8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 22, 2023

McGRATH RENTCORP

(Exact name of Registrant as Specified in Its Charter)

California	000-13292	94-2579843
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
5700 Las Positas Road
Livermore, California		94551-7800
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (925) 606-9200

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MGRC	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On February 22, 2023, McGrath RentCorp (the “Company”) announced via press release the Company’s results for its fourth quarter ended December 31, 2022. A copy of the Company’s press release is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are provided under Item 2.02 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission, and shall not be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press Release of McGrath RentCorp, dated February 22, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			McGRATH RENTCORP
Date:	February 22, 2023	By:	/s/ Keith E. Pratt
			Keith E. Pratt Executive Vice President and Chief Financial Officer

EX-99

Exhibit 99.1

 

Contact

Keith E. Pratt

EVP & Chief Financial Officer

925-606-9200

PRESS RELEASE

FOR RELEASE February 22, 2023

McGrath Announces Results for Fourth Quarter 2022

and Announces 32nd Annual Dividend Increase

Livermore, CA - February 22, 2023 – McGrath RentCorp (“McGrath” or the “Company”) (Nasdaq: MGRC), a leading business-to-business rental company in North America, today announced total revenues for the quarter ended December 31, 2022 of $210.9 million, an increase of 20%, compared to the fourth quarter of 2021. The Company reported net income of $39.6 million, or $1.62 per diluted share, for the fourth quarter of 2022, compared to net income of $28.4 million, or $1.16 per diluted share, for the fourth quarter of 2021.

Total revenues for the year ended December 31, 2022 increased to $733.8 million from $616.8 million in 2021, with adjusted EBITDA increasing $40.2 million, or 16%, to $288.9 million. Net income for the year ended December 31, 2022 was $115.1 million, or $4.70 per diluted share, compared to $89.7 million, or $3.66 per diluted share, in 2021.

The Company also announced that the board of directors declared a cash dividend of $0.465 per share for the upcoming quarter ending March 31, 2023, a quarterly increase of $0.01, or 2%, over the prior year period. The cash dividend will be payable on April 28, 2023 to all shareholders of record on April 14, 2023. This marks 32 consecutive years the Company has increased its annual dividend.

Fourth QUARTER 2022 YEAR-OVER-YEAR Company HIGHLIGHTS:

•Rental revenuesincreased 16% to $122.8 million.

•Total revenues increased20% to $210.9 million.

•Adjusted EBITDA1 increased 23% to $91.0 million.

•Dividend rate of $0.455 per share for the fourth quarter of 2022.On an annualized basis, this dividend represents a 1.7% yield on the February 21, 2023 close price of $105.86 per share.

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

“We delivered strong fourth quarter results. Our 20% growth in total company revenues was a result of robust performance in both rental operations and sales revenues. Demand was healthy across each of our rental segments. Mobile Modular rental revenues grew 18%, reflecting strong organic growth from modular operations. Our initiatives to grow modular sales also showed progress as sales revenues increased by 77% compared to a year ago. Rental revenue growth was also strong at TRS-RenTelco and Adler Tanks, which grew 8% and 20%, respectively.

I am very proud of everything we accomplished in 2022. Our full year revenue and profit growth reflects a diligent focus on execution as we made the most of healthy market conditions across each of our segments. We pursued our strategic growth focus on the modular segment with significant organic investment in new fleet, while managing pricing to higher rates and improving fleet utilization. We also made progress with our modular growth initiatives for additional services and new equipment sales. In addition to our operational accomplishments, we continued our strategic work to explore options to accelerate and strengthen our long-term growth momentum. This work culminated in the Vesta Modular acquisition and Adler divestiture, which we announced on February 1, 2023.

Looking forward to 2023, I believe we will continue to make progress in expanding our businesses. We will maintain our focus on disciplined operational execution, while also working on the successful integration of Vesta. Demand conditions continue to be healthy and we are well positioned for further business growth in 2023."

Division HIGHLIGHTS:

All comparisons presented below are for the quarter ended December 31, 2022 to the quarter ended December 31, 2021 unless otherwise indicated.

Mobile Modular

For the fourth quarter of 2022, the Company’s Mobile Modular division reported income from operations of $36.8 million, an increase of $10.7 million, or 41%, with Adjusted EBITDA increasing $14.0 million, or 36%, to $53.1 million. Rental revenues increased 18% to $72.7 million, depreciation expense increased 3% to $7.8 million and other direct costs increased 6% to $16.0 million, which resulted in an increase in gross profit on rental revenues of 26% to $48.9 million. The rental revenue increase was primarily attributed to higher average rental equipment on rent and higher average monthly rental rates. Rental related services revenues increased 41% to $24.9 million, primarily attributable to higher delivery and pick up activities for both modular buildings and portable storage containers with associated gross profit increasing 39% to $6.9 million. Sales revenues increased 77% to $35.9 million, primarily from higher used and new equipment sales. Gross margin on sales was 32% compared to 33% in 2021, resulting in a 76% increase in gross profit on sales revenues to $11.6 million. Selling and administrative expenses increased 26% to $31.0 million, primarily due to $3.7 million higher allocated corporate expenses and $2.2 million increased marketing and administrative costs.

TRS-RenTelco

For the fourth quarter of 2022, the Company’s TRS-RenTelco division reported income from operations of $11.8 million, an increase of $2.0 million, or 21%, with Adjusted EBITDA increasing $3.0 million, or 13%, to $25.3 million. Rental revenues increased 8% to $31.4 million, depreciation expense increased 4% to $12.5 million and other direct costs increased 19% to $5.8 million, which resulted in a 7% increase in gross profit on rental revenues to $13.1 million. The rental revenue increase was the result of higher average equipment on rent and higher average monthly rental rates compared to the prior year. Sales revenues increased 15% to $8.7 million and gross profit on sales revenues increased 42% to $5.4 million. Selling and administrative expenses increased 8% to $7.3 million, primarily due to higher allocated corporate expenses.

Adler Tanks

For the fourth quarter of 2022, the Company’s Adler Tanks division reported income from operations of $7.0 million, an increase of $4.1 million, with Adjusted EBITDA increasing $4.3 million, or 55%, to $12.1 million. Rental revenues increased $3.2 million, or 20%, to $18.7 million, depreciation expense decreased 2% to $4.0 million and other direct costs decreased 22% to $2.6 million, which resulted in an increased gross profit on rental revenues of 49%, to $12.1 million. The rental revenue increase was broad-based across regions and vertical markets served. Rental related services revenues increased 44% to $8.4 million, with gross profit on rental related services increasing $1.2 million to $2.3 million, compared to $1.1 million in the fourth quarter of 2021. Selling and administrative expenses increased 16% to $7.8 million primarily due to higher allocated corporate expenses and higher employee salaries and benefit costs.

financial outlook:

For the full-year 2023, the Company expects:

		2023 Outlook	2022 Actual
•	Total revenue:	$780 to $810 million	$734 million
•	Adjusted EBITDA1, 2:	$294 to $309 million	$289 million
•	Gross rental equipment capital expenditures:	$190 to $210 million	$188 million

1.Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. 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.

2

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-RenTelcobusiness 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.

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 January 19, 2023, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 22, 2023 to discuss the fourth quarter 2022 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 1-800-839-6980 (in the U.S.), or 1-402-220-6062 (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.

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 making progress to expand the Company's businesses in 2023, the Company's strategic focus to explore options to accelerate and strengthen long-term growth, healthy demand conditions and being well positioned for further business growth in 2023, the successful integration of Vesta, as well as the statements regarding the full year 2023 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 continued economic impact of the COVID-19 pandemic; the health of the education and commercial markets in our modular building division; unforeseen liabilities and integration challenges associated with the Vesta acquisition; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; continued execution of our strategic 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.

3

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended December 31,						Twelve Months Ended December 31,
(in thousands, except per share amounts)	2022			2021			2022			2021
Revenues
Rental	$	122,803		$	106,076		$	456,029		$	390,013
Rental related services		34,120			24,191			122,617			98,061
Rental operations		156,923			130,267			578,646			488,074
Sales		52,915			44,732			150,653			125,235
Other		1,045			912			4,524			3,524
Total revenues		210,883			175,911			733,823			616,833
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		24,315			23,671			96,429			91,887
Rental related services		24,826			18,020			89,793			74,256
Other		24,424			23,373			116,780			91,069
Total direct costs of rental operations		73,565			65,064			303,002			257,212
Costs of sales		34,176			28,579			93,913			78,600
Total costs of revenues		107,741			93,643			396,915			335,812
Gross profit		103,142			82,268			336,908			281,021
Selling and administrative expenses		47,332			39,295			171,342			148,600
Income from operations		55,810			42,973			165,566			132,421
Other (expense) income:
Interest expense		(5,170	)		(3,247	)		(15,168	)		(10,455	)
Foreign currency exchange (loss) gain		26			(25	)		(378	)		(210	)
Income before provision for income taxes		50,666			39,701			150,020			121,756
Provision for income taxes		11,025			11,254			34,882			32,051
Net income	$	39,641		$	28,447		$	115,138		$	89,705
Earnings per share:
Basic	$	1.63		$	1.17		$	4.73		$	3.70
Diluted	$	1.62		$	1.16		$	4.70		$	3.66
Shares used in per share calculation:
Basic		24,384			24,252			24,353			24,220
Diluted		24,527			24,537			24,519			24,515
Cash dividends declared per share	$	0.455		$	0.435		$	1.82		$	1.74

4

MCGRATH RENTCORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31,
(in thousands)	2022			2021
Assets
Cash	$	957		$	1,491
Accounts receivable, net of allowance for credit losses of $2,300 in 2022 and $2,125 in 2021		190,023			159,499
Rental equipment, at cost:
Relocatable modular buildings		1,123,268			1,040,094
Electronic test equipment		398,267			361,391
Liquid and solid containment tanks and boxes		308,396			309,908
		1,829,931			1,711,393
Less: accumulated depreciation		(701,877	)		(646,169	)
Rental equipment, net		1,128,054			1,065,224
Property, plant and equipment, net		143,945			135,325
Prepaid expenses and other assets		71,429			54,945
Intangible assets, net		41,131			47,049
Goodwill		132,305			132,393
Total assets	$	1,707,844		$	1,595,926
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	413,742		$	426,451
Accounts payable and accrued liabilities		160,829			136,313
Deferred income		82,417			58,716
Deferred income taxes, net		246,911			242,425
Total liabilities		903,899			863,905
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,388 shares as of December 31, 2022 and 24,260 shares as of December 31, 2021		110,080			108,610
Retained earnings		693,943			623,465
Accumulated other comprehensive loss		(78	)		(54	)
Total shareholders’ equity		803,945			732,021
Total liabilities and shareholders’ equity	$	1,707,844		$	1,595,926

5

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Twelve Months Ended December 31,
(in thousands)	2022			2021
Cash Flows from Operating Activities:
Net income	$	115,138		$	89,704
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation and amortization		111,344			106,695
Deferred income taxes		4,486			26,348
Provision for credit losses		837			451
Share-based compensation		8,009			7,666
Gain on sale of used rental equipment		(37,979	)		(25,441	)
Foreign currency exchange loss		378			210
Amortization of debt issuance costs		16			15
Change in:
Accounts receivable		(31,361	)		(24,397	)
Prepaid expenses and other assets		(16,484	)		(6,816	)
Accounts payable and accrued liabilities		16,347			12,226
Deferred income		23,701			9,082
Net cash provided by operating activities		194,432			195,743
Cash Flows from Investing Activities:
Purchases of rental equipment		(187,689	)		(114,145	)
Purchases of property, plant and equipment		(17,617	)		(2,680	)
Cash paid for acquisition of businesses		—			(283,124	)
Cash paid for acquisition of Titan business assets		—			(6,585	)
Cash paid for acquisition of non-compete agreements		—			(2,500	)
Proceeds from sales of used rental equipment		73,879			57,337
Net cash used in investing activities		(131,427	)		(351,696	)
Cash Flows from Financing Activities:
Net borrowings borrowings under bank lines of credit		47,275			143,729
Borrowings under note purchase agreement		—			100,000
Principal payment of Series C senior notes		(60,000	)		—
Principal payment of Series B senior notes		—			(40,000	)
Taxes paid related to net share settlement of stock awards		(6,539	)		(5,345	)
Payment of dividends		(44,269	)		(42,182	)
Net cash (used in) provided by financing activities		(63,533	)		156,202
Effect of foreign currency exchange rate changes on cash		(6	)		4
Net (decrease) increase in cash		(534	)		253
Cash balance, beginning of period		1,491			1,238
Cash balance, end of period	$	957		$	1,491
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period	$	14,775		$	10,326
Net income taxes paid, during the period	$	27,362		$	9,087
Dividends accrued during the period, not yet paid	$	11,227		$	11,280
Rental equipment acquisitions, not yet paid	$	13,220		$	5,750

6

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2022
(dollar amounts in thousands)	Mobile Modular			TRS-RenTelco			Adler Tanks			Enviroplex		Consolidated
Revenues
Rental	$	72,690		$	31,385		$	18,728		$	—	$	122,803
Rental related services		24,904			783			8,433			—		34,120
Rental operations		97,594			32,168			27,161			—		156,923
Sales		35,866			8,726			698			7,625		52,915
Other		397			525			123			—		1,045
Total revenues		133,857			41,419			27,982			7,625		210,883
Costs and Expenses
Direct costs of rental operations:
Depreciation		7,843			12,464			4,008			—		24,315
Rental related services		17,985			745			6,096			—		24,826
Other		15,959			5,826			2,639			—		24,424
Total direct costs of rental operations		41,787			19,035			12,743			—		73,565
Costs of sales		24,288			3,309			472			6,107		34,176
Total costs of revenues		66,075			22,344			13,215			6,107		107,741
Gross Profit
Rental		48,888			13,095			12,081			—		74,064
Rental related services		6,919			38			2,337			—		9,294
Rental operations		55,807			13,133			14,418			—		83,358
Sales		11,578			5,417			226			1,518		18,739
Other		397			525			123			—		1,045
Total gross profit		67,782			19,075			14,767			1,518		103,142
Selling and administrative expenses		30,989			7,315			7,786			1,242		47,332
Income from operations	$	36,793		$	11,760		$	6,981		$	276	$	55,810
Interest expense													(5,170	)
Foreign currency exchange gain													26
Provision for income taxes													(11,025	)
Net income												$	39,641
Other Information
Adjusted EBITDA 1	$	53,145		$	25,333		$	12,140		$	351	$	90,969
Average rental equipment 2	$	1,044,751		$	395,789		$	307,398
Average monthly total yield 3		2.32	%		2.63	%		2.03	%
Average utilization 4		81.2	%		63.0	%		58.0	%
Average monthly rental rate 5		2.86	%		4.20	%		3.50	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.

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.

7

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Three months ended December 31, 2021
(dollar amounts in thousands)	Mobile Modular			TRS-RenTelco			Adler Tanks			Enviroplex		Consolidated
Revenues
Rental	$	61,451		$	29,079		$	15,546		$	—	$	106,076
Rental related services		17,604			731			5,856			—		24,191
Rental operations		79,055			29,810			21,402			—		130,267
Sales		20,216			7,563			769			16,184		44,732
Other		431			361			120			—		912
Total revenues		99,702			37,734			22,291			16,184		175,911
Costs and Expenses
Direct costs of rental operations:
Depreciation		7,634			11,945			4,092			—		23,671
Rental related services		12,634			643			4,743			—		18,020
Other		15,120			4,881			3,372			—		23,373
Total direct costs of rental operations		35,388			17,469			12,207			—		65,064
Costs of sales		13,631			3,738			552			10,658		28,579
Total costs of revenues		49,019			21,207			12,759			10,658		93,643
Gross Profit
Rental		38,697			12,253			8,082			—		59,032
Rental related services		4,970			88			1,113			—		6,171
Rental operations		43,667			12,341			9,195			—		65,203
Sales		6,585			3,825			217			5,526		16,153
Other		431			361			120			—		912
Total gross profit		50,683			16,527			9,532			5,526		82,268
Selling and administrative expenses		24,627			6,770			6,689			1,209		39,295
Income from operations	$	26,056		$	9,757		$	2,843		$	4,317		42,973
Interest expense													(3,247	)
Foreign currency exchange loss													(25	)
Provision for income taxes													(11,254	)
Net income												$	28,447
Other Information
Adjusted EBITDA 1	$	39,144		$	22,345		$	7,817		$	4,386	$	73,692
Average rental equipment 2	$	988,067		$	362,760		$	309,841
Average monthly total yield 3		2.07	%		2.67	%		1.67	%
Average utilization 4		76.9	%		65.9	%		50.1	%
Average monthly rental rate 5		2.70	%		4.05	%		3.34	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.

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.

8

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Twelve months ended December 31, 2022
(dollar amounts in thousands)	Mobile Modular			TRS-RenTelco			Adler Tanks			Enviroplex			Consolidated
Revenues
Rental	$	268,288		$	121,375		$	66,366		$	—		$	456,029
Rental related services		91,851			3,112			27,654			—			122,617
Rental operations		360,139			124,487			94,020			—			578,646
Sales		99,979			24,571			2,933			23,170			150,653
Other		1,599			1,720			1,205			—			4,524
Total revenues		461,717			150,778			98,158			23,170			733,823
Costs and Expenses
Direct costs of rental operations:
Depreciation		31,172			49,253			16,004			—			96,429
Rental related services		66,254			2,592			20,947			—			89,793
Other		83,031			21,327			12,422			—			116,780
Total direct costs of rental operations		180,457			73,172			49,373			—			303,002
Costs of sales		64,073			9,707			2,085			18,048			93,913
Total costs of revenues		244,530			82,879			51,458			18,048			396,915
Gross Profit
Rental		154,085			50,795			37,940			—			242,820
Rental related services		25,597			520			6,707			—			32,824
Rental operations		179,682			51,315			44,647			—			275,644
Sales		35,906			14,864			848			5,122			56,740
Other		1,599			1,720			1,205			—			4,524
Total gross profit		217,187			67,899			46,700			5,122			336,908
Selling and administrative expenses		110,234			27,245			28,428			5,435			171,342
Income (loss) from operations	$	106,953		$	40,654		$	18,272		$	(313	)	$	165,566
Interest expense														(15,168	)
Foreign currency exchange loss														(378	)
Provision for income taxes														(34,882	)
Net income													$	115,138
Other Information
Adjusted EBITDA 1	$	159,224		$	92,007		$	37,660		$	(25	)	$	288,866
Average rental equipment 2	$	1,025,637		$	383,235		$	307,651
Average monthly total yield 3		2.18	%		2.63	%		1.80	%
Average utilization 4		79.1	%		64.2	%		53.1	%
Average monthly rental rate 5		2.75	%		4.11	%		3.38	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.

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.

9

MCGRATH RENTCORP
BUSINESS SEGMENT DATA (unaudited)
Twelve months ended December 31, 2021
(dollar amounts in thousands)	Mobile Modular			TRS-RenTelco			Adler Tanks			Enviroplex		Consolidated
Revenues
Rental	$	220,569		$	113,419		$	56,025		$	—	$	390,013
Rental related services		72,330			2,880			22,851			—		98,061
Rental operations		292,899			116,299			78,876			—		488,074
Sales		68,982			22,242			2,930			31,081		125,235
Other		1,435			1,653			436			—		3,524
Total revenues		363,316			140,194			82,242			31,081		616,833
Costs and Expenses
Direct costs of rental operations:
Depreciation		28,071			47,374			16,442			—		91,887
Rental related services		53,018			2,704			18,534			—		74,256
Other		60,429			19,148			11,492			—		91,069
Total direct costs of rental operations		141,518			69,226			46,468			—		257,212
Costs of sales		45,758			9,574			2,075			21,193		78,600
Total costs of revenues		187,276			78,800			48,543			21,193		335,812
Gross Profit
Rental		132,070			46,897			28,091			—		207,058
Rental related services		19,310			176			4,317			—		23,803
Rental operations		151,380			47,073			32,408			—		230,861
Sales		23,225			12,667			855			9,888		46,635
Other		1,435			1,653			436			—		3,524
Total gross profit		176,040			61,394			33,699			9,888		281,021
Selling and administrative expenses		92,603			25,152			25,542			5,303		148,600
Income from operations	$	83,436		$	36,243		$	8,157		$	4,585	$	132,421
Interest expense													(10,455	)
Foreign currency exchange loss													(210	)
Provision for income taxes													(32,051	)
Net income												$	89,705
Other Information
Adjusted EBITDA 1	$	130,089		$	85,723		$	27,961		$	4,844	$	248,617
Average rental equipment 2	$	925,951		$	351,895		$	312,150
Average monthly total yield 3		1.99	%		2.69	%		1.50	%
Average utilization 4		76.2	%		67.0	%		45.4	%
Average monthly rental rate 5		2.61	%		4.01	%		3.29	%

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.

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.

10

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, share-based compensation and transaction costs. 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 the Company’s 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, including share-based compensation and transaction costs, 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 and transaction costs. 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 Net Income to Adjusted EBITDA

(dollar amounts in thousands)	Three Months Ended December 31,						Twelve Months Ended December 31,
	2022			2021			2022			2021
Net income	$	39,641		$	28,447		$	115,138		$	89,705
Provision for income taxes		11,025			11,254			34,882			32,051
Interest expense		5,170			3,247			15,168			10,455
Depreciation and amortization		28,072			27,648			111,344			106,695
EBITDA		83,908			70,596			276,532			238,906
Share-based compensation		2,903			2,364			8,009			7,666
Transaction costs 3		4,158			732			4,325			2,045
Adjusted EBITDA 1	$	90,969		$	73,692		$	288,866		$	248,617
Adjusted EBITDA margin 2		43	%		41	%		39	%		40	%

11

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)	Three Months Ended December 31,						Twelve Months Ended December 31,
	2022			2021			2022			2021
Adjusted EBITDA 1	$	90,969		$	73,692		$	288,866		$	248,617
Interest paid		(5,793	)		(3,849	)		(14,775	)		(10,326	)
Income taxes paid, net of refunds received		(2,477	)		(1,013	)		(27,362	)		(9,087	)
Gain on sale of used rental equipment		(11,274	)		(7,653	)		(37,979	)		(25,441	)
Foreign currency exchange (gain) loss		(26	)		25			378			210
Amortization of debt issuance costs		3			4			16			15
Change in certain assets and liabilities:
Accounts receivable, net		(64	)		9,332			(30,524	)		(23,946	)
Prepaid expenses and other assets		829			4,593			(16,484	)		(6,816	)
Accounts payable and other liabilities		(1,335	)		(4,628	)		8,595			13,435
Deferred income		(9,698	)		(11,046	)		23,701			9,082
Net cash provided by operating activities	$	61,134		$	59,457		$	194,432		$	195,743

1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs. During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities. For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.

2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

3. Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.

12

XML

Document And Entity Information	Feb. 22, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 22, 2023
Entity Registrant Name	McGRATH RENTCORP
Entity Central Index Key	0000752714
Entity Emerging Growth Company	false
Securities Act File Number	000-13292
Entity Incorporation, State or Country Code	CA
Entity Tax Identification Number	94-2579843
Entity Address, Address Line One	5700 Las Positas Road
Entity Address, City or Town	Livermore
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94551-7800
City Area Code	(925)
Local Phone Number	606-9200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	MGRC
Security Exchange Name	NASDAQ