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MR

MCGRATH RENTCORP (MGRC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered 10% revenue growth to $243.7M and diluted EPS of $1.58, with Adjusted EBITDA up 5% to $92.0M; strength in Mobile Modular offset weakness in Portable Storage and continued demand challenges at TRS-RenTelco .
  • Mobile Modular rental revenues grew 8% and sales revenues 32%, supported by pricing optimization, value-added services (Mobile Modular Plus, Site Related Services), and new equipment sales; segment Adjusted EBITDA rose 13% to $61.0M .
  • Management set 2025 guidance at $920–$970M revenue, $345–$360M Adjusted EBITDA, and $120–$130M gross rental equipment capex; an OpEx-heavy shift prepares existing fleet, reducing capex while pressing EBITDA near-term by ~$9–$13M .
  • Dividend increased to $0.485/share for Q1 2025, the 34th consecutive annual increase; leverage stands comfortably at 1.68x funded debt/LTM Adjusted EBITDA, providing capital allocation flexibility (potential M&A, throttling capex) .

What Went Well and What Went Wrong

What Went Well

  • Mobile Modular delivered broad-based growth: rental revenues +8%, rental margins up, and new modular sales up 32% (Adjusted EBITDA +13% to $61.0M). “Rental revenues grew across both commercial and education customer bases… pricing optimization… value-added services… new modular equipment sales” .
  • Pricing tailwind: modular monthly revenue per unit on rent increased 11% YoY to $828; new shipments over the last 12 months averaged $1,220 per unit, reflecting strong pricing on newer contracts and services attachment .
  • Cash generation and balance sheet: 2024 operating cash flow $374.4M (benefiting from merger termination payment net of costs), dividends paid $47M; funded debt/LTM Adjusted EBITDA 1.68x, providing ample flexibility .

What Went Wrong

  • Portable Storage remained soft: rental revenues −15% YoY, utilization fell to 61.2% (from 74.8% a year ago), with broad-based construction weakness; segment Adjusted EBITDA decreased 22% .
  • TRS-RenTelco continued end-market weakness: rental revenues −9% YoY; utilization ~59.1% vs 58.9% a year ago; Adjusted EBITDA −8%; mix stability but markets remain challenged .
  • EBITDA margin compression: company Adjusted EBITDA margin at 38% vs 40% prior year; management guided to higher 2025 OpEx ($9–$13M) to prep owned fleet, which will pressure EBITDA despite revenue growth .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenues ($USD Millions)$221.6 $266.8 $243.7
Gross Profit ($USD Millions)$110.1 $124.0 $114.8
Adjusted EBITDA ($USD Millions)$87.9 $104.0 $92.0
Adjusted EBITDA Margin (%)40% 39% 38%
Diluted EPS - Continuing Operations ($)$1.30 $6.08 (includes termination fee accounting) $1.58

Segment breakdown (revenues and Adjusted EBITDA):

SegmentQ4 2023 Revenues ($MM)Q4 2024 Revenues ($MM)Q4 2023 Adj. EBITDA ($MM)Q4 2024 Adj. EBITDA ($MM)
Mobile Modular$150.7 $171.8 $54.1 $61.0
Portable Storage$26.9 $22.7 $12.8 $9.9
TRS-RenTelco$35.2 $34.0 $20.7 $19.1
Enviroplex$8.8 $15.2 $0.3 $2.0
Consolidated$221.7 $243.7 $87.9 $92.0

KPIs across recent quarters:

KPIQ2 2024Q3 2024Q4 2024
Mobile Modular – Average Utilization (%)78.4% 77.1% 76.0%
Mobile Modular – Avg Monthly Rental Rate (%)2.76% 2.84% 2.84%
Portable Storage – Average Utilization (%)66.1% 62.8% 61.2%
Portable Storage – Avg Monthly Rental Rate (%)3.96% 3.94% 3.94%
TRS-RenTelco – Average Utilization (%)56.5% 57.3% 59.1%
TRS-RenTelco – Avg Monthly Rental Rate (%)4.07% 4.12% 4.11%

Actual vs. Estimates (Wall Street consensus via S&P Global):

  • Consensus estimates were unavailable at time of retrieval; comparisons to Street EPS/revenue cannot be presented due to SPGI request limits. We will update when accessible.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($MM)FY 2025N/A$920–$970 New
Adjusted EBITDA ($MM)FY 2025N/A$345–$360 New
Gross Rental Equipment Capex ($MM)FY 2025N/A$120–$130 New
Rental Equipment Depreciation ($MM)FY 2025N/A$85–$89 New
Direct Cost of Rental Operations ($MM)FY 2025N/A$119–$123 New
SG&A ($MM)FY 2025N/A$213–$217 New
Interest Expense ($MM)FY 2025N/A~$36–$38 New
Mobile Modular OpEx to Prep FleetFY 2025N/A+$9–$13M (pressures EBITDA) New
Quarterly Dividend/Share ($)Q1 2025$0.475 (Q4 2024 rate) $0.485 (↑2%) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Modular pricing tailwindNew shipments pricing +13% YoY; recurring Rev/Unit rising via Plus/SRS Rev/Unit on rent +18% YoY; Plus and SRS growth Rev/Unit on rent +11% YoY; new shipments $1,220; continued pricing optimization Improving
Portable Storage demandWeaker, smaller projects affected; holding pricing Softness, sequential declines; Q4 expected lower than Q3 −15% rental revenue YoY; broad-based weakness; utilization 61% Softening but potential stabilization
TRS-RenTelco demandSoft across semis and wireless; wired/data centers stronger; “bouncing along bottom” Continued weakness; reduced fleet; margin pressure Bookings outpacing returns early 2025; signs of stabilization; 2025 EBITDA comparable to 2024 Stabilizing
OpEx vs CapEx mixN/AN/AShift to preparing owned fleet (OpEx +$9–$13M), lower capex; EBITDA pressure New pressure
Capital allocation & leverageFunded debt/LTM Adj. EBITDA 2.43x; normal choices incl. M&A, dividends, buybacks 1.75x; net proceeds applied to debt; resume M&A pipeline 1.68x; options to throttle capex, pursue tuck-ins; dividend raised Improving flexibility
Education funding (CA)Broad funding and backlogs; seasonal strength in Q3/Q4 Balanced geographies; modular backlog strong $10B CA bond passed; healthy modernization backlog; positive for demand Supportive

Management Commentary

  • “We were pleased with our fourth quarter results. The 10% increase in companywide revenues and 5% increase in Adjusted EBITDA were driven by growth at Mobile Modular.”
  • “Fourth quarter monthly revenue per unit on rent increased 11% year-over-year to $828. For new shipments… average monthly revenue per unit increased 15% to $1,220.”
  • “We expect to spend approximately $9 million to $13 million higher operating expenses in 2025, preparing available fleet to meet customer orders… an increase in our direct cost of rental operations, which reduces adjusted EBITDA.”
  • “Portable Storage… weaker demand was broad-based… primarily a result of lower commercial construction project activity.”
  • “TRS… we are seeing some early positive signs… bookings… stronger than returns… we believe… stabilization… 2025 adjusted EBITDA comparable to 2024.”

Q&A Highlights

  • Modular segment mix: Q4 rental growth balanced—commercial +9%, education +7%; order activity better than last year across businesses .
  • Pricing convergence tailwind: Material gap between fleet-average pricing and new orders ($828 vs $1,220/month), a “powerful margin driver,” tempered by OpEx vs. CapEx mix in 2025 .
  • 2025 EBITDA cadence: Three drivers pressuring EBITDA relative to revenue—(1) higher OpEx to prep owned fleet; (2) Portable Storage starting at low run rate; (3) faster growth in sales revenue (lower EBITDA intensity) than rental operations .
  • Capital deployment: Comfortable leverage (1.68x); options include throttling capex, tuck-in M&A, and monitoring buybacks/dividends .
  • Education demand/California bond: $10B facilities bond passed; positive funding backdrop, but storm-related demand unlikely to be a significant needle mover .

Estimates Context

  • S&P Global consensus (EPS and revenue) for Q4 2024 was unavailable due to data retrieval limits at time of analysis; therefore, we cannot present actual vs. consensus comparisons. We will update when SPGI access is restored.
  • Based on company commentary and segment dynamics, Street models likely need to reflect: (a) 2025 OpEx shift reducing EBITDA relative to revenue growth; (b) lower 2025 Portable Storage EBITDA vs 2024; (c) TRS stabilization, not recovery, in 2025 .

Key Takeaways for Investors

  • Mobile Modular remains the growth engine with pricing tailwinds and services attachment driving revenue per unit; expect sustained contribution even as utilization recovers later in 2025 .
  • Near-term margin dynamics: deliberate OpEx increase ($9–$13M) to prep owned fleet will weigh on 2025 EBITDA despite revenue growth; this is a capital discipline choice (lower capex) and should enhance asset turns .
  • Portable Storage is the principal headwind entering 2025; watch quote/shipments trajectory—management sees stabilization beginning, with stronger impact likely in 2H25 .
  • TRS-RenTelco shows early signs of stabilization, with wired/data center projects offering support; 2025 EBITDA expected comparable to 2024 rather than a step-up .
  • Balance sheet strength (1.68x leverage) and higher dividend support total return; optionality for tuck-in M&A and capex throttle provides a buffer against macro uncertainty .
  • 2025 guide implies low-to-mid single-digit revenue growth and flat-to-modest EBITDA growth; mix shift toward sales revenue also dilutes EBITDA margin—model accordingly .
  • Watch catalysts: California education funding deployment, data center activity (wired comms), OpEx/capex mix execution, Portable Storage demand inflection, and any tuck-in acquisition announcements .

Non-GAAP Adjustments and Cross-References

  • Adjusted EBITDA excludes non-operating items such as the WillScot Mobile Mini merger termination gain; reconciliation provided in company materials .
  • Q3 2024 included a $180M termination payment and $39.4M transaction costs, materially affecting GAAP EPS; use Adjusted EBITDA and segment ops data for operational trend analysis .