Segment Reporting

9 Months Ended

Sep. 30, 2023

Segment Reporting [Abstract]

Segment Reporting

NOTE 9. SEGMENT REPORTING

The Company historically operated four reportable segments and divested its Adler Tanks business segment on February 1, 2023, see Note 5 to the consolidated financial statements for more information on the divestiture of Adler Tanks. The three reportable segments from continuing operations are (1) its modular building and portable storage container rental segment (“Mobile Modular”); (2) its electronic test equipment segment (“TRS-RenTelco”); and (3) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”). The operations of each of these segments are described in Part I – Item 1, “Business,” and the accounting policies of the segments are described in “Note 1 – Summary of Significant Accounting Policies” in the Company’s 2022 Annual Report. Management focuses on several key measures to evaluate and assess each segment’s performance, including rental revenue growth, gross profit and gross margins, income from operations, income before provision for income taxes and adjusted EBITDA. Excluding interest expense, allocations of revenue and expense not directly associated with one of these segments are generally allocated to Mobile Modular and TRS-RenTelco based on their pro-rata share of direct revenues. Interest expense is allocated amongst Mobile Modular and TRS-RenTelco based on their pro-rata share of average rental equipment at cost, intangible assets, accounts receivable, deferred income and customer security deposits. The Company does not report total assets by business segment. Summarized financial information for the nine months ended September 30, 2023 and 2022 for the Company’s reportable segments and discontinued operations are shown in the following table:

(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Enviroplex 1			Adler Tanks (Discontinued)3			Consolidated
Nine Months Ended September 30,
2023
Rental revenues	$	264,398		$	86,375		$ —			$	6,520		$	357,293
Rental related services revenues		99,158			2,323		—				2,584			104,065
Sales and other revenues		122,245			24,376			11,379			334			158,334
Total revenues		485,801			113,074			11,379			9,438			619,692
Depreciation of rental equipment		29,766			36,733		—				1,325			67,824
Gross profit		233,970			47,184			2,357			4,665			288,176
Selling and administrative expenses		124,642			23,576			4,814			2,582			155,614
Other income		(2,740	)		(819	)		—			—			(3,559	)
Income (loss) from operations		112,068			24,427			(2,457	)		2,083			136,121
Interest (expense) income allocation		(24,129	)		(6,008	)		1,703			(374	)		(28,808	)
Income (loss) before provision for income taxes		87,939			18,585			(754	)		1,709			107,479
Adjusted EBITDA		172,222			64,031			(2,207	)		3,682			237,728
Rental equipment acquisitions		142,067			21,801		—				—			163,868
Accounts receivable, net (period end)		186,354			29,086			8,829			—			224,269
Rental equipment, at cost (period end)		1,474,359			383,006		—				—			1,857,365
Rental equipment, net book value (period end)		1,141,194			150,674		—				—			1,291,868
Utilization (period end) 2		79.7	%		60.3	%
Average utilization 2		79.5	%		59.0	%
2022
Rental revenues	$	195,598		$	89,990		$ —			$	47,638		$	333,226
Rental related services revenues		66,947			2,329		—				19,221			88,497
Sales and other revenues		65,315			17,040			15,545			3,317			101,217
Total revenues		327,860			109,359			15,545			70,176			522,940
Depreciation of rental equipment		23,329			36,789		—				11,996			72,114
Gross profit		149,405			48,824			3,604			31,933			233,766
Selling and administrative expenses		79,245			19,930			4,193			20,642			124,010
Other income		—			—			—			—			—
Income (loss) from operations		70,160			28,894			(589	)		11,291			109,756
Interest (expense) income allocation		(6,616	)		(2,160	)		719			(1,941	)		(9,998	)
Income before provision for income taxes		63,544			26,330			130			9,350			99,354
Adjusted EBITDA		106,156			66,675			(377	)		25,443			197,897
Rental equipment acquisitions		73,895			57,169		—				3,067			134,131
Accounts receivable, net (period end)		139,730			24,353			7,691			18,185			189,959
Rental equipment, at cost (period end)		1,085,060			396,068		—				309,607			1,790,735
Rental equipment, net book value (period end)		780,939			177,221		—				141,662			1,099,822
Utilization (period end) 2		81.2	%		65.2	%
Average utilization 2		78.5	%		64.8	%

1.Gross Enviroplex sales revenues were $11,597 and $16,401 for the nine months ended September 30, 2023 and 2022, respectively. There were $218 inter-segment sales to Mobile Modular in the nine months ended September 30, 2023 and $856 inter-segment sales during the same period in 2022, which required elimination in consolidation.

2.Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding accessory equipment, and new equipment inventory. The Average utilization for the period is calculated using the average costs of rental equipment.

3.The financial results of Adler Tanks included in this table are through the date of the business divestiture, which occurred on February 1, 2023.

No single customer accounted for more than 10% of total revenues for the nine months ended September 30, 2023 and 2022. Revenues from foreign country customers accounted for 3% and 4% of the Company’s total revenues for the same periods, respectively.