Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Fourth 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 call is being recorded today, Wednesday, February 22, 2023.

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

Important actual under from Risk that filings. XX-K to disclosed the the in differ SEC company’s Form factors materially could cause Factors and are company’s expectations other results

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

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

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

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

Joe Hanna

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

finish pleased positive perspective and providing today We on be year outlook the look to our forward to are for together XXXX. strong to and additional

outlook I full provide questions. will additional will our year to on as up open for start and our look with financial the complete before ahead. Keith we detail and some fourth XXXX review well quarter comments overall prepared comments call his our performance, remarks as in

by This with and progress increased XX% solid conditions the revenue impressive strategy. businesses company of the total our quarter. in of market of and XX%. XX%, a robust Rental quarter. our all revenues a good in we rental sales achieved delivered increased grew execution Notably, was combination results On basis, EBITDA grew fourth

these strong would attributable service aside, to provide continuing realized for results. to dedicated well the everyone for teams our like to appreciate our people. country, to the we is they Without conditions McGrath. would our not customers Market thank across come the from success clearly job our and have have of work done I exceptional

Mobile performance. deployed. all new growth the on pricing adding quarter equipment rent, fourth healthy over rental by units a Modular to We on rent units utilization, while fleet. in X%, to and up had X,XXX were which equates strong additional Units saw

our with solid maintained gains fleet pricing We to orders, pricing as new year a on strategically as pricing, average on on ago. focus well compared

increase solid performance the as of to Additionally, storage XX% demand quarter revenues rental the a strength portable the in and reflecting operate. where robust, we expand in for execution markets with in was continue we

the be is rental a higher provider a have The for Modular a yielding increased of from revenues, a to construction in one an addition quarter. revenues impressive strategy solutions Our Modular XX% Modular customers of solution results, benefits to construction to project. conventional momentum day gained our considering and sales now primary equipment alternative to customers are as

this trend exciting of ourselves growing of built team serve and we have internal take positioned have We an advantage that sector to market. to the full and

favorable position market revenues consistent very a ROIC and business, and has is both our high and grew with market rentals. growth reflecting TRS purpose At steady TRS-RenTelco, rental general X%, strong time. over conditions a communications in profitability

and space. growing is now opportunities top and market technology capable competitors in of is competent in team a two have of well business to one in It the highly the future. the keeping capture We operations growing positioned upside its

of to a Modular our investment business the in acquisition announced These leverage On February increase Xst, the growing we value a business. Vesta business. and provided unique Tank the Modular of divestiture Adler and Rentals’ simultaneous non-core of opportunity to transactions

years, XX the of part for to over Ironclad Environmental sale give the the While a Adler opportunity. a a had business been family new to McGrath way was businesses of

an it be forward temporary positioned storage investment solutions waste and growth. for specialty hazardous future of and and will will containment industrial management of industry-leading and provider be and non-hazardous part waste Going equipment for

now of With portfolio. a more sale Adler, have the McGrath streamlined focused will and

on Reflecting I proud we of year, full the accomplished XXXX. am in everything very

Our conditions reflects segments. year revenue full healthy the as of growth the diligent and focus our execution of profit on a each made most market we across

managing We pricing the improving utilization. organic Modular rates segment significant and fleet, new pursued the strategic with growth in fleet to focus on our investment higher while

We growth additional initiatives for sales. and also made Modular our with progress services new equipment

options in we the explore to continued work accelerate and Vesta our In momentum. strategic our accomplishments, This addition, strengthen growth Adler acquisition our and to long-term to operational culminated work divestiture.

the speak will Overall, demand on and off for and outlook to TRS-RenTelco. good XXXX start. I Modular Mobile to year views the a our is both Now,

First, for on so side strong to be XXXX. of far the has Modular continued project Mobile the commercial business, velocity in

a tailwind and creating geographies effect our We of any all likely across is continue the funding to slower offsetting believe demand be federal entrants potential of to a of economy. infrastructure to

overall opportunity With addition growth are of deploy the fleet to to more have now With entering more Vesta, capital adding by the key we high equipment utilization, year regions across new we grow. geographies. with the

revenues projects. have education On and in slowdown do a healthy monies modernization not school the the local Modular of been business, side anticipate and bond we tax

the our addition a broaden market to and the will of have coverage. help Vesta strong We education position in

TRS-RenTelco, At to expect we be demand healthy.

purpose serving which softness On in and our may we particularly offset solid side computer some anticipated the the by of defense and markets. opportunities, the general markets, aerospace business, partly semiconductor be see

for longer communication term the driver us. network is On side, the a XG positive

and We despite wireless broader bandwidth, uncertainty potential expect macroeconomic environment. by more wired some for driven need in communication the well, continued the up hold rentals to both

are opportunities. TRS team confident and in on seasoned we plans to is Our growth their seize

dividend an as champions, years. known to than around our On whom distinction XXnd being all dividend a of has total XX McGrath of today company increased the for consecutive XXX growth. marking level, dividends companies year one we announced our more consecutive have increase listed of dividend rare publicly of currently their

are especially consistently the proud in the performance of value of has return this shareholders allowed business, to us it We to manner.

marketplace operational delivering disciplined value be our relationships, will we shareholders. expanding always, our execution, customers, on our to as XXXX, focused and For

of acquisition be of integration and priorities. the synergies Vesta, the will With successful realization

addition tuck-in to already add for acquisitions organic to pipeline we capital add of operate. we growth, deploying locations have to smartly a where potential and new In density places

sheet path an leadership of continue long-term team, experienced growth. have We to track balance execution, strong record flow our healthy generation cash of and

and forward Our I XXXX positive successful has start to to year. looking a am been

me call Now the to Keith. let turn over

Keith Pratt

Joe, you, and Thank good everyone. afternoon,

in the across positive As with the quarter, Joe Board. delivered highlighted, excellent performance fourth results we

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

review highlights full our current from results year quarter provide and I specifics of my today, performance. fourth will our XXXX financial In outlook for

we getting which the Therefore, a concurrent transactions completed acquisition Before had Modular subsequent fourth into and during period on the quarter I no these February XXXX Both the the will reminder, as of detailed now Xst, of Vesta comment. operating fourth quarter. completed Adler impact to Tank divestiture my comments, on were Rentals. reporting

onto quarter XXXX the fourth now details. So

both Looking Tanks each operations generally with revenue reflecting XX% is year-over-year, overall The results increase corporate Mobile the for in sales rental each quarter, at the business improved increased the and Modular, from revenues, which fourth total segment. -- Adler million. to conditions TRS-RenTelco rental improved rental $XXX.X growing and revenues revenues

adjusted adjusted consolidated XX%. million EBITDA margin quarter was Fourth increased EBITDA the XX% to and $XX

higher of Mobile XX% revenues operating including division had quarter. XX% impressive $XX.X million. as higher down performance rental to rental XXXX, compared There services revenues fourth results XX% the XX% the by Modular Breaking revenues. revenues, million all an to increased were streams, sales increases rental or and across $XXX.X quarter Total revenue higher related

saw we to or million grow our education revenues million, strength Modular operations, rental broad-based storage customer $XX.X strong progress demonstrating our commercial, bases. sales $XX.X projects. initiatives and portable our In increased across Sales with XX% to

and while We fleet up continued management of from ago. average achievement XX.X% growing rental also and was fleet increasing utilization substantial achieved year our our XX.X% disciplined rates. accomplished fleet This utilization a average

our With rent on we increased average XX% on $XX.X or investment X% fleet successfully for $XX.X Modular, million strategic improved and quarter equipment by as million increased the utilization. by the size average focus or

X.XX%, by was depreciation rental higher center of margins year quarter XX% XX%, rate rental costs the ago to X% compared resulting rental expense, higher conditions. than X% offset and for pricing were healthy continued X% a higher The Higher average in inventory reflects year a was monthly revenues ago. partly and which

in At increases and TRS-RenTelco, revenues increasing We revenues total revenues increasing revenues, increased rental with million. both $X.X million saw rental or $X.X to XX% and million $XX.X sales million. sales $X.X

rentals. communications for the Rental revenues saw monthly and quarter increased quarter purpose both The which demand We and rentals, was equipment X% equipment increased good X%, for for average rate rate the demand X.X%, average a rental for coupled respectively. ago. general general up healthy year X%. compared X% rent, equipment with higher on This pricing and reflects and rental purpose X% communications higher average to

to to fourth Sales quarter for a with a and margins XX.X% year XX%, year-over-year XX% compared utilization ago Average compared XX% to increasing year rental gross revenues $X.X XX% million increased to $X.X the million. profit ago. XX%, was were

of $XX verticals. demand At all for Adler regions the rental and revenues with geographic XX% all on of total to increased revenues. five and million million $X.X XX%, services or in rentals, Rental Adler’s industry increased higher Tank broad-based rental-related growth revenues improvement its six quarter was

the business seasonally to the a had addition, finish In strong year.

improved at to and strong utilization The quarter quarter XX% quarter environment. for XX.X% conditions demand increased ending improving conditions to Average rental throughout strong the Business rental leverage. with the to healthy margins monthly rates utilization reflecting year a to operating XX%, fourth XX% ago, compared an for X.X%, X% average pricing and from increased XX.X%. the reflecting were

to company be XX% $X.X The $X was divestiture. administrative expenses related total to Vesta of will on costs result remainder the basis. my acquisition of fourth million. of $XX.X comments the a increase transaction quarter Adler Selling million million a or and increased and

was of lower debt interest by levels as offset million, of increase the average the $X.X expense an rates, result $X higher quarter. million partly during Interest average

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

tax full effective compared in rate was the XX.X% XX.X%, year, For XXXX. to the

equipment reflecting business investment Turning compared in $XXX.X to year-to-date provided our to the flow $XXX.X was million, year, with million, our $XXX.X million Rental the to comparable on operating focus cash year. in net were Modular prior segment. purchases activities by organic prior strong a the was cash which highlights,

X. us pay million, in organic In paid At and borrow $XXX.X quarter $XX.X $XXX.X of ratio The million of to actual comprised million XX funded $XXX million had million shareholder debt healthy high in notes to of outstanding an debt. million under the $XX.X and generation with dividends of fleet, months under facility, on our credit. EBITDA a to new net addition lines cash we credit last $XXX.X additional to was capacity of the adjusted investment borrowings our X.XX allowed to end,

Finally, turning to our XXXX financial outlook.

and XXXX, $XXX XXXX. currently $XXX $XXX total to in in Gross million, million, between between million million compared million, XXXX. capital and expect to Adjusted $XXX expenditures compared to $XXX EBITDA million revenue million $XXX equipment between rental $XXX For $XXX in we $XXX and XXXX. compared million million

our sale from the excludes related and the that acquisition costs divestiture, note, transaction anticipated also outlook excludes Adler Adler divestiture. to adjusted on Please and the EBITDA Vesta gain

the revenue will additional have count some lease the are conjunction which Adler, approximately properties statements. divestiture on Adler comments leasing divestiture. previously as $X part we will McGrath of $X XXXX. certain Adler will million fixed generate transferred million not Vesta in be annual other with and overhead the to the range have McGrath included a Ironclad, impact income acquisition property sale our of that on statement to income XXXX expected I to allocated approximately is of financial to of how In and in offset This of

McGrath’s addition an $XXX sales XXXX, of million XXXX. for compared $XXX estimated Vesta, of $XXX sales increase million and the million expect we in revenue mix to in to revenue With approximately

XXXX million compared estimate direct to equipment operations costs a $XXX million, earlier. maintain million which $XXX to to to We inventory approximately costs other, primarily and of are rental $XXX rental be center year repair

amortization the to million the XXXX $XXX recent We approximately excluding $XXX related acquisition transaction expenses and and of estimate intangibles of divestiture to million. costs SG&A

resulting Interest from million to is to rates. approximately as with Vesta expense $XX a higher increase result acquisition, interest million expected combined of debt levels to our anticipated $XX higher

and of effective expect between We tax XX% XX%. rate an

prepared very my are fourth year proud McGrath’s full and XXXX remarks, Closing performance. quarter strong of out we

our capital business, look we working our on XXXX, our ahead, for and focus on grow to will growth be we hard Modular furthering maintaining strategies. As to continue return while

remarks. That now concludes open lines questions. you our prepared Gretchen, for the may

Operator

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

Scott Schneeberger

questions two will I Joe, afternoon. and Modular. over TRS-RenTelco Good with much. start very you out Thank then

long-term Just XXXX? take but on are of near-term opportunity business spoke thinking aware very good -- how to I wasn’t it’s clear the when to a the you Thanks. that, that how conditions you about for long-term we are XG, that opportunity

Joe Hanna

similar anticipate are Yeah. has going optimistic the demand that The so we to of We start Sure. not XXXX changed really for year. picture significantly to on of transpire and will the the that’s rest how be during XXXX. the year

Scott Schneeberger

All right.

particularly to Sounds keep into jumping is the now, just and bringing right move we -- about increased as The how but an Mobile think is good. we component model, Swinging kind sales Modular. Vesta, Appreciate guess of with maybe cadence that. over think you how should we cadence the as, of this there should the sales through in, rental with sales year? revenue I

Keith Pratt

comments a offer and Scott, to be me Yeah. helpful. try let few

if the of summer positive months, which education important rental months lot some and in have year. for a significant in revenues very mix, year when the tend more I are season, us, strong, to the you think of we a a in is the our summer education second the for see half the for the net activity business in lift that’s is then

look sales of a actually particular in long-term will healthy a to year, typical. quarter which fairly The business to trickier that’s hit. rhythm you record is track over sales part signed if And our the

I in a significant sales Again, days, then often say, than old was education the sales quarter was third quarter. more mix, big the would where

of past years of look if had in in quarter XXXX, a will very at the year particular you this you If you QX. just we look at large sales see couple last and

So there when those variability will sales is to more as hit.

Again be bigger mix, full be part have Vesta business of thing the addition and initiatives look, progress a on with year lot will at important see been year-over-year we with to the an Modulars. going is, important a opportunity. basis, our look This making in we the it of the is of

it maybe particular as be some give we will last some quarter, than any call again, to will get heavier predict. trickier quarter-to-quarter, I two guidance harder at year bit would movement be will color a look be to there can in But little projects. the A or in and there whatever the But others, some ideas. little year to of It will and progresses. --

Joe Hanna

Scott, I also will add in there.

We full have very a pipeline.

will lumpiness of there, the in be Keith have here close there are alluded quarters the got to, scheduled we as -- And so, certainly all are of to lot that year. and different some projects but a for

And so they are spread out pretty well and that’s a good thing.

a with full pipeline. busy very are very We

Scott Schneeberger

ask Yeah. Thanks. to That next, actually was jumps Joe. what I going

is You spoke about But you booking you Thanks. visibility what historical said. more, just for projects a how what you that’s little already XXXX, and elaborate versus are of and clearly, type seeing? from last could your projects now bit well call going

Joe Hanna

to -- projects the to they our of that too a year. of the changed say hasn’t obviously see It’s would But I are lot good that second at times these scheduled half is thing Sure. QX, have half including visibility really tougher projects much. the various the in and while in are come the second to a take year. the close QX we year to pipeline now in of and the fruition

So, much overall, hasn’t this point at visibility it’s and changed positive. too

projects quite that’s of that place of place in the in the be while. that government projects we space field work, some that types to we and seeing, California. business some got taking even there’s terms are scope flooding a of that bit large anticipate are swing out them that quite the for in here industry will construction it We In There’s took and private size from a be play. and municipal in still are of continues

a different hitting just of lot verticals. it’s broad-based end market been industry So, pretty and

Scott Schneeberger

Thanks.

any or Keith, me. that day for to couple ago, Vesta, revenue when haven’t more commentary close, weeks from think. a you I books and and synergy bit regard The their this now seen opportunities? outlook cost Is Just there for one’s you end same three Probably, -- you was magnitude a had to the the synergy it really weeks two have announced more you or time little -- peak. a timing with of

Keith Pratt

say, we roughly through did ago. XXXX topic million Yeah. we three on I know on over But of just as Scott, would a established EBITDA goal a benefit cost weeks a lot two-thirds that we reminder, $X the synergies of than one-third whole more just opportunities. don’t and in revenue side and from

feel of with coming very market we for commercially, a good weeks in And discussing and the in customers early good the really teams marketplace. these how to work posture with doing approach the all winning together

work the year to well a this the way of some think appropriate operate of out integrate I have We smartest will together, the be may in figuring opportunities our lot business. of sooner, us. get There’s second a efficiencies to year the but ahead of little work of done. I the lot to those half to a achieve be want of don’t parts some

feel appreciate opportunity is at we during set while we as up all a will transactions, year it and some through a time, will Vesta, we good as and integrating doing hard lot as our you of very we XXXX. quite see Adler, go this for of As work really good is in taxing the the of to about very progress for be change. be work to divestiture involved teams can But the of same this make we much working both there

Scott Schneeberger

the go the Adler how And we -- model, just deal was how With dynamic could about this expressed, think new that was I in just two and of you that when model over into which assets some one on think the Thanks. the housekeeping. call announced. retained model the you last plays there just -- versus very that on

Keith Pratt

Alder the recap. just but had to but at for see year really you and here. the for Adler as year exchange, Adler on full detail recap $XX.X you the resulted which it of at the a see numbers, level gets full you value full published a the finish provide of detail, few just for was full year the I at good details the we I if structure, will then for understand million. can a of look can business into of the adjusted million. said, in of the the EBITDA the very today to it $XX.X total some of modelings Sure. P&L, the cost If you And look we will And SG&A Adler,

I of say, is in out, of I approximately allocated and Adler, McGrath. quarters all, the what some that Adler first $X that there million want SG&A point incurred at Here’s all but of the SG&A portion in division, to overhead of is a will fixed three directly is

One think the way costs. it about leadership company to public of is and some

For example, myself, allocated the that of cost is of some we the are Adler. Joe McGrath businesses, across applied allocation or to

fixed allocated that’s So is million part of the division. $X cost of the of to overhead kind that that

divestiture is to certain of a and McGrath-owned property we operates, that fact related the in Obviously, with not transaction that owner that $X certain the business in approximately where the also Adler owns And offsetting remains McGrath remains receive McGrath, cost none now of property fact was lease that transferred Adler move the the income it McGrath. business the where we out McGrath are the operates. new does use cost the locations million of at for and the properties to landlord will in

of of lease to million an net $X exchange $X results. Does income, EBITDA the we with where get help, economic the full million impact dynamic? reported recap year is there really so, unchanged the just what And transfer, we remains, the that that cost benefit of adjusted in is there, but

Scott Schneeberger

it a the I just bit And the pieces? guiding you year XXXX just and elaboration Thanks. are than rate Thanks. XXXX to moving XXXX closer like that. this tax looks then Yeah. any believe the on lot lower a XXXX rate, was Appreciate there

Keith Pratt

shielding. a Yeah. liability, we some significant relates customary major rental tricky equipment, a companies, as of capital tax deferred tax fact pretty to of that invest the Scott, in the the it is we thing lot we get we is rental a have lot have, for

liability. all to a we tend deferred effect carry defect large tax So --

though of tax really in some states in and our impact, And causes we the deferred rate. change the having re-priced liability current our in a gets the That there’s realize. the of annual that year when deferred that that a impact tax mix across re-pricing even liability a has shift that it’s on tax average rate minor business the maybe state effect

variable adjustments where at spot when to when hard true-ups, we year, But fact is recent estimate. on up for that with And we for trends will the this results predict, approximately in hard it the XX%. XX% year do if we published that the the you affect rate biggest year. we are by to business observation, states, guide the rates look are the of that deferred, across we come up that The with you there end can cause wrap the see in that

Scott Schneeberger

appreciate all I that. Thanks. Okay. I it will over. turn

Operator

And and question. Instructions] that appears [Operator our to last ladies be gentlemen

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

Joe Hanna

on the results. thank in our to to first everyone for interest again look joining early May us like call in with forward We to speaking company. and our review for quarter XXXX you your continuing today I’d

Operator

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

You disconnect. may now

McGrath RentCorp (MGRC) 22 Feb 232022 Q4 Earnings call transcript