Segment Reporting

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Segment Reporting

NOTE 10. SEGMENT REPORTING

During the quarter ended December 31, 2023, the Company determined that its Portable Storage business segment met the criteria for separate recognition as defined in the Accounting Standards Codification ("ASC") Topic 280, Segment Reporting. The guidance under this topic requires a public business entity to evaluate both quantitative and qualitative thresholds to determine the significance of a business segment and whether the separate reporting of a business segment enhances the users' understanding of the reporting entity's performance, future net cash flows and judgments. The Company evaluated the guidance within Topic 280 and made its determination to separately report the Portable Storage segment primarily due to the Company's continued growth in container fleet purchases and related increased revenues and improved profitability performance when compared to previously reported periods. In addition to this determination, the Company also divested its Adler Tanks business segment during the year ended December 31, 2023. Additional information regarding the divestiture of Adler Tanks can be found in Note 5 of the condensed consolidated financial statements.

At March 31, 2024, the Company was comprised of four reportable segments: (1) its modular building segment (“Mobile Modular”); (2) its portable storage container segment ("Portable Storage"); (3) its electronic test equipment segment (“TRS-RenTelco”); and (4) 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 2023 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 and income before provision for income taxes. Excluding interest expense, allocations of revenue and expense not directly associated with one of these segments are generally allocated to Mobile Modular, Portable Storage and TRS-RenTelco based on their pro-rata share of direct revenues. Interest expense is allocated amongst Mobile Modular, Portable Storage 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 three months ended March 31, 2024 and 2023 for the Company’s reportable segments are shown in the following table:

(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS- RenTelco			Enviroplex1			Consolidated
Three Months Ended March 31,
2024
Rental revenues	$	76,496		$	18,407		$	25,429		$ —			$	120,332
Rental related services revenues		24,133			4,723			724			—			29,580
Sales and other revenues		26,956			1,630			7,610			1,719			37,915
Total revenues		127,585			24,760			33,763			1,719			187,827
Depreciation of rental equipment		9,874			965			11,527			—			22,366
Gross profit		61,845			17,103			13,875			445			93,268
Selling and administrative expenses		40,087			9,010			8,918			1,803			59,818
Other income		(6,220	)		(1,319	)		(1,742	)		—			(9,281	)
Income (loss) from operations		27,978			9,412			6,699			(1,358	)		42,731
Interest (expense) income allocation		(9,799	)		(1,420	)		(2,062	)		577			(12,704	)
Income (loss) before provision for income taxes		18,179			7,992			4,505			(781	)		29,895
Rental equipment acquisitions		59,263			5,128			3,393			—			67,784
Accounts receivable, net (period end)		166,382			14,117			22,637			8,814			211,950
Rental equipment, at cost (period end)		1,345,919			240,517			370,641		—				1,957,077
Rental equipment, net book value (period end)		1,013,965			220,811			133,766		—				1,368,542
Utilization (period end) 2		78.5	%		68.8	%		56.8	%
Average utilization 2		78.7	%		69.8	%		56.5	%
2023
Rental revenues	$	64,056		$	17,057		$	29,134		$ —			$	110,247
Rental related services revenues		21,534			4,718			880			—			27,132
Sales and other revenues		18,337			955			6,106			941			26,339
Total revenues		103,927			22,730			36,120			941			163,718
Depreciation of rental equipment		8,657			787			12,389			—			21,833
Gross profit		46,171			15,451			15,620			125			77,367
Selling and administrative expenses		38,456			8,058			9,451			1,533			57,498
Other income		—			—			—			—			—
Income (loss) from operations		7,715			7,393			6,169			(1,408	)		19,869
Interest (expense) income allocation		(5,387	)		(884	)		(1,742	)		549			(7,464	)
Income (loss) before provision for income taxes		2,328			6,509			4,653			(859	)		12,631
Rental equipment acquisitions		54,448			7,651			10,112			—			72,211
Accounts receivable, net (period end)		135,104			13,776			24,493			3,633			177,006
Rental equipment, at cost (period end)		1,200,869			211,215			401,801		—				1,813,885
Rental equipment, net book value (period end)		901,090			195,074			171,104		—				1,267,268
Utilization (period end) 2		79.5	%		79.8	%		59.0	%
Average utilization 2		79.4	%		80.8	%		59.2	%

1.Gross Enviroplex sales revenues were $1,719 and $941 for the three months ended March 31, 2024 and 2023, respectively. There were no inter-segment sales to Mobile Modular in the three months ended March 31, 2024 and 2023, 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.

No single customer accounted for more than 10% of total revenues for the three months ended March 31, 2024 and 2023. Revenues from foreign country customers accounted for 2% and 3% of the Company’s total revenues for the same periods, respectively.

NOTE 11. SUBSEQUENT EVENT

On April 23, 2024, the Company entered into a first incremental facility amendment with Bank of America, N.A., as Administrative Agent and the first incremental lender (“BoA”) and the guarantors named therein (the “First Incremental Amendment”). The First Incremental Amendment amends the Second Amended and Restated Credit Agreement, dated as of July 15, 2022, as amended, by and among the Company, BoA, the other lenders named therein, and the guarantors named therein (the “Credit Agreement”) to institute an incremental term loan “A” facility in an aggregate principal amount of $75.0 million (the “Incremental Credit Facility”). The proceeds from the Incremental Credit Facility will be used for general corporate purposes. Concurrently with entry into the First Incremental Amendment, the Company repaid revolving loans issued under the Credit Agreement in an aggregate amount equal to $75.0 million.