McGrath RentCorp Announces Results for First Quarter 2020
LIVERMORE, Calif., April 29, 2020 (GLOBE NEWSWIRE) — McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended March 31, 2020 of $129.5 million, an increase of 6%, compared to the first quarter of 2019. The Company reported net income of $20.2 million, or $0.81 per diluted share, for the first quarter of 2020, compared to net income of $18.4 million, or $0.75 per diluted share, for the first quarter of 2019.
FIRST QUARTER 2020 COMPANY HIGHLIGHTS:Income from operations increased 9% year-over-year to $29.7 million.Rental revenues increased 8% year-over-year to $89.5 million.Adjusted EBITDA1 increased 10% year-over-year to $54.9 million. Dividend rate increased 12% year-over-year to $0.42 per share for the first quarter of 2020. On an annualized basis, this dividend represents a 3.0% yield on the April 28, 2020 close price of $55.69 per share.Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:“Since our last quarterly update in late February, we have seen a significant shift in our operating environment. We have transitioned from the generally positive and stable conditions for our businesses, which prevailed for the majority of the first quarter, to current conditions of higher uncertainty, disruption and more difficult operating environment overall related to the COVID-19 pandemic. In the rapidly changing operating environment, we have moved quickly to keep our employees safe, support our customers as they continue to operate, and protect long-term stakeholder value. The health and safety of our team members has been paramount. We have taken significant steps to ensure we are operating safely, consistent with national and local guidelines, while maintaining business continuity across the country for our customer-facing and production team members, as well as support staff.We were pleased with our start to 2020, completing a successful first quarter of top and bottom line growth. Our first quarter companywide rental revenues grew 8% and operating income grew 9% as we kicked off the year with good business momentum. Standout performers were Mobile Modular with continued strength in both classroom and commercial rentals and TRS-RenTelco with growth in both general purpose and communications customer segments. We saw fewer rental opportunities at Adler compared to a year ago, as demand conditions continued to be soft. Entering the second quarter, we have experienced varying degrees of weakening demand across our business segments and geographic regions as customers adjust to COVID-19 conditions. Due to the current circumstances, our ability to see into the future is very limited at this time, and the prolonged impact of COVID-19 conditions on the US economy and our business is unknown. We have an engaged and dedicated employee team, many long-term customer relationships, and a solid financial foundation, all of which I believe will help us successfully navigate through the current uncertainty until more normal conditions return.”DIVISION HIGHLIGHTS:All comparisons presented below are for the quarter ended March 31, 2020 to the quarter ended March 31, 2019 unless otherwise indicated.MOBILE MODULARFor the first quarter of 2020, the Company’s Mobile Modular division reported income from operations of $19.4 million, an increase of $3.9 million, or 25%. Rental revenues increased 12% to $47.4 million, depreciation expense increased 5% to $5.7 million and other direct costs were comparable at $12.6 million, which resulted in an increase in gross profit on rental revenues of 20% to $29.1 million. The rental revenue growth came from both commercial and education markets. Rental related services revenues increased 25% to $18.1 million, with associated gross profit increasing 35% to $4.8 million. Sales revenues decreased 9% to $7.3 million and gross margin on sales increased to 35% from 34%, resulting in a 7% decrease in gross profit on sales revenues to $2.6 million. Selling and administrative expenses increased 13% to $17.4 million, primarily due to higher allocated corporate expenses and increased headcount, salaries and employee benefit costs.TRS-RENTELCOFor the first quarter of 2020, the Company’s TRS-RenTelco division reported income from operations of $8.4 million, an increase of $0.7 million, or 9%. Rental revenues increased 17% to $27.5 million, depreciation expense increased 24% to $11.8 million and other direct costs increased 7% to $4.4 million, which resulted in a 13% increase in gross profit on rental revenues to $11.3 million. The rental revenue growth came from both general purpose and communications test equipment market. Sales revenues decreased 11% to $5.1 million. Gross margin on sales was comparable at 52%, resulting in a 11% decrease in gross profit on sales revenues to $2.7 million. Selling and administrative expenses increased 7% to $6.4 million, primarily due to higher allocated corporate expenses.ADLER TANKSFor the first quarter of 2020, the Company’s Adler Tanks division reported income from operations of $2.7 million, a decrease of $1.7 million, or 38%. Rental revenues decreased 13% to $14.6 million, depreciation expense increased 3% to $4.1 million and other direct costs decreased 18% to $2.5 million, which resulted in a 19% decrease in gross profit on rental revenues to $8.0 million. The rental revenue decrease was across five of our six end markets. Rental related services revenues decreased 12% to $5.5 million, with gross profit on rental related services decreasing 13% to $1.3 million. Selling and administrative expenses decreased 4% to $6.8 million, primarily due to decreased allocated corporate expenses and decreased salaries and employee benefit costs.FINANCIAL OUTLOOK:Given the economic uncertainty and rapidly-evolving circumstances related to the COVID-19 pandemic, the company is withdrawing its previously issued 2020 guidance and is not providing an updated outlook at this time.
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