McGrath RentCorp

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath Rent Corp Fourth Quarter 2022 Earnings Call. At this time, all conference participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press the star key followed by the 1 key on your telephone. This conference call is being recorded today, Wednesday, February 22, 2023. Before we begin, note that the matters the company management will be discussing today that are not statements of historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our full year, 2023, financial outlook, as well as statements relating to the company's expectations, strategies, prospects, or targets. These forward-looking statements are not guarantees of future performance and involves significant risks and uncertainties that could cause our actual results to differ materially from those projected. Important factors that could cause actual results to differ materially from the company's expectations are 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 forward-looking statements. In addition to the press release issued today, the company also filed with the SEC the earnings release on Form 8K and its Form 10K for the year ending December 31, 2022. Speaking today will be Joe Hanna, Chief Executive Officer, and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hanna. Go ahead, sir.

Thank you, Gretchen. Good afternoon, and thank you, everyone, for joining us on today's call. We are pleased to be together today and look forward to providing additional perspective on our strong finish to the year and positive outlook for 2023. I will start with some overall comments on our fourth quarter and full year 2022 performance, as well as our look ahead. Keith will provide additional detail in his financial review and outlook comments to complete our prepared remarks before we open the call up for questions. On a total company basis, we delivered impressive results in the fourth quarter. Rental revenue increased 16%, sales revenues increased 18%, and EBITDA grew by 23%. Notably, all of our rental businesses grew in the quarter. This robust progress was achieved with a combination of good market conditions and solid execution of our strategy. Market conditions aside, Our success is clearly attributable to our people. Without the dedicated work of our teams across the country, we would not have realized these strong results. I would like to thank everyone for a job well done and for continuing to provide our customers the exceptional service they have come to appreciate from McGrath. Mobile Modular had a strong fourth quarter performance. We saw healthy growth in units on rent, pricing, and utilization, all while adding new equipment to the rental fleet. Units on rent were up by 4%, which equates to over 1,000 additional units deployed. We maintained our focus on pricing strategically with solid gains on fleet average pricing as well as pricing on new orders compared to a year ago. Additionally, The performance of portable storage for the quarter was robust, with a 34% increase in rental revenues reflecting solid demand and strength in execution as we continue to expand in the markets where we operate. Our strategy to be a solutions provider to our customers is yielding results. In addition to higher rental revenues, modular equipment sales revenues increased an impressive 77 percent for the quarter. The benefits of modular construction have gained momentum and customers are now considering a modular solution as a primary alternative to conventional construction from day one of a project. We have positioned ourselves to take full advantage of that trend and we have built an internal team to serve this exciting and growing sector of the market. At TRS Rentalco, Rental revenues grew 8% reflecting favorable market conditions in both our general purpose and communications rentals. TRS has a very strong market position and is a high ROIC business with consistent profitability and steady growth over time. We have a highly competent team capable of keeping business operations growing now and in the future. It is one of the top two competitors in its market and is positioned well to capture upside opportunities in the growing technology space. On February 1st, we announced the simultaneous acquisition of Vesta Modular and divestiture of Adler Tank Reynolds Business. These transactions provided a unique opportunity to leverage the value of a non-core business and to increase investment in our growing modular business. While Adler had been a part of the McGrath family of businesses for over 14 years, the sale to Ironclad Environmental was a way to give the business a new opportunity. Going forward, it will be part of an industry-leading provider of specialty waste management solutions and temporary storage and containment equipment for hazardous and non-hazardous industrial waste and will be positioned for future investment and growth. With the sale of Adler, McGrath will now have a more streamlined and focused portfolio. Reflecting on the full year, I'm 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 the 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 acquisition and Adler divestiture. Now, I'll speak to 2023 and our views on the demand outlook for both Mobile Modular and TRS Rentalco. Overall, the year is off to a good start. First, for Mobile Modular, on the commercial side of the business, project velocity has continued to be strong so far in 2023. We continue to believe the entrance of federal infrastructure funding is likely to be a tailwind, creating demand across all of our geographies and offsetting to any potential effect of a slower economy. With the addition of VESTA, we now have more regions to grow. With high overall fleet utilization, we are entering the year with the opportunity to deploy more growth capital by adding new equipment across key geographies. On the education side of the modular business, bond monies and local tax revenues have been healthy, and we do not anticipate a slowdown in school modernization projects. We have a strong position in the education market and the addition of Vesta will help to broaden our coverage. At TRS Rentalco, we expect demand to be healthy. On the general purpose side of our business, we see solid opportunities, particularly serving the aerospace and defense markets, which may be partly offset by some anticipated softness in the computer and semiconductor markets. On a communications side, The 5G network is a longer term positive driver for us. We expect both wired and wireless communication rentals to hold up well, driven by the continued need for more bandwidth, despite some potential uncertainty in the broader macroeconomic environment. Our TRS team is seasoned, and we are confident in their plans to seize on growth opportunities. On a total company level, we announced an increase to our dividend today, marking our 32nd consecutive year of dividend growth. McGrath has the rare distinction of being one of around 130 publicly listed companies currently known as dividend champions, all of whom have increased their dividends more than 25 consecutive years. We are especially proud of that performance of the business that has allowed us to consistently return value to shareholders in this manner. For 2023, we will be focused on disciplined operational execution, our customers, our expanding marketplace relationships, and as always, delivering value to our shareholders. With the acquisition of Vesta, successful integration and the realization of synergies will be priorities. In addition to deploying capital for organic growth, we have a pipeline of potential tuck-in acquisitions to smartly add new locations and add density to places where we already operate. We have an experienced leadership team, track record of execution, strong balance sheet, and healthy cash flow generation to continue our long-term path of growth. Our start to 2023 has been positive, and I'm looking forward to a successful year. Now, let me turn the call over to Keith.

Thank you, Joe, and good afternoon, everyone.