MGRC - Earnings call transcript Q3 2024

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp's Third Quarter 2024 Earnings Call. [Operator Instructions] This conference call is being recorded today, Thursday, October 24, 2024.

Before we begin, note that the matters that the company management will be discussing today that are not statements of historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the company's expectations, strategies, prospects, backlog or targets. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected.

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

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

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

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

Joseph Hanna

XX, fee Thank accordance to of X-month with January million. thank acquisition received acquired. today. McGrath $XXX we you operating From this of Needless we In you, had agreement, McGrath to our where terminate and company. the period by we quite call WillScott. announcement the company XXXX, an our everyone, It on as say, Good Jess. for operated has our a joining September an anticipating merger environment unfamiliar pending was announced the mutually afternoon, that a being in agreed of merger navigated us been terms On termination stretch the for a eventful.

positioning We this period. maintained teams marketplace the simple. competitive our My was independent throughout in direction very to our

to and team dedication to through truly customers this period. each and revenue the reduce teams I and we keep together, always members have and and we ways to as done; few company, our cost strategy found think our our period challenging commitment another strong one a execute supported healthy. the people company our very and and testament to to to financial Through lost it deliver we enhance our plan that First, other turnover the stick second, our to of X-month streams throughout. kept across the culture is

such during that, everyone's to be earnings could are back not quarterly of an normal we With uncertain discussion. I accomplishments prouder time. and reporting

to latest now turn results. let's So our

third XX%. performed company TRS well, the Storage increased the market and quarter, Modular business Portable while EBITDA and our quarter. XX% during headwinds increased demand For very revenues businesses total adjusted experienced The

had XX%. with sales including we broad-based experienced our and and our commercial a growing wins rentals geographically technology. Mobile wide the commercial market rental revenues strong verticals, in revenues Modular quarter. quarter and and variety of Both X% education a grew during growing The were government business

school modernization We education growth solid customers. benefited execution. projects on and public Our focus from maintained our and business and encompass private both

actively we to deployment and Consistent Our some ended fleet quarter pricing, environment. and Utilization of team managed utilization of experienced healthy construction-related indicators this still we be XX.X%. at data macro consider year-over-year in softness demand, a the the demand and fleet. with dipped range. slightly delays new and other recent

Based volumes this improve opportunities on quote and number. to bookings, have we

all grew to Mobile our core offerings. quarter, the custom site-related excited about modular expansion remain the in Modular our we addition we customer the in Plus, services, customers. also these sales In our revenues services Revenues additional our drivers, the of portion services of from rental and offer revenue opportunities and continued

our any was expectations were as concentrated new and a primary Storage and The the commercial reflect Recent activity widespread revenues to geographies by demand construction, were quickly. X Shipments indicators decrease. replaced as not and planned below than XX% interest ABI the Portable from in Rental by Portable declined our projects projects year be completed and a in and driven higher appears delays our Storage softness activity returns construction-related were driving in to effect rate of Less factor headwinds quarter across Turning business. environment. for macro ago. other area. data in not

XX% at by stable our industry-wide measurement communications declined general markets slowdown revenues test revenues purpose both continuing This and and rental rental equipment reflected OEM providers. and in TRS-Rentelco, the and back equipment. equipment sold We a with keep the impacted. rental excess We both to At measures took and new footing. scale appropriate continue purchases in of the equipment on business quarter to

Shifting would the comment like third gears hurricanes. the now about to moment quarter. Helene take beyond I a to Milton and

running in disasters, this or in delays not either Our with storm operations disruption. heartbreaking we of the up in typically for mover the could needle negative in photos field Despite customer natural big and some are a secure, storms and to with extensive damage McGrath. events now are locations like negligible regional and planned. term, coverage are Near all a impact the projects, cases, have these

are recovery it. efforts storage business we positioned of stages, not need reach new until provide are much way the both Nevertheless, further opportunities we and anticipating for who for in to McGrath. customers space Also,

know We likely recovery will continue. storm-related in more the new as about operations demand months ahead any

quarter fourth the XXXX, there in the for is demand clearly uncertainty ahead environment. overall look beyond to and Continuing

improve, With softness. interest time, and of results. positive demand been before XXXX Soft likely experiencing offset optimistic market although will any be that Modular, may demand cautiously and the demand quarters into that storage to projected we At conditions and TRS continue rates portable help ahead, our we in and initiatives Mobile positive businesses growth we could ease to range XXXX. see are we dynamics well pricing our into may have take that should remain

more growth strategy. That our prospects about and not be execution continued said, long for I of the term, our positive could

Our broader customers. from of modular we to have investments efforts to further make acquisitions, branch plenty with new business serve to organically and both and locations strategic produce opportunities coverage acquisitions fleet to our by our our continue results grow geographic encouraging

to to for years grow runway continue have many ahead. We

are will And processes revenue robust. the fleet and disciplines pricing tailwind. we over, Our a turns as have

Modular for sales The modular growing. value customers initiatives that adding started, Plus, site-related and and Mobile services namely are we our custom

high-quality base We large, education have a customer diverse and markets. commercial and across

and period infrastructure government customers education include charter of to support and school we megaprojects, construction private growth broad schools, We student shifting geographies. continuing in opportunities positioned data new are Our modernization needs, multiyear and center serve well has across those to commercial believe populations schools and multiple our a growth. opportunities are and business

Storage has early we Portable new markets only business us enter are Our time, many representing in, are their that for also over in growth phase to markets not but growth potential. future we

for day, a Our the TRS path technology ongoing business provider business faster and for see positive with bandwidth is recovery. we leading speeds a use we devices ahead more to in the demands every

and We multiyear building remain In footing execution. long-term terminated our allocation from shareholder consistent the we increase and to to to geographic value to committed believe bring service agreement. base disciplined summary, strong as through and committed we strategic value coverage. focus, to is merger on our a our expanded through additional offerings emerge are continuing sound opportunity McGrath customers capital customer

Sometimes companies emerging from damaged. are terminated a merger process

We are not.

culture honored of. success to part be that our a I a to is am genuinely Fundamental

Our team we it level move success quite Their in have care through and members to our I'm lean each XX place in of was other serve I an today, to of to customers what strategies of execution uncertain growth performance. our period, driver another and about sure takes and with business the and and plans have McGrath unlike our coupled experience. anything my will seen years in

along doing team will focused the our way. be shareholders, on that, customers, benefiting We just members partners and

you leaders the for to already team year. members outstanding our of done like and again once would has each I job thank this

We focused finish on are XXXX. team as solid a to a

year. the With Keith, and full our of to our turn to you like for quarter take the that, over the outlook I'd through call will who financial details

Keith E. Pratt

Thank and you, Joe, good everyone. afternoon,

performance As our Joe in of we the the Mobile results by Modular business. highlighted, very quarter, delivered driven good third

the to increased third to $XXX at million. EBITDA quarter. results overall continuing $XXX from XX% Looking XX% and revenues million, for increased adjusted corporate the Total operations

$XX million. incurred $XXX taxes third or and resulted to a the provision a proceeds were Mini company now partly the increase terminated $X.XX during in previously the income contribution agreement. for from WillScot The $XXX merger per an the costs termination the in transaction net process, of quarter, received quarter, the received, quarter million share. due During merger income payment announced attributed diluted the to transaction the incurred million offset Mobile by The during costs

XXXX. to mobile quarter our increases make increased quarter were strategy. impressive our operational XX% higher performance rental -- Adjusted million. services operating Reviewing to $XX.X revenues; streams, sales million, X% including of $XXX.X across and an total had Mobile There on all Modular increased as and EBITDA higher XX% revenues. revenues we higher delivering growth XX% progress business to Modular's to compared rental-related modular XX% continue Mobile as the third revenue revenues;

growth a new The costs. sales primarily projects. with year was primarily XX%, grow sales up due the sales rental of and initiatives revenue from the margins were Rental demonstrated equipment inventory revenues because to XX% modular to progress lower increase higher our ago, center good and

fleet management XX.X% of rental on ago. with our X% higher larger utilization compared a XX.X% continued on fleet year We to fleet disciplined and average equipment average a rent

Third quarter rent $XXX. unit to monthly year-over-year per increased revenue XX% on

new the and additional last points unit For driver. $X,XXX. these is average revenue growth monthly in XX% with Mobile the is Modular months, Plus XX Progress increased over per to data shipments embedded an

We continue services modular our to make offerings. progress with

a increased For from $XX.X million $X.X million. up $XX.X to to and Plus site-related Modular $X.X quarter, year the million, Mobile increased million services revenues third from earlier,

primarily and year million. XX.X% equipment quarter Demand rental XX% Turning ago. prior utilization year conditions for quarter revenue decrease decrease compared the offset decreased partly Portable million, to XX%, total of the Portable average of $XX were while million, rent weakness, XX% for a review were in margins EBITDA XX.X% Average commercial XX% revenues weaker, to the of ago. to to revenues was compared activity. project because was resulting the compared decreased of the construction XX% for Higher lower $XX.X Adjusted rental a Rental Storage Storage. a on to a quarter $XX.X during XX% rental year. to sales

softer reducing market conditions carefully by We equipment demand the costs. responded managing and to spending operating capital new

decrease review Rental $XX.X for now Adjusted EBITDA decreased a year, the Turning was to of TRS-RenTelco. XX% decreased $XX.X of the and million, compared XX% to revenues for quarter million. last industry revenues total and was the a ago. rental margins XX.X% year year were weakness. as a ago, to Average end to compared market XX% XX% experienced utilization XX% quarter continued XX.X% compared the to

Total and September, spending margins focused XX% a original at value year $XX down new softer equipment ago. Sales of size million $X.X costs. operating and on compared the based used sales reduce quarter a gross to second equipment, the down XX% from was to capital million continue address and ago. $XXX equipment from To carefully million cost million reduced our decreased year we conditions, on of business fleet fleet end revenues managed were to the XX% of $XX

from of basis total operations. comments The company continuing remainder my on will a be

increased quarter administrative $X.X and million. Third selling $XX.X to expenses million

terminated the to the determined agreement and quarter, company administrative from merger and totaling costs the $XX attributed selling transaction excluded expenses. During were were that nonoperating million therefore,

Interest of expense million, of quarter. during the higher $XX.X increase average result was and higher average an levels rates the million as $X.X debt interest

was The provision on in third due effective mix business for compared of to taxes year was quarter state. a XX.X% based decrease tax earlier. by changes The income XX.X% to primarily an rate

Turning million to costs. the received $XXX provided purchases compared year. to highlights. Rental prior $XXX our million $XXX Mini $XXX year-to-date million the was Mobile was cash in compared The million million cash in payment activities prior $XX transaction WillScot operating attributed by flow increase of from $XXX year. million were net to Net equipment to the primarily

to at were we softer response reduced New as business spending Storage for equipment primarily the in conditions. demand TRS modular and Portable purchases

EBITDA in investments million the to allowed end, healthy to of funded new debt $XXX quarter borrowings ratio in the pay to million, addition cash had of In was dividends. XX $XX net last At we shareholder and fleet, adjusted X.XX:X. us months generation

outlook. financial XXXX our Finally,

gross year, million $XXX expect the be $XXX For between operations expenditures and full and and we rental million. $XXX $XXX capital adjusted continuing $XXX revenue million EBITDA million between million; from equipment $XXX to million; results currently total between

rental revenues comparable Our year. the quarter following revenues quarter. the level reflects second third services at to quarter, slightly the rental-related outlook for the the up of final a expectations modular Modular from

seasonality. busier seasonally Overall We performance expect in and quarter revenues, third third the quarter. levels, portable projects fourth at market demand the sales fewer and quarter. reflecting quarter the compared down Modular third TRS slightly storage from below softness site-related services to

Total $XX.X to of Interest expenses excluding to McGrath merger selling approximately quarter. million. transaction, administrative from sequentially third related the and the million expense expenses, $XX up

year. execution capital the businesses, on solid process footing. from summary, of committed building Despite value McGrath a focus, merger and solid financial market is and disciplined to conditions sound on shareholder for end for consistent strong of fully We In execution. long-term through focused and remain challenging year-to-date delivered strategic allocation demand we X are we remainder our the the results, have distractions

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

Operator

Schneeberger Instructions] go with first Oppenheimer. [Operator to We'll Scott

Scott Schneeberger

start in I'm A and few Modular commercial education. markets, going with the questions. to Mobile end

and you good of mentioned up? education stronger, give would Could us a both sounds sense rental, sense them I each you good. magnitude? a it magnitude You up the were bit in give is of but imagine us of a of much how is the can

Joseph Hanna

balanced Sure. both as as big those far There quarter. for Scott, those was divergence the actually, not there -- it pretty segments a how performed. was

think education I was commercial up XX% up quarter. the for and was X%

So pretty balanced.

Keith E. Pratt

That is correct.

Scott Schneeberger

with how demand like One, you're could the looks you then speak is charts strong this. very still anticipate continue getting when do deck, regard volume And price guess the we pricing. And in split? the in It questions volume sounds next to to we pricing was Great. solid. X into that? It year? price environment that to there's versus I so strong the saw

Joseph Hanna

say up. say Keith are a tailwind we Yes. answer the -- and there. can would part, nice have I I'll I first -- would we follow

Our us, pricing paid for efforts next and dynamic we will into go that same year. have anticipate off

Keith E. Pratt

pricing healthy. also Yes. as remains We've Scott, overall to services add contract. price you in additional of hard, to working know, just terms in volume, been

unit So there. we're progress revenue helps the with per that statistics on rent, on so making

rent slightly churn assets published equipment quarter as there You'll introduce more compared up the newer and increased it that, that were see we on that year fleet a value third are on to our statistics of Having down rent year-over-year. expensive. of X%. is said earlier, about in some actually we Units the dynamic the was a for

we So there's some third moving lot in are a mix a saw of quarter. there, lot of but that the as the well, parts those issues dynamics of

Scott Schneeberger

seeing deliveries on following classrooms quoting But time the for quiet is a however type move just your comment? we'll of realize until trends you this year-over-year to on get you to how But of there? year and what or also activity for the that, probably basis and -- I Keith, and are your to care then quarter the first commercial modulars. maybe there you another segment.

Joseph Hanna

that in resulting of actually those opportunities some quote addition Scott, easily were Yes, very the and by in up of was talking But quarter. -- double-digit Vesta. quotes the I'm from volumes there. influenced range nicely very we're the

the And so we were so year very remained virtually encouraged entire and that has far. strong

Scott Schneeberger

fourth question, Storage, said a answer quoting you Portable expected about portable little the in could of you quarter, relative deliveries? guide, versus bit specifically, of the third lot in the some cyclically please, you more it, others Could I just Is to X down maybe of on industry. quarter. know either Over you I that. that a don't do now And trend. be quarter something and on Appreciate Great. to obviously, speak just pressured. it seasonal? seasonal missed if But to the same kind you Keith, fourth despite

Keith E. Pratt

Yes.

Storage Scott. reflects we've QX. comment, we last of disappointing. as your to point, the Portable gone It's pressures. difficult we demand if year, the went QX those at this with chart look there. start revenues to just rental Yes, actually and at see around to don't demand It down very QX this any seen conditions plot change And you Just a they've

lower part than So we performance lower that QX. expect quarter most quarter fourth overall and of third we to rental will think the business, the would the be likely revenues of see than therefore,

the We're So detail. first that's going into comment. sort of percentage not all the necessarily

were comments of reduction at similar in the a If difficult we reductions QX. some of consistent QX, you demand I made, think, quote All in look rental environment. at in similarly And the shipments. bookings, the to the end saw in reductions with we drop revenues in opportunities, a metrics

difficult and what So we experienced. definitely conditions

Scott Schneeberger

X And more segment. that in just

environment? is any topic. just you said, pricing everything elaboration Given on how that the Just

Joseph Hanna

much Yes. Pricing we've had worked has really possible. -- slightly, to we've to as hold but reduce pricing our as

And we so a Scott. -- haven't haven't deterioration there, I significant seen

Scott Schneeberger

and to of you what be then XG? of, regard downturns on And the it, you prolonged past a for this could And in would Joe, with this to compare kind in semiconductors question has then speak you Could the last TRS, One, the if pretty duration questions. speak standard guess, how segment if I you're to downturn. been seeing possible? cyclical you, contrast

Joseph Hanna

Sure.

the doing like than seeing the and in business on slowness was and the work had with the -- the in earlier business. things bit. are wireless mostly service seeing we that, that tower anticipated. first part But and As computer less in providers seen of we part the reported that that spread now a weakness business, has year, had of of is and semiconductor the site, we're semiconductor, we're actually we just It that's out that

Wired requirements that and things is which supporting for hand, like actually data has been other bandwidth the the strong. communications all on of very centers

business. longer X about we've in address seen. that we're your kind different downturn So has mixes typically this longevity, of question seeing a To been than

And it so turn. We we'd like will turn. it think to

One things worthy in of business band. in I is narrow is performing quarter-over-quarter basis, a of sequential that notable business think mentioning that very the the has been from a the

So we really a there deterioration year as progresses. seen the haven't

I have have us. have a now that and in ahead things kind we right hope leveled where to So a we're of situation upside out that of

Scott Schneeberger

other last just cash $XXX expenses post post then inflow. it one the you the and Keith, for quantified on And taxes. your on call million is as legal me and

across is think million was I to business? be that it applied $XXX going leftover. the How

Keith E. Pratt

And just expand want upon Scott. I comment. to Sure, your

disclosed the and if $XXX got regarding it termination we quarter fourth the back at expenses had contribution with we first year. all journey that more and entire the And of us quarter quarter in of But expense you this right process reverse recall, the we began $XX related of in to said broadly we and additional expenses, fee. million approximately caused in transaction million transaction-related go what to second the quarter. look may the You're the incur results then you million to the that absolutely incur third way we expenses. to when back Really, $X

rate the the much the number million. million take sort we you then are tax and to If proceeds to closer $XX gain McGrath $XXX that really, apply a of net against of that had,

at that comment. the first look like of terms terminated the the that's So with impact said about the full look quarter. when was journey right McGrath to the I Everything at on in we it on economic third transaction. overall we've been you

the a of couple terms we of with do money, what comments. In

in landscape allocation. first our just areas a with little the funds long look shares. really, a have And normal flexibility capital think at more We bit the and the our allocation I in assessing If options. ago, slightly terms periodically, it us thing all choices. then gives to that keep complement of look dividends. the opportunities we're at look and doing We the in business we look we're investment is look organic routinely to record mind we our the track shareholder those a our we got business, over at our for increasing month across Obviously, can and we organically. business. dividends the We start will M&A repurchase in what with capital

areas pay the benefit debt, of allocated did we allocation what those over that at any near of the go we'll But capital as down the to term. wise choices capital excess to is and not we to the those at we So areas immediately looking that's try in normal of quarter. term shareholder long and is that be make will forward, end the used one third

Scott Schneeberger

life now of that Great. And complete. over the the your I clarifying WillScot with endeavor appreciate

that. to that the question quarter? of final was million into anticipate trickle Or that $XX in you some to might fourth And Are that be as incur a related there your third the counted quarter? just all So on net? done costs

Keith E. Pratt

believe, Substantially been all this incurred point. Yes. have the costs, at we

Operator

will next to We move with Mark Riddick Sidoti.

Marc Riddick

little at take I commentary follow us up around how bit quarter? to additional could taken, we and sort what about already I did if a Or magnitude what the timing think little talk I and and -- debt -- appreciate the of the wanted wonder place. about a all just maybe commentary you there. the to very from XQ to wanted reduction was reduction we're provided. I of guess, of on give the you've the XQ looking that end and at I the debt the the very should end

Keith E. Pratt

Yes.

a merger the proceeds in per promptly XX. used few announced We on as funds sheet. the WillScot, down third after we net the And is quarter, I merger the the mentioned, that that agreement we pay to So the process received and balance termination came really of on the from just September and announcement. debt reflected days the in

quarter, we that net are So if of the that's third the at look of of you end where at really all activity.

details, into that tens much flows. look item the lower we a But quarter higher rental only There'll fourth The where of be some in CapEx cash the will quarter we is higher taxes fourth cash millions if you is few quarter. typically, a expenditure the and generally have have there. also

of look at would year-end, going want So fourth you saw and the sort of quarter we to what to QX. levels comparable to end debt the for they're be ahead and I at if say look

Marc Riddick

acquisition of thought nature. have things levels And maybe we sort thinking was sidelines How Okay. so looked should pipeline, the been of the then that forward? maybe potential guys little maybe ramping ranges a up of brings on at you which reiteration that leverage how general the guys sort long-term this to of just process. me could a you of of -- And during process, and about of you comfort that sort be going talk and then about things of bit on have

and opportunities those again. if maybe start the to So little wonder doing that bit talk could opportunity you about a

Keith E. Pratt

terms our of the let a leverage, in Sure. we the cap think just with X.XX. quarter ended have broader of about X.XX. we maybe in work. at But how Joe comment on mind I'll agreements, And loan M&A Keep we

at business we very of that opportunities the Xs. pull look And one just at and view, leverage comfortable in a M&A from running the the weigh any strategic we again, allocation. So initiatives look the It's or we other sporadic more extremely to big in as we're on nature. of are as that factors comfortable. capital we when We're point trigger

fact financial exit But QX. footing we've speaks we of end process with to comfortable It a the leverage is very this as company at really on been that sound the very the through.

Joseph Hanna

Marc, of on of I We're Yes. can kind comment strategy. process our updating there. the in our priorities M&A

Portable grow However, a option that do as are newer be either not build a out Modular in us past, present in perhaps the we M&A. that the us that viable area. for acquisition any could and areas our area we if Storage areas will use focus in business as or and We view to continuing in that to help we grow have footprint an for

But that for have good be fair strategy the We prices. followed quality in And we guidelines the -- past. would look we forward. same exactly businesses will at moving what follow get that's our

Marc Riddick

sort during needs commentary course that the the talk if little sort be like there the employees relooking process. spend a anything then talk whether to year have may internal of as any want active through through technology want were bit might you're about far and be strength in you And places like process, or not that be of are about pick shoulder at Are and of as appreciate going around your wondering as what gone maybe having you there this or far areas internal your investment that you as to wise, of you this that looking to of any able it's or I could up forward? that? we that if a areas been should at everything culture sort sort bit about you'd any hiring little the I thinking I was Excellent. may sort the and of

Joseph Hanna

Sure.

on nothing there of really are the start hiring significant those. in lost put in that had of process. operational that a across the we and agreement, staff or that sales But And had we're -- We because positions are some we decrease varies haven't for. we some merger business, all going we'll to some folks at positions the that the delay positions, during essentially -- turnover had number

we're it's operating not deficit like a And from so there.

so to other put projects estate. delayed in report in significant And IT terms and at I again, this perhaps on some that think investments make, but those slower We time. path we investments a we some of going we'll real initiatives nothing get

Keith E. Pratt

help in just Marc, the to quarter remarks the quarter than made regarding of year. comments with SG&A the in I the one this you And third that prepared higher fourth being of

think period achieve hiring If make there's lot pending to of actually more in or hiring, it's like a you do hiring difficult where a things a acquisition.

year So think we if positions the turnover. we support course you would some business were normal the few And to had to year, addition, we over of a where any of January, in liked we growth. have have hire in like in

here. of in And charting we're running independent positions we're effect very and with the we're them net organization fill at we're not it's that easier company, filling. you because If not open that, look actively future clearly an the to our

for be expense side pent-up in there's all with on to increase the been So little that the a and normal area, that, some do that running will demand reflected bit of business.

Operator

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

Now let for call the me closing Hanna Mr. over turn back to any remarks.

Joseph Hanna

I'd the late interest speaking to in your thank review for with again like you on results. fourth to everyone for forward and call today look company. to We us February our our quarter joining continuing in

Operator

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

disconnect. now You may

McGrath RentCorp (MGRC) 24 Oct 242024 Q3 Earnings call transcript