Release Date: February 19, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total company revenues increased by 10% and adjusted EBITDA increased by 5% compared to the previous year.
- Mobile Modular had a strong quarter with rental revenues growing 8% and sales revenues growing 32%.
- The Education business benefited from modernization and growth projects, supported by a $10 billion bond passed in California for school facilities.
- McGrath RentCorp (MGRC, Financial) announced an increase in the company's dividend for the 34th consecutive year, highlighting its shareholder focus.
- The company is entering 2025 with good momentum in Mobile Modular and TRS-RenTelco, with early positive signs in customer activity levels.
Negative Points
- Portable storage rental revenues declined by 15% due to less activity in commercial construction, driven by high interest rates.
- TRS-RenTelco rental revenues declined by 9% due to an industry-wide slowdown in test and measurement equipment markets.
- Utilization dipped year-over-year, ending the quarter at 75.1%, indicating some softness in demand.
- The company expects portable storage adjusted EBITDA to be lower in 2025 than in 2024, starting the year at a challenging position.
- The shift from capital spending to operating expenses in 2025 is expected to reduce adjusted EBITDA, despite revenue growth.
Q & A Highlights
Q: Could you discuss the growth in the Modular segment, specifically in commercial offices versus education, and provide your outlook for 2025?
A: Keith Pratt, CFO, explained that rental revenue growth in the fourth quarter for modulars was 8%, with commercial growing 9% and education 7%. For 2025, they expect balanced growth between these segments, with positive customer activity and funding, particularly in education, indicating a strong outlook.
Q: How do you view the prospects for each of your three major segments: Modular, Portable Storage, and TRS-RenTelco, for 2025 compared to 2024?
A: Joseph Hanna, CEO, expressed optimism for 2025, noting good momentum in Modulars, challenges in Portable Storage due to a lower starting run rate, and positive signs in TRS-RenTelco with increased bookings and activity levels.
Q: Can you elaborate on the pricing tailwind in Mobile Modular and its impact on margins?
A: Keith Pratt, CFO, highlighted a significant pricing gap between average fleet pricing and new orders, which has been a positive tailwind for margins. This gap, driven by strategic pricing, is expected to continue benefiting margins over the next several years.
Q: With a lower CapEx guide for 2025, how do you plan to utilize your strong balance sheet and cash flow?
A: Keith Pratt, CFO, stated that they are well-positioned with options for capital allocation, including potential M&A opportunities and possibly increasing CapEx if demand improves. They are also considering strategic tuck-in acquisitions to support growth.
Q: What are the early signs of improvement in the TRS-RenTelco segment, and how do you see this evolving in 2025?
A: Joseph Hanna, CEO, noted that TRS-RenTelco is seeing consistent bookings outpacing returns, particularly in general purpose and wired communications rentals. This momentum is expected to support better performance in 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
