McGrath Announces Results for Second Quarter 2024

July 25, 2024 at 16:01 PM EDT

McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues from continuing operations for the quarter ended June 30, 2024 of $212.6 million, an increase of 5% compared to the second quarter of 2023. The Company reported net income from continuing operations of $20.6 million, or $0.84 per diluted share, for the second quarter of 2024, compared to net income from continuing operations of $28.0 million, or $1.14 per diluted share, for the second quarter of 2023.

SECOND QUARTER 2024 YEAR-OVER-YEAR COMPANY HIGHLIGHTS (FROM CONTINUING OPERATIONS):

Rental revenues increased 3% to $121.2 million.
Total revenues increased 5% to $212.6 million.
Selling and administrative expenses increased 31% to $61.4 million primarily due to $12.4 million in transaction costs attributable to the pending merger with WillScot Mobile Mini, which decreased 2024 net income from continuing operations by $0.36 per diluted share.
Adjusted EBITDA¹ increased 9% to $83.7 million.
Dividend rate of $0.475 per share for the second quarter 2024. On an annualized basis, this dividend represents a 1.7% yield on the July 24, 2024 close price of $111.63 per share.

Joe Hanna, President and CEO of McGrath, made the following comments:

“We were pleased with our second quarter results. The 5% increase in companywide revenues was driven by higher rental operations and sales revenues.

Our modular business was the highlight for the quarter, with 10% rental revenue growth. Rental revenues grew across our commercial and education customer bases. We maintained our focus on pricing optimization, rental fleet utilization, and value-added services for our customers. Growth initiatives for Mobile Modular Plus, Site Related Services and new modular equipment sales all continued to show progress.

Portable storage demand conditions were weaker than a year ago, resulting in 4% lower rental revenues for the quarter, compared to a year ago. The weaker demand was primarily a result of lower commercial construction project activity.

TRS-RenTelco experienced continued demand challenges, resulting in 11% lower rental revenues for the quarter, compared to a year ago. During the quarter we maintained disciplined new equipment capital spending and made progress with reducing the fleet size to better align with demand conditions.

I appreciate the strong commitment from the McGrath employee team as we maintain our independent focus on disciplined execution during the pending WillScot Mobile Mini transaction."

DIVISION HIGHLIGHTS:

All comparisons presented below are for the quarter ended June 30, 2024 to the quarter ended June 30, 2023 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2024, the Company’s Mobile Modular division reported Adjusted EBITDA of $53.4 million, an increase of $8.9 million, or 20%, when compared to the same quarter in 2023.

Rental revenues increased 10% to $78.0 million, depreciation expense increased 6% to $10.0 million, and other direct costs decreased 9% to $21.3 million, which resulted in an increase in gross profit on rental revenues of 23% to $46.8 million.
Rental related services revenues increased 4% to $28.9 million, primarily attributable to higher delivery and pick-up activities and higher site related services, with associated gross profit decreasing 3% to $9.1 million.
Sales revenues decreased 6% to $35.9 million, primarily from lower new equipment sales. Gross margin on sales was 38% in 2024, compared to 31% in 2023, resulting in a 17% increase in gross profit on sales revenues to $13.8 million. The increase in gross margin on sales was primarily attributed to a higher mix of used versus new sales during the quarter.
Selling and administrative expenses increased $11.2 million to $42.3 million. Included within selling and administrative expenses was $11.3 million higher allocated corporate costs, which included $9.0 million in allocated transaction costs attributed to the pending merger with WillScot Mobile Mini.

PORTABLE STORAGE

For the second quarter of 2024, the Company’s Portable Storage division reported Adjusted EBITDA of $11.0 million, a decrease of $1.3 million, or 11%, when compared to the same quarter in 2023.

Rental revenues decreased 4% to $17.8 million, depreciation expense increased 15% to $1.0 million, and other direct costs decreased 10% to $1.5 million, which resulted in a decrease in gross profit on rental revenues of 4% to $15.3 million.
Rental related services revenues were $4.6 million and gross profit on rental related services revenues was $0.2 million, which was down from $0.7 million in the second quarter of 2023.
Sales revenues increased $0.2 million to $1.3 million, primarily from higher used equipment sales. Gross margin on sales was 43% compared to 38% in 2023, resulting in a $0.1 million increase in gross profit on sales revenues to $0.6 million.
Selling and administrative expenses increased $1.7 million to $8.9 million, primarily due to higher allocated corporate expenses, which included $1.4 million in allocated transaction costs attributed to the pending WillScot Mobile Mini merger.

TRS-RENTELCO

For the second quarter of 2024, the Company’s TRS-RenTelco division reported Adjusted EBITDA of $18.0 million, a decrease of 16%, when compared to the same quarter in 2023.

Rental revenues decreased 11% to $25.3 million, depreciation expense decreased 9%, and other direct costs decreased 6%, resulting in a 16% decrease in gross profit on rental revenues to $9.0 million. The rental revenue decrease was primarily due to continued weakness in end markets, resulting in lower average rental equipment on rent compared to the prior year.
Sales revenues decreased 22% to $5.8 million and gross profit on sales revenues decreased 23% to $3.1 million.
Selling and administrative expenses increased 19%, to $8.5 million, primarily due to higher allocated corporate expenses, which included $1.9 million in transaction costs attributed to the pending merger with WillScot Mobile Mini.

ABOUT MCGRATH:

McGrath RentCorp (Nasdaq: MGRC) is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies.

McGrath is headquartered in Livermore, California. Additional information about McGrath and its businesses is available at mgrc.com and investors.mgrc.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 July 1, 2024, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on July 25, 2024 to discuss the second quarter 2024 results. To participate in the teleconference, dial 1-800-245-3047 (in the U.S.), or 1-203-518-9765 (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 1-800-723-0488 (in the U.S.), or 1-402-220-2651 (outside the U.S.). 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.

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2024		2023		2024			2023
Revenues
Rental	$	121,176	$	117,840	$	241,508		$	228,087
Rental related services		34,358		33,857		63,938			60,989
Rental operations		155,534		151,697		305,446			289,076
Sales		54,414		47,801		89,483			71,461
Other		2,663		3,532		5,509			6,211
Total revenues		212,611		203,030		400,438			366,748
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		22,165		22,597		44,531			44,430
Rental related services		24,990		23,825		45,776			43,093
Other		27,920		30,560		56,930			61,695
Total direct costs of rental operations		75,075		76,982		147,237			149,218
Costs of sales		34,121		31,438		56,518			45,553
Total costs of revenues		109,196		108,420		203,755			194,771
Gross profit		103,415		94,610		196,683			171,977
Expenses:
Selling and administrative expenses		61,370		47,026		121,188			104,524
Other income, net		—		—		(9,281	)		—
Income from operations		42,045		47,584		84,776			67,453
Interest expense		13,037		9,945		25,741			17,409
Foreign currency exchange loss (gain)		31		18		163			(208	)
Income from continuing operations before provision for income taxes		28,977		37,621		58,872			50,252
Provision for income taxes from continuing operations		8,359		9,669		15,406			10,782
Income from continuing operations		20,618		27,952		43,466			39,470

Discontinued operations:
Income from discontinued operations before provision for income taxes		—		—		—			1,709
Provision for income taxes from discontinued operations		—		—		—			453
Gain on sale of discontinued operations, net of tax		—		2,630		—			61,513
Income from discontinued operations		—		2,630		—			62,769

Net income	$	20,618	$	30,582	$	43,466		$	102,239

Earnings per share from continuing operations:
Basic	$	0.84	$	1.14	$	1.77		$	1.61
Diluted	$	0.84	$	1.14	$	1.77		$	1.61
Earnings per share from discontinued operations:
Basic	$	—	$	0.11	$	—		$	2.57
Diluted	$	—	$	0.11	$	—		$	2.56
Earnings per share:
Basic	$	0.84	$	1.25	$	1.77		$	4.18
Diluted	$	0.84	$	1.25	$	1.77		$	4.17
Shares used in per share calculation:
Basic		24,549		24,479		24,531			24,448
Diluted		24,560		24,512		24,562			24,527
Cash dividends declared per share	$	0.475	$	0.465	$	0.950		$	0.930

MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
	June 30,			December 31,
(in thousands)	2024			2023
Assets
Cash	$	9,396		$	877
Accounts receivable, net of allowance for credit losses of $2,866 at June 30, 2024 and $2,801 at December 31, 2023		217,379			227,368
Rental equipment, at cost:
Relocatable modular buildings		1,398,475			1,291,093
Portable storage containers		242,107			236,123
Electronic test equipment		368,324			377,587
		2,008,906			1,904,803
Less: accumulated depreciation		(601,584	)		(575,480	)
Rental equipment, net		1,407,322			1,329,323
Property, plant and equipment, net		191,801			169,114
Inventories		28,213			15,425
Prepaid expenses and other assets		81,547			87,364
Intangible assets, net		59,453			64,588
Goodwill		323,224			323,224
Total assets	$	2,318,335		$	2,217,283
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	794,271		$	762,975
Accounts payable		73,132			58,760
Accrued liabilities		108,928			108,763
Deferred income		134,624			111,428
Deferred income taxes, net		253,147			241,555
Total liabilities		1,364,102			1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,550 shares as of June 30, 2024 and 24,496 shares as of December 31, 2023		111,596			111,122
Retained earnings		842,675			822,796
Accumulated other comprehensive loss		(38	)		(116	)
Total shareholders’ equity		954,233			933,802
Total liabilities and shareholders’ equity	$	2,318,335		$	2,217,283

MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	Six Months Ended June 30,
(in thousands)	2024			2023
Cash Flows from Operating Activities:
Net income	$	43,466		$	102,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		54,131			54,958
Deferred income taxes		11,592			(39,486	)
Provision for credit losses		873			1,400
Share-based compensation		4,556			3,382
Gain on sale of property, plant and equipment		(9,281	)		—
Gain on sale of discontinued operations		—			(61,513	)
Gain on sale of used rental equipment		(15,537	)		(14,250	)
Foreign currency exchange loss (gain)		163			(208	)
Amortization of debt issuance costs		4			4
Change in:
Accounts receivable		9,116			(1,116	)
Inventories		(12,788	)		(6,594	)
Prepaid expenses and other assets		5,817			(1,910	)
Accounts payable		23,155			19,209
Accrued liabilities		166			6,046
Deferred income		23,196			9,290
Net cash provided by operating activities		138,629			71,451
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations		—			268,012
Purchases of rental equipment		(145,345	)		(128,088	)
Purchases of property, plant and equipment		(30,125	)		(11,229	)
Cash paid for acquisition of businesses		—			(456,312	)
Proceeds from sales of used rental equipment		29,334			27,410
Proceeds from sales of property, plant and equipment		12,251			—
Net cash used in investing activities		(133,885	)		(300,207	)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit		(43,708	)		258,885
Borrowings under term note agreement		75,000			—
Taxes paid related to net share settlement of stock awards		(4,082	)		(6,100	)
Payment of dividends		(23,435	)		(22,782	)
Net cash provided by financing activities		3,775			230,003
Effect of foreign currency exchange rate changes on cash		—			1
Net increase in cash		8,519			1,248
Cash balance, beginning of period		877			957
Cash balance, end of period	$	9,396		$	2,205
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period	$	26,394		$	16,802
Net income taxes (refunded) paid, during the period	$	(4,599	)	$	6,931
Dividends accrued during the period, not yet paid	$	12,150		$	11,937
Rental equipment acquisitions, not yet paid	$	7,634		$	7,612

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2024
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex		Consolidated
Revenues
Rental	$	78,039		$	17,823		$	25,314		$	—	$	121,176
Rental related services		28,920			4,640			798			—		34,358
Rental operations		106,959			22,463			26,112			—		155,534
Sales		35,930			1,266			5,845			11,373		54,414
Other		1,657			293			713			—		2,663
Total revenues		144,546			24,022			32,670			11,373		212,611

Costs and Expenses
Direct costs of rental operations:
Depreciation		9,995			1,001			11,169			—		22,165
Rental related services		19,828			4,476			686			—		24,990
Other		21,265			1,527			5,128			—		27,920
Total direct costs of rental operations		51,088			7,004			16,983			—		75,075
Costs of sales		22,172			716			2,716			8,517		34,121
Total costs of revenues		73,260			7,720			19,699			8,517		109,196

Gross Profit
Rental		46,779			15,295			9,017			—		71,091
Rental related services		9,092			164			112			—		9,368
Rental operations		55,871			15,459			9,129			—		80,459
Sales		13,758			550			3,129			2,856		20,293
Other		1,657			293			713			—		2,663
Total gross profit		71,286			16,302			12,971			2,856		103,415
Selling and administrative expenses		42,267			8,874			8,515			1,714		61,370
Income from operations	$	29,019		$	7,428		$	4,456		$	1,142		42,045
Interest expense													(13,037	)
Foreign currency exchange loss													(31	)
Provision for income taxes													(8,359	)
Net income												$	20,618

Other Information
Adjusted EBITDA ¹	$	53,418		$	11,015		$	18,001		$	1,238	$	83,672
Average rental equipment ²	$	1,203,415		$	226,754		$	367,322
Average monthly total yield ³		2.16	%		2.62	%		2.28	%
Average utilization ⁴		78.4	%		66.1	%		56.5	%
Average monthly rental rate ⁵		2.76	%		3.96	%		4.07	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net.
Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended June 30, 2023
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex			Consolidated
Revenues
Rental	$	70,770		$	18,487		$	28,583		$	—		$	117,840
Rental related services		27,836			5,354			667			—			33,857
Rental operations		98,606			23,841			29,250			—			151,697
Sales		38,248			1,109			7,521			923			47,801
Other		1,983			475			1,074			—			3,532
Total revenues		138,838			25,424			37,845			923			203,030

Costs and Expenses
Direct costs of rental operations:
Depreciation		9,415			870			12,312			—			22,597
Rental related services		18,443			4,641			741			—			23,825
Other		23,377			1,705			5,478			—			30,560
Total direct costs of rental operations		51,236			7,215			18,531			—			76,982
Costs of sales		26,517			690			3,431			800			31,438
Total costs of revenues		77,753			7,905			21,962			800			108,420

Gross Profit
Rental		37,977			15,913			10,793			—			64,683
Rental related services		9,393			713			(74	)		—			10,032
Rental operations		47,370			16,626			10,719			—			74,715
Sales		11,731			419			4,090			123			16,363
Other		1,983			475			1,074			—			3,532
Total gross profit		61,084			17,520			15,883			123			94,610
Selling and administrative expenses		31,092			7,204			7,126			1,604			47,026
Income (loss) from operations	$	29,993		$	10,315		$	8,757		$	(1,481	)		47,584
Interest expense														(9,945	)
Foreign currency exchange loss														(18	)
Provision for income taxes														(9,669	)
Net income													$	27,952

Other Information
Adjusted EBITDA ¹	$	44,516		$	12,308		$	21,538		$	(1,394	)	$	76,968
Average rental equipment ²	$	1,117,141		$	204,627		$	393,891
Average monthly total yield ³		2.11	%		3.01	%		2.40	%
Average utilization ⁴		79.3	%		78.2	%		58.2	%
Average monthly rental rate ⁵		2.66	%		3.85	%		4.16	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net.
Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Six months ended June 30, 2024
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex			Consolidated
Revenues
Rental	$	154,535		$	36,230		$	50,743		$	—		$	241,508
Rental related services		53,053			9,363			1,522			—			63,938
Rental operations		207,588			45,593			52,265			—			305,446
Sales		61,256			2,478			12,657			13,092			89,483
Other		3,287			711			1,511			—			5,509
Total revenues		272,131			48,782			66,433			13,092			400,438

Costs and Expenses
Direct costs of rental operations:
Depreciation		19,870			1,965			22,696			—			44,531
Rental related services		35,608			8,932			1,236			—			45,776
Other		43,938			2,995			9,997			—			56,930
Total direct costs of rental operations		99,416			13,892			33,929			—			147,237
Costs of sales		39,584			1,484			5,658			9,791			56,517
Total costs of revenues		139,000			15,377			39,587			9,791			203,755

Gross Profit
Rental		90,727			31,270			18,050			—			140,047
Rental related services		17,445			431			286			—			18,162
Rental operations		108,172			31,701			18,336			—			158,209
Sales		21,672			993			6,999			3,301			32,965
Other		3,287			711			1,511			—			5,509
Total gross profit		133,131			33,405			26,846			3,301			196,683
Selling and administrative expenses		82,354			17,885			17,433			3,517			121,189
Other income, net		(6,220	)		(1,319	)		(1,742	)		—			(9,281	)
Income (loss) from operations	$	56,999		$	16,840		$	11,155		$	(216	)		84,778
Interest expense														(25,741	)
Foreign currency exchange loss														(163	)
Provision for income taxes														(15,406	)
Net income													$	43,468

Other Information
Adjusted EBITDA ¹	$	96,745		$	22,538		$	36,481		$	(24	)	$	155,740
Average rental equipment ²	$	1,188,828		$	225,025		$	369,756
Average monthly total yield ³		2.17	%		2.68	%		2.27	%
Average utilization ⁴		78.6	%		67.8	%		56.4	%
Average monthly rental rate ⁵		2.76	%		3.96	%		4.05	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net.
Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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.

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Six months ended June 30, 2023
(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS-RenTelco			Enviroplex			Adler Tanks (Discontinued)		Consolidated
Revenues
Rental	$	134,826		$	35,544		$	57,717		$	—		$	6,520	$	234,607
Rental related services		49,370			10,072			1,547			—			2,584		63,573
Rental operations		184,196			45,616			59,264			—			9,104		298,180
Sales		55,215			1,747			12,635			1,864			269		71,730
Other		3,342			803			2,066			—			65		6,276
Total revenues		242,753			48,166			73,965			1,864			9,438		376,186

Costs and Expenses
Direct costs of rental operations:
Depreciation		18,072			1,657			24,701			—			1,325		45,755
Rental related services		32,669			9,022			1,402			—			2,020		45,113
Other		47,504			3,487			10,703			—			1,270		62,965
Total direct costs of rental operations		98,246			14,166			36,806			—			4,614		153,832
Costs of sales		37,263			1,018			5,656			1,616			159		45,712
Total costs of revenues		135,509			15,184			42,462			1,616			4,773		199,544

Gross Profit
Rental		69,249			30,400			22,313			—			3,926		125,888
Rental related services		16,701			1,050			145			—			564		18,460
Rental operations		85,950			31,450			22,458			—			4,490		144,348
Sales		17,952			729			6,979			248			110		26,018
Other		3,342			803			2,066			—			65		6,276
Total gross profit		107,244			32,982			31,503			248			4,665		176,642
Selling and administrative expenses		69,548			15,262			16,577			3,137			2,582		107,106
Income (loss) from operations	$	37,696		$	17,720		$	14,926		$	(2,889	)	$	2,083		69,536
Interest expense																(17,783	)
Foreign currency exchange gain																208
Provision for income taxes																(11,235	)
Net income															$	40,726

Other Information
Adjusted EBITDA ¹	$	76,941		$	22,328		$	42,173		$	(2,724	)	$	3,682	$	142,400
Average rental equipment ²	$	1,044,711		$	196,577		$	395,049
Average monthly total yield ³		2.15	%		3.01	%		2.42	%
Average utilization ⁴		79.4	%		79.4	%		58.7	%
Average monthly rental rate ⁵		2.71	%		3.80	%		4.15	%

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net.
Average rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.
Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
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.
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.

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and gains on property sales. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges and non-recurring transactions, including share-based compensation, transaction costs and gains on property sales is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non−GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges, transaction costs and gains on property sales. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure, as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Reconciliation of Income from Continuing Operations to Adjusted EBITDA

(dollar amounts in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						Twelve Months Ended June 30,
	2024			2023			2024			2023			2024			2023
Income from continuing operations	$	20,618		$	27,952		$	43,466		$	39,470		$	115,848		$	101,577
Provision for income taxes from continuing operations		8,359			9,669			15,406			10,782			42,234			29,654
Interest expense		13,037			9,945			25,741			17,409			48,892			24,937
Depreciation and amortization		26,944			27,368			54,131			53,501			108,548			100,650
EBITDA		68,958			74,934			138,744			121,162			315,522			256,818
Share-based compensation		2,347			1,889			4,556			3,264			9,449			7,228
Transaction costs ³		12,367			145			21,721			14,292			23,306			18,345
Other income, net ⁴		—			—			(9,281	)		—			(12,899	)		—
Adjusted EBITDA ¹	$	83,672		$	76,968		$	155,740		$	138,718		$	335,378		$	282,391
Adjusted EBITDA margin ²		39	%		38	%		38	%		38	%		38	%		39	%

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						Twelve Months Ended June 30,
	2024			2023			2024			2023			2024			2023
Adjusted EBITDA ¹	$	83,672		$	76,968		$	155,740		$	142,400		$	335,378		$	308,256
Interest paid		(12,210	)		(8,985	)		(26,394	)		(16,802	)		(48,195	)		(25,756	)
Income taxes paid, net of refunds received		5,078			(6,518	)		4,599			(6,931	)		(80,035	)		(17,215	)
Gain on sale of used rental equipment		(8,182	)		(11,161	)		(15,537	)		(14,250	)		(32,929	)		(36,136	)
Foreign currency exchange loss		31			18			163			(208	)		61			2
Amortization of debt issuance costs		2			2			4			4			8			11
Change in certain assets and liabilities:
Accounts receivable, net		(5,429	)		(16,669	)		9,989			284			(25,438	)		(22,410	)
Prepaid expenses and other assets		519			(1,159	)		5,817			(8,504	)		(15,005	)		(14,133	)
Accounts payable and other liabilities		3,800			(2,828	)		(18,948	)		(33,832	)		(2,942	)		(22,935	)
Deferred income		11,928			6,072			23,196			9,290			28,000			14,156
Net cash provided by operating activities	$	79,209		$	35,740		$	138,629		$	71,451		$	158,903		$	183,840

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs and other income, net. Adjusted EBITDA for the six months ended June 30, 2023, excludes the gain on sale of discontinued operations from the divestiture of Adler Tanks. Total Adjusted EBITDA attributed to discontinued operations for the six month period ended June 30, 2023 was $3,682.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.
Other income, net consists of net gains on property, plant and equipment sales that are infrequent in nature and excluded from Adjusted EBITDA.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724863913/en/

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