Company Announces 5% Dividend Increase

LIVERMORE, Calif.--(BUSINESS WIRE)-- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2021 of $175.9 million, an increase of 18%, compared to the fourth quarter of 2020. The Company reported net income of $28.4 million, or $1.16 per diluted share, for the fourth quarter of 2021, compared to net income of $31.2 million, or $1.27 per diluted share, for the fourth quarter of 2020.

Total revenues for the year ended December 31, 2021 increased to $616.8 million from $572.6 million in 2020, with adjusted EBITDA increasing $5.6 million, or 2%, to $246.6 million. Net income for the year ended December 31, 2021 was $89.7 million, or $3.66 per diluted share, compared to $102.0 million, or $4.16 per diluted share, in 2020.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.455 per share for the quarter ending March 31, 2022, an increase of $0.02, or 5%, over the prior year period. The cash dividend will be payable on April 29, 2022 to all shareholders of record on April 15, 2022. This marks 31 consecutive years the Company has increased its annual dividend.

FOURTH QUARTER 2021 COMPANY HIGHLIGHTS:

• Rental revenues increased 20% year-over-year to $106.1 million.
• Total revenues increased 18% year-over-year to $175.9 million.
• Adjusted EBITDA1 increased 12% year-over-year to $73.0 million.
• Dividend rate increased 4% year-over-year to $0.435 per share for the fourth quarter of 2021. On an annualized basis, this dividend represents a 2.4% yield on the February 22, 2022 close price of $72.98 per share.

Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:

“We were pleased with our fourth quarter results. Improved end market conditions in each of our three rental business segments enabled us to deliver a 20% increase in companywide rental revenues in the fourth quarter, compared to the prior year. Modular rental revenues grew 29%, with approximately three quarters of the growth attributable to our Design Space and Kitchens To Go acquisitions. Rental revenues at TRS-RenTelco and Adler Tanks grew 4% and 19%, respectively. We were also pleased with the high volume of modular new equipment sales during the quarter, as some previously delayed projects were completed by year end.

"2021 was a year of strategic growth investments, with particular emphasis on the modular acquisitions. We expanded our geographic coverage, added new customers and welcomed new team members. I am extremely grateful to our team members who worked tirelessly throughout 2021 to serve our customers and integrate our new acquisitions. With the major integration steps now complete we are very focused on revenue and profit growth, as reflected by our 12% adjusted EBITDA growth in the fourth quarter.

"We are encouraged by the positive rental demand trends since the start of the year. Year to date new order bookings at Mobile Modular are up significantly from a year ago. We are well positioned to continue growing this business as demand conditions continue to strengthen.

"Our strategic priorities for the next few years are centered on our modular business. We see significant opportunities to further expand our geographic coverage and to broaden the value we bring to customers with rental solutions, site related services and new modular equipment sales. As we demonstrated in 2021, we expect to utilize a disciplined combination of organic investments and acquisitions to deploy growth capital and accelerate these priorities. With an experienced leadership team, track record of execution, strong balance sheet and healthy free cash flow generation we are well positioned for long term growth.”

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2021 to the quarter ended December 31, 2020 unless otherwise indicated.

MOBILE MODULAR

The Company’s Mobile Modular division reported income from operations of $26.1 million, an increase of $3.6 million, or 16%, with Adjusted EBITDA increasing $8.4 million, or 28%, to $38.4 million. Rental revenues increased 29% to $61.5 million, depreciation expense increased 32% to $7.6 million and other direct costs increased 38% to $15.1 million, which resulted in an increase in gross profit on rental revenues of 26% to $38.7 million. The rental revenue increase reflects in part the new Design Space and Kitchens To Go customers that contributed approximately three quarters of the increase. Rental related services revenues increased 8% to $17.6 million, primarily attributable to services performed during the lease and increased delivery and return delivery revenues at Portable Storage, with associated gross profit increasing 9% to $5.0 million. Sales revenues increased 68% to $20.2 million, due to increased new and used equipment sales. Gross margin on sales was 33% compared to 27% in 2020, resulting in an increase in gross profit on sales revenues of $3.3 million. Selling and administrative expenses increased $8.2 million, or 50%, primarily due to increased employee salaries and benefit costs totaling $2.7 million, mostly from the addition of Design Space and Kitchens To Go employees, $2.4 million higher allocated corporate expenses and $1.7 million higher amortization of intangible assets associated with the Design Space and Kitchens To Go acquisitions.

TRS-RENTELCO

The Company’s TRS-RenTelco division reported income from operations of $9.8 million, a decrease of $1.1 million, or 10%, with Adjusted EBITDA decreasing $0.4 million, or 2%, to $22.3 million. Rental revenues increased 4% to $29.1 million, depreciation expense increased 5% to $11.9 million and other direct costs increased 12% to $4.9 million, which resulted in gross profit on rental revenues comparable to the prior year. Rental revenue increases were primarily from increased demand for general purpose equipment. Sales revenues decreased 13% to $7.6 million while gross margin on sales improved to 51% in 2021 from 47% in 2020, which together resulted in a 7% decrease in gross profit on sales revenues to $3.8 million. Selling and administrative expenses increased 11% to $6.8 million, primarily due to increased marketing and administrative expenses and higher allocated corporate expenses.

ADLER TANKS

The Company’s Adler Tanks division reported income from operations of $2.8 million, an increase of 29%, with Adjusted EBITDA increasing $0.8 million, or 12%, to $7.8 million. Rental revenues increased 19% to $15.5 million, as a result of broad based regional and end market demand. Depreciation expense was comparable to the prior year and other direct costs increased 47% to $3.4 million, which resulted in an increased gross profit on rental revenues of 21%, to $8.1 million. Rental related services revenues increased 10% to $5.9 million, with gross profit on rental related services decreasing 13%, to $1.1 million. Selling and administrative expenses increased 16% to $6.7 million primarily due to increased employee salaries and benefit costs and higher allocated corporate expenses.

FINANCIAL OUTLOOK:

For the full-year 2022, the Company expects:

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
2. Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release.

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.com
Modular Buildings – www.mobilemodular.com
Electronic Test Equipment – www.trsrentelco.com
Tanks and Boxes – www.adlertankrentals.com
Portable Storage – www.mobilemodularcontainers.com
School Facilities Manufacturing – www.enviroplex.com

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K, 10-Q and other SEC filings.

CONFERENCE CALL NOTE:

As previously announced in its press release of January 20, 2022, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2022 to discuss the fourth quarter 2021 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay will be available for 7 days following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.). The pass code for the conference call replay is 8842099. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company’s website at https://investors.mgrc.com/events-and-presentations.

FORWARD-LOOKING STATEMENTS:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s statements about the expectation to deploy more rental equipment capital and to expand the breadth of products and services to the Company’s customers, optimism about the overall positive rental demand trends, to further expand geographic coverage through the utilization of organic investments and acquisitions, and that the Company is positioned for long term growth, as well as the statements regarding the full year 2022 in the “Financial Outlook” section, are forward-looking.

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 including: the duration of the ongoing COVID-19 pandemic and its economic impact, the extent and length of the restrictions associated with COVID-19 pandemic, the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; our ability to successfully increase prices to offset cost increases; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.

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

1. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
3. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
4. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
2. Average rental equipment represents the cost of rental equipment, excluding accessory equipment. For Mobile Modular and Adler Tanks, Average rental equipment also excludes new equipment inventory.
3. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
4. Average utilization is calculated by dividing the average month end costs of rental equipment on rent by the average month end total costs of rental equipment.
5. Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent for the period.