecting was with modular primarily corporate rental rental for Adler

EBITDA consolidated of mobile Breaking EBITDA Third quarter third increased adjusted operating compared performance modular margin and quarter adjusted XX.X was XX% XX%. an down the had to rental quarter. XXXX, to division, by impressive the million

utilization. and had X.X saw this modulars million XX.X% Mobile addressed as will larger our X% XX% disciplined rental revenues, the demand resulting or offset This rental The to bases. the increased based year not margins achieved revenues, for business reflects improved and comparable which XX% utilization pricing were of of This while was revenues. the organic by rental revenues total and XXXX the equipment rates. customer generated costs strongest X% related our with in ago rent utilization. well revenue X% There all by we million. XX.X have XX%, million X% This XXX.X was equipment achieved Education growth from or business which revenues important inventory demonstrating rental a completed higher we the costs is prepared growing first including partly of rental storage modular substantial kitchens by XX.X% and order quarter increases increased see as XX% XX%, quarter strong X.XX% first the higher higher increasing up were base. compared XX.X% average strength we and the level increased rental XX.X higher first broad reflect XXXX. management size and and we average than a by go last modular The primarily ended space depreciation bans, increased to customer we some and education of sales I million of portable pandemic The Sales half opportunity year. was rate sales. even significantly higher since average accomplished strong total were fleet acquisitions at conditions. quarter fleet seen center levels, used post recovery a increased monthly average to higher by pressures million fleet revenues across utilization for from successfully as ago. since equipment revenues as a year XX.X% to full across XX.X the in XX% We quarter We is our average and to achievement reemphasize in on Higher conditions meet ago, commercial, costs. XX% or fleet the levels and rental higher year higher quarter labor was our continued inflation activity to center materials representing growth XX.X increased XX% from inventory activity as healthy streams, design million fleet services higher and

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

and employee X.X were X% compared geographic increase average higher reflecting utilization the to strong million the healthy Average or as to since XX.X% was continue was quarter, has and at XXXX. the see increase partly to which XX% demand rates, third comments increased improving bases. industry for utilization X% be to The year in well five remainder of leverage. million. my and was well and rental marketing across and The on lows six our the costs, expense The operating regions recovery levels. by total improved was XX.X for X.X utilization achieved been as company XX% from further We XX.X%. increased verticals result the and conditions million million, strong pandemic demand margins with reflects XX% achieved Selling and environment. quarter not interest offset ending the throughout broad reflecting quarter salaries improvement ago, standing pricing conditions an from third costs. XX.X% X driver primary of benefit will to rates debt X.X Interest expenses based monthly Business before rental administrative higher in The a average a higher average to X.XX%, million, of increased of lower and last Adler’s markets. quarter administrative pandemic

a The due effective business for states. to rate primarily third taxes rates XX.X% quarter reduced The this based the was year tax on to rate XX.X% earlier. provision income of tax levels an in year compared lower increased was

full interest rates, our higher the equipment debt rental expect increases increases Given interest to incrementally capital expense XX year growth, to million. total in recent for spending along approximately million now with which be XX.X we

debt in allowed Healthy had quarter storage facilities dividends credit X on in demand was the XXX million the outstanding of our fleet. our months and operating purchases to million. of taxes cash million, organic lower Net our a of corresponding growth XX.X under sheet prior to balance XXX.X was ratio equipment notes decrease cash At XX provided Rental year-to-date increased we million highlights. X actual XXX.X X. other deferred and income facility. changes. adjusted generation XXX.X year credit million borrowings activities by us XXX.X were to pay was and higher and EBITDA and by reflecting flow increased cash by offset income comprised as funded Turning million for to modular million portable million to The X.XX compared and of shareholder XX.X our paid net last million investment in net

positive of to are and trends McGrath XXXX across segments continue encouraging. full our demand business we The sale the financial year outlook. each rental raising Finally, be

full you for total expect XXX million, open equipment XXX the lines Gretchen concludes between and expenditures gross million the and capital adjusted between EBITDA XXX XXX we questions. million. and million prepared For million XXX may remarks. between That XXX year, revenue currently million rental not our and

Operator

[Operator from question open. Instructions] now is comes floor the time, Schneeberger Scott from this Oppenheimer. At Our first

Scott Schneeberger

guys. A the modular and great. achieve Good much. afternoon, in very you that’s Thank high I’ll utilization very segment. start

get you on and good season constraints for supply that everything a Thanks. rent. that Did high But You there grew still needed that and an getting up you’re Are you grew issue? utilization. Very then and you this to wanted fleet for you – are on chain fleet mentioned follow any fleet in see. Good. that?

Keith Pratt

is Scott. orders. Sure, yes. that. we answer would mean, fulfill I can were our I answer customer able Hi, short to I say

pretty we XX.X good new One quarter manufacturing of supply for that rent only increased have base. equipment the by not the the things into And million. a we good fleet, turning but used the our put we seeing on that we’re pipeline chain our into in

get turn quarter of haven’t robust a able them. or away orders to a was equipment. us fulfill And for been equipment and it fulfill unable lot orders been and turned So to really we’ve to to used new had

firing So overall cylinders. all well on

Joseph Hanna

avenues supply time. and done at could our quite add, have I business, have supply where quite been resourceful teams execution number our really tight good if have an Scott, And for new particularly And, quarters. the and on just now teams The looking a a some the think for around supply been container job creative of I has side of for the from chain of view. issues point been

So a that result of achievements sort the the good of and really focus of fleet increasing the growing utilization execution. and are

Scott Schneeberger

pushing And about hard not what on you then you talking were price. Joe too

get the It right like the sounds striking you So utilization. happy you’re balance.

sounds this Sounds it like opportunity maybe not and You’re necessarily you high to your utilization Can but like you’re pricing you approach talk was price? good, have business. winning about running just obviously taking. that

there more happy an in are is level achieving you’re pricing cost on So the you inflationary particularly upside environment, inflation? relative Thanks. with to available

Joseph Hanna

doing basis to is have the the on And happy. Yes, that sophisticated good anytime what really we tools we answer is are pretty we price our thing the and a ratios yes, have opportunity it increase close real so time are. we’re share that

rapidly. adjustments a now. good So environment something right we’re our team. able doing sales increase And in we to anytime that The we it. the operating price, definitely is profile that’s focus with can And make pretty those do for that’s

utilization both see I prepared So that And important remarks, is improve in the we I pricing. balance of us. as those achieving to said and think, things, want to

very do do wherever And we’re that. we happy them, to both can so of

Scott Schneeberger

and you think going XXXX. said I out orders something And into about

what What manufacturing you out Are seeing and you projects just can projects? portables it that how are expect not Thanks. it’s it is, put in those? be you’re strong and on seeing like have curious that Is you would they seeing based? for yet. infrastructure magnitude Just modulars is? for bills out the Sounds expected. out that far comprises Maybe you the Is happy sizable you the energy what pacing of You’re funding how helpful. where address as it big visibility consistent at with can deterioration starting? horizon you

Joseph Hanna

those are visibility topics a very my what I years, say business these say don’t Sure. XXXX. significant do rental in of projects XXXX. I far into with too three Scott, And that large you complexes projects have typically a am increased seeing sorry, that provide would actually become very, hit that I that we’re at. numerous and there remarks. that are very good we would stream. I are last lot see about we And involved we But one, those And which talked two, with require associated that projects.

So be those their it’s as very we areas could industry see in government work. are we’re activity expected, could right happy And it’s expansions It very with facilities. based. doing and in be broad It now. that And private that.

municipalities infrastructure The some And could that much One small. has was I’d yet renovations, number And many so infrastructure too out those very be passed. I said, bill recently been not the like that haven’t yet. funded relatively heard it projects things. seen airport from have bill that been expansions, money all commentary of we is thing and

we’ll that more that see position that. And so in do as a ramp, to that. of and spending And starts very project hoping good we’re that to we’re activity

We have government contracts.

be we to And year. that we in of advantage next believe as go We’re the that. into should position improving definitely take

Scott Schneeberger

XG you because Could on into just Thanks. and quick, penetration up? a how delve segments shaping touch little bit other that now, TRS Real the as the well. I’ll

Joseph Hanna

cable of is to up are towers, one all that. that There this infrastructure like bandwidth the is that the seeking, wired. two things optic bandwidth these is fiber Sure. aspects And that clients goes these in and

are healthy and the tower And fleet. demand our been of being in things done part seeing that and healthy we’ve in there’s to like other we test of that. cell fleet tower we’re are terms designed communications to work tools continuing in too. phone so that signals And demand see then And have and that our other the that’s other seeing products there

of all would wireless and been I aspects say our that’s very wired And those fleet tied to of it’s both So have that XG. good. in communications

pleased been so very that. And we’ve with

Scott Schneeberger

you of And you to then that lastly, it that Thanks. and each you particular to markets Could speak sustained strengths AdWords any I’ll turn weakness, segment one over. individually?

Keith Pratt

two was shared. that’s They up projects were up cleanups, as all were we might see like the that’s something like things services more be at spills, And up our that was quarter. a others significantly that construction than environmental cleanup that up was say that work. petrochem and in construction segment. right behind of plant that and considerably on environmental plant had And was And or that, And them that a I site. our one all And that. and would construction dewatering you’ll

So would were they say overall and two for the all highlights the those were I quarter. pleased that up

Operator

Our next from from Marc question Riddick Sidoti. comes

Marc Riddick

modular. wanted pretty If the rental profitability, a which mobile to about the because within certainly outpaced good I start we profitability pace the growth, revenue the services as talk so growth a was the of well. little bit could So

driver certainly that there’s bit certainly over there shortage you’re So And is light, we’ve but let pricing talk lot revenue, a getting there. of there. in the a indicate and versus the years services given about those some little would profitability talked growth the me activity about it the

Joseph Hanna

one. And short, for it’s in happy be focus that a I’d you with to been Marc, area help Sure, us.

of on working in that area into nice with pricing work You’re margins. our some that We’ve we’re improvement adjusting the of the are reflect for to been impact of cost starting teams for pressures course right. over a that this pricing that really And of see put fuel area, margins, we’re to absolutely and drivers. year. sure making in the working And refining the our lot work on

early identified area. as a an something organized program, we focus So

of focus economics got a have that’s another lot In our pickups deliveries, improving. making the us. portable addition, markets, deliveries storage ongoing of we’ve particularly as key And area density been the for and and more on

progress teams. issues, So these are the good all really execution and by

Marc Riddick

revenue on where as as area? digit for storage, portable in high that still company we of far total and touching And percentage sort are of ballpark we single

Joseph Hanna

McGrath’s Yes, portable of revenues. total storage XX% represented

Marc Riddick

performing over we’ve Talking TRS, Adler, given because the to shifting there. and really then well, what ended that we’ve a on the bit obviously to verticals Adler pace can we’ll come to seen that been. to, encouraging, the little you it’s are you that especially talk especially And within about impossible utilization we over to with where as very where growth about commentary back growth, of utilization not the with jump Adler’s mentioned is given

Keith Pratt

Sure, clear I fleet you real been new our haven’t equipment. we’ve deployed past and making I that calls. has know, as And investments. mean utilization And think strategy been more is just we’ve about improved we

improve, the that what did equipment So that’s good fleet, us. in a and improves, ship out when the can exactly of demand And right from we for conditions our in we and quarter. thing That’s yard. that’s equipment

we you that’s So like did. in why see improvement utilization that

Joseph Hanna

just Marc, really utilization as operating operating segment remind And but up, quarter. was the only third pricing doubled got we we good up in in leverage, well, was I almost you, and profit as that said, not

Marc Riddick

during you talking about would to education wise this year, was because to at there’s talked what were little profitability just greater certainty achieved those I guess as and area quarter as wanted I what talk wondering calls. and as looking education, the opposed because you quarter. education your about what vis-à-vis this imagine and of greater, I think I are guess strength I about was last the then to bit the granted, And and experiences I then there mean, the maybe, as a maybe within maybe dealing with Maybe the execution for shift prior far year back customers. last you

Joseph Hanna

our again if part say I that been if and the with and funding conditions favorable have. I the shape, say we first good. I of been market something older focus up. here that environment drives doesn’t would has but follow that just to, Yes, in fact up older say the can really that’s all, keep that schools miss that’s getting passes, would I pretty across what of And you country year And and are that, with each you’d like Keith would combine good maintenance

demand for that to markets, modernization in I markets And see mean, serve. that quite that too. drives we so high of growth that population continues other in terms every is growth in term of there. where we And we be rentals have those that one student the really And then long

So our teams good to to applications. with to I see mean that And those one we’re are either of being customers districts. be set two able needs of serve at those we school quite both able support in up

Keith Pratt

think part impact education was lose as pandemic we didn’t much time over grind, the flat. pandemic, tough a customers. Marc. in didn’t the X% I grind look pointed education the of Joe was much hit the last growth reason six of or with highlights, the we if live the education, gain We we all The with a through the was you quarters, that out years relatively very back over business last our two the but so for

Joe of the with demand So evidence more good to the and a is and really pleased said, as a customer return this and of this base. we’re normal, important hoping bunch third levels, quarter back

Marc Riddick

and as bit bit general picture wanted far mix revenue a during a but the the shift of mean, within a margin I touch a mean, what far as TRS-RenTelco. mix sort in little versus the think seeing out of the I XG, we from a that Can might about of you as you might you little see of did kind I then sort mention I the quarter? just how be bigger as equipment are little there? And perspective? beneficial talk shook Thanks. And bit to revenue

Joseph Hanna

third dramatic the roughly Yes. two thirds is related. shift. No business about related general and of purpose equipment a about I mean, communications

the that investing market not new, selling shifted we the mix is making constantly again, the address So dramatically. really that is opportunities. about equipment own, business looking in And that to we’re good adjustments, at some thing

making is good So monitoring are demand, deliver our The segments and and now segments are with team our growing, healthy. good the very very and in does both an Both nimble segments. fleet they market several quarters news job incredible Both adjustments row. company. returns for a

Operator

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

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

Joseph Hanna

McGrath thank results. speaking end wish for joining evening today calendar in again look a success. and your to on with in company’s you again and to good year review everyone like our our continuing and you call We growth forward I’d the us to for interest late and February

Operator

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

may disconnect. You now

Joseph Hanna	President, CEO
Keith Pratt	EVP, CFO
Scott Schneeberger	Oppenheimer & Company
Marc Riddick	Sidoti & Company

McGrath RentCorp (MGRC) 28 Oct 222022 Q3 Earnings call transcript