Q4 2024 McGrath RentCorp Earnings Call
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Speaker Change: Ladies and gentlemen, thank you for standing by welcome to the Mcgrath rent Corp, fourth quarter 2024 earnings call.
Speaker Change: 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 digit one on your telephone keypad.
Speaker Change: This conference call is being recorded today Wednesday February 19th 2025.
Speaker Change: Before we begin note that the matters the company manager I'll 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 relating to the company's expectations strategies prospects backlog our targets.
Speaker Change: These forward looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected.
Speaker Change: 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.
Speaker Change: Forward looking statements are made as only as of the date hereof, except as otherwise required by law, we assume no obligation to update any forward looking statements.
Speaker Change: In addition to the press release issued today. The company also filed with the FCC. The earnings release on form 8-K, and its Form 10-K for the year ended December 31st 2024.
Speaker Change: Speaking today will be Joe Hanna Chief Executive Officer, and Keith Pratt Chief Financial Officer.
Speaker Change: I will now turn the call over to Mr. Hanna. Please go ahead Sir.
Joe Hanna: Thank you Jeff Good afternoon, everyone and thank you for joining us today for Mcgrath ranked Corp's fourth quarter 2024 earnings call.
Speaker Change: I am pleased to report on our performance over the past quarter and full year and to provide insight into our outlook for 2025.
Speaker Change: Before we dive into the details of our results I want to start by acknowledging that 2024 was a year with some challenges, but also one where we were able to demonstrate resilience and our commitment to long term growth.
Speaker Change: We navigated a tough market demand conditions and the distractions of the terminated merger with wheels Scott.
Speaker Change: Throughout it all we executed solidly and are well positioned for future growth and success.
Speaker Change: For the fourth quarter total company revenues increased 10% and adjusted EBITDA increased 5% compared to a year earlier.
Speaker Change: I was pleased with this performance, which was driven by continued progress from our modular strategic growth initiatives.
Speaker Change: Mobile modular had a strong quarter with rental revenues growing 8% and sales revenues growing 32%.
Speaker Change: Both our commercial business and our education rentals grew during the quarter.
Speaker Change: The commercial wins, we experienced re geographically broad based and in a wide variety of market verticals, including government and technology.
Speaker Change: Our education business benefited from modernization and growth projects and encompassed both public and private school customers.
Speaker Change: Consistent with recent Abi data and other macro indicators of construction related demand, we continued to experience some delays and softness in the demand environment, Utah.
Speaker Change: Utilization dipped year over year and ended the quarter at 75, 1%.
Speaker Change: Rental revenue gains from pricing optimization and growth in mobile modular plus services.
Speaker Change: Then offset lower units on rent for the quarter.
Speaker Change: Mobile modular strong sales growth reflects further progress with our new modular sales initiatives, providing additional value to our customers and benefiting from increasing interest in new modular units as an attractive solution for construction projects.
Speaker Change: Turning to our portable storage business rental revenues declined by 15% less activity in commercial construction driven by high interest rates appears to be a primary factor driving our portable storage decrease.
Speaker Change: Weaker demand mark market demand conditions were widespread and not concentrated in any one geographic area.
Speaker Change: At Trs Ritacco rental revenues declined by 9% with both our general purpose and communications rental revenues impacted this reflected the industry wide slowdown in test and measurement equipment markets, both at OEM and rental equipment providers.
Speaker Change: The rental revenues for Trs held relatively steady in the fourth quarter as they did throughout 2024, which was encouraging.
Speaker Change: Shifting now to the full year I am very proud of the results we delivered in 2024.
Speaker Change: Our full year, 10% growth in both revenue and adjusted EBITDA reflects diligent focus on execution.
Speaker Change: The modular business had a good year and we made solid progress with our modular growth initiatives for additional services and new equipment sales.
Speaker Change: Our performance was driven by the strong focus drive and care for customers and fellow team members. Our teams demonstrated their ability to adapt and execute on our strategy and remain focused on the long term health of the business.
Speaker Change: I would like to express my heartfelt appreciation to all of our team members for their consistent desire to provide an exceptional customer experience.
Speaker Change: Well done and thank you for all your efforts throughout 2024.
Speaker Change: Yes.
Speaker Change: Now, let's look at a year ahead.
Speaker Change: The key driver for our performance in 2025 will be the demand conditions across our business segments.
Speaker Change: We've seen some stabilization in certain areas, but it is early in the year and we need to see how customer activity plays out in the next few months January quote activity was stronger across all our businesses compared to the same time last year.
Speaker Change: We are encouraged by this and hopeful that it is a positive indicator of future orders.
Speaker Change: We will be closely monitoring market trends and customer demand to ensure we are making the right decisions to meet customer needs as the year unfolds.
Speaker Change: Now, let me provide a bit more detail on how we're thinking about each of our business segments as we entered the year.
Speaker Change: We started the year at mobile modular with good momentum driven by the ongoing success of our initiatives as well as favorable activity in several important market verticals.
Speaker Change: We anticipate commercial activity such as large industrial projects Datacenters and government work to be positive drivers for the year.
Speaker Change: Our education business is continuing to see good funding in our markets and modernization backlogs are healthy.
Speaker Change: In California voters passed the $10 billion bond in November for school facilities. There is already a considerable list of projects that district wants to move forward.
Speaker Change: The pricing tailwind we have seen over the last few years should continue with the sizeable gap between our fleet average pricing and current new order pricing contributing to rent revenue growth as the fleet turns.
Speaker Change: We also have opportunities for additional long term growth and several regional markets, where we gained an initial foothold through our modular acquisitions.
Speaker Change: We are investing in increased sales team coverage and will be accompanying that with prudent equipment purchases to meet order volumes.
Speaker Change: Despite softness in the broader commercial construction market mobile modular has been a strong performer and we believe that our focus on our core business augmented by our initiatives will help drive continued growth.
Speaker Change: Turning to portable storage, we are starting 2025 with a lower rental revenue run rate than we had at the beginning of 'twenty 'twenty four.
Speaker Change: For January we have seen quote volumes and shipments improve and returning equipment has slowed we are hopeful that market demand stabilization may be materializing.
Speaker Change: Long term, we believe strongly in the horsepower. This business, we will continue to invest in growing locations. We're in entering new locations and looking for attractive tuck in acquisitions to augment our growth.
Speaker Change: Crs is entering 2025 with more momentum than we had at this time last year in terms of customer activity levels. We are seeing some early positive signs across both our general purpose and our wired communications equipment rentals.
Speaker Change: Overall market demand continues to pick up in 2025, we are confident that Trs will be in a good position to capitalize on that momentum.
Speaker Change: Across Mcgrath, we are entering 2025 confident that our strategy is sound and we are well positioned to execute.
Speaker Change: To further support our growth efforts on January 16th we announced the promotion of Phil Hawkins to Chief operating officer.
Speaker Change: It's been a strong leader for our modular business since 2011, and he ladder it here at business prior to that.
Speaker Change: His experience makes him ideal for the role as we grow the company. He will help us execute our strategy and ensure that we continue to hone the critical operational rigor and cultural dynamics that have enabled mcgrath to deliver results and to be so well respected by our customers.
Hills: I am pleased to have hills partnership in this new role.
Speaker Change: Finally, before I turn the call over to Keith I'd like to highlight two important company milestones that we are very proud of last week Mcgrath 40th anniversary as a NASDAQ listed company was acknowledged on the NASDAQ tower display in times Square, New York Today, we would.
Hills: Ounce to an increase in the company's dividend for the 34th consecutive year.
Hills: Both these items demonstrate the grass impressive longevity and shareholder focus as a public company.
We continue to focus on the long term success of Mcgrath and remain committed to executing our strategy with discipline for the benefit of our customers team members and shareholders.
Speaker Change: With that I'll turn the call over to Keith who will take you through the financial details of our quarter and our outlook for the full year.
Hills: Okay.
Keith: Thank you Joe and good afternoon, everyone.
As Joe highlighted we delivered good results in the fourth quarter driven by the performance of our mobile modular business.
Keith: Looking at the overall corporate results for the fourth quarter total revenues from continuing operations increased 10% to $244 million.
Keith: And adjusted EBITDA increased 5% to $92 million.
Keith: Reviewing mobile modular is operating performance as compared to the fourth quarter of 2023.
Mobile modular had a strong quarter as we continued to make progress delivering on our mobile modular business growth strategy.
Keith: Adjusted EBITDA increased 13% to 61 million and total revenues increased 14% to 171 8 million.
Keith: There were increases across all key operational revenue streams.
Keith: Including 8% higher rental revenues, 5% higher rental related services revenues and 32% higher sales revenues.
Keith: These sales revenues increase was primarily due to higher new equipment sales and demonstrated continued good progress with our initiative to grow modular sales projects.
Keith: Rental margins were 65% up from 63% a year ago, primarily because of the rental revenue growth and lower inventory center costs.
Keith: Average fleet utilization was 76% compared to 79, 7% a year ago.
Keith: Yes.
Keith: Fourth quarter monthly revenue per unit on rent increased 11% year over year to $828.
Keith: For new shipments over the last 12 months.
Keith: The average monthly revenue per unit increased 15% to $1220.
Keith: Continued progress with mobile modular plus is embedded in these data points and as an additional growth driver.
Keith: For the fourth quarter mobile modular plus revenues increased to 8.4 million from $7 6 million a year earlier and site related services increased to $6 9 million up from $6 2 million.
Keith: Turning to the review of portable storage.
Keith: Adjusted EBITDA for portable storage was $9 9 million, a decrease of 22% compared to the prior year.
Keith: And conditions during the quarter were weaker than a year ago, primarily because of lower commercial construction project activity.
Keith: Rental revenues for the quarter decreased 15% to $16 7 million and.
Keith: And rental margins were 85% compared to 87% a year ago.
Keith: Average rental equipment on rent decreased 14%.
Keith: Average utilization for the quarter was 61, 2% compared to 74.8% a year ago.
Keith: We responded to the softer market demand conditions by reducing new equipment capital spending and carefully managing operating costs.
Keith: Turning now to the review of Trs rent telco.
Keith: Adjusted EBITDA was $19 1 million, a decrease of 8% compared to last year and total revenues decreased 3% to $34 million.
Keith: Rental revenues for the quarter decreased 9%.
Keith: The industry experienced continued end market weakness.
Keith: Average utilization for the quarter was 59, 1%.
Compared to 58, 9% a year ago.
Keith: And rental margins were 40% compared to 41% a year ago.
Keith: Yeah.
Keith: Sales revenues increased 26% to.
Keith: $207 3 million.
Keith: And gross margins were 58% compared to 55% a year ago.
To address the softer business conditions.
Keith: We continue to reduce new equipment capital spending.
Keith: Focused on sales of used equipment.
Keith: <unk> fleet size.
Keith: Carefully managed operating costs.
Keith: Total fleet value based on original cost of equipment with $344 million at the end of December.
Keith: $13 million from the third quarter and down $34 million from a year ago.
Keith: The remainder of my comments will be on a total company basis from continuing operations.
Keith: Fourth quarter, selling and administrative expenses decreased $2 8 million to $51 7 million.
Keith: Interest expense was $8 9 million a decrease of $3 3 million.
As a result of lower average interest rates and a reduction in average debt levels during the quarter when compared to a year ago.
Keith: The fourth quarter provision for income taxes.
Keith: Based on an effective tax rate of 25% compared to 26, 7% a year earlier.
Keith: Turning to our year to date cash flow highlights net cash provided by operating activities was $374 million compared to 95 million in the prior year.
Keith: The decrease was primarily attributed to the 180 million merger termination payment received from well Scott.
Keith: Net of 63 million Mcgrath merger transaction costs.
Rental equipment purchases were a $191 million compared to $230 million in the prior year.
Keith: New equipment purchases were primarily for the modular business, while spending a trs and portable storage was reduced in response to softer demand conditions.
Keith: In addition to investments in new fleet healthy cash generation allowed us to pay $47 million in shareholder dividends.
Keith: At quarter end, we had net borrowings of $590 million and the ratio of funded debt to last 12 months actual adjusted EBITDA was $1 68 to one.
Keith: Finally, our 2025 financial outlook.
Keith: For the full year, we currently expect.
Keith: Total revenue between 920 and $970 million.
Keith: Adjusted EBITDA between 345 and $360 million.
Keith: Gross rental equipment capital expenditures between 120 and $130 million.
Keith: Our current assessment of the outlook for each rental segment.
Keith: Given where our businesses ended 2024 and <unk> 2025 started is as follows.
We see good momentum at mobile modular, where we have multiple growth initiatives. Some progress and we expect this business to be the primary driver of adjusted EBITDA growth for 2025.
Keith: We ended 2024 with fleet utilization at 75%.
Keith: Which means we enter 2025 with more fleet available to meet rental demand than a year ago.
Keith: Consequently, our plans for 2025 include a shift from capital spending to operating expense as we fulfill customer orders.
Keith: We expect to spend approximately $9 million to $13 million higher operating expenses in 2025 preparing available fleet to meet customer orders.
Keith: This expense was an increase in our direct cost of rental operations, which reduces adjusted EBITDA.
Keith: As we incur these expenses, we will have a significant offsetting reduction.
Two our capital budget for new rental equipment purchases compared to last year.
Keith: At portable storage, we ended with our lowest adjusted EBITDA run rate of the year.
Keith: As a result, we start 2025 in a challenging position.
Keith: And we currently expect portable storage adjusted EBITDA to be lower.
Keith: In 2025 than 2024.
At Trs after two challenging years of softening market demand conditions. We believe we are seeing some signs of bottoming out and stabilization in the business performance, which we expect will result in 2025 adjusted EBITDA comparable.
Keith: To 2024.
Keith: Our outlook also includes the following expectations for the company overall for the year.
Keith: Rental equipment depreciation expense of $85 million to $89 million.
Keith: Cost of rental operations of $119 million to $123 million.
Keith: SG&A expense of 213 to 217 million and.
Keith: And interest expense of approximately $36 million to $38 million.
Keith: In summary, we remain committed to building long term shareholder value through some strategic focus disciplined capital allocation and consistent execution.
Jeff Good: That concludes our prepared remarks, Jeff you May now open the lines for questions.
Speaker Change: Thank you Sir at this time, if you would like to ask a question. Please press star one on your telephone keypad.
Jeff Good: You may remove yourself from the queue by pressing star Q.
Once again that is star one to ask a question, we'll pause for a moment to allow the questions to queue.
Scott Schneeberger: We'll go first to Scott Schneeberger with Oppenheimer.
Scott Schneeberger: Thank you very much good evening.
Speaker Change: I guess I'd like to start in the modular segment on the.
Speaker Change: Commercial offices versus education, I think the press release mentioned you all mentioned that both segments grew could you talk about that.
Speaker Change: Growth in the fourth quarter and for the full year are now on an in each segment basis.
Education versus commercial and then thoughts on those two and it sounds like you have a very optimistic outlook for modular for Oh, it relative to the conditions for 2025, but if you could speak to each of those segments for 25 as well. Thank you.
Speaker Change: Sure Scott I'll start this is Keith if you look at the rental revenue growth in the fourth quarter for modular that was 8% growth.
Speaker Change: Similar to the third quarter I would characterize the growth was balanced across commercial and education for the fourth quarter commercial grew 9% education grew 7%.
Speaker Change: So.
I think on a full year basis fairly consistent view, both have been good contributors to the modular growth story.
Speaker Change: And Keith will get ahead.
Speaker Change: This time of year I guess, it's a little early yet in mid February but you get paid for what the order book is for the classroom rentals.
Speaker Change: A do you have a feel for that yet or do you need another month or two and B do you anticipate that mix can be balanced again next year of growth being pretty equal of these two segments.
Speaker Change: Hey, Scott This is Joe yes.
Speaker Change: I presume, we believe that it will be relatively balanced.
Speaker Change: What I can say at this point is that our.
Speaker Change: It feels like customer activity is better than it was this time last year and what it mean activity I mean quote volumes are up and actually they're up across all the businesses. So in particular mobile modular that's a good sign.
Speaker Change: School districts are in the process of booking orders now don't know exactly how that's going to pan out because it's a little bit early but the signs are good. The funding is good and so we're positive on next year.
Joe Hanna: Thanks, just a quick summary, Joe it sounds like so just to each of your.
Joe Hanna: Three major segments modular and portable storage and Trs <unk>.
Joe Hanna: Speak a little bit too.
Joe Hanna: Same or down I guess qualifications of each 125 versus 24 as far as how you feel about the end market. Thank you.
Sure.
Joe Hanna: Well overall I would say we're positive on.
Joe Hanna: The business outlook for 2025.
Joe Hanna: <unk>.
Joe Hanna: Obviously theres a lot of unknowns in terms of how things will pan out, but I believe that less regulations, hopefully some lower interest rates, we'll see if that happens I think it will.
Joe Hanna: There is potential there for it to unlock.
Joe Hanna: Business and all of the segments that we operate and so I think for modular as you know we're coming into the year with good momentum.
Joe Hanna: And I think that's going to continue as we stated with portable storage. We are at a lower run rate than we were.
Joe Hanna: At the same time last year, and Thats, not something that we need to work out of and worked through and so.
Joe Hanna: Take a little bit of time for us to do that but overall I think.
Joe Hanna: Well, even though I think business will pick up I think it will be a challenge for us to deliver better results than we are.
Joe Hanna: We had in 2024 in that business and then you look over at Trs.
Joe Hanna: We've been really consistent quarter over quarter, it's been relatively flat for all of 2024, and we're starting to see more momentum better quote volumes.
Joe Hanna: Billings I'm, sorry bookings that we're getting on a daily basis are stronger than returns and have been consistently so well into this year. So far so I think the businesses.
Joe Hanna: Good should do better in 2025, so hopefully that gives you a kind of a brief rundown.
Speaker Change: Okay. Thanks, and I appreciate that summary, I think it is helpful.
Speaker Change: I have one on pricing and then and then and then wanted to dig in a little bit on margin Capex guidance. So on pricing it would be in mobile modular Keith I guess for you could you speak to the conversion tailwind.
Speaker Change: Pricing just elaborate on that it seems pretty powerful so I know you have some interesting margin movement will talk about in a moment.
Speaker Change: But absent that just the power on margin of all of this pricing convergence you have in mobile modular. Thank you.
Speaker Change: Sure and Youll see in our Investor slides that are published today, where we elaborate in a little bit more detail, but if you look at the average unit on rent the revenue per month, we get to $828. If you compare that to new shipments over the last 12 months, we're at 1200.
Speaker Change: $20. So that's a sizable gap its about 47% at clearly mix can play a role here, which region what type of unit, but at a high level. It does indicate that there is a gap between average pricing on the sleep, it's installed compared with new orders that were shipping.
Speaker Change: <unk> been in place now for well over a year or two and as the fleet is rotating youre seeing that unit on rent average revenue increase it was up 11%.
Speaker Change: For the most recent quarter compared to a year earlier.
And we think that's a positive.
Speaker Change: Tailwind over the next several years. So that's in place. We're seeing continued evidence of it I think it speaks to good work by the business in terms of how do we look for revenue opportunities, how we price very carefully.
Speaker Change: And so that's encouraging.
Speaker Change: Thanks Keith.
Speaker Change: It's safe to.
Speaker Change: And for that it is a powerful margin driver correct that that natural pricing lift.
Speaker Change: Yes, I think the way to look at margin is on the revenue side. It helps and then in any particular quarter or any particular year. You've then got to look at the rental cost structure and that rental cost structure is driven by how many of the units you put on rent from existing owned inventory, where you essentially spanned.
Speaker Change: In operating expense to get them rental Randy as opposed to whether you're satisfying new demand with brand New fleet that is purchased new and in any given year that balance can move around obviously as I indicated with some of the prepared remarks on the outlook will be preparing a lot more units.
Speaker Change: For rent that we already own and incurring more expenses so.
Speaker Change: Good news Bad news scenario. Good news is we want to be satisfying customer orders near term that does pressure margin a little bit if we're spending heavily in our inventory centers. This is all something we see over the years, it's not uncommon.
Speaker Change: That interplay between Opex and Capex and so the mix shifts a little bit for 2025, Thats our current expectation.
Speaker Change: And that covers where I wanted to go next.
Speaker Change: I guess two final ones.
Speaker Change: Is there that sounds like that's the big contributor to a.
Speaker Change: Pretty solid total company revenue guide in the low to mid single David you had a flattish EBITDA guide it sounds like that represents that delta of why it's not more and it's somewhat of a high class problem, but not more.
Speaker Change: Ambitious on the EBITDA line is there a rental sales mix.
Speaker Change: We anticipate more sales this year is that contributing or is it purely this opex capex dynamic.
Speaker Change: Yes, I'd say, there's three things I'd look at Scott. The first would be as you noted this shift in the mobile modular business with more.
Speaker Change: Operating expense to get units ready to go out on rent and we do that every year and we're happy to do that it's very good use of our cash to satisfy demand that way and you will see that our guide for capital spending is down by about a third consistent with my remarks that we'll satisfy more demand from fleet, we already own.
Speaker Change: That's the first thing second thing I would say is.
Speaker Change: Again, we noted this in the prepared remarks portable storage has had a tough.
Speaker Change: Year end 2024. It has started 2025 really at a low run rate from rental revenue point of view EBITDA point of view. So the question is how much can we improve from that position over the course of the year and I think our initial view is even if we make progress in growing the business that's going to be a headwind.
Speaker Change: And in terms of EBITDA contribution so keep that in mind as well.
Speaker Change: Our view currently for what it can contribute in 2025 lastly, EBITDA then it contributed in 2024, and then I'd say the last comment would be as you mentioned what about the mix between rents in sales. If you look at the overall revenue guide here's how it looks today I would characterize the <unk>.
Speaker Change: Growth in rental operations for the company as a whole probably in the low to mid single digit range in that neighborhood. If I look at the sales portion I would say that can be in the high single digit up to 10%, possibly even slightly better if we have a very good sales year.
Speaker Change: But that's how we're looking at that so if you look at the two revenue streams. The sales revenue stream is growing faster it tends to have a lower EBITDA contribution and the rental side. So that's another factor that if you look at the year as a whole with press pressurizes, the EBITA margin a bit.
Speaker Change: Thanks, Keith and was that that was a rank order that you just gave those three.
Speaker Change: Not deliberately but I would say it probably is as I reflect on it in fact, yes, I would say it is the top three in order.
Speaker Change: Thanks, and then last from me, yes that Capex guide is significantly lower than what you've been running at and you've done a good job on this call explaining why that is.
Speaker Change: You would.
Speaker Change: When you have the breakup fee from the.
Speaker Change: The acquisition this past year that Didnt consummate.
Speaker Change: So you are heading into 2025.
Speaker Change: With a very strong balance sheet ample cash just to increase the dividend as you guys noted for however, many years in a row and 30 something.
Speaker Change: What is going to be the use of capital. This year. Just how are you thinking about that it sounds like you certainly have had to spend thanks.
Speaker Change: Yeah, well the good news is we're very well positioned we're very comfortable leverage is $1 68 at the end of the year. That's a very comfortable number we've got options. That's the important thing to really stress here lots of options. If demand plays out better we can always throttle up.
Speaker Change: Capex, a little bit, but that's not how we're starting the year with you.
Speaker Change: <unk> heard our views on where we're starting the year, but that's an option.
Speaker Change: Obviously, we talked about getting the M&A pipeline active again.
Speaker Change: That has been a tool in our toolkit over the last few years, whether it's smaller tuck ins or other opportunities. We see we're opening to doing the right deals at the right price that we think are.
Speaker Change: Valuable and fit well with our strategy. So that's another thing we're not going to be in a rush, but we are actively getting the pipeline moving again looking at opportunities and that's another avenue for deploying cash.
Speaker Change: Great. Thanks, I appreciate you taking them all best of luck.
Speaker Change: Thank you.
Scott Schneeberger: Thanks Scott.
Speaker Change: And just a reminder, with star one if you had a question we will go next to Marc Riddick with Sidoti.
Marc Riddick: Hey, good evening.
Speaker Change: Hi, Mark to Mark.
Speaker Change: So I was wondering if you can spend and thanks for all the detail that you've already provided is wanted to spend a little time talking about California.
Speaker Change: You mentioned in prepared remarks around the bond.
Speaker Change: In November.
Speaker Change: And sort of maybe what you're seeing there are you seeing anything that is particularly related to any of the b. The weather challenges in the fires and the like is there anything that we should be thinking about from from those situations.
Speaker Change: Sure well first of all that always good news when voters passive bond here and so we were very happy to see the $10 billion bond for facilities that was passed in November.
Speaker Change: Thats augmented of course by a lot of local bonds that also passed and so theres plenty of money that should be available for education projects in the states. So that's good news there concerning the weather and the fires a little bit early for us to comment on what that's going to mean for the business.
We are very well positioned to help customers both in the portable storage part of the business and.
Speaker Change: The modular part of the business there has been.
Speaker Change: A number of schools that have been.
Speaker Change: Completely destroyed and we were just well positioned to help them if they need it but I really don't think mark that's going to be a huge needle mover.
For us we're happy to be there when these events occur.
Speaker Change: And we will get some orders I'm sure we will but I don't think it'll be anything really significant that will make a huge difference in the year for us.
Speaker Change: Okay, and then I was wondering if you could talk a little bit about the.
Speaker Change: The potential for the acquisition pipeline, particularly around and selling in the U S and maybe what you're seeing there both as far as availability is in valuations and forgive me if I. If you could touch on this already and I missed it but I was sort of curious as to whether or not that's loosened up at all or changed any since since the <unk>.
Speaker Change: General how we should be thinking about what the pipeline might look like with the domestic expansion. Thank you.
Speaker Change: Sure I Wouldnt say that Theres the opportunity count has changed.
Speaker Change: There has been consolidation as we know in the industry, particularly in the modular business, but there are still folks out there that are potentially available we'd be very interested in them.
Speaker Change: Same with the portable storage business that being much more fragmented there are more opportunities for tuck ins and.
Speaker Change: Typically those businesses end up becoming available on the market due to a life event.
Speaker Change: The owner wants to retire or cash out monetize their investment pass it down.
Speaker Change: Two two and pass the investment funds down to other <unk>.
Speaker Change: Members of their families or something like that so those those things don't necessarily get tied to.
Speaker Change: And how.
Speaker Change: How the economies performing we see those opportunities when there is a weaker economy and we see it when theyre stronger economy. So we're just out there and we'll be we'll be looking at those carefully as the year progresses.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you Mark Thanks, Mark.
Daniel Moore: We'll go next to Daniel Moore with CJS Securities.
Daniel Moore: Good afternoon, Thanks for all the color and taking my questions.
Speaker Change: Let me start with mobile modular pricing clearly a meaningful tailwind as we've just talked about and I realize this is a little bit of a crystal ball, but when you look at utilization would you expect utilization to level off and perhaps begin to grow again sometime over the course of fiscal 'twenty five.
Speaker Change: Particularly with a little bit lower capital spending or is it just too early to tell at this point.
Speaker Change: Yes that would be the objective.
Speaker Change: Since we're going to be pulling more units out of the yard.
Because utilization is has made those units available we hope to we hope to push that number up during the year. So definitely an objective for us.
Speaker Change: And probably second half of the year Dan.
Speaker Change: Progresses, we generally see the activity levels.
Speaker Change: Increase in so there's more movement in the fleet and as we explained our goal is to satisfy more of them as new shipments from fleet, we already own.
It makes sense perfect in terms of the revenue growth guide, obviously, it's a wide range given the environment understandable, 4% at the midpoint wondering if you have any thoughts on cadence of growth overall on a year over year basis kind of H one versus HD.
Speaker Change: Yes, I would say typically second half is stronger than the first half.
Speaker Change: With a little bit more sales in the modular business of new equipment in the mix that has the potential to have a little bit more volatility because when projects happen they happen when they get completed they get completed so.
Speaker Change: If you look at a typical year I would say second half is bigger than the first half.
Speaker Change: But with the overlay of some ups and downs on the sales piece as we go through the year and we'll be happy to comment on that as we learn more this early in the year. It's just really hard to tell but by mid year, we have a pretty good sense.
Speaker Change: What that cadence is looking like.
Speaker Change: Helpful.
Speaker Change: Portable storage.
Speaker Change: Obviously I appreciate the commentary.
Speaker Change: Yeah, the math makes all the sense in the world It would be down a little bit year on year, just based on where we're starting when would you need to see things start to turn in order to be more confident about say a return to growth in 2006.
Yes.
We would need to see them start to turn now and it is.
Speaker Change: So it just takes a little while for that to flow through the business and starting in the quarter and fourth quarter and into this year, we've definitely seen more activity and higher volumes than we did for the first three quarters of 2024.
Speaker Change: So we believe that this is this is the momentum that we're talking about and that momentum is good as we go into this year and I think if it continues.
Speaker Change: Which I think it will.
Speaker Change: It will it will help us.
Speaker Change: More in the second half of the year as order flow volume and we get shipments out in the first half of the year. It should should help us in our results for the second half.
Speaker Change: Helpful and.
Speaker Change: Maybe just talk a little bit more about the green shoots you're seeing for Trs <unk> telco now what youre hearing from your customers and when you have a better sense of maybe a sustained turn versus moderate improvement versus easier comps.
Speaker Change: Yeah.
Speaker Change: Similar situation there as I commented before our rental revenues were flat for the for the year and I think what's changed now for US is we.
Speaker Change: We are seeing at least coming into this year, we're seeing a consistent bookings that are outpacing returns and so when you have that momentum into the beginning of the year. That's a very good sign.
Speaker Change: Selling for us.
Speaker Change: Excuse me.
Speaker Change: And so that's been a positive indicator for us I think.
Speaker Change: Two segments of the business general purpose and our <unk>.
Speaker Change: Wired communications rentals were seeing strength, there and particularly in R&D for for General purpose and then in the commute.
Speaker Change: Data centers for our Wired communications, so just a lot of work going on there to put.
Speaker Change: Fiber optic capacity and everything in four.
Speaker Change: For the data centers, and we're very well positioned to serve that market. So those are green shoots and we're happy to see them and we're going to we're going to really continue to chase after those orders.
Speaker Change: Alright really helpful last one I'll jump back but.
Speaker Change: The I appreciate the color opex versus Capex. So it sounds like youre spending an incremental kind of $9 million to $13 million in opex to prepare the fleet.
Speaker Change: If it werent for that mix change would that be the amount that EBITDA guide would be higher because that kind of a one to one.
Speaker Change: Kind of making sure I understand the dynamic there. Thank you again.
Speaker Change: Yes, I think thats, a reasonable way to look at it and as I tried to say earlier in any particular year, we're going to have the option of supplying new orders through inventory, we own where we spend some opex to get the equipment ready or we're supplying from fleet that we're buying you from the factories. So if you look.
Speaker Change: Look back lets say at 2023 and 2024 as utilization became higher of the modular fleet, we were deploying more shipments from new equipment bought at the factory. That's typical when utilization is high and then when you are in the other situation where utilization is a bit.
Speaker Change: Lower as it currently is we can satisfy more orders from again, some fleet, we already own but we do incur incrementally higher costs in the inventory centers. So I would say that 9% to $13 million range. The majority of that you can think of is a sort of one for one deed up to EBIT.
Speaker Change: Again, we probably comparing to almost book and cases last year was high on the capital lower on the Opex. This year, it's really flipped the other way high on the Opex low on the Capex. So you might argue a typical year might be somewhere between the two but.
Speaker Change: That's how we're looking at 2025.
Dan: Yes, Dan.
Dan: Yes, let me add let me add really quick there that's consistent with our long term view on how we run the business more.
Dan: More responsible we feel.
Dan: To.
Dan: Pull units out of the yard and spend capital to get them ready then to put new capital into the business I mean, it's just.
Dan: Consistent with our responsible way to run the business.
Dan: We could make EBITDA look better by buying new equipment, but we're not going to do that.
Dan: Couldn't agree more.
Dan: You asked if you had asked the capital allocation question, but cash flow is going to accelerate here with a little bit with lesser capex.
Speaker Change: And that balance sheet is already in great shape. So are you seeing much in the M&A pipeline that gets you excited and if not.
Dan: Our buybacks.
Dan: You know.
Dan: That opportunity.
Dan: Maybe ramp up a little bit depending on share prices et cetera. Thanks again, yeah, we stay flexible on all of those items I would say we pay attention to all the choices, we have with capital allocation will continue to monitor all of them, but we're well positioned that's the important takeaway.
Dan: Very good.
Speaker Change: Thank you, ladies and gentlemen that appears to be our last question. Let me now turn the call back over to Mr. Hannah for any closing remark.
Speaker Change: I'd like to thank everyone for joining us on the call today and for your continuing interest in our company. We look forward to speaking with you again in late April to review, our first quarter results.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
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Speaker Change: Hmm.
Speaker Change: Okay.
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Speaker Change: No.
Speaker Change: Uh huh.