Item 1. Financial Statements
Item 1. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
McGrath RentCorp
Results of review of interim financial statements
We have reviewed the accompanying condensed consolidated balance sheet of McGrath RentCorp (a California Corporation) and subsidiaries (the “Company”) as of March 31, 2025, and the related condensed consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows as of March 31, 2025 and for the three-month periods ended March 31, 2025 and 2024, and the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2024, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 19, 2025, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2024, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for review results
These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ GRANT THORNTON LLP
San Francisco, California
April 24, 2025
3
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31,
(in thousands, except per share amounts)
2025
2024
Revenues
Rental
$
120,113
$
120,332
Rental related services
33,916
29,580
Rental operations
154,029
149,912
Sales
38,926
35,069
Other
2,461
2,846
Total revenues
195,416
187,827
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment
21,505
22,366
Rental related services
24,313
20,786
Other
27,652
29,010
Total direct costs of rental operations
73,470
72,162
Costs of sales
25,510
22,397
Total costs of revenues
98,980
94,559
Gross profit
96,436
93,268
Expenses:
Selling and administrative expenses
50,869
50,464
Other income, net
—
( 9,281
)
Income from operations
45,567
52,085
Interest expense
8,158
12,704
Foreign currency exchange (gain) loss
( 5
)
132
WillScot Mobile Mini transaction costs (Note 1)
—
9,354
Income before provision for income taxes
37,414
29,895
Provision for income taxes
9,205
7,047
Net income
28,209
22,848
Earnings per share:
Basic
$
1.15
$
0.93
Diluted
$
1.15
$
0.93
Shares used in per share calculation:
Basic
24,572
24,513
Diluted
24,622
24,564
Cash dividends declared per share
$
0.485
$
0.475
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended March 31,
(in thousands)
2025
2024
Net income
$
28,209
$
22,848
Other comprehensive income:
Foreign currency translation adjustment, net of tax impact
—
67
Comprehensive income
$
28,209
$
22,915
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
McGrath RentCorp
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31,
December 31,
(in thousands)
2025
2024
Assets
Cash
$
3,392
$
807
Accounts receivable, net of allowance for credit losses of $ 2,866 at March 31, 2025 and at December 31, 2024
208,882
219,342
Rental equipment, at cost:
Relocatable modular buildings
1,414,535
1,414,367
Portable storage containers
240,348
240,846
Electronic test equipment
334,110
343,982
1,988,993
1,999,195
Less: accumulated depreciation
( 619,690
)
( 611,536
)
Rental equipment, net
1,369,303
1,387,659
Property, plant and equipment, net
199,096
197,439
Inventories
17,114
14,304
Prepaid expenses and other assets
69,503
80,477
Intangible assets, net
51,773
54,332
Goodwill
323,224
323,224
Total assets
$
2,242,287
$
2,277,584
Liabilities and Shareholders' Equity
Liabilities:
Notes payable
$
559,338
$
590,208
Accounts payable
43,023
60,082
Accrued liabilities
104,463
113,961
Deferred income
116,910
109,836
Deferred income taxes, net
282,142
280,129
Total liabilities
1,105,876
1,154,216
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,606 shares as of March 31, 2025 and 24,551 shares as of December 31, 2024
113,181
116,253
Retained earnings
1,023,230
1,007,115
Total shareholders’ equity
1,136,411
1,123,368
Total liabilities and shareholders’ equity
$
2,242,287
$
2,277,584
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
McGrath RentCorp
CONDENSED Consolidated Statements OF SHAREHOLDERS’ EQUITY
(unaudited)
Common Stock
Retained
Accumulated
Other
Comprehensive
Total
Shareholders’
(in thousands, except per share amounts)
Shares
Amount
Earnings
Income (Loss)
Equity
Balance at December 31, 2024
24,551
$
116,253
$
1,007,115
$
—
$
1,123,368
Net income
—
—
28,209
—
28,209
Share-based compensation
—
2,544
—
—
2,544
Common stock issued under stock plans, net of shares
withheld for employee taxes
55
—
—
—
—
Taxes paid related to net share settlement of stock awards
—
( 5,616
)
—
—
( 5,616
)
Dividends accrued of $ 0.485 per share
—
—
( 12,094
)
—
( 12,094
)
Other comprehensive income
—
—
—
—
—
Balance at March 31, 2025
24,606
$
113,181
$
1,023,230
$
—
$
1,136,411
The accompanying notes are an integral part of these condensed consolidated financial statements.
Common Stock
Retained
Accumulated
Other
Comprehensive
Total
Shareholders’
(in thousands, except per share amounts)
Shares
Amount
Earnings
Income (Loss)
Equity
Balance at December 31, 2023
24,496
$
111,122
$
822,796
$
( 116
)
$
933,802
Net income
—
—
22,848
—
22,848
Share-based compensation
—
2,209
—
—
2,209
Common stock issued under stock plans, net of shares
withheld for employee taxes
45
—
—
—
—
Taxes paid related to net share settlement of stock awards
—
( 4,082
)
—
—
( 4,082
)
Dividends accrued of $ 0.475 per share
—
—
( 11,824
)
—
( 11,824
)
Other comprehensive income
—
—
—
67
67
Balance at March 31, 2024
24,541
$
109,249
$
833,820
$
( 49
)
$
943,020
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
McGrath RentCorp
CONDENSED Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended March 31,
(in thousands)
2025
2024
Cash Flows from Operating Activities:
Net income
$
28,209
$
22,848
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
26,400
27,187
Deferred income taxes
2,013
4,709
Provision for credit losses
361
253
Share-based compensation
2,544
2,209
Gain on sale of property, plant and equipment
—
( 9,281
)
Gain on sale of used rental equipment
( 6,393
)
( 7,355
)
Foreign currency exchange (gain) loss
( 5
)
132
Amortization of debt issuance costs
23
2
Change in:
Accounts receivable
10,099
15,165
Inventories
( 2,810
)
( 9,123
)
Prepaid expenses and other assets
10,974
5,298
Accounts payable
( 15,109
)
9,145
Accrued liabilities
( 9,498
)
( 13,037
)
Deferred income
7,074
11,268
Net cash provided by operating activities
53,882
59,420
Cash Flows from Investing Activities:
Purchases of rental equipment
( 11,533
)
( 78,641
)
Purchases of property, plant and equipment
( 3,992
)
( 25,277
)
Proceeds from sales of used rental equipment
12,822
13,554
Proceeds from sales of property, plant and equipment
—
12,251
Net cash used in investing activities
( 2,703
)
( 78,113
)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit
( 30,894
)
35,584
Taxes paid related to net share settlement of stock awards
( 5,616
)
( 4,082
)
Payment of dividends
( 12,084
)
( 11,774
)
Net cash (used in) provided by financing activities
( 48,594
)
19,728
Net increase in cash
2,585
1,035
Cash balance, beginning of period
807
877
Cash balance, end of period
$
3,392
$
1,912
Supplemental Disclosure of Cash Flow Information:
Interest paid, during the period
$
9,145
$
14,184
Net income taxes paid, during the period
$
24
$
479
Dividends accrued during the period, not yet paid
$
12,471
$
12,060
Rental equipment acquisitions, not yet paid
$
3,439
$
5,795
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
MCGRATH RENTCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2025
NOTE 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The condensed consolidated financial statements for the three months ended March 31, 2025 and 2024 have not been audited, but in the opinion of management, all adjustments (consisting of normal recurring accruals, consolidating and eliminating entries) necessary for the fair presentation of the consolidated financial position, results of operations and cash flows of McGrath RentCorp (the “Company”) have been made. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to those rules and regulations. The consolidated results for the three months ended March 31, 2025, should not be considered as necessarily indicative of the consolidated results for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K, filed with the SEC on February 19, 2025 for the year ended December 31, 2024 (the “2024 Annual Report”).
Mutual decision to terminate Merger Agreement with WillScot Mobile Mini Holdings Corp.
As previously disclosed, on January 28, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with WillScot Mobile Mini Holdings Corp., a Delaware corporation ("WillScot Mobile Mini”), Brunello Merger Sub I, Inc., a California corporation and a direct wholly owned subsidiary of WillScot Mobile Mini, and Brunello Merger Sub II, LLC, a Delaware limited liability company and direct wholly owned subsidiary of WillScot Mobile Mini. On September 17, 2024, the Company and WillScot Mobile Mini mutually agreed to terminate the Merger Agreement, effective upon WillScot Mobile Mini's cash payment of $ 180.0 million to the Company, which was received on September 20, 2024.
Transaction costs attributed to the Merger Agreement are reported in the Company's Corporate segment. Expenses recognized as a result of the terminated merger totaled $ 9.4 million and $ 63.2 million for the three and twelve month periods ended March 31, 2024 and December 31, 2024, respectively. The termination payment received of $ 180.0 million, net of transaction costs, resulted in net proceeds received of $ 116.8 million during the year ended December 31, 2024. The Company determined that the transaction costs incurred on the terminated merger were significant and required separate presentation on the Company's consolidated statements of income for the year ended December 31, 2024. Due to this determination, the Company has excluded such transaction costs from Selling and administrative expenses and reported them separately on the consolidated statements of income as non-operating expenses.
NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes—Improvements to Income Tax Disclosures (Topic 740), which will require Companies to disclose annually the specific categories in income tax rate reconciliations, provide additional information for reconciling items which meet a quantitative threshold, and disaggregate domestic and foreign income or loss from operations. Additionally, this ASU will also require the disclosure of income tax expense or benefit from operations disaggregated by federal, state and foreign. This ASU is effective for fiscal years beginning after December 15, 2024, and applied on a prospective basis. The Company is in the process of evaluating the financial statement impact of this ASU.
NOTE 3. REVENUE RECOGNITION
The Company’s accounting for revenues is governed by two accounting standards. The majority of the Company’s revenues are considered lease or lease related and are accounted for in accordance with Accounting Standards Codification 842, Leases (Topic 842). Revenues determined to be non-lease related are accounted for in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606). The Company accounts for revenues when approval and commitment from both parties have been obtained, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company typically recognizes non-lease related revenues at a point in time because the customer does not simultaneously consume the benefits of the Company’s promised goods and services, or performance obligations, and obtains control when delivery and installation are complete. For contracts that have multiple performance obligations, the transaction price is allocated to each performance obligation in the contract based on the Company’s best estimate of the standalone selling prices of each distinct performance obligation in the contract. The standalone selling price is typically determined based upon the expected cost plus an estimated margin of each performance obligation.
Revenue from contracts that satisfy the criteria for over time recognition are recognized as work is performed by using the ratio of costs incurred to estimated total contract costs for each contract. The majority of revenue for these contracts is derived from long-term projects which typically span multiple quarters . The timing of revenue recognition, billings, and cash collections results in billed
9
contract receivables and contract assets on the Company's Consolidated Balance Sheets. In the Company’s contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Billings can occur subsequent to revenue recognition, resulting in contract assets, or in advance, resulting in contract liabilities. These contract assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. The contract liabilities included in Deferred income on the Company’s Consolidated Balance Sheets totaled $ 48.0 million and $ 35.4 million at March 31, 2025 and December 31, 2024, respectively. Sales revenues totaling $ 14.9 million were recognized during the three months ended March 31, 2025, which were included in the contract liability balance at December 31, 2024. For certain modular building sales, the customer retains a small portion of the contract price until full completion of the contract, or revenue is recognizable prior to customer billing, which results in revenue earned in excess of billings. These unbilled contract assets are included in Accounts receivable on the Company’s Consolidated Balance Sheets and totaled $ 17.9 million and $ 13.0 million at March 31, 2025 and December 31, 2024, respectively. The Company did not recognize any material contract asset impairments during the periods ended March 31, 2025 and December 31, 2024, respectively.
The Company's uncompleted contracts with customers which meet the criteria for over-time revenue recognition have unsatisfied or partially satisfied performance obligations. As of March 31, 2025, approximately $ 40.5 million of revenue is expected to be recognized for unsatisfied or partially satisfied obligations. The Company expects to recognize revenue for approximately one half of these unsatisfied or partially satisfied performance obligations over the next 12 months, with the remaining balance recognized thereafter. For the three months ended March 31, 2025, approximately $ 37.2 million of revenue was recognized for sales and non-lease services transferred at a point in time and approximately $ 10.3 million of revenue was recognized for sales and non-lease services transferred over time, respectively.
The Company generally rents and sells to customers on 30 day payment terms. The Company does not typically offer variable payment terms or accept non-monetary consideration. Amounts billed and due from the Company’s customers are classified as Accounts receivable on the Company’s consolidated balance sheet. For certain sales of modular buildings, progress payments from the customer are received during the manufacturing of new equipment, or the preparation of used equipment. The advance payments are not considered a significant financing component because the payments are used to meet working capital needs during the contract and to protect the Company from the customer failing to adequately complete their obligations under the contract.
Lease Revenues
Rental revenues from operating leases are recognized on a straight-line basis over the term of the lease for all operating segments. Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned. Rental related services revenues are primarily associated with relocatable modular buildings. For modular building leases, rental related services revenues for modifications, delivery, installation, dismantle and return delivery are lease related because the payments are considered minimum lease payments that are an integral part of the negotiated lease agreement with the customer. These revenues are recognized on a straight-line basis over the term of the lease. Certain leases are accounted for as finance leases. For these leases, sales revenue and the related accounts receivable are recognized upon delivery and installation of the equipment and the unearned interest is recognized over the lease term on a basis which results in a constant rate of return on the unrecovered lease investment. As of the three months ended March 31, 2025, the Company’s future minimum lease payments to be received under non-cancelable finance leases were $ 6.4 million. Of the total investment in sales-type leases, future minimum lease payments are expected to be $ 2.3 million in 2026, $ 1.2 million in 2027, $ 1.0 million in 2028, $ 1.1 million in 2029 and $ 0.8 million in 2030. The Company’s assessment of current expected losses on these receivables was immaterial and therefore no credit loss expense was provided as of the three months ended March 31, 2025. Other revenues include interest income on finance leases and rental income on facility leases.
In the three months ended March 31, 2025, the Company’s lease revenues were $ 147.9 million, consisting of $ 147.1 million of operating lease revenues and $ 0.8 million of finance lease revenues. The Company has entered into finance leases to finance certain equipment sales to customers. The lease agreements have a bargain purchase option at the end of the lease term. For these leases, sales revenue and the related accounts receivable are recognized upon delivery and installation of the equipment and the unearned interest is recognized over the lease term on a straight-line basis, which results in a constant rate of return on the unrecovered lease investment. The Company’s finance lease revenues for the three months ended March 31, 2025, include $ 0.6 million of sales revenues and $ 0.2 million of interest income.
Non-Lease Revenues
Non-lease revenues are recognized in the period when control of the performance obligation is transferred, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. For portable storage containers and electronic test equipment, rental related services revenues for delivery and return delivery are considered non-lease revenues.
Sales revenues are typically recognized at a point in time, which occurs upon the completion of delivery, installation and acceptance of the equipment by the customer. Sales contracts that satisfy the criteria for over-time recognition are recognized as work
10
is performed by using the ratio of costs incurred to estimated total contract costs for each contract. Accounting for non-lease revenues requires judgment in determining the point in time the customer gains control of the equipment and the appropriate accounting period to recognize revenue.
Sales taxes charged to customers are reported on a net basis and are excluded from revenues and expenses.
The following table disaggregates the Company’s revenues by lease (within the scope of Topic 842) and non-lease revenues (within the scope of Topic 606) and the underlying service provided for the three months ended March 31, 2025 and 2024:
(in thousands)
Mobile
Modular
Portable Storage
TRS-
RenTelco
Enviroplex
Consolidated
Three Months Ended March 31,
2025
Leasing
$
104,764
$
16,592
$
26,564
$
—
$
147,920
Non-lease:
Rental related services
4,629
3,389
680
—
8,698
Sales
22,490
1,244
7,422
7,213
38,369
Other
36
40
353
—
429
Total non-lease
27,155
4,673
8,455
7,213
47,496
Total revenues
$
131,919
$
21,265
$
35,019
$
7,213
$
195,416
2024
Leasing
$
94,890
$
19,030
$
26,245
$
—
$
140,165
Non-lease:
Rental related services
4,272
4,391
623
—
9,286
Sales
25,326
1,212
6,539
1,719
34,796
Other
3,097
127
356
—
3,580
Total non-lease
32,695
5,730
7,518
1,719
47,662
Total revenues
$
127,585
$
24,760
$
33,763
$
1,719
$
187,827
Customer returns of rental equipment prior to the end of the rental contract term are typically billed a cancellation fee, which is recorded as rental revenue in the period billed. Sales of new relocatable modular buildings, portable storage containers and electronic test equipment not manufactured by the Company are typically covered by warranties provided by the manufacturer of the products sold. The Company typically provides limited 90 -day warranties for certain sales of used rental equipment and one-year warranties on equipment manufactured by Enviroplex. Although the Company’s policy is to provide reserves for warranties when required for specific circumstances, warranty costs have not been significant to date.
The Company’s incremental cost of obtaining lease contracts, which consists of salesperson commissions, are deferred and amortized over the initial lease term for modular leases. Incremental costs for obtaining a contract for all other operating segments are expensed in the period incurred because the lease term is typically less than 12 months.
Other Income, net
Other income, net consists of the net gain on sales of property, plant and equipment. These sales are generally recognized at a point in time, with contractually defined performance obligations that are typically transferred upon the closing date of the sale. These types of sales are infrequent in occurrence and reported on the condensed consolidated statements of income within the scope of ASC 610, Other Income . Proceeds to be received from the sale of property, plant and equipment are included in Accounts receivable on the Company's condensed consolidated balance sheets.
11
NOTE 4. EARNINGS PER SHARE
Basic earnings per share (“EPS”) is computed as net income divided by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS is computed assuming conversion of all potentially dilutive securities including the dilutive effect of stock options, unvested restricted stock awards and other potentially dilutive securities. The table below presents the weighted-average number of shares of common stock used to calculate basic and diluted earnings per share:
Three Months Ended
March 31,
(in thousands)
2025
2024
Weighted-average number of shares of common stock for
calculating basic earnings per share
24,572
24,513
Effect of potentially dilutive securities from equity-based
compensation
50
51
Weighted-average number of shares of common stock for
calculating diluted earnings per share
24,622
24,564
There were 86,219 and 73,190 anti-dilutive securities excluded from the computation of diluted earnings per share for the three months ended March 31, 2025, and 2024, respectively.
The Company has in the past made purchases of shares of its common stock from time to time in over-the-counter market (NASDAQ) transactions, through privately negotiated, large block transactions and through a share repurchase plan, in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In September 2024, the Company's Board of Directors increased the capacity under the share repurchase program by authorizing the Company to repurchase up to 2,000,000 shares of the Company's outstanding common stock (the "Repurchase Plan"), an increase from the 1,309,805 remaining shares authorized for repurchase under the Repurchase Plan established in August 2015. The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion. All shares repurchased by the Company are canceled and returned to the status of authorized but unissued shares of common stock. There can be no assurance that any authorized shares will be repurchased, and the Repurchase Plan may be modified, extended or terminated by the Company’s Board of Directors at any time. There were no shares repurchased during the three months ended March 31, 2025 and 2024. As of March 31, 2025, 2,000,000 shares were authorized for repurchase under the Repurchase Plan.
NOTE 5. INVENTORIES
Inventories consist of raw materials, supplies and work-in-process. Inventories are measured at the lower of actual cost or net realizable value for acquired units and estimated standard costs for manufactured units. The costs include expenditures incurred in acquiring the inventories, manufacturing, production costs, and other costs incurred in bringing them to their existing location and condition. The following table presents the carrying value of inventories:
(dollar amounts in thousands)
March 31,
December 31,
2025
2024
Raw materials
$
4,054
$
3,380
Work-in-process
13,060
10,924
Inventories
$
17,114
$
14,304
12
NOTE 6. GOODWILL AND INTANGIBLE ASSETS
Intangible assets consist of the following:
(dollar amounts in thousands)
Estimated
useful life
in years
Average remaining life in years
Cost
Accumulated amortization
Net book value
March 31, 2025
Customer relationships
8 to 11
6.7
$ 73,217
$( 27,012 )
$ 46,205
Non-compete agreements
5
2.6
10,556
( 5,759 )
4,797
Trade name
0.75 to 8
4.0
2,000
( 1,400 )
600
Total amortizing
85,773
( 34,171 )
51,602
Trade name - non-amortizing
Indefinite
171
—
171
Total
$ 85,944
$( 34,171 )
$ 51,773
December 31, 2024
Customer relationships
8 to 11
6.9
$ 73,217
$( 25,010 )
$ 48,207
Non-compete agreements
5
2.8
10,556
( 5,239 )
5,317
Trade name
0.75 to 8
4.3
2,000
( 1,363 )
637
Total amortizing
85,773
( 31,612 )
54,161
Trade name - non-amortizing
Indefinite
171
—
171
Total
$ 85,944
$( 31,612 )
$ 54,332
The Company assesses potential impairment of its goodwill and intangible assets when there is evidence that events or circumstances have occurred that would indicate the recovery of an asset’s carrying value is unlikely. The Company also assesses potential impairment of its goodwill and intangible assets with indefinite lives on an annual basis regardless of whether there is evidence of impairment. If indicators of impairment were to be present in intangible assets used in operations and future discounted cash flows were not expected to be sufficient to recover the asset’s carrying amount, an impairment loss would be charged to expense in the period identified. The amount of an impairment loss that would be recognized is the excess of the asset’s carrying value over its fair value. Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results. The Company last conducted a qualitative analysis of its goodwill and intangible assets in the fourth quarter 2024, with no indicators of impairment. In addition, no impairment triggering events occurred during the three months ended March 31, 2025, and there were no changes to the carrying value of goodwill during this period. Determining fair value of a reporting unit is judgmental and involves the use of significant estimates and assumptions. The Company bases its fair value estimates on assumptions that it believes are reasonable but are uncertain and subject to changes in market conditions.
Intangible assets with finite useful lives are amortized over their respective useful lives. Amortization expense incurred during the three months ended March 31, 2025 and 2024, was $ 2.6 million for both periods. Based on the carrying values at March 31, 2025, and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be $ 7.7 million for the remainder of fiscal year 2025, $ 9.8 million in 2026, $ 9.6 million in 2027, $ 8.2 million in 2028, $ 4.7 million in 2029 and $ 3.0 million in 2030.
13
NOTE 7. SEGMENT REPORTING
FASB guidelines establish annual and interim reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. In accordance with these guidelines, the Company’s four reportable segments are Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex. The Company's Chief Operating Decision Maker ("CODM") Joe Hanna, Chief Executive Officer, and senior management focus on several key measures to evaluate and assess each segment’s performance, including rental, rental related services and sales revenue growth, gross profit, income from operations and income before provision for income taxes. In addition to the evaluation of the aforementioned key measures of each reportable segment, the CODM and senior management evaluate supplemental information by reportable segment, such as rental equipment acquisitions, fleet utilization, and average utilization, to further assess segment performance and the future allocation of Company resources.
The CODM is the primary individual in control of resource allocation, and the allocation determinations are made in consultation with the Company’s senior management team, of which the CODM is a member. The most significant allocation determinations made by the CODM pertain to purchases of rental equipment and employee headcount. These determinations are generally made as part of the annual budgeting process, with regular reviews occurring throughout the year that can result in allocation changes depending upon performance against budget. On a monthly basis, the CODM considers period end and average rental equipment utilization and budget-to-actual variances to gross profit, income from operations and income before provision for income taxes when making decisions about allocating capital and employee resources to the segments. 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, goodwill, 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, 2025 and 2024, for the Company’s reportable segments is shown in the following tables:
(dollar amounts in thousands)
Mobile
Modular
Portable Storage
TRS-
RenTelco
Enviroplex 1
Consolidated
Three Months Ended March 31,
2025
Revenues
Rental revenues
$
78,496
$
16,074
$
25,543
$
—
$
120,113
Rental related services revenues
29,475
3,631
810
—
33,916
Sales
22,490
1,244
7,979
7,213
38,926
Other
1,458
316
687
—
2,461
Total revenues
131,919
21,265
35,019
7,213
195,416
Costs of Revenues
Depreciation of rental equipment
10,554
1,031
9,920
—
21,505
Rental related services
19,740
3,933
640
—
24,313
Other
20,812
1,527
5,313
—
27,652
Costs of sales
15,345
831
4,271
5,063
25,510
Total costs of revenues
66,451
7,322
20,144
5,063
98,980
Gross profit
65,468
13,943
14,875
2,150
96,436
Significant Segment Expenses 3
Wages and benefits
14,110
3,524
2,899
1,196
21,729
Depreciation and amortization
3,531
357
26
102
4,016
Marketing and administrative expenses
4,666
1,640
1,303
590
8,199
Allocated corporate services 4
11,554
1,864
3,146
—
16,564
Other segment items 5
127
170
64
—
361
Total expenses
33,988
7,555
7,438
1,888
50,869
Income from operations
31,480
6,388
7,437
262
45,567
Interest expense (income) allocation
6,505
971
1,277
( 595
)
8,158
Foreign currency exchange gain
—
—
( 5
)
—
( 5
)
Income before provision for income taxes
$
24,975
$
5,417
$
6,165
$
857
$
37,414
Other Selected Information
Rental equipment acquisitions
$
4,400
$
357
$
4,822
—
$
9,579
Accounts receivable, net (period end)
$
159,672
$
10,397
$
22,388
$
16,425
$
208,882
Rental equipment, at cost (period end)
$
1,414,535
$
240,348
$
334,110
—
$
1,988,993
Rental equipment, net book value (period end)
$
1,051,635
$
217,060
$
100,608
—
$
1,369,303
Utilization (period end) 2
74.3
%
61.0
%
64.9
%
Average utilization 2
74.6
%
60.2
%
61.6
%
14
(dollar amounts in thousands)
Mobile
Modular
Portable Storage
TRS-
RenTelco
Enviroplex 1
Consolidated
Three Months Ended March 31,
2024
Revenues
Rental revenues
$
76,496
$
18,407
$
25,429
$
—
$
120,332
Rental related services revenues
24,133
4,723
724
—
29,580
Sales
25,326
1,212
6,812
1,719
35,069
Other
1,630
418
798
—
2,846
Total revenues
127,585
24,760
33,763
1,719
187,827
Costs of Revenues
Depreciation of rental equipment
9,874
965
11,527
—
22,366
Rental related services
15,780
4,456
550
—
20,786
Other
22,673
1,468
4,869
—
29,010
Costs of sales
17,413
768
2,942
1,274
22,397
Total costs of revenues
65,740
7,657
19,888
1,274
94,559
Gross profit
61,845
17,103
13,875
445
93,268
Significant Segment Expenses 3
Wages and benefits
14,262
3,516
2,695
1,165
21,638
Depreciation and amortization
3,380
442
26
97
3,945
Marketing and administrative expenses
4,718
1,595
1,401
542
8,256
Allocated corporate services 4
11,191
2,122
3,054
—
16,367
Other segment items 5
63
134
61
—
258
Total expenses
33,614
7,809
7,237
1,804
50,464
Other income, net
( 6,220
)
( 1,319
)
( 1,742
)
—
( 9,281
)
Income from operations
34,451
10,613
8,380
( 1,359
)
52,085
Interest expense (income) allocation
9,799
1,420
2,062
( 577
)
12,704
Foreign currency exchange loss
—
—
132
—
132
Income before provision for income taxes
$
24,652
$
9,193
$
6,186
$
( 782
)
$
39,249
Reconciliation of Segment Profit (Loss)
Total segment gross profit
$
93,268
Segment operating expenses, net
50,464
Other income, net
( 9,281
)
Interest expense allocation
12,704
Foreign currency exchange loss
132
WillScot Mobile Mini transaction costs
9,354
Income before provision for income taxes
$
29,895
Other Selected Information
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
%
1. Gross Enviroplex sales revenues were $ 7,213 and $ 1,719 for the three months ended March 31, 2025 and 2024, respectively. There were no inter-segment sales to Mobile Modular in the three months ended March 31, 2025 and $ 1,845 inter-segment sales to Mobile Modular for the same period in 2024, 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 new equipment inventory and accessory equipment. The average utilization for the period is calculated using the average costs of rental equipment.
3. The Significant Segment Expense categories and amounts align with the segment-level information that is regularly provided to the CODM.
4. Allocated corporate services costs are comprised of expenses incurred by the Company which are not directly incurred by each business segment as a part of their normal operations. These allocated indirect corporate costs primarily include wages and benefits, depreciation of corporate capital assets, information technology, legal, accounting and other administrative expenses.
5. Other segment items for each reportable segment is primarily comprised of credit losses.
No single customer accounted for more than 10 % of total revenues for the three months ended March 31, 2025 and 2024. Revenues from foreign country customers accounted for 2 % of the Company’s total revenues for the same periods.
15
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.