10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY AND EXCHANGE ACT OF 1934

Commission file number 000-13292

McGRATH RENTCORP

(Exact name of registrant as specified in its Charter)

     California

    94-2579843

    (State or other jurisdiction
of incorporation or organization)

    (I.R.S. Employer
Identification No.)

5700 Las Positas Road, Livermore, CA 94551-7800

(Address of principal executive offices)

Registrant’s telephone number: (925) 606-9200

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MGRC	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period of complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 23, 2024, 24,551,184 shares of Registrant’s Common Stock were outstanding.

FORWARD LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s (the “Company’s”) expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates”, “believes”, “continues”, “could”, “estimates”, “expects”, “intends”, “may”, “plan”, “predict”, “project”, or “will”, or the negative of these terms or other comparable terminology.

Management cautions that forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. Further, our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties as set forth under “Risk Factors” in this Form 10-Q. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.

Forward-looking statements are made only as of the date of this Form 10-Q and are based on management’s reasonable assumptions, however these assumptions can be wrong or affected by known or unknown risks and uncertainties. No forward-looking statement can be guaranteed and subsequent facts or circumstances may contradict, obviate, undermine or otherwise fail to support or substantiate such statements. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. Except as otherwise required by law, we are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results or to changes in our expectations.

Part I - Financial Information

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 September 30, 2024, and the related condensed consolidated statements of income, comprehensive income, and shareholders’ equity, for the three-month and nine-month periods ended September 30, 2024 and 2023, cash flows for the nine-month periods ended September 30, 2024 and 2023, 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, 2023, 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 21, 2024, 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, 2023, 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

October 24, 2024

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2024			2023			2024			2023
Revenues
Rental	$	124,203		$	122,686		$	365,708		$	350,773
Rental related services		47,701			40,492			111,640			101,481
Rental operations		171,904			163,178			477,349			452,254
Sales		92,508			77,115			181,992			148,576
Other		2,346			3,213			7,855			9,424
Total revenues		266,758			243,506			667,196			610,254
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		21,981			22,069			66,512			66,499
Rental related services		32,439			28,532			78,215			71,625
Other		27,252			28,493			84,182			90,188
Total direct costs of rental operations		81,672			79,094			228,909			228,312
Costs of sales		61,107			52,878			117,625			98,431
Total costs of revenues		142,779			131,972			346,534			326,743
Gross profit		123,979			111,534			320,661			283,511
Expenses:
Selling and administrative expenses		49,297			48,508			148,764			153,032
Other income, net		—			(3,559	)		(9,281	)		(3,559	)
Income from operations		74,682			66,585			181,178			134,038
Interest expense		12,641			11,025			38,383			28,434
Foreign currency exchange (gain) loss		(216	)		42			(53	)		(166	)
Gain on merger termination from WillScot Mobile Mini (Note 1)		(180,000	)		—			(180,000	)		—
WillScot Mobile Mini transaction costs		39,436			—			61,157			—
Income from continuing operations before provision for income taxes		202,821			55,518			261,691			105,770
Provision for income taxes from continuing operations		53,504			15,152			68,913			25,934
Income from continuing operations		149,317			40,366			192,778			79,836

Discontinued operations:
Income from discontinued operations before provision for income taxes		—			—			—			1,709
Provision for income taxes from discontinued operations		—			—			—			453
Gain on sale of discontinued operations, net of tax		—			—			—			61,513
Income from discontinued operations		—			—			—			62,769

Net income	$	149,317		$	40,366		$	192,778		$	142,605

Earnings per share from continuing operations:
Basic	$	6.08		$	1.65		$	7.86		$	3.26
Diluted	$	6.08		$	1.65		$	7.85		$	3.26
Earnings per share from discontinued operations:
Basic	$	—		$	—		$	—		$	2.57
Diluted	$	—		$	—		$	—		$	2.56
Earnings per share:
Basic	$	6.08		$	1.65		$	7.86		$	5.83
Diluted	$	6.08		$	1.65		$	7.85		$	5.81
Shares used in per share calculation:
Basic		24,551			24,487			24,538			24,461
Diluted		24,567			24,525			24,564			24,527
Cash dividends declared per share	$	0.475		$	0.465		$	1.425		$	1.395

The accompanying notes are an integral part of these condensed consolidated financial statements.

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2024			2023		2024			2023
Net income	$	149,317		$	40,366	$	192,778		$	142,605
Other comprehensive income:
Foreign currency translation adjustment, net of tax impact		(135	)		11		(57	)		36
Comprehensive income	$	149,182		$	40,377	$	192,721		$	142,641

The accompanying notes are an integral part of these condensed consolidated financial statements.

McGrath RentCorp

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	September 30,			December 31,
(in thousands)	2024			2023
Assets
Cash	$	4,056		$	877
Accounts receivable, net of allowance for credit losses of $2,866 at September 30, 2024 and $2,801 at December 31, 2023		224,529			227,368
Rental equipment, at cost:
Relocatable modular buildings		1,398,422			1,291,093
Portable storage containers		241,620			236,123
Electronic test equipment		356,979			377,587
		1,997,021			1,904,803
Less: accumulated depreciation		(605,339	)		(575,480	)
Rental equipment, net		1,391,682			1,329,323
Property, plant and equipment, net		195,593			169,114
Inventories		22,285			15,425
Prepaid expenses and other assets		67,376			87,364
Intangible assets, net		56,891			64,588
Goodwill		323,224			323,224
Total assets	$	2,285,636		$	2,217,283
Liabilities and Shareholders' Equity
Liabilities:
Notes payable	$	608,562		$	762,975
Accounts payable		76,240			58,760
Accrued liabilities		109,367			108,763
Deferred income		123,925			111,428
Deferred income taxes, net		273,482			241,555
Total liabilities		1,191,576			1,283,481
Shareholders’ equity:
Common stock, no par value - Authorized 40,000 shares
Issued and outstanding - 24,551 shares as of September 30, 2024 and 24,496 shares as of December 31, 2023		113,989			111,122
Retained earnings		980,244			822,796
Accumulated other comprehensive loss		(173	)		(116	)
Total shareholders’ equity		1,094,060			933,802
Total liabilities and shareholders’ equity	$	2,285,636		$	2,217,283

The accompanying notes are an integral part of these condensed consolidated financial statements.

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, 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
Net income		—		—			20,618			—			20,618
Share-based compensation		—		2,347			—			—			2,347
Common stock issued under stock plans, net of shares withheld for employee taxes		9		—			—			—			—
Dividends accrued of $0.475 per share		—		—			(11,763	)		—			(11,763	)
Other comprehensive income		—		—			—			11			11
Balance at June 30, 2024		24,550	$	111,596		$	842,675		$	(38	)	$	954,233
Net income		—		—			149,317			—			149,317
Share-based compensation		—		2,393			—			—			2,393
Common stock issued under stock plans, net of shares withheld for employee taxes		1		—			—			—			—
Dividends accrued of $0.475 per share		—		—			(11,748	)		—			(11,748	)
Other comprehensive loss		—		—			—			(135	)		(135	)
Balance at September 30, 2024		24,551	$	113,989		$	980,244		$	(173	)	$	1,094,060

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, 2022		24,388	$	110,080		$	693,943		$	(78	)	$	803,945
Net income		—		—			71,657			—			71,657
Share-based compensation		—		1,493			—			—			1,493
Common stock issued under stock plans, net of shares withheld for employee taxes		78		—			—			—			—
Taxes paid related to net share settlement of stock awards		—		(6,086	)		—			—			(6,086	)
Dividends accrued of $0.465 per share		—		—			(11,453	)		—			(11,453	)
Other comprehensive loss		—		—			—			(18	)		(18	)
Balance at March 31, 2023		24,466	$	105,487		$	754,147		$	(96	)	$	859,538
Net income		—		—			30,582			—			30,582
Share-based compensation		—		1,889			—			—			1,889
Common stock issued under stock plans, net of shares withheld for employee taxes		19		—			—			—			—
Taxes paid related to net share settlement of stock awards		—		(14	)		—			—			(14	)
Dividends accrued of $0.465 per share		—		—			(11,469	)		—			(11,469	)
Other comprehensive income		—		—			—			43			43
Balance at June 30, 2023		24,485	$	107,362		$	773,260		$	(53	)	$	880,569
Net income		—		—			40,366			—			40,366
Share-based compensation		—		1,891			—			—			1,891
Common stock issued under stock plans, net of shares withheld for employee taxes		4		—			—			—			—
Dividends accrued of $0.465 per share		—		—			(11,465	)		—			(11,465	)
Other comprehensive income		—		—			—			11			11
Balance at September 30, 2023		24,489	$	109,253		$	802,161		$	(42	)	$	911,372

The accompanying notes are an integral part of these condensed consolidated financial statements.

McGrath RentCorp

CONDENSED Consolidated Statements of Cash Flows

(unaudited)


	Nine Months Ended September 30,
(in thousands)	2024			2023
Cash Flows from Operating Activities:
Net income	$	192,778		$	142,605
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		80,824			81,842
Deferred income taxes		31,927			(30,018	)
Provision for credit losses		1,437			1,794
Share-based compensation		6,949			5,273
Gain on sale of property, plant and equipment		(9,281	)		(3,559	)
Gain on sale of discontinued operations		—			(61,513	)
Gain on sale of used rental equipment		(25,185	)		(22,964	)
Foreign currency exchange gain		(53	)		(166	)
Amortization of debt issuance costs		6			6
Change in:
Accounts receivable		1,402			(27,733	)
Inventories		(6,860	)		(1,988	)
Prepaid expenses and other assets		19,988			(5,402	)
Accounts payable		30,562			22,513
Accrued liabilities		605			10,305
Deferred income		12,497			7,908
Net cash provided by operating activities		337,596			118,903
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations		—			268,012
Purchases of rental equipment		(167,269	)		(171,322	)
Purchases of property, plant and equipment		(36,070	)		(16,448	)
Cash paid for acquisition of businesses		—			(458,315	)
Cash paid for acquisition of business assets		—			(3,474	)
Proceeds from sales of used rental equipment		50,270			49,405
Proceeds from sales of property, plant and equipment		12,251			595
Net cash used in investing activities		(140,818	)		(331,547	)
Cash Flows from Financing Activities:
Net (payments) borrowings under bank lines of credit		(154,420	)		178,892
Borrowings under term note agreement		—			75,000
Taxes paid related to net share settlement of stock awards		(4,082	)		(6,100	)
Payment of dividends		(35,097	)		(34,168	)
Net cash (used in) provided by financing activities		(193,599	)		213,624
Effect of foreign currency exchange rate changes on cash		—			9
Net increase in cash		3,179			989
Cash balance, beginning of period		877			957
Cash balance, end of period	$	4,056		$	1,946
Supplemental Disclosure of Cash Flow Information:
Gain on merger termination, net of transaction costs, presented under net cash provided by operating activities	$	118,843		$	—
Interest paid, during the period	$	40,338		$	27,818
Net income taxes (refunded) paid, during the period	$	(3,826	)	$	9,547
Dividends accrued during the period, not yet paid	$	12,241		$	12,014
Rental equipment acquisitions, not yet paid	$	3,333		$	5,765

The accompanying notes are an integral part of these condensed consolidated financial statements.

MCGRATH RENTCORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2024

NOTE 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The condensed consolidated financial statements for the nine months ended September 30, 2024 and 2023 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 and nine months ended September 30, 2024, 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 21, 2024 for the year ended December 31, 2023 (the “2023 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 Agreement during the three and nine months ended September 30, 2024, were $39.4 million and $61.2 million, respectively. The termination payment received of $180.0 million, net of transaction costs, resulted in net proceeds received of $118.8 million during the nine months ended September 30, 2024. The Company determined that the transaction costs incurred on the terminated Merger Agreement were significant and required separate presentation on the Company's condensed consolidated statements of income for the three and nine-months ended September 30, 2024. Due to this determination, the Company has excluded such transaction costs from Selling and administrative expenses. Transaction costs incurred by the Company of $21.7 million and $9.4 million for the six-months ended June 30, 2024, and three-months ended March 31, 2024, respectively, have been reclassified from Selling and administrative expenses and reported separately on the condensed 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 continuing operations. Additionally, this ASU will also require the disclosure of income tax expense or benefit from continuing 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.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280), which will require public companies to provide more transparency in both quarterly and annual reports about the expenses they incur from revenue generating reportable business segments. In addition, the ASU requires that a public entity disclose significant segment expenses that are regularly provided to the chief operating decision maker, an amount for other segment items by reportable business segment, including a description of its composition, and the primary measures of a business segment's profit or loss in assessing segment performance. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the financial statement impact of this ASU.

NOTE 3. IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2024, the Company adopted the Accounting Standards Update ("ASU") 2023-01, Leases (Topic 842): Common Control Arrangements, which requires a lessee involved in a common control lease agreement to amortize leasehold improvements over the useful life of the improvements to the common control group, regardless of the lease term, as long as the lessee

controls the use of the underlying asset. If the lessor obtains the right to control the use of the underlying asset through a lease with another entity not within the same control group, the amortization period cannot exceed the period of the common control group. Furthermore, the ASU requires the accounting for a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the use of the underlying asset. The adoption of this new guidance did not have a material impact on the Company's consolidated financial statements.

NOTE 4. ACQUISITIONS

On February 1, 2023, the Company completed the acquisition of Vesta Housing Solutions Holdings, Inc. (“Vesta Modular”), a portfolio company of Kinderhook Industries, for $437.2 million cash consideration on the closing date, which included certain adjustments, including net working capital and certain qualified capital expenditures. In connection with the acquisition, the Company purchased a representation and warranty insurance policy to provide certain recourse in the event of breaches of representations and warranties of Vesta Modular and the seller of Vesta Modular under the stock purchase agreement. Vesta Modular was a leading provider of temporary and permanent modular space solutions serving customers between its modular leasing and modular construction divisions. The acquisition was accounted for as a purchase of a “business” in accordance with criteria in Accounting Standards Codification ("ASC") 805, Business Combinations, using the purchase method of accounting. Under the purchase method of accounting, the total purchase price is assigned to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date. The excess of the purchase price over those fair values is recorded as goodwill. The financial results of Vesta Modular were a part of the Mobile Modular segment since February 1, 2023, including $7.7 million of acquisition related transaction costs.

On March 1, 2023, the Company completed the acquisition of Jerald R. Brekke, Inc., DBA Brekke Storage ("Brekke Storage"), for a total purchase price of $16.4 million. Brekke Storage was a regional provider of portable storage solutions in the Colorado market. The acquisition expanded the Portable Storage fleet by approximately 2,700 units and provided a new regional operation to serve the Colorado market. The acquisition was accounted for as a purchase of a “business” in accordance with criteria in ASC 805 using the purchase method of accounting. The financial results of Brekke Storage were a part of the Portable Storage segment since March 1, 2023, including $0.2 million of transaction costs.

On April 1, 2023, the Company completed the acquisition of Dixie Temporary Storage, LLC ("Dixie Storage"), for a purchase price of $4.9 million. Dixie Storage was a regional provider of portable storage solutions in the South Carolina market and is highly complementary to the Company's Portable Storage business segment. The acquisition was accounted for as a purchase of a “business” in accordance with criteria in ASC 805 using the purchase method of accounting. The financial results of Dixie Storage were a part of the Portable Storage segment since April 1, 2023, including $0.1 million of transaction costs.

On July 1, 2023, the Company completed the purchase of assets of Inland Leasing and Storage, LLC ("Inland Leasing"), for a purchase price of $3.8 million. Inland Leasing was a regional provider of portable storage solutions in the Colorado market and is highly complementary to the Company's Portable Storage business segment. The acquisition was accounted for as a purchase of "assets" in accordance with criteria in ASC 805 and the assessment of the fair value of the purchased assets was allocated primarily to rental equipment totaling $3.0 million and intangible assets totaling $0.7 million. Supplemental pro forma information has not been provided as the historical financial results of Inland Leasing were not significant. Incremental transaction costs associated with the asset purchase were not significant.

The following tables summarize the purchase price allocations reflecting estimated fair values of assets acquired and liabilities assumed in the Vesta Modular, Brekke Storage and Dixie Storage business acquisitions, with excess amounts allocated to goodwill. The assets acquired and liabilities assumed were based upon their fair values on the closing date. The valuation of intangible assets acquired is based on certain valuation assumptions including cash flow projections, discount rates, contributory asset charges and other valuation model inputs. The valuation of tangible long-lived assets acquired is dependent upon various analyses including an analysis of the condition and estimated remaining economic lives of the assets acquired.

Vesta Modular:


(dollar amounts in thousands)
Rental equipment	$	212,639
Intangible assets:
Goodwill		211,178
Customer relationships		29,900
Non-compete		7,100
Trade name		800
Cash		11
Accounts receivable		22,666
Property, plant and equipment		1,437
Prepaid expenses and other assets		3,550
Accounts payable and accrued liabilities		(26,202	)
Deferred income		(14,273	)
Deferred income taxes		(11,596	)
Total purchase price	$	437,210

Brekke Storage:


(dollar amounts in thousands)
Rental equipment	$	10,798
Intangible assets:
Goodwill		4,083
Customer relationships		949
Non-compete		59
Property, plant and equipment		875
Deferred income		(382	)
Total purchase price	$	16,382

Dixie Storage:


(dollar amounts in thousands)
Rental equipment	$	2,758
Intangible assets:
Goodwill		1,555
Customer relationships		259
Non-compete		22
Property, plant and equipment		318
Deferred income		(161	)
Total purchase price	$	4,751

The value assigned to identifiable intangible assets was determined based on discounted estimated future cash flows associated with such assets to their present value. The combined acquired goodwill of $216.8 million reflects the strategic fit of Vesta Modular, Brekke Storage and Dixie Storage with the Company’s modular and portable storage business operations. The Company amortizes the acquired customer relationships over their expected useful lives of 11 years for Vesta Modular, 8 years for Brekke Storage and 9 years for Dixie Storage. The expected useful life for the non-compete agreements is 5 years. The trade name intangible acquired from the Vesta Modular acquisition will be amortized over its useful life of nine months. Goodwill is expected to have an indefinite life and will be subject to future impairment testing. The goodwill is deductible for tax purposes over 15 years.

The following table reports the actual results of the Company for the nine months ended September 30, 2024, and the unaudited pro forma financial information for the nine months ended September 30, 2023. The pro forma financial information shows the combined results of continuing operations of the Company and Vesta Modular as if the acquisition occurred as of the beginning of the period presented. The pro forma results include the effects of the amortization of the purchased intangible assets and depreciation expense of acquired rental equipment valuation step up, interest expense on the debt incurred to finance the acquisitions. A pro forma adjustment has been made to reflect the income taxes that would have been recorded at the combined federal and state statutory rate of 26.5% on the acquisitions’ combined net income. The pro forma results for the nine months ended September 30, 2023, have been adjusted to include transaction related costs. This pro forma data is presented for informational purposes only and does not purport to

be indicative of the results of the future operations or the results that would have occurred had the acquisitions taken place in the periods noted below:


	(Unaudited)
	Nine months ended September 30,
(dollar amounts in thousands, except for per share amounts)	2024		2023
	(Actual)		(Pro Forma)
Pro-forma total revenues	$	667,196	$	617,897
Pro-forma net income	$	192,778	$	79,540
Pro-forma basic earnings per share	$	7.86	$	3.25
Pro-forma diluted earnings per share	$	7.85	$	3.25

Vesta Modular
Actual total revenues			$	82,186
Actual net income			$	17,627
Actual basic earnings per share			$	0.72
Actual diluted earnings per share			$	0.72

NOTE 5. DISCONTINUED OPERATIONS

On February 1, 2023, the Company completed the sale of Adler Tank Rentals, LLC to Ironclad Environmental Solutions, Inc. ("Ironclad"), a portfolio company of Kinderhook Industries, for a sale price of $268.0 million. The total transaction costs incurred from the divestiture were $8.8 million, with $6.7 million and $2.1 million incurred during the years ended December 31, 2023 and 2022, respectively. The divestiture of the Company's Adler Tanks business represents the Company's strategic shift to concentrate its operations on its core modular and storage businesses. The sale price was subject to certain adjustments, including net working capital, certain qualified capital expenditures and certain transaction expenses to be borne by the Company. In connection with the sale, the Company entered into a number of ancillary agreements, including an escrow agreement associated with net working capital adjustments, a restricted covenant agreement, a transition services agreement, and a number of leases whereby Ironclad or one of its affiliates would be a lessee to certain properties owned by the Company that the Adler Tanks business would continue to utilize after the sale. These ancillary agreements do not provide for continued involvement by the Company in Adler Tanks. In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations and ASC 360, Property, Plant and Equipment, the Company determined that the criteria for the presentation of discontinued operations and held-for-sale, respectively, were met during the first quarter of 2023.

The following table presents the results of Adler Tanks as reported in income from discontinued operations within the condensed consolidated statements of income for the nine months ended September 30, 2023:


(dollar amounts in thousands)	Nine Months Ended September 30,
	2023
Revenues
Rental	$	6,520
Rental related services		2,584
Rental operations		9,104
Sales		269
Other		65
Total revenues		9,438
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		1,325
Rental related services		2,020
Other		1,270
Total direct costs of rental operations		4,614
Costs of sales		159
Total costs of revenues		4,773
Gross Profit
Rental		3,926
Rental related services		564
Rental operations		4,490
Sales		110
Other		65
Total gross profit		4,665
Expenses:
Selling and administrative expenses		2,582
Income from operations		2,083
Interest expense allocation		374
Income from discontinued operations before provision for income taxes		1,709
Provision for income taxes from discontinued operations		453
Income from discontinued operations	$	1,256

The following table presents the carrying value of the divested business' assets and liabilities as presented within assets and liabilities of discontinued operations on the consolidated balance sheets as of December 31, 2022, which was the most recently audited period prior to divestiture:


	December 31,
(in thousands)	2022
Assets
Accounts receivable, net of allowance for credit losses of $450	$	20,086
Rental equipment, net		137,738
Property, plant and equipment, net		6,632
Prepaid expenses and other assets		191
Intangible assets, net		5,700
Goodwill		25,902
Total assets of discontinued operations	$	196,249
Liabilities
Accounts payable and accrued liabilities	$	9,621
Deferred income taxes, net		43,550
Total liabilities of discontinued operations	$	53,171

For the nine months ended September 30, 2023, significant operating and investing items related to Adler Tanks were as follows:


	September 30,
(in thousands)	2023
Operating activities of discontinued operations:
Depreciation and amortization	$	1,457
Gain on sale of used rental equipment		(111	)
Investing activities of discontinued operations:
Proceeds from sales of used rental equipment		269
Purchases of rental equipment		(25	)
Purchases of property, plant and equipment		(40	)

The following table presents the reconciliation of income from discontinued operations to Adjusted EBITDA for the nine months ended September 30, 2023:


	September 30,
(in thousands)	2023
Income from discontinued operations	$	1,256
Provision for income taxes from discontinued operations		453
Interest expense		374
Depreciation and amortization		1,457
EBITDA		3,540
Share-based compensation		118
Transaction costs		24
Adjusted EBITDA from discontinued operations	$	3,682

NOTE 6. 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 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 $49.1 million and $40.7 million at September 30, 2024 and December 31, 2023, respectively. Sales revenues totaling $10.6 million and $26.3 million were recognized during the three and nine months ended September 30, 2024, respectively, which were included in the contract liability balance at December 31, 2023. 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 $16.7 million and $8.7 million at September 30, 2024 and December 31, 2023, respectively. The Company did not recognize any material contract asset impairments during the periods ended September 30, 2024 and December 31, 2023, 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 September 30, 2024, approximately $67.1 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 and nine months ended September 30, 2024, approximately $96.9 million and $198.9 million of revenue was recognized for sales and non-lease services transferred at a point in time, respectively, and approximately $16.6 million and $28.2 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 nine months ended September 30, 2024, the Company’s future minimum lease payments to be received under non-cancelable finance leases were $2.4 million. Of the total investment in sales-type leases, future minimum lease payments are expected to be $1.7 million in 2025, $0.5 million in 2026, and $0.2 million in 2027. The Company’s assessment of current expected losses on these receivables was immaterial and therefore no credit loss expense was provided as of the nine months ended September 30, 2024. Other revenues include interest income on finance leases and rental income on facility leases.

In the three and nine months ended September 30, 2024, the Company’s lease revenues were $153.3 million and $440.1 million, respectively, consisting of $152.7 million and $438.5 million of operating lease revenues, respectively, and $0.5 million and $1.6 million of finance lease revenues, respectively. 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 and nine months ended September 30, 2024 include $0.4 million and $1.3 million of sales revenues, respectively, and $0.1 million and $0.3 million of interest income, respectively.

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. 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 and nine months ended September 30, 2024 and 2023:


(in thousands)	Mobile Modular		Portable Storage		TRS- RenTelco		Enviroplex		Consolidated
Three Months Ended September 30,
2024
Leasing	$	109,249	$	17,486	$	26,524	$	—	$	153,259
Non-lease:
Rental related services		16,131		4,127		755		—		21,013
Sales		65,994		1,411		7,169		17,499		92,073
Other		33		27		353		—		413
Total non-lease		82,158		5,565		8,277		17,499		113,499
Total revenues	$	191,407	$	23,051	$	34,801	$	17,499	$	266,758

2023
Leasing	$	93,676	$	20,279	$	29,711	$	—	$	143,666
Non-lease:
Rental related services		13,224		5,027		664		—		18,915
Sales		57,723		1,144		8,341		9,515		76,723
Other		3,782		27		393		—		4,202
Total non-lease		74,729		6,198		9,398		9,515		99,840
Total revenues	$	168,405	$	26,477	$	39,109	$	9,515	$	243,506

Nine Months Ended September 30,
2024
Leasing	$	306,003	$	54,881	$	79,180	$	—	$	440,064
Non-lease:
Rental related services		27,130		12,865		2,087		—		42,082
Sales		127,250		3,889		18,926		30,591		180,656
Other		3,153		200		1,041		—		4,394
Total non-lease		157,533		16,954		22,054		30,591		227,132
Total revenues	$	463,536	$	71,835	$	101,234	$	30,591	$	667,196

2023
Leasing	$	267,242	$	56,791	$	90,388	$	—	$	414,421
Non-lease:
Rental related services		26,693		14,440		1,952		—		43,085
Sales		112,937		2,891		19,545		11,379		146,752
Other		4,737		70		1,189		—		5,996
Total non-lease		144,367		17,401		22,686		11,379		195,833
Total revenues	$	411,609	$	74,192	$	113,074	$	11,379	$	610,254

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.

NOTE 7. 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 September 30,				Nine Months Ended September 30,
(in thousands)	2024		2023		2024		2023
Weighted-average number of shares of common stock for calculating basic earnings per share		24,551		24,487		24,538		24,461
Effect of potentially dilutive securities from equity-based compensation		16		38		26		66
Weighted-average number of shares of common stock for calculating diluted earnings per share		24,567		24,525		24,564		24,527

There were no anti-dilutive securities excluded from the computation of diluted earnings per share for the nine months ended September 30, 2024, and 1,800 anti-dilutive securities excluded from the computation of diluted earnings per share for the nine months ended September 30, 2023.

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 and nine months ended September 30, 2024 and 2023. As of September 30, 2024, 2,000,000 shares were authorized for repurchase under the Repurchase Plan.

NOTE 8. 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)	September 30,		December 31,
	2024		2023
Raw materials	$	3,500	$	3,806
Work-in-process		18,785		11,619
Inventories	$	22,285	$	15,425

NOTE 9. 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
September 30, 2024
Customer relationships	8 to 11	7.1	$73,217	$(23,009)	$50,208
Non-compete agreements	5	3.0	10,556	(4,719)	5,837
Trade name	0.75 to 8	4.5	2,000	(1,325)	675
Total amortizing			85,773	(29,053)	56,720
Trade name - non-amortizing	Indefinite		171	—	171
Total			$85,944	$(29,053)	$56,891

December 31, 2023
Customer relationships	8 to 11	7.8	$73,217	$(17,003)	$56,214
Non-compete agreements	5	3.7	10,556	(3,141)	7,415
Trade name	0.75 to 8	5.3	2,000	(1,212)	788
Total amortizing			85,773	(21,356)	64,417
Trade name - non-amortizing	Indefinite		171	—	171
Total			$85,944	$(21,356)	$64,588

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 2023, with no indicators of impairment. In addition, no impairment triggering events occurred during the nine months ended September 30, 2024, 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 in the nine months ended September 30, 2024 and 2023, was $7.7 million and $7.8 million, respectively. Based on the carrying values at September 30, 2024, and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be $2.6 million for the remainder of fiscal year 2024, $10.2 million in 2025, $9.8 million in 2026, $9.6 million in 2027, $8.2 million in 2028 and $4.7 million in 2029.

NOTE 10. SEGMENT REPORTING

During the quarter ended December 31, 2023, the Company determined that its Portable Storage business segment met the criteria for separate recognition as defined in the Accounting Standards Codification ("ASC") Topic 280, Segment Reporting. The guidance under this topic requires a public business entity to evaluate both quantitative and qualitative thresholds to determine the significance of a business segment and whether the separate reporting of a business segment enhances the users' understanding of the reporting entity's performance, future net cash flows and judgments. The Company evaluated the guidance within Topic 280 and made its determination to separately report the Portable Storage segment primarily due to the Company's continued growth in container fleet purchases and related increased revenues and improved profitability performance when compared to previously reported periods. In addition to this determination, the Company also divested its Adler Tanks business segment during the year ended December 31, 2023. Additional information regarding the divestiture of Adler Tanks can be found in Note 5 of the condensed consolidated financial statements.

At September 30, 2024, the Company was comprised of four reportable segments: (1) its modular building segment (“Mobile Modular”); (2) its portable storage container segment ("Portable Storage"); (3) its electronic test equipment segment (“TRS-RenTelco”); and (4) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”). The operations of each of these segments are described in Part I – Item 1, “Business,” and the accounting policies of the segments are described in “Note 1 – Summary of Significant Accounting Policies” in the Company’s 2023 Annual Report. Management focuses on several key measures to evaluate and assess each segment’s performance, including rental revenue growth, gross profit and gross margins, income from operations and income before provision for income taxes. 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, intangible assets, accounts receivable, deferred income and customer security deposits. During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement with WillScot Mobile Mini were significant and required separate presentation. For the three and nine-months ended September 30, 2024, the Company has reported the terminated Merger Agreement transaction costs in the Corporate segment and excluded such costs from Selling and administrative expenses. The Company does not report total assets by business segment. Summarized financial information for the nine months ended September 30, 2024 and 2023 for the Company’s reportable segments are shown in the following table:




(dollar amounts in thousands)	Mobile Modular			Portable Storage			TRS- RenTelco			Enviroplex 1			Corporate (Unallocated)			Consolidated
Nine Months Ended September 30,
2024
Rental revenues	$	236,040		$	53,270		$	76,398		$ —			$	—		$	365,708
Rental related services revenues		95,450			13,768			2,422		—				—			111,640
Sales and other revenues		132,046			4,796			22,414			30,591			—			189,847
Total revenues		463,536			71,835			101,234			30,591			—			667,196
Depreciation of rental equipment		29,994			2,971			33,547		—				—			66,512
Gross profit		222,901			48,939			40,939			7,882			—			320,661
Selling and administrative expenses		100,882			22,064			20,450			5,368			—			148,764
Other income		(6,220	)		(1,319	)		(1,742	)		—			—			(9,281	)
Income from operations		128,239			28,194			22,231			2,514			—			181,178
Interest expense (income) allocation		29,951			4,255			6,070			(1,893	)		—			38,383
Gain on merger termination from WillScot Mobile Mini 3		—			—			—			—			(180,000	)		(180,000	)
WillScot Mobile Mini transaction costs 4		—			—			—			—			61,157			61,157
Income before provision for income taxes		98,288			23,939			16,214			4,407			118,843			261,691
Rental equipment acquisitions		129,837			7,818			16,295		—				—			153,950
Accounts receivable, net (period end)		182,617			10,481			19,642			11,789			—			224,529
Rental equipment, at cost (period end)		1,398,422			241,620			356,979		—				—			1,997,021
Rental equipment, net book value (period end)		1,051,703			220,139			119,840		—				—			1,391,682
Utilization (period end) 2		76.5	%		62.0	%		59.0	%
Average utilization 2		78.0	%		66.1	%		56.8	%
2023
Rental revenues	$	209,622		$	54,776		$	86,375		$ —			$	—		$	350,773
Rental related services revenues		83,799			15,359			2,323		—				—			101,481
Sales and other revenues		118,188			4,057			24,376			11,379			—			158,000
Total revenues		411,609			74,192			113,074			11,379			—			610,254
Depreciation of rental equipment		27,196			2,570			36,733		—				—			66,499
Gross profit		183,682			50,288			47,184			2,357			—			283,511
Selling and administrative expenses		101,360			23,282			23,576			4,814			—			153,032
Other income		(2,290	)		(450	)		(819	)		—			—			(3,559	)
Income (loss) from operations		84,612			27,456			24,427			(2,457	)		—			134,038
Interest expense (income) allocation		20,607			3,522			6,008			(1,703	)		—			28,434
Income (loss) before provision for income taxes		64,005			23,934			18,585			(754	)		—			105,770
Rental equipment acquisitions		121,751			20,316			21,801		—				—			163,868
Accounts receivable, net (period end)		170,247			16,107			29,086			8,829			—			224,269
Rental equipment, at cost (period end)		1,245,462			228,897			383,006		—				—			1,857,365
Rental equipment, net book value (period end)		929,776			211,418			150,674		—				—			1,291,868
Utilization (period end) 2		80.2	%		77.2	%		60.3	%
Average utilization 2		79.7	%		78.4	%		59.0	%

Gross Enviroplex sales revenues were $30,593 and $16,401 for the nine months ended September 30, 2024 and 2023, respectively. There were $2 and $218 of inter-segment sales to Mobile Modular in the nine months ended September 30, 2024 and 2023, respectively, which required elimination in consolidation.

Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding accessory equipment, and new equipment inventory. The Average utilization for the period is calculated using the average costs of rental equipment.

During the period ended September 30, 2024, the Company received $180 million in cash proceeds attributed to the mutual decision to terminate the Merger Agreement. These proceeds are reported as non-operating income on the Company's Condensed Consolidated Statements of Income and are reported in the Company's Corporate segment.

During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company has separately reported these transaction costs in the Company's Corporate segment and excluded such costs from Selling and administrative expenses. The total transaction costs excluded from Selling and administrative expenses for the six months ended June 30, 2024, and the three months ended March 31, 2024, for Mobile Modular, Portable Storage and TRS-RenTelco was $15.5 million, $2.6 million and $3.6 million, respectively, and $6.5 million, $1.2 million and $1.7 million, respectively.

No single customer accounted for more than 10% of total revenues for the nine months ended September 30, 2024 and 2023. Revenues from foreign country customers accounted for 2% and 3% of the Company’s total revenues for the same periods, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Form 10-Q, including the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains forward-looking statements under federal securities laws. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Our actual results could differ materially from those indicated by forward-looking statements as a result of various factors. These factors include, but are not limited to, those set forth under this Item, those discussed in Part II—Item 1a, “Risk Factors” and elsewhere in this Form 10-Q and those that may be identified from time to time in our reports and registration statements filed with the SEC.

This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in Part I—Item 1 of this Form 10-Q and the Consolidated Financial Statements and related Notes and the Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 21, 2024 (the “2023 Annual Report”). In preparing the following MD&A, we presume that readers have access to and have read the MD&A in our 2023 Annual Report, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K. We undertake no duty to update any of these forward-looking statements after the date of filing of this Form 10-Q to conform such forward-looking statements to actual results or revised expectations, except as otherwise required by law.

General

The Company, incorporated in 1979, is a leading rental provider of relocatable modular buildings for classroom and office space and electronic test equipment for general purpose and communications needs. The Company’s primary emphasis is on equipment rentals. The Company is comprised of four reportable business segments: (1) its modular building segment (“Mobile Modular”); (2) its portable storage container segment (“Portable Storage”); (3) its electronic test equipment segment (“TRS-RenTelco”); and (4) its classroom manufacturing business selling modular buildings used primarily as classrooms in California (“Enviroplex”).

In the nine months ended September 30, 2024, Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex contributed 69%, 17%, 11% and 3% of the Company’s income from continuing operations before provision for taxes (the equivalent of “pretax income”), respectively, compared to 60%, 23%, 18% and negative 1% for the same period in 2023.

The Company generates its revenues primarily from the rental of its equipment on operating leases and from sales of equipment occurring in the normal course of business. The Company requires significant capital outlay to purchase its rental inventory and recovers its investment through rental and sales revenues. Rental revenues and certain other service revenues negotiated as part of lease agreements with customers and related costs are recognized on a straight-line basis over the terms of the leases. Sales revenues and related costs are recognized upon delivery and installation of the equipment to customers. Sales revenues are less predictable and can fluctuate from quarter to quarter and year to year depending on customer demands and requirements. Generally, rental revenues less cash operating costs recover the equipment’s capitalized cost in a short period of time relative to the equipment’s potential rental life and when sold, sale proceeds are usually above its net book value.

The Company’s modular revenues (consisting of revenues from Mobile Modular, Kitchens To Go and Enviroplex) are derived from rentals and sales to commercial and education customers. Modular revenues are affected by demand for classrooms, which in turn is affected by shifting and fluctuating school populations, the levels of state funding to public schools, the need for temporary classroom space during reconstruction of older schools and changes in policies regarding class size. As a result of any reduced funding, lower expenditures by these schools may result in certain planned programs to increase the number of classrooms, such as those that the Company provides, to be postponed or terminated. However, reduced expenditures may also result in schools reducing their long-term facility construction projects in favor of using the Company’s modular classroom solutions. At this time, the Company can provide no assurances as to whether public schools will either reduce or increase their demand for the Company's modular classrooms as a result of fluctuations in state funding of public schools. Looking forward, the Company believes that any interruption in the passage of facility bonds or contraction of class size reduction programs by public schools may have a material adverse effect on both rental and sales revenues of the Company. (For more information, see “Item 1. Business – Relocatable Modular Buildings – Classroom Rentals and Sales to Public Schools (K-12)” in the Company’s 2023 Annual Report and “Item 1a. Risk Factors – Significant reductions of, or delays in, funding to public schools have caused the demand and pricing for our modular classroom units to decline, which has in the past caused, and may cause in the future, a reduction in our revenues and profitability” in Part II – Other Information of this Form 10-Q.)

Revenues of Portable Storage consists of the rental and sale of steel containers and ground level offices to provide a temporary storage solution that is delivered to the customer’s location and addresses the need for secure temporary storage with immediate access to the unit. The portable storage container rental market in the U.S. has a large and diverse number of market segments including construction, retail, commercial and industrial, energy and petrochemical, manufacturing, education and healthcare.

Revenues of TRS-RenTelco are derived from the rental and sale of general purpose and communications test equipment to a broad range of companies, from Fortune 500 to middle and smaller market companies primarily in the aerospace, defense, communications, manufacturing and semiconductor industries. Electronic test equipment revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and maintenance.

The Company’s rental operations include rental and rental related service revenues which comprised approximately 71% and 74% of consolidated revenues from continuing operations in the nine months ended September 30, 2024 and 2023, respectively. Of the total continuing rental operations revenues for the nine months ended September 30, 2024, Mobile Modular, Portable Storage and TRS-RenTelco comprised 69%, 14% and 17%, respectively, compared to 64%, 16% and 20%, respectively, in the same period of 2023. The Company’s direct costs of rental operations include depreciation of rental equipment, rental related service costs, impairment of rental equipment (if applicable), and other direct costs of rental operations (which include direct labor, supplies, repairs, insurance, property taxes, license fees, cost of sub-rentals and amortization of certain lease costs).

The Company’s Mobile Modular, Portable Storage and TRS-RenTelco business segments sell modular units, storage containers and electronic test equipment, respectively, which are either new or previously rented. In addition, Enviroplex sells new modular buildings used primarily as classrooms in California. For the nine months ended September 30, 2024 and 2023, sales and other revenues of modular, container and electronic test equipment comprised approximately 29% and 26% of the Company’s consolidated revenues from continuing operations, respectively. Of the total sales and other revenues from continuing operations for the nine months ended September 30, 2024 and 2023, Mobile Modular and Enviroplex together comprised 85% and 82%, respectively, Portable Storage comprised 3% in both periods, and TRS-RenTelco comprised 12% and 16%, respectively. The Company’s cost of sales includes the carrying value of the equipment sold and the direct costs associated with the equipment sold, such as delivery, installation, modifications and related site work.

Selling and administrative expenses primarily include personnel and benefit costs, which include share-based compensation, depreciation and amortization, bad debt expense, advertising costs, and professional service fees. Transaction costs incurred by the Company attributed to the terminated Merger Agreement with WillScot Mobile Mini were considered non-operating and excluded from Selling and administrative expenses. The Company believes that sharing of common facilities, financing, senior management, and operating and accounting systems by all of the Company’s operations results in an efficient use of overhead. Historically, the Company’s operating margins have been impacted favorably to the extent its costs and expenses are leveraged over a large installed customer base. However, there can be no assurances as to the Company’s ability to maintain a large installed customer base or ability to sustain its historical operating margins.

Recent Developments

Mutual Decision to Terminate Merger Agreement with WillScot Mobile Mini

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 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.

Dividends

On September 9, 2024, the Company announced that the Board of Directors declared a quarterly cash dividend of $0.475 per common share for the quarter ended September 30, 2024, an increase of 2% over the prior year’s comparable quarter.

Results of Operations

Three Months Ended September 30, 2024 Compared to

Three Months Ended September 30, 2023

Overview

Consolidated revenues for the three months ended September 30, 2024, increased 10% to $266.8 million, from $243.5 million for the same period in 2023. Consolidated net income for the three months ended September 30, 2024, increased $109.0 to $149.3 million, from $40.4 million for the same period in 2023. Earnings per diluted share for the three months ended September 30, 2024, increased by $4.43 to $6.08, compared to $1.65 for the same period in 2023. The increase in consolidated net income and earnings per diluted share during the period was primarily attributed to the $180.0 million gain on merger termination, partly offset by $39.4 million in transaction costs attributed to the terminated Merger Agreement, net of provision for income taxes. Excluding the gain and transaction costs attributed to the merger termination in the current year, the Company's net income increased by approximately $5.5 million, or 14%, to $45.9 million, and diluted earnings per share increased $0.22, or 13%, to $1.87.

There was no revenue, income or earnings per share from discontinued operations for the three months ended September 30, 2024 and 2023.

For the three months ended September 30, 2024, on a consolidated basis from continuing operations:

•

Gross profit increased $12.4 million, or 11%, to $124.0 million in 2024. Mobile Modular’s gross profit increased $13.8 million, or 18%, primarily due to higher gross profit on rental, sales and rental related services revenues. Portable Storage's gross profit decreased $2.2 million, or 13%, primarily due to lower gross profit on rental and rental related services revenues. TRS-RenTelco’s gross profit decreased $1.6 million, or 10%, primarily due to lower gross profit on rental revenues. Enviroplex’s gross profit increased $2.5 million, due to higher sales revenue and an increase in sales margins in 2024.

•

Selling and administrative expenses increased 2% to $49.3 million. During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant and required separate presentation on the condensed consolidated statements of income. Due to this determination, the Company has excluded the transaction costs incurred by the Company from Selling and administrative expenses for all reportable business segments for the period ended September 30, 2024.

•

Interest expense increased $1.6 million to $12.6 million, which was primarily attributed to $86.2 million higher average debt levels of the Company and a higher effective interest rate in 2024 of 6.63%, compared to 6.52% for the same period in 2023. The 13% increase in average debt when compared to 2023 was primarily the result of the funding of rental equipment purchases and transaction costs regarding the terminated merger with WillScot Mobile Mini.

•

Pre-tax income contribution by Mobile Modular, Portable Storage and TRS-RenTelco was 71%, 12% and 9%, respectively, compared to 70%, 15% and 13%, respectively, for the comparable 2023 period. These results are discussed on a segment basis below. Enviroplex pre-tax income contribution was 5% and 2% in 2024 and 2023, respectively.

•

The provision for income taxes resulted in an effective tax rate of 26.4% and 27.3%, for the quarters ended September 30, 2024 and 2023, respectively.

•

Adjusted EBITDA increased $12.2 million, or 13%, to $104.0 million in 2024.

Mobile Modular

For the three months ended September 30, 2024, Mobile Modular’s total revenues increased $23.0 million, or 14%, to $191.4 million compared to the same period in 2023, primarily due to higher sales, rental related services and rental revenues. The revenue increase, together with higher gross profit on rental, sales and rental related services revenues, partly offset by $2.2 million higher selling and administrative expenses, resulted in a $6.9 million increase in pre-tax income to $45.8 million for the three months ended September 30, 2024, from $38.9 million for the same period in 2023.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

Mobile Modular – Three Months Ended 9/30/24 compared to Three Months Ended 9/30/23 (Unaudited)


(dollar amounts in thousands)	Three Months Ended September 30,						Increase (Decrease)
	2024			2023			$			%
Revenues
Rental	$	81,508		$	74,796		$	6,712			9	%
Rental related services		42,396			34,429			7,967			23	%
Rental operations		123,904			109,225			14,679			13	%
Sales		65,994			57,723			8,271			14	%
Other		1,509			1,908			(399	)		(21	)%
Total revenues		191,407			168,856			22,551			13	%
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		10,124			9,123			1,001			11	%
Rental related services		27,366			23,033			4,333			19	%
Other		20,549			21,222			(673	)		(3	)%
Total direct costs of rental operations		58,039			53,378			4,661			9	%
Costs of sales		43,595			39,039			4,556			12	%
Total costs of revenues		101,634			92,417			9,217			10	%
Gross Profit
Rental		50,835			44,451			6,384			14	%
Rental related services		15,030			11,395			3,635			32	%
Rental operations		65,865			55,846			10,019			18	%
Sales		22,399			18,684			3,715			20	%
Other		1,509			1,908			(399	)		(21	)%
Total gross profit		89,773			76,438			13,335			17	%
Expenses:
Selling and administrative expenses 5		34,028			31,813			2,215			7	%
Other income, net		—			(2,290	)		(2,290	)	nm
Income from operations		55,745			46,915			8,830			19	%
Interest expense allocation		9,979			8,014			1,965			25	%
Pre-tax income	$	45,766		$	38,901		$	6,865			18	%
Other Selected Information
Adjusted EBITDA	$	71,420		$	58,166		$	13,254			23	%
Average rental equipment 1	$	1,240,950		$	1,137,675		$	103,275			9	%
Average rental equipment on rent	$	956,245		$	909,377		$	46,868			5	%
Average monthly total yield 2		2.19	%		2.19	%					—
Average utilization 3		77.1	%		79.9	%					(4	)%
Average monthly rental rate 4		2.84	%		2.74	%					4	%
Period end rental equipment 1	$	1,259,179		$	1,145,377		$	113,802			10	%
Period end utilization 3		76.5	%		80.2	%					(5	)%

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding new equipment inventory and accessory equipment. Average utilization for the period is calculated using the average month end costs of rental equipment.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company reclassified $29.5 million in transaction costs from Selling and administrative expenses in 2024, and reported such expenses separately under the Corporate segment.

nm = Not meaningful

Mobile Modular’s gross profit for the three months ended September 30, 2024, increased $13.3 million, or 17%, to $89.8 million. For the three months ended September 30, 2024, compared to the same period in 2023:

•

Gross Profit on Rental Revenues – Rental revenues increased $6.7 million, or 9%, due to 5% higher average rental equipment on rent and 4% higher average monthly rental rates in 2024. As a percentage of rental revenues, depreciation was 12% in both 2024 and 2023, and other direct costs were 25% in 2024 and 29% in 2023, which resulted in gross margin percentages of 62% in 2024, compared to 59% in 2023. The higher rental revenues and higher rental margins, resulted in gross profit on rental revenues increasing $6.4 million, or 14%, to $50.8 million in 2024.

•

Gross Profit on Rental Related Services – Rental related services revenues increased $8.0 million, or 23%, compared to 2023. The increase in rental related services revenues was primarily attributable to higher delivery, return delivery and dismantle revenues and higher site related services. The increase in revenues coupled with higher gross margin percentage of 35% in 2024, compared to 33% in 2023, resulted in rental related services gross profit increasing $3.6 million, or 32%, to $15.0 million in 2024.

•

Gross Profit on Sales – Sales revenues increased $8.3 million, or 14%, compared to 2023, due to higher new equipment sales. The higher gross margin percentage of 34% in 2024 compared to 32% in 2023, together with higher sales revenue, resulted in gross profit on sales increasing $3.7 million, or 20%, to $22.4 million. The higher gross profit on sales in 2024 was primarily due to higher new equipment sales. Sales occur routinely as a normal part of Mobile Modular’s rental business; however, these sales and related gross margins can fluctuate from quarter to quarter and year to year depending on customer requirements, the scope of work to be performed, equipment availability and funding.

For the three months ended September 30, 2024, selling and administrative expenses increased $2.2 million, or 7%, to $34.0 million.

Portable Storage

For the three months ended September 30, 2024, Portable Storage’s total revenues decreased $3.0 million, or 11%, to $23.1 million compared to the same period in 2023, primarily due to lower rental and rental related services revenues. Lower gross profit on rental and rental related services revenues, partly offset by lower selling and administrative expenses, resulted in a decrease in pre-tax income of $1.0 million, or 12%, to $7.4 million in 2024.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

Portable Storage – Three Months Ended 9/30/24 compared to Three Months Ended 9/30/23 (Unaudited)


(dollar amounts in thousands)	Three Months Ended September 30,						Increase (Decrease)
	2024			2023			$			%
Revenues
Rental	$	17,040		$	19,232		$	(2,192	)		(11	)%
Rental related services		4,405			5,287			(882	)		(17	)%
Rental operations		21,445			24,519			(3,074	)		(13	)%
Sales		1,411			1,144			267			23	%
Other		195			363			(168	)	nm
Total revenues		23,051			26,026			(2,975	)		(11	)%
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		1,006			914			92			10	%
Rental related services		4,280			4,894			(614	)		(13	)%
Other		1,327			2,131			(804	)		(38	)%
Total direct costs of rental operations		6,613			7,939			(1,326	)		(17	)%
Costs of sales		906			782			124			16	%
Total costs of revenues		7,519			8,721			(1,202	)		(14	)%
Gross Profit
Rental		14,707			16,187			(1,480	)		(9	)%
Rental related services		125			394			(269	)		(68	)%
Rental operations		14,832			16,581			(1,749	)		(11	)%
Sales		505			362			143			40	%
Other		195			363			(168	)	nm
Total gross profit		15,532			17,306			(1,774	)		(10	)%
Expenses:
Selling and administrative expenses 5		6,790			8,019			(1,229	)		(15	)%
Other income, net		—			(450	)		(450	)	nm
Income from operations		8,742			9,737			(995	)		(10	)%
Interest expense allocation		1,388			1,397			(9	)		(1	)%
Pre-tax income	$	7,354		$	8,340		$	(986	)		(12	)%
Other Selected Information
Adjusted EBITDA	$	10,796		$	12,047		$	(1,251	)		(10	)%
Average rental equipment 1	$	229,231		$	212,888		$	16,343			8	%
Average rental equipment on rent	$	144,000		$	162,869		$	(18,869	)		(12	)%
Average monthly total yield 2		2.48	%		3.01	%					(18	)%
Average utilization 3		62.8	%		76.5	%					(18	)%
Average monthly rental rate 4		3.94	%		3.94	%					0	%
Period end rental equipment 1	$	230,261		$	216,132		$	14,129			7	%
Period end utilization 3		62.0	%		77.2	%					(20	)%

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding new rental equipment inventory and accessory equipment. Average utilization for the period is calculated using the average month end costs of rental equipment.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company reclassified $3.5 million in transaction costs from Selling and administrative expenses in 2024, and reported such expenses separately under the Corporate segment.

nm = Not meaningful

Portable Storage’s gross profit for the three months ended September 30, 2024, decreased $1.8 million, or 10%, to $15.5 million. For the three months ended September 30, 2024, compared to the same period in 2023:

•

Gross Profit on Rental Revenues – Rental revenues decreased $2.2 million, or 11%, due to 12% lower average rental equipment on rent. As a percentage of rental revenues, depreciation was 6% and 5% in 2024 and 2023, respectively, and other direct costs were 8% and 11% in 2024 and 2023, respectively, which resulted in gross margin percentage of 86% in 2024 and 84% in 2023. The lower rental revenues and higher rental margins resulted in gross profit on rental revenues decreasing $1.5 million, or 9%, to $14.7 million in 2024.

•

Gross Profit on Rental Related Services – Rental related services revenues was $4.4 million, compared to $5.3 million during the same period in 2023. The gross margin on rental related services revenues was 3% in 2024, compared to 7% in 2023. The lower revenues coupled with lower gross margins in 2024, resulted in rental related services gross profit decreasing $0.3 million, when compared to 2023.

•

Gross Profit on Sales– Sales revenues increased $0.3 million to $1.4 million, primarily due to higher used equipment sales. The higher sales revenues and increased gross margins of 36% in 2024, compared to 32% in 2023, resulted in sales gross profit increasing $0.1 million, or 40%, to $0.5 million in 2024. Sales occur routinely as a normal part of Portable Storage’s rental business; however, these sales can fluctuate from period to period depending on customer requirements, equipment availability and funding.

For the three months ended September 30, 2024, Portable Storage’s selling and administrative expenses decreased $1.2 million, or 15%, to $6.8 million.

TRS-RenTelco

For the three months ended September 30, 2024, TRS-RenTelco’s total revenues decreased $4.3 million to $34.8 million, compared to the same period in 2023, primarily due to lower rental and sales revenues. Lower gross profit on rental revenues, partly offset by higher gross profit on sales and lower selling and administrative expenses, resulted in a 21% decrease in pre-tax income to $5.7 million for the three months ended September 30, 2024, from $7.3 million for the same period in 2023.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

TRS-RenTelco – Three Months Ended 9/30/24 compared to Three Months Ended 9/30/23 (Unaudited)


(dollar amounts in thousands)	Three Months Ended September 30,						Increase (Decrease)
	2024			2023			$			%
Revenues
Rental	$	25,655		$	28,658		$	(3,003	)		(10	)%
Rental related services		900			776			124			16	%
Rental operations		26,555			29,434			(2,879	)		(10	)%
Sales		7,604			8,733			(1,129	)		(13	)%
Other		642			942			(300	)		(32	)%
Total revenues		34,801			39,109			(4,308	)		(11	)%
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		10,851			12,032			(1,181	)		(10	)%
Rental related services		793			605			188			31	%
Other		5,376			5,140			236			5	%
Total direct costs of rental operations		17,020			17,777			(757	)		(4	)%
Costs of sales		3,688			5,651			(1,963	)		(35	)%
Total costs of revenues		20,708			23,428			(2,720	)		(12	)%
Gross Profit
Rental		9,428			11,486			(2,058	)		(18	)%
Rental related services		107			171			(64	)		(37	)%
Rental operations		9,535			11,657			(2,122	)		(18	)%
Sales		3,916			3,082			834			27	%
Other		642			942			(300	)		(32	)%
Total gross profit		14,093			15,681			(1,588	)		(10	)%
Expenses:
Selling and administrative expenses 5		6,627			6,999			(372	)		(5	)%
Other income, net		—			(819	)		(819	)	nm
Income from operations		7,466			9,501			(2,035	)		(21	)%
Interest expense allocation		1,949			2,207			(258	)		(12	)%
Foreign currency exchange (gain) loss		(216	)		42			258		nm
Pre-tax income	$	5,733		$	7,252		$	(1,519	)		(21	)%
Other Selected Information
Adjusted EBITDA	$	18,945		$	21,039		$	(2,094	)		(10	)%
Average rental equipment 1	$	362,431		$	385,353		$	(22,922	)		(6	)%
Average rental equipment on rent	$	207,788		$	229,062		$	(21,274	)		(9	)%
Average monthly total yield 2		2.36	%		2.46	%					(4	)%
Average utilization 3		57.3	%		59.4	%					(4	)%
Average monthly rental rate 4		4.12	%		4.17	%					(1	)%
Period end rental equipment 1	$	354,183		$	383,952		$	(29,769	)		(8	)%
Period end utilization 3		59.0	%		60.3	%					(2	)%

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant. Due to this determination, the Company reclassified $6.4 million in transaction costs from Selling and administrative expenses in 2024, and reported such expenses separately under the Corporate segment.

nm = Not meaningful

TRS-RenTelco’s gross profit for the three months ended September 30, 2024 decreased $1.6 million, or 10%, to $14.1 million. For the three months ended September 30, 2024 compared to the same period in 2023:

•

Gross Profit on Rental Revenues – Rental revenues decreased $3.0 million, or 10%, depreciation expense decreased $1.2 million, or 10%, and other direct costs increased by $0.3 million, or 5%, resulting in a 18% decrease in gross profit on rental revenues to $9.4 million. As a percentage of rental revenues, depreciation was 42% in both 2024 and 2023 and other direct costs were 21% and 18%, in 2024 and 2023, respectively, which resulted in a gross margin percentage of 37% and 40% in 2024 and 2023, respectively. The decrease in rental revenues was primarily due to a 9% reduction in average rental equipment on rent and 1% lower average monthly rental rates in 2024, as compared to 2023.

•

Gross Profit on Sales – Sales revenues decreased $1.1 million, or 13%, to $7.6 million in 2024. Gross profit on sales increased $0.8 million, or 27%, to $3.9 million, with a higher gross margin percentage of 52% in 2024, compared to 35% in 2023. Sales occur as a normal part of TRS-RenTelco’s rental business; however, these sales and related gross margins can fluctuate from quarter to quarter depending on customer requirements and related mix of equipment sold, equipment availability and funding.

For the three months ended September 30, 2024, selling and administrative expenses decreased $0.4 million, or 5%, to $6.6 million.

Nine Months Ended September 30, 2024 Compared to

Nine Months Ended September 30, 2023

Overview

Consolidated revenues for the nine months ended September 30, 2024, increased 9% to $667.2 million, from $610.3 million for the same period in 2023. Consolidated net income for the nine months ended September 30, 2024, increased $50.2 million to $192.8 million, from $142.6 million for the same period in 2023. Earnings per diluted share for the nine months ended September 30, 2024, increased by $2.04 to $7.85, compared to $5.81 for the same period in 2023. The increase in consolidated net income and earnings per diluted share during the period was primarily attributed to the $180.0 million gain on merger termination, partly offset by $61.2 million in transaction costs attributed to the terminated merger agreement. Excluding the gain and transaction costs attributed to the merger termination in the current year and the gain on sale of discontinued operations in 2023, the Company's net income increased by approximately $25.4 million, or 32%, to $105.2 million, and diluted earnings per share increased $1.03, or 32%, to $4.28.

There were no revenues from discontinued operations for the nine months ended September 30, 2024, compared to $9.4 million for the same period in 2023. There was no income or earnings per diluted share from discontinued operations for the nine months ended September 30, 2024. Income from discontinued operations for the same period in 2023 was $62.8 million, which included the $61.5 million net gain on sale of discontinued operations, and earnings per diluted share from discontinued operations for the nine months ended September 30, 2023 was $2.56. For additional information on discontinued operations and the divestiture of Adler Tanks, refer to Note 5 of the condensed consolidated financial statements.

For the nine months ended September 30, 2024, on a consolidated basis from continuing operations:

•

Gross profit increased $37.2 million, or 13%, to $320.7 million in 2024. Mobile Modular’s gross profit increased $39.7 million, or 22%, largely due to higher gross profit on rental, sales and rental related services revenues. Portable Storage's gross profit decreased $1.8 million, or 4%, primarily due to lower gross profit on rental related services and rental revenues. TRS-RenTelco’s gross profit decreased $6.2 million, or 13%, primarily due to lower gross profit on rental revenues. Enviroplex’s gross profit increased $5.5 million, due to higher sales revenue and an increase in sales margins in 2024.

•

Selling and administrative expenses decreased $4.3 million to $148.8 million, primarily due to $14.3 million in transaction costs incurred by the Company in 2023, attributed to the acquisitions of Vesta Modular, Brekke Storage, Dixie Storage and Inland Leasing, and the divestiture of Adler Tanks, partly offset by an increase in employee salaries and benefit costs of $5.1 million in 2024. During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant and required separate presentation on the condensed consolidated statements of income. Due to this determination, the Company has excluded the transaction costs incurred by the Company from Selling and administrative expenses for all reportable business segments for the nine-months ended September 30, 2024.

•

Interest expense increased $9.9 million to $38.4 million, which was primarily attributed to $138.7 million higher average debt levels of the Company and a higher effective interest rate in 2024 of 6.60%, compared to 5.96% for the same period in 2023. The 22% increase in average debt when compared to 2023 was primarily the result of the funding of rental equipment purchases, taxes paid attributed to the gain on sale of discontinued operations and transaction costs regarding the terminated merger with WillScot Mobile Mini.

•

Pre-tax income contribution by Mobile Modular, Portable Storage and TRS-RenTelco was 69%, 17% and 11%, respectively, compared to 60%, 23% and 18%, respectively, for the comparable 2023 period. These results are discussed on a segment basis below. Enviroplex pre-tax income contribution was 3% and negative 1% in 2024 and 2023, respectively.

•

The provision for income taxes resulted in an effective tax rate of 26.3% and 24.5%, for the periods ended September 30, 2024 and 2023, respectively. The increase in effective tax rate during the current period was largely attributed to increased business activity in higher tax rate states.

•

Adjusted EBITDA increased $29.2 million, or 13%, to $259.7 million in 2024.

Mobile Modular

For the nine months ended September 30, 2024, Mobile Modular’s total revenues increased $51.9 million, or 13%, to $463.5 million compared to the same period in 2023, primarily due to higher rental, sales and rental related services revenues. The revenue increase, together with higher gross profit on rental, sales and rental related services revenues, and a $6.2 million allocated net gain on the sale of a corporate property, resulted in a $34.3 million increase in pre-tax income to $98.3 million for the nine months ended September 30, 2024, from $64.0 million for the same period in 2023.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

Mobile Modular – Nine Months Ended 9/30/24 compared to Nine Months Ended 9/30/23 (Unaudited)


(dollar amounts in thousands)	Nine Months Ended September 30,						Increase (Decrease)
	2024			2023			$			%
Revenues
Rental	$	236,040		$	209,622		$	26,418			13	%
Rental related services		95,450			83,799			11,651			14	%
Rental operations		331,490			293,421			38,069			13	%
Sales		127,251			112,939			14,312			13	%
Other		4,795			5,249			(454	)		(9	)%
Total revenues		463,536			411,609			51,927			13	%
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		29,994			27,196			2,798			10	%
Rental related services		62,974			55,702			7,272			13	%
Other		64,487			68,726			(4,239	)		(6	)%
Total direct costs of rental operations		157,455			151,624			5,831			4	%
Costs of sales		83,180			76,303			6,877			9	%
Total costs of revenues		240,635			227,927			12,708			6	%
Gross Profit
Rental		141,559			113,700			27,859			25	%
Rental related services		32,476			28,097			4,379			16	%
Rental operations		174,035			141,797			32,238			23	%
Sales		44,071			36,636			7,435			20	%
Other		4,795			5,249			(454	)	nm
Total gross profit		222,901			183,682			39,219			21	%
Expenses:
Selling and administrative expenses 5		100,882			101,360			(478	)		(0	)%
Other income, net		(6,220	)		(2,290	)		(3,930	)	nm
Income from operations		128,239			84,612			43,627			52	%
Interest expense allocation		29,951			20,607			9,344			45	%
Pre-tax income	$	98,288		$	64,005		$	34,283			54	%
Other Selected Information
Adjusted EBITDA	$	168,165		$	135,107		$	33,058			24	%
Average rental equipment 1	$	1,206,361		$	1,073,384		$	132,977			12	%
Average rental equipment on rent	$	940,878		$	855,218		$	85,660			10	%
Average monthly total yield 2		2.17	%		2.17	%					—
Average utilization 3		78.0	%		79.7	%					(2	)%
Average monthly rental rate 4		2.79	%		2.72	%					3	%
Period end rental equipment 1	$	1,259,179		$	1,145,377		$	113,802			10	%
Period end utilization 3		76.5	%		80.2	%					(5	)%

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

nm = Not meaningful

Mobile Modular’s gross profit for the nine months ended September 30, 2024, increased $39.2 million, or 21%, to $222.9 million. For the nine months ended September 30, 2024, compared to the same period in 2023:

•

Gross Profit on Rental Revenues – Rental revenues increased $26.4 million, or 13%, due to 10% higher average rental equipment on rent and 3% higher average monthly rental rates in 2024. As a percentage of rental revenues, depreciation was 13% in both 2024 and 2023, and other direct costs were 27% in 2024 and 33% in 2023, which resulted in gross margin percentages of 60% in 2024, compared to 54% in 2023. The higher rental revenues and higher rental margins, resulted in gross profit on rental revenues increasing $27.9 million, or 25%, to $141.6 million in 2024.

•

Gross Profit on Rental Related Services – Rental related services revenues increased $11.7 million, or 14%, compared to 2023. The increase in rental related services revenues was primarily attributable to higher delivery, return delivery and dismantle revenues and higher site related services. The increase in revenues accompanied by comparable gross margin percentage of 34% in 2024, resulted in rental related services gross profit increasing $4.4 million, or 16%, to $32.5 million in 2024.

•

Gross Profit on Sales – Sales revenues increased $14.3 million, or 13%, compared to 2023, due to higher new and used equipment sales. The higher gross margin percentage of 35% in 2024 compared to 32% in 2023, together with higher sales revenue, resulted in gross profit on sales increasing $7.4 million, or 20%, to $44.1 million. The higher gross margin on sales in 2024 was primarily due to higher margins on both new and used equipment sales. Sales occur routinely as a normal part of Mobile Modular’s rental business; however, these sales and related gross margins can fluctuate from quarter to quarter and year to year depending on customer requirements, the scope of work to be performed, equipment availability and funding.

For the nine months ended September 30, 2024, selling and administrative expenses decreased $0.5 million to $100.9 million, when compared to the same period in 2023.

Portable Storage

For the nine months ended September 30, 2024, Portable Storage’s total revenues decreased $2.4 million, or 3%, to $71.8 million compared to the same period in 2023, primarily due to lower rental related services and rental revenues, partly offset by higher sales revenues. Lower gross profit on rental related services and rental revenues, coupled with a $1.3 million allocated net gain on the sale of a corporate property, resulted in a comparable pre-tax income of $23.9 million in 2024.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

Portable Storage – Nine Months Ended 9/30/24 compared to Nine Months Ended 9/30/23 (Unaudited)


(dollar amounts in thousands)	Nine Months Ended September 30,						Increase (Decrease)
	2024			2023			$			%
Revenues
Rental	$	53,270		$	54,776		$	(1,506	)		(3	)%
Rental related services		13,768			15,359			(1,591	)		(10	)%
Rental operations		67,039			70,135			(3,096	)		(4	)%
Sales		3,889			2,890			999			35	%
Other		907			1,167			(260	)		(22	)%
Total revenues		71,835			74,192			(2,357	)		(3	)%
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		2,971			2,570			401			16	%
Rental related services		13,212			13,916			(704	)		(5	)%
Other		4,322			5,619			(1,297	)		(23	)%
Total direct costs of rental operations		20,505			22,105			(1,600	)		(7	)%
Costs of sales		2,390			1,799			591			33	%
Total costs of revenues		22,895			23,904			(1,009	)		(4	)%
Gross Profit
Rental		45,977			46,587			(610	)		(1	)%
Rental related services		556			1,443			(887	)		(61	)%
Rental operations		46,533			48,030			(1,497	)		(3	)%
Sales		1,499			1,091			408			37	%
Other		907			1,167			(260	)		(22	)%
Total gross profit		48,939			50,288			(1,349	)		(3	)%
Expenses:
Selling and administrative expenses 5		22,064			23,282			(1,218	)		(5	)%
Other income, net		(1,319	)		(450	)		(869	)	nm
Income from operations		28,194			27,456			738			3	%
Interest expense allocation		4,255			3,522			733			21	%
Pre-tax income	$	23,939		$	23,934		$	5			0	%
Other Selected Information
Adjusted EBITDA	$	33,333		$	34,375		$	(1,042	)		(3	)%
Average rental equipment 1	$	226,373		$	201,946		$	24,427			12	%
Average rental equipment on rent	$	149,705		$	158,383		$	(8,678	)		(5	)%
Average monthly total yield 2		2.61	%		3.01	%					(13	)%
Average utilization 3		66.1	%		78.4	%					(16	)%
Average monthly rental rate 4		3.95	%		3.84	%					3	%
Period end rental equipment 1	$	230,261		$	216,132		$	14,129			7	%
Period end utilization 3		62.0	%		77.2	%					(20	)%

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

nm = Not meaningful

Portable Storage’s gross profit for the nine months ended September 30, 2024, decreased $1.3 million, or 3%, to $48.9 million. For the nine months ended September 30, 2024, compared to the same period in 2023:

•

Gross Profit on Rental Revenues – Rental revenues decreased $1.5 million, or 3%, due to 5% lower average rental equipment on rent, partly offset by 3% higher average monthly rental rates in 2024. As a percentage of rental revenues, depreciation was 6% and 5% in 2024 and 2023, respectively, and other direct costs were 8% and 10% in 2024 and 2023, respectively, which resulted in gross margin percentage of 86% and 85% in 2024 and 2023, respectively. The lower rental revenues and higher rental margins resulted in gross profit on rental revenues decreasing $0.6 million, or 1%, to $46.0 million in 2024.

•

Gross Profit on Rental Related Services – Rental related services revenues was $13.8 million, a decrease of $1.6 million compared to 2023. The gross margin on rental related services revenues was 4% in 2024, compared to 9% in 2023. The lower revenues coupled with lower gross margins in 2024, resulted in rental related services gross profit decreasing $0.9 million, when compared to 2023.

•

Gross Profit on Sales– Sales revenues increased $1.0 million, primarily due to higher used equipment sales. The higher sales revenues and higher gross margins of 39% in 2024, compared to 38% in 2023, resulted in sales gross profit increasing $0.4 million, or 37%, to $1.5 million in 2024. Sales occur routinely as a normal part of Portable Storage’s rental business; however, these sales can fluctuate from period to period depending on customer requirements, equipment availability and funding.

For the nine months ended September 30, 2024, Portable Storage’s selling and administrative expenses decreased $1.2 million when compared to the same period in 2023. The reduction in selling and administrative expenses was primarily the result of allocated transaction costs of $1.1 million in 2023, attributed to the acquisitions of Vesta Modular, Brekke Storage, Dixie Storage and Inland Leasing, and the divestiture of Adler Tanks.

TRS-RenTelco

For the nine months ended September 30, 2024, TRS-RenTelco’s total revenues decreased $11.8 million to $101.2 million, compared to the same period in 2023, primarily due to lower rental and sales revenues. Lower gross profit on rental revenues, partly offset by a $1.7 million allocated net gain on the sale of a corporate property, resulted in a 13% decrease in pre-tax income to $16.2 million for the nine months ended September 30, 2024, from $18.6 million for the same period in 2023.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

TRS-RenTelco – Nine Months Ended 9/30/24 compared to Nine Months Ended 9/30/23 (Unaudited)


(dollar amounts in thousands)	Nine Months Ended September 30,						Increase (Decrease)
	2024			2023			$			%
Revenues
Rental	$	76,398		$	86,375		$	(9,977	)		(12	)%
Rental related services		2,422			2,323			99			4	%
Rental operations		78,820			88,698			(9,878	)		(11	)%
Sales		20,261			21,368			(1,107	)		(5	)%
Other		2,153			3,008			(855	)		(28	)%
Total revenues		101,234			113,074			(11,840	)		(10	)%
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		33,547			36,733			(3,186	)		(9	)%
Rental related services		2,029			2,007			22			1	%
Other		15,373			15,843			(470	)		(3	)%
Total direct costs of rental operations		50,949			54,583			(3,634	)		(7	)%
Costs of sales		9,346			11,307			(1,961	)		(17	)%
Total costs of revenues		60,295			65,890			(5,595	)		(8	)%
Gross Profit
Rental		27,478			33,799			(6,321	)		(19	)%
Rental related services		393			316			77			24	%
Rental operations		27,871			34,115			(6,244	)		(18	)%
Sales		10,915			10,061			854			8	%
Other		2,153			3,008			(855	)		(28	)%
Total gross profit		40,939			47,184			(6,245	)		(13	)%
Expenses:
Selling and administrative expenses 5		20,450			23,576			(3,126	)		(13	)%
Other income, net		(1,742	)		(819	)		(923	)	nm
Income from operations		22,231			24,427			(2,196	)		(9	)%
Interest expense allocation		6,070			6,008			62			1	%
Foreign currency exchange gain		(53	)		(166	)		(113	)	nm
Pre-tax income	$	16,214		$	18,585		$	(2,371	)		(13	)%
Other Selected Information
Adjusted EBITDA	$	55,426		$	63,212		$	(7,786	)		(12	)%
Average rental equipment 1	$	367,137		$	391,993		$	(24,856	)		(6	)%
Average rental equipment on rent	$	208,639		$	231,273		$	(22,634	)		(10	)%
Average monthly total yield 2		2.31	%		2.43	%					(5	)%
Average utilization 3		56.8	%		59.0	%					(4	)%
Average monthly rental rate 4		4.07	%		4.15	%					(2	)%
Period end rental equipment 1	$	354,183		$	383,952		$	(29,769	)		(8	)%
Period end utilization 3		59.0	%		60.3	%					(2	)%

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

nm = Not meaningful

TRS-RenTelco’s gross profit for the nine months ended September 30, 2024 decreased $6.2 million, or 13%, to $40.9 million. For the nine months ended September 30, 2024 compared to the same period in 2023:

•

Gross Profit on Rental Revenues – Rental revenues decreased $10.0 million, or 12%, depreciation expense decreased $3.2 million, or 9%, and other direct costs decreased by $0.5 million, or 3%, resulting in a 19% decrease in gross profit on rental revenues to $27.5 million. As a percentage of rental revenues, depreciation was 44% and 43% in 2024 and 2023, respectively, and other direct costs were 20% and 18%, in 2024 and 2023, respectively, which resulted in a gross margin percentage of 36% and 39% in 2024 and 2023, respectively. The decrease in rental revenues was primarily due to a 10% reduction in average rental equipment on rent and 2% lower average monthly rental rates in 2024, as compared to 2023.

•

Gross Profit on Sales – Sales revenues decreased $1.1 million, or 5%, to $20.3 million in 2024. Gross profit on sales was $10.9 million, an increase of $0.9 million when compared to 2023, with a gross margin percentage of 54% in 2024, up from 47% in 2023. Sales occur as a normal part of TRS-RenTelco’s rental business; however, these sales and related gross margins can fluctuate from quarter to quarter depending on customer requirements and related mix of equipment sold, equipment availability and funding.

For the nine months ended September 30, 2024, selling and administrative expenses decreased $3.1 million, or 13%, to $20.5 million, when compared to the same period in 2023. The reduction in selling and administrative expenses was primarily the result of allocated transaction costs of $1.4 million in 2023, attributed to the acquisitions of Vesta Modular, Brekke Storage, Dixie Storage and Inland Leasing, and the divestiture of Adler Tanks.

Adjusted EBITDA

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs, gains on property sales and non-operating transactions. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges and non-recurring transactions, including share-based compensation, transaction costs and gains on property sales is useful in measuring the Company’s cash available for operations and performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP and may be different from non−GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include share-based compensation charges, transaction costs, gains on property sales and non-operating transactions. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure, as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Reconciliation of Income from Continuing Operations to Adjusted EBITDA


(dollar amounts in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,						Twelve Months Ended September 30,
	2024			2023			2024			2023			2024			2023
Income from continuing operations	$	149,317		$	40,366		$	192,778		$	79,836		$	224,799		$	114,828
Provision for income taxes from continuing operations		53,502			15,152			68,913			25,934			80,586			35,624
Interest expense		12,642			11,025			38,383			28,434			50,509			32,607
Depreciation and amortization		26,693			26,884			80,824			80,385			108,357			103,893
EBITDA		242,154			93,427			380,898			214,589			464,249			286,952
Share-based compensation		2,393			1,891			6,949			5,155			9,951			7,658
Transaction costs 3		39,436			10			61,157			14,302			62,732			18,188
Other income, net 4		—			(3,559	)		(9,281	)		(3,559	)		(9,340	)		(3,559	)
Gain on merger termination from WillScot Mobile Mini 5		(180,000	)		—			(180,000	)		—			(180,000	)		—
Adjusted EBITDA 1	$	103,983		$	91,769		$	259,723		$	230,487		$	347,592		$	309,239
Adjusted EBITDA margin 2		39	%		39	%		38	%		38	%		39	%		39	%

Adjusted EBITDA is defined as income from operations before interest expense, provision for income taxes, depreciation, amortization, share-based compensation, other income, net and non-operating transactions.

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total revenues for the period.

Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.

Other income, net consists of net gains on property, plant and equipment sales that are infrequent in nature and excluded from Adjusted EBITDA.

The gain on merger termination from WillScot Mobile Mini was considered a non-operating transaction and is excluded from Adjusted EBITDA.

For the nine months ended September 30, 2024, total Adjusted EBITDA from both continuing and discontinued operations was $259.7 million, compared to $234.2 million for the same period in 2023, excluding the gain on sale of the divestiture of Adler Tanks. For the nine months ended September 30, 2024 and 2023, the total Adjusted EBITDA from continuing operations was $259.7 million

and $230.5 million, respectively. There were no adjusted earnings from discontinued operations during the nine months ended September 30, 2024, and total Adjusted EBITDA from discontinued operations of $3.7 million during the comparable period in 2023.

The following table reconciles Adjusted EBITDA on a combined basis, including both continuing and discontinued operations, to the net cash provided by operating activities on the Company's condensed consolidated statement of cash flows.

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities


(dollar amounts in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,						Twelve Months Ended September 30,
	2024			2023			2024			2023			2024			2023
Adjusted EBITDA 1	$	103,983		$	91,769		$	259,723		$	234,169		$	347,592		$	325,138
Interest paid		(13,944	)		(11,016	)		(40,338	)		(27,818	)		(51,123	)		(33,611	)
Income taxes paid, net of refunds received		(773	)		(2,616	)		3,826			(9,547	)		(78,192	)		(12,024	)
Gain on sale of used rental equipment		(9,648	)		(8,714	)		(25,185	)		(22,964	)		(33,863	)		(34,238	)
Foreign currency exchange loss		(216	)		42			(53	)		(166	)		(197	)		(192	)
Amortization of debt issuance costs		2			2			6			6			8			9
Change in certain assets and liabilities:
Accounts receivable, net		(7,150	)		(26,223	)		2,839			(25,939	)		(6,365	)		(26,003	)
Prepaid expenses and other assets		14,171			1,114			19,988			(7,390	)		(1,948	)		(6,561	)
Accounts payable and other liabilities		123,241			4,476			104,293			(29,356	)		119,382			(30,691	)
Deferred income		(10,699	)		(1,382	)		12,497			7,908			18,683			(1,790	)
Net cash provided by operating activities	$	198,967		$	47,452		$	337,596		$	118,903		$	313,977		$	180,037

Adjusted EBITDA is defined as income from operations before interest expense, provision for income taxes, depreciation, amortization, share-based compensation and non-operating transactions.

Adjusted EBITDA is a component of two restrictive financial covenants for the Company’s unsecured Credit Facility, the Note Purchase Agreement, Series D Senior Notes, Series E Senior Notes and Series F Senior Notes (as defined and more fully described under the heading “Liquidity and Capital Resources” in this MD&A). These instruments contain financial covenants requiring the Company to not:

•

Permit the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility and the Note Purchase Agreement (as defined and more fully described under the heading “Liquidity and Capital Resources” in this MD&A)) of Adjusted EBITDA (as defined in the Credit Facility and the Note Purchase Agreement) to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1. At September 30, 2024, the actual ratio was 3.07 to 1.

•

Permit the Consolidated Leverage Ratio of funded debt (as defined in the Credit Facility and the Note Purchase Agreement) to Adjusted EBITDA at any time during any period of four consecutive quarters to be greater than 2.75 to 1. At September 30, 2024, the actual ratio was 1.75 to 1.

At September 30, 2024, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although, significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.

Liquidity and Capital Resources

The Company’s rental businesses are capital intensive and generate significant cash flows. Cash flows for the Company for the nine months ended September 30, 2024 compared to the same period in 2023 are summarized as follows:

Cash Flows from Operating Activities: The Company’s operations provided net cash of $337.6 million in 2024, compared to $118.9 million in 2023. The $218.7 million increase in net cash provided by operating activities was primarily attributable to the gain on merger termination from WillScot Mobile Mini after transaction costs, which provided $87.6 million of net income during the period. Further, operating activities provided for a $61.9 million increase in deferred income taxes, a $29.1 million reduction in accounts receivable and a $25.4 million reduction in prepaid expenses and other assets, which contributed to the net cash provided by operating activities during the period.

Cash Flows from Investing Activities: Net cash used in investing activities was $140.8 million in 2024, down from $331.5 million in 2023. The $190.7 million decrease in net cash used was primarily due to the $461.8 million paid for the business acquisitions of Vesta Modular, Brekke Storage, Dixie Storage and Inland Leasing acquisitions in 2023, which was partly offset by $268.0 million in

proceeds from the sale of discontinued operations during the same period. The net effect of these transactions in 2023 was $193.8 million in net cash used by investing activities.

Cash Flows from Financing Activities: Net cash used in financing activities was $193.6 million in 2024, compared to $213.6 million in net cash provided during 2023. The $407.2 million change was primarily attributable to reduced borrowings under bank lines of credit and note purchase agreements in 2024, as during 2023 the net borrowings were required for the funding of the Vesta Modular, Brekke Storage, Dixie Storage and Inland Leasing business acquisitions. Further, during the 2024 period the Company made net payments of $154.4 million under bank lines of credit, primarily attributable to proceeds received from the merger termination with WillScot Mobile Mini.

Significant capital expenditures are required to maintain and grow the Company’s rental assets. During the last three years, the Company has financed its working capital and capital expenditure requirements through cash flow from operations, proceeds from the sale of rental equipment and from borrowings. Sales occur routinely as a normal part of the Company’s rental business. However, these sales can fluctuate from period to period depending on customer requirements and funding. Although the net proceeds received from sales may fluctuate from period to period, the Company believes its liquidity will not be adversely impacted from lower sales in any given year because it believes it has the ability to increase its bank borrowings and conserve its cash in the future by reducing the amount of cash it uses to purchase rental equipment, pay dividends, or repurchase the Company’s common stock.

Unsecured Revolving Lines of Credit

On July 15, 2022, the Company entered into an amended and restated credit agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender, L/C Issuer and lender, and other lenders named therein (the “Credit Facility”). The Credit Facility provides for a $650.0 million unsecured revolving credit facility (which may be further increased to $950.0 million, of which as of September 30, 2024, $73.0 million was utilized through the term loan entered on April 23, 2024, by adding one or more tranches of term loans and/or increasing the aggregate revolving commitments), which includes a $40.0 million sublimit for the issuance of standby letters of credit and a $20.0 million sublimit for swingline loans. The proceeds of the Credit Facility are available to be used for general corporate purposes, including permitted acquisitions. The Credit Facility permits the Company’s existing indebtedness to remain, which includes the Company’s $20.0 million Treasury Sweep Note due July 15, 2027, the Company’s existing senior notes issued pursuant to the Note Purchase and Private Shelf Agreement with Prudential Investment Management, Inc., dated as of April 21, 2011 (as amended): (i) the $60.0 million aggregate outstanding principal of notes issued November 5, 2015 and due November 5, 2022, (ii) the $40.0 million aggregate outstanding principal of notes issued March 17, 2021 and due March 17, 2028, and (iii) the $60.0 million aggregate outstanding principal of notes issued June 16, 2021 and due June 16, 2026. In addition, the Company may incur additional senior note indebtedness in an aggregate amount not to exceed $250.0 million. The Credit Facility matures on July 15, 2027 and replaced the Company’s prior $420.0 million credit facility dated March 31, 2020 with Bank of America, N.A., as agent, as amended. All obligations outstanding under the prior credit facility as of the date of the Credit Facility were refinanced by the Credit Facility on April 23, 2022.

On August 19, 2022, the Company entered into an amended and restated Credit Facility Letter Agreement and a Credit Line Note in favor of MUFG Union Bank, N.A., which provides for a $20.0 million line of credit facility related to its cash management services (“Sweep Service Facility”). The Sweep Service Facility matures on the earlier of July 15, 2027, or the date the Company ceases to utilize MUFG Union Bank, N.A. for its cash management services. The Sweep Service Facility replaced the Company’s prior $12.0 million sweep service facility, dated as of March 30, 2020.

On April 23, 2024, the Company entered into a first incremental facility amendment with Bank of America, N.A., as Administrative Agent and the first incremental lender (“BoA”) and the guarantors named therein (the “First Incremental Amendment”). The First Incremental Amendment amends the Second Amended and Restated Credit Agreement, dated as of July 15, 2022, as amended, by and among the Company, BoA, the other lenders named therein, and the guarantors named therein (the “Credit Agreement”) to institute an incremental term loan “A” facility in an aggregate principal amount of $75.0 million (the “Incremental Credit Facility”). The proceeds from the Incremental Credit Facility were used for general corporate purposes. Concurrently with entry into the First Incremental Amendment, the Company repaid revolving loans issued under the Credit Agreement in an aggregate amount equal to approximately $75.0 million.

At September 30, 2024, under the Credit Facility and Sweep Service Facility, the Company had unsecured lines of credit that permit it to borrow up to $650.0 million of which $360.6 million was outstanding and had capacity to borrow up to an additional $289.4

million. The Credit Facility contains financial covenants requiring the Company to not (all defined terms used below not otherwise defined herein have the meaning assigned to such terms in the Credit Facility):

•

Permit the Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than 2.50 to 1. At September 30, 2024, the actual ratio was 3.07 to 1.

•

Permit the Consolidated Leverage Ratio at any time during any period of four consecutive fiscal quarters to be greater than 2.75 to 1. At September 30, 2024, the actual ratio was 1.75 to 1.

At September 30, 2024, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.

Note Purchase and Private Shelf Agreement

On June 8, 2023, the Company entered into a Second Amended and Restated Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”) with PGIM, Inc. (“PGIM”) and the holders of Series D and Series E Notes previously issued pursuant to the Prior Amended and Restated NPA, among the Company and the other parties to the Note Purchase Agreement. The Note Purchase Agreement amended and restated, and superseded in its entirety, the Prior NPA. Pursuant to the Prior NPA, the Company issued (i) $40.0 million aggregate principal amount of its 2.57% Series D Senior Notes, due March 17, 2028, and (ii) $60.0 million aggregate principal amount of its 2.35% Series E Senior Notes, due June 16, 2026, to which the terms of the Note Purchase Agreement shall apply.

In addition, pursuant to the Note Purchase Agreement, the Company may authorize the issuance and sale of additional senior notes (the “Shelf Notes”) in the aggregate principal amount of (x) $300 million minus (y) the amount of other notes (such as the Series D Senior Notes, Series E Senior Notes and Series F Senior Notes, each defined below) then outstanding, to be dated the date of issuance thereof, to mature, in case of each Shelf Note so issued, no more than 15 years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than 15 years after the date of original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in accordance with the Note Purchase Agreement. Shelf Notes may be issued and sold from time to time at the discretion of the Company’s Board of Directors and in such amounts as the Board of Directors may determine, subject to prospective purchasers’ agreement to purchase the Shelf Notes. The Company will sell the Shelf Notes directly to such purchasers. The full net proceeds of each Shelf Note will be used in the manner described in the applicable Request for Purchase with respect to such Shelf Note.

6.25% Senior Notes Due in 2030

On September 27, 2023, the Company issued and sold to the purchasers $75.0 million aggregate principal amount of 6.25% Series F Notes (the “Series F Senior Notes”) pursuant to the terms of the Second Amended and Restated Note Purchase and Private Shelf Agreement, dated June 8, 2023 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.

The Series F Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 6.25% per annum and mature on September 27, 2030. Interest on the Series F Senior Notes is payable semi-annually beginning on March 27, 2024 and continuing thereafter on September 27 and March 27 of each year until maturity. The principal balance is due when the notes mature on September 27, 2030. The full net proceeds from the Series F Senior Notes will primarily be used to fulfill the income tax obligations incurred from the divestiture of Adler Tanks. At September 30, 2024, the principal balance outstanding under the Series F Senior Notes was $75.0 million.

2.57% Senior Notes Due in 2028

On March 17, 2021, the Company issued and sold to the purchasers $40.0 million aggregate principal amount of 2.57% Series D Notes (the “Series D Senior Notes”) pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.

The Series D Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 2.57% per annum and mature on March 17, 2028. Interest on the Series D Senior Notes is payable semi-annually beginning on September 17, 2021 and continuing thereafter on March 17 and September 17 of each year until maturity. The principal balance is due when the notes mature on March 17, 2028. The full net proceeds from the Series D Senior Notes were used to pay off the Company’s $40 million Series B Senior Notes. At September 30, 2024, the principal balance outstanding under the Series D Senior Notes was $40.0 million.

2.35% Senior Notes Due in 2026

On June 16, 2021, the Company issued and sold to the purchasers $60.0 million aggregate principal amount of 2.35% Series E Notes (the "Series E Notes") pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.

The Series E Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 2.35% per annum and mature on June 16, 2026. Interest on the Series E Senior Notes is payable semi-annually beginning on December 16, 2021 and continuing thereafter on June 16 and December 16 of each year until maturity. The principal balance is due when the notes mature on June 16, 2026. The full net proceeds from the Series E Senior Notes were used to pay down the Company’s credit facility. At September 30, 2024, the principal balance outstanding under the Series E Senior Notes was $60.0 million.

Among other restrictions, the Note Purchase Agreement, which has superseded in its entirety the Prior NPA, under which the Series D Senior Notes, Series E Senior Notes and Series F Senior Notes were sold, contains financial covenants requiring the Company to not (all defined terms used below not otherwise defined herein have the meaning assigned to such terms in the Note Purchase Agreement):

•

Permit the Consolidated Fixed Charge Coverage Ratio of EBITDA to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1. At September 30, 2024, the actual ratio was 3.07 to 1.

•

Permit the Consolidated Leverage Ratio of funded debt to EBITDA at any time during any period of four consecutive quarters to be greater than 2.75 to 1. At September 30, 2024, the actual ratio was 1.75 to 1.

At September 30, 2024, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.

Although no assurance can be given, the Company believes it will continue to be able to negotiate general bank lines of credit and issue senior notes adequate to meet capital requirements not otherwise met by operational cash flows and proceeds from sales of rental equipment.

Contractual Obligations and Commitments

We believe that our contractual obligations and commitments have not changed materially from those included in our 2023 Annual Report.

Critical Accounting Estimates

There were no material changes in our judgments and assumptions associated with the development of our critical accounting estimates during the nine month period ended September 30, 2024. Refer to our 2023 Annual Report for a discussion of our critical accounting policies and estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk exposures from those reported in our 2023 Annual Report.

Item 4. Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), the Company’s principal executive officer and principal financial officer, respectively, performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of September 30, 2024. There were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II -Other Information

Item 1. Legal Proceedings

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company’s management does not expect that the outcome in the current proceedings, individually or collectively, will have a material adverse effect on the Company’s financial condition, operating results or cash flows.

On June 20 and 21, 2024, two purported shareholders of the Company commenced separate actions, captioned Smith v. McGrath RentCorp, et al., Index No. 653114/2024, and Taylor v. McGrath RentCorp, et al., Index No. 653148/2024, both in the Supreme Court of the State of New York, County of New York (the “June 2024 Complaints”). The June 2024 Complaints both name the Company and the members of its board of directors as defendants. The June 2024 Complaints assert claims for breach of fiduciary duty in connection with alleged misleading disclosures and misleading omissions in the special proxy statement filed by the Company with the SEC on June 10, 2024. The June 2024 Complaints seek, among other relief, an injunction preventing the parties from consummating the proposed transaction set forth in the Merger Agreement, damages in the event the transaction is consummated, and an award of attorneys’ fees. To the Company’s knowledge, the June 2024 Complaints have not yet been served on any defendant. The Company believes the allegations made in the June 2024 Complaints are without merit and, in the event the June 2024 Complaints are not dismissed as moot as a result of the stockholder vote that occurred on July 11, 2024, or the termination of the Merger Agreement, the Company will rigorously defend itself at the appropriate time.

Item 1a. Risk Factors

You should carefully consider the following discussion of various risks and uncertainties. We believe these risk factors are the most relevant to our business and could cause our results to differ materially from the forward-looking statements made by us. Our business, financial condition, and results of operations could be seriously harmed if any of these risks or uncertainties actually occur or materialize. In that event, the market price for our common stock could decline, and you may lose all or part of your investment. The risk factors below are intended to supersede in their entirety the risk factors contained in “Item 1. A Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

RISKS RELATED TO OUR STRATEGY AND OPERATION:

Our future operating results may fluctuate, fail to match past performance or fail to meet expectations, which may result in a decrease in our stock price.

Our operating results may fluctuate in the future, may fail to match our past performance or fail to meet the expectations of analysts and investors. Our results and related ratios, such as gross margin, operating income percentage and effective tax rate may fluctuate as a result of a number of factors, some of which are beyond our control including but not limited to:

•

general economic conditions in the geographies and industries where we rent and sell our products;

•

legislative and educational policies where we rent and sell our products;

•

the budgetary constraints of our customers;

•

loss of customers and prospective customers during the pendency of the now terminated merger with WillScot Mobile Mini

•

seasonality of our rental businesses and our end-markets;

•

success of our strategic growth initiatives;

•

costs associated with the launching or integration of new or acquired businesses;

•

the timing and type of equipment purchases, rentals and sales;

•

the nature and duration of the equipment needs of our customers;

•

the timing of new product introductions by us, our suppliers and our competitors;

•

the volume, timing and mix of maintenance and repair work on our rental equipment;

•

supply chain delays or disruptions;

•

our equipment mix, availability, utilization and pricing;

•

inflation in the cost of materials, labor and new rental equipment;

•

the mix, by state and country, of our revenues, personnel and assets;

•

rental equipment impairment from excess, obsolete or damaged equipment;

•

movements in interest rates or tax rates;

•

changes in, and application of, accounting rules;

•

changes in the regulations applicable to our business operations; and

•

claims and litigation matters.

As a result of these factors, our historical financial results are not necessarily indicative of our future results or stock price.

Our stock price has fluctuated and may continue to fluctuate in the future, which may result in a decline in the value of your investment in our common stock.

The market price of our common stock fluctuates on the NASDAQ Global Select Market and is likely to be affected by a number of factors including but not limited to:

•

impact of the termination of the Merger Agreement on the Company and the industrial sector generally;

•

our operating performance and the performance of our competitors, and in particular any variations in our operating results or dividend rate from our stated guidance or from investors’ expectations;

•

any changes in general conditions in the global economy, the industries in which we operate or the global financial markets;

•

investors’ reaction to our press releases, public announcements or filings with the SEC;

•

the stock price performance of our competitors or other comparable companies;

•

any changes in research analysts’ coverage, recommendations or earnings estimates for us or for the stocks of other companies in our industry;

•

any sales of common stock by our directors, executive officers and our other large shareholders, particularly in light of the limited trading volume of our stock;

•

any merger and acquisition activity that involves us or our competitors; and

•

other announcements or developments affecting us, our industry, customers, suppliers or competitors.

In addition, in recent years the U.S. stock market has experienced significant price and volume fluctuations. These fluctuations are often unrelated to the operating performance of particular companies. Additionally, the most recent global credit crisis adversely affected the prices of most publicly traded stocks as many stockholders became more willing to divest their stock holdings at lower values to increase their cash flow and reduce exposure to such fluctuations. These broad market fluctuations and any other negative economic trends may cause declines in the market price of our common stock and may be based upon factors that have little or nothing to do with our Company or its performance, and these fluctuations and trends could materially reduce our stock price.

Our ability to retain our executive management and to recruit, retain and motivate key qualified employees is critical to the success of our business.

If we cannot successfully recruit and retain qualified personnel, our operating results and stock price may suffer. We believe that our success is directly linked to the competent people in our organization, including our executive officers, senior managers and other key personnel, and in particular, Joe Hanna, our Chief Executive Officer. Personnel turnover can be costly and could materially and adversely impact our operating results and can potentially jeopardize the success of our current strategic initiatives. We need to attract and retain highly qualified personnel to replace personnel when turnover occurs, as well as add to our staff levels as growth occurs. The pendency of the now terminated merger with WillScot Mobile Mini had a negative impact on the recruitment and retention of our personnel. Our business and stock price likely will suffer if we are unable to fill, or experience delays in filling open positions, or fail to retain key personnel.

Failure by third parties to manufacture and deliver our products to our specifications or on a timely basis may harm our reputation and financial condition.

We depend on third parties to manufacture our products even though we are able to purchase products from a variety of third-party suppliers. In the future, we may be limited as to the number of third-party suppliers for some of our products. Although in general, we make advance purchases of some products to help ensure an adequate supply, currently we do not have any long-term purchase contracts with any third-party supplier. We may experience supply problems as a result of financial or operating difficulties or failure of our suppliers, or shortages and discontinuations resulting from product obsolescence or other shortages or allocations by our suppliers. Unfavorable economic conditions may also adversely affect our suppliers or the terms on which we purchase products. In the future, we may not be able to negotiate arrangements with third parties to secure products that we require in sufficient quantities or on reasonable terms. If we cannot negotiate arrangements with third parties to produce our products or if the third parties fail to produce our products to our specifications or in a timely manner, our reputation and financial condition could be harmed.

We are subject to information technology system failures, network disruptions and breaches in data security which could subject us to liability, reputational damage or interrupt the operation of our business.

We rely upon our information technology systems and infrastructure for our business. We sustained an immaterial cybersecurity attack in 2021 involving ransomware that impacted certain of our systems but was unsuccessful in its ability to disrupt our network. Our investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, directors, contractor workers and their dependents and certain other persons. Upon detection, we promptly undertook steps to address the incident, restored network systems and resumed normal operations. The attack did not result in any material disruption to our operations or ability to service our customers and did not affect our financial performance.

In the future, we could experience additional breaches of our security measures resulting in the theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. Similarly, additional data privacy breaches by those who access our systems may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our employees, customers or other business partners, may be exposed to unauthorized persons or to the public.

The immaterial breach of our information technology system that we suffered in 2021 and any future breaches could subject us to reputational damage. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. We expend significant resources to minimize the risk of security breaches, including deploying additional personnel and protection technologies, training employees annually, and engaging third-party experts and contractors. Significant and increasing investments of time and resources by management and Board have been, and will continue to be, required to anticipate and address cybersecurity risks and incidents. However, given that the techniques used to obtain unauthorized access or to sabotage systems change frequently, and often are not identified until they are launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures in time to stop a cyber incident. Thus, there can be no assurance that our efforts to protect our data and information technology systems will prevent future breaches in our systems (or that of our third-party providers). Such breaches could adversely affect our business and result in financial and reputational harm to us, theft of trade secrets and other proprietary information, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties.

Disruptions in our information technology systems or failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail, become unavailable for any period of time or are not upgraded, this could limit our ability to effectively monitor and control our operations and adversely affect our operations.

Our information technology systems facilitate our ability to transact business, monitor and control our operations and adjust to changing market conditions. We sustained an immaterial cybersecurity attack in 2021 involving ransomware that impacted certain of our systems, but was unsuccessful in its ability to disrupt our network. Upon detection, we promptly undertook steps to address the incident, restored network systems and resumed normal operations. Any future cybersecurity attack causing disruption in our information technology systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively transact business, monitor and control our operations and adjust to changing market conditions in a timely manner.

As part of our business, we develop, receive and retain confidential data about our company and our customers. In addition, because of recent advances in technology and well-known efforts on the part of computer hackers and cyber-terrorists to breach data security of companies, we face risks associated with failure to adequately protect critical corporate, customer and employee data, which could adversely impact our customer relationships, our reputation, and even violate privacy laws.

Further, the delay or failure to implement information system upgrades and new systems effectively could disrupt our business, distract management’s focus and attention from our business operations and growth initiatives, and increase our implementation and operating costs, any of which could negatively impact our operations and operating results.

We continually assess the strategic fit of our existing businesses and may divest or otherwise dispose of businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment, and we cannot be certain that our business, operating results and financial condition will not be materially and adversely affected.

A successful divestiture depends on various factors, including reaching an agreement with potential buyers on terms we deem attractive, as well as our ability to effectively transfer liabilities, contracts, facilities, and employees to any purchaser, identify and separate the assets to be divested from the assets that we wish to retain, reduce fixed costs previously associated with the divested assets or business, and collect the proceeds from any divestitures. These efforts require varying levels of management resources, which may divert our attention from other business operations. If we do not realize the expected benefits of any divestiture transaction, our consolidated financial position, results of operations and cash flows could be negatively impacted. In addition, divestitures of businesses involve a number of risks, including significant costs and expenses, the loss of customer relationships and a decrease in revenues and earnings associated with the divested business. Furthermore, divestitures potentially involve significant post-closing separation activities, which could involve the expenditure of material financial resources and significant employee resources. Any divestiture may result in a dilutive impact to our future earnings if we are unable to offset the dilutive impact from the loss of revenue associated with the divestiture, as well as significant write-offs, including those related to goodwill and other intangible assets, which could have a material adverse effect on our results of operations and financial condition.

If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

At September 30, 2024, we had $380.1 million of goodwill and intangible assets, net, on our Consolidated Balance Sheets. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Under accounting principles generally accepted in the United States of America, we assess potential impairment of our goodwill and intangible assets at least annually, as well as on an interim basis to the extent that factors or indicators become apparent that could reduce the fair value of any of our businesses below book value. Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results.

Our rental equipment is subject to residual value risk upon disposition and may not sell at the prices or in the quantities we expect.

The market value of any given piece of rental equipment could be less than its depreciated value at the time it is sold. The market value of used rental equipment depends on several factors, including:

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the market price for new equipment of a like kind;

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the age of the equipment at the time it is sold, as well as wear and tear on the equipment relative to its age;

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the supply of used equipment on the market;

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technological advances relating to the equipment;

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worldwide and domestic demand for used equipment; and

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general economic conditions.

We include in income from operations the difference between the sales price and the depreciated value of an item of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation expense, as well as the gain or loss realized upon disposal of equipment. Sales of our used rental equipment at prices that fall significantly below our projections or in lesser quantities than we anticipate will have a negative impact on our results of operations and cash flows.

If we do not effectively manage our credit risk, collect on our accounts receivable or recover our rental equipment from our customers’ sites, it could have a material adverse effect on our operating results.

We generally rent and sell to customers on 30 day payment terms, individually perform credit evaluation procedures on our customers for each transaction and require security deposits or other forms of security from our customers when a significant credit risk is identified. Historically, accounts receivable write-offs and write-offs related to equipment not returned by customers have not been significant and have averaged less than 1% of total revenues over the last five years. If economic conditions deteriorate, we may see an

increase in credit losses relative to historical levels, which may materially and adversely affect our operations. Business segments that experience significant market disruptions or declines may experience increased customer credit risk and higher credit losses. Failure to manage our credit risk and receive timely payments on our customer accounts receivable may result in write-offs and/or loss of equipment, particularly electronic test equipment. If we are not able to effectively manage credit risk issues, or if a large number of our customers should have financial difficulties at the same time, our receivables and equipment losses could increase above historical levels. If this should occur, our results of operations may be materially and adversely affected.

Effective management of our rental assets is vital to our business. If we are not successful in these efforts, it could have a material adverse impact on our results of operations.

Our modular, containers and electronics rental products have long useful lives and managing those assets is a critical element to each of our rental businesses. Generally, we design units and find manufacturers to build them to our specifications for our modulars and containers. Modular asset management requires designing and building the product for a long life that anticipates the needs of our customers, including anticipating potential changes in legislation, regulations, building codes and local permitting in the various markets in which the Company operates. Electronic test equipment asset management requires understanding, selecting and investing in equipment technologies that support market demand, including anticipating technological advances and changes in manufacturers’ selling prices. Container asset management requires obtaining high quality, well-constructed products and repairing and maintaining the products to ensure its long life. For each of our modular, container and electronic test equipment assets, we must successfully maintain and repair this equipment cost-effectively to maximize the useful life of the products and the level of proceeds from the sale of such products. To the extent that we are unable to do so, our result of operations could be materially adversely affected.

The nature of our businesses, including the ownership of industrial property, exposes us to the risk of litigation and liability under environmental, health and safety and products liability laws. Violations of environmental or health and safety related laws or associated liability could have a material adverse effect on our business, financial condition and results of operations.

We are subject to national, state, provincial and local environmental laws and regulations concerning, among other things, hazardous substance handling, storage and disposal and employee health and safety. These laws and regulations are complex and frequently change. We could incur unexpected costs, penalties and other civil and criminal liability if we fail to comply with applicable environmental or health and safety laws. We also could incur costs or liabilities related to waste disposal or remediating soil or groundwater contamination at our properties, at our customers’ properties or at third party landfill and disposal sites. These liabilities can be imposed on the parties generating, transporting or disposing of such substances or on the owner or operator of any affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.

Several aspects of our businesses involve risks of environmental and health and safety liability. For example, our operations involve the use of petroleum products, solvents and other hazardous substances in the construction and maintaining of modular buildings and for fueling and maintaining our delivery trucks and vehicles. The historical operations at some of our previously or currently owned or leased and newly acquired or leased properties may have resulted in undiscovered soil or groundwater contamination or historical non-compliance by third parties for which we could be held liable. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination or non-compliance, may also give rise to liabilities or other claims based on these operations that may be material. In addition, compliance with future environmental or health and safety laws and regulations may require significant capital or operational expenditures or changes to our operations.

Accordingly, in addition to potential penalties for non-compliance, we may become liable, either contractually or by operation of law, for investigation, remediation and monitoring costs even if the contaminated property is not presently owned or operated by us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. In addition, certain parties may be held liable for more than their “fair” share of environmental investigation and cleanup costs. Contamination and exposure to hazardous substances or other contaminants such as mold can also result in claims for remediation or damages, including personal injury, property damage, and natural resources damage claims. Although expenses related to environmental compliance, health and safety issues, and related matters have not been material to date, we cannot assure that we will not have to make significant expenditures in the future in order to comply with applicable laws and regulations. Violations of environmental or health and safety related laws or associated liability could have a material adverse effect on our business, financial condition and results of operations.

In general, litigation in the industries in which we operate, including class actions that seek substantial damages, arises with increasing frequency. Enforcement of environmental and health and safety requirements is also frequent. Such proceedings are invariably expensive, regardless of the merit of the plaintiffs’ or prosecutors’ claims. We may be named as a defendant in the future, and there can be no assurance, irrespective of the merit of such future actions, that we will not be required to make substantial settlement payments in the future. Further, a significant portion of our business is conducted in California which is one of the most highly regulated and litigious states in the country. Therefore, our potential exposure to losses and expenses due to new laws, regulations or litigation may be greater than companies with a less significant California presence.

The nature of our business also subjects us to property damage and product liability claims, especially in connection with our modular buildings and tank and box rental businesses. Although we maintain liability coverage that we believe is commercially reasonable, an unusually large property damage or product liability claim or a series of claims could exceed our insurance coverage or result in damage to our reputation.

Our routine business activities expose us to risk of litigation from employees, vendors and other third parties, which could have a material adverse effect on our results of operations.

We may be subject to claims arising from disputes with employees, vendors and other third parties in the normal course of our business; these risks may be difficult to assess or quantify and their existence and magnitude may remain unknown for substantial periods of time. If the plaintiffs in any suits against us were to successfully prosecute their claims, or if we were to settle any such suits by making significant payments to the plaintiffs, our operating results and financial condition would be harmed. Even if the outcome of a claim proves favorable to us, litigation can be time consuming and costly and may divert management resources. In addition, our organizational documents require us to indemnify our senior executives to the maximum extent permitted by California law. We maintain directors’ and officers’ liability insurance that we believe is commercially reasonable in connection with such obligations, but if our senior executives were named in any lawsuit, our indemnification obligations could magnify the costs of these suits and/or exceed the coverage of such policies.

If we suffer loss to our facilities, equipment or distribution system due to catastrophe, our insurance policies could be inadequate or depleted, our operations could be seriously harmed, which could negatively affect our operating results.

Our facilities, rental equipment and distribution systems may be subject to catastrophic loss due to fire, flood, hurricane, earthquake, terrorism or other natural or man-made disasters. In particular, our headquarters, three operating facilities, and certain of our rental equipment are located in areas of California, with above average seismic activity and could be subject to catastrophic loss caused by an earthquake. Our rental equipment and facilities in Texas, Louisiana, Florida, North Carolina and Georgia are located in areas subject to hurricanes and other tropical storms. In addition to customers’ insurance on rented equipment, we carry property insurance on our rental equipment in inventory and operating facilities as well as business interruption insurance. We believe our insurance policies have adequate limits and deductibles to mitigate the potential loss exposure of our business. We do not maintain financial reserves for policy deductibles and our insurance policies contain exclusions that are customary for our industry, including exclusions for earthquakes, flood and terrorism. If any of our facilities or a significant amount of our rental equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition and result in expenses to repair or replace the damaged rental equipment and facility not covered by insurance, which could have a material adverse effect on our results of operations.

INTEREST RATE AND INDEBTEDNESS RISKS:

Our debt instruments contain covenants that restrict or prohibit our ability to enter into a variety of transactions and may limit our ability to finance future operations or capital needs. If we have an event of default under these instruments, our indebtedness could be accelerated, and we may not be able to refinance such indebtedness or make the required accelerated payments.

The agreements governing our Series D, E and F Senior Notes (as defined and more fully described under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”) and our Credit Facility contain various covenants that limit our discretion in operating our business. In particular, we are limited in our ability to merge, consolidate, reorganize or transfer substantially all of our assets, make investments, pay dividends or distributions, redeem or repurchase stock, change the nature of our business, enter into transactions with affiliates, incur indebtedness and create liens on our assets to secure debt. In addition, we are required to meet certain financial covenants under these instruments. These restrictions could limit our ability to obtain future financing, make strategic acquisitions or needed capital expenditures, withstand economic downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise.

A failure to comply with the restrictions contained in these agreements could lead to an event of default, which could result in an acceleration of our indebtedness. In the event of an acceleration, we may not have or be able to obtain sufficient funds to refinance our indebtedness or make any required accelerated payments. If we default on our indebtedness, our business financial condition and results of operations could be materially and adversely affected.

The majority of our indebtedness is subject to variable interest rates, which makes us vulnerable to increases in interest rates, which could negatively affect our net income.

Our indebtedness exposes us to interest rate increases because the majority of our indebtedness is subject to variable rates. At present, we do not have any derivative financial instruments such as interest rate swaps or hedges to mitigate interest rate variability. The interest rates under our credit facilities are reset at varying periods. These interest rate adjustments could cause periodic fluctuations in our operating results and cash flows. Our annual debt service obligations increase by approximately $4.3 million per year for each 1% increase in the average interest rate we pay based on the $433.6 million balance of variable rate debt outstanding at September 30, 2024. If interest rates rise in the future, and, particularly if they rise significantly, interest expense will increase and our net income will be negatively affected.

SPECIFIC RISKS RELATED TO OUR RELOCATABLE MODULAR BUILDINGS AND PORTABLE STORAGE BUSINESS SEGMENTS:

Significant reductions of, or delays in, funding to public schools have caused the demand and pricing for our modular classroom units to decline, which has in the past caused, and may cause in the future, a reduction in our revenues and profitability.

Rentals and sales of modular buildings to public school districts for use as classrooms, restroom buildings, and administrative offices for K-12 represent a significant portion of Mobile Modular’s rental and sales revenues. Funding for public school facilities is derived from a variety of sources including the passage of both statewide and local facility bond measures, developer fees and various taxes levied to support school operating budgets. Many of these funding sources are subject to financial and political considerations, which vary from district to district and are not tied to demand. Historically, we have benefited from the passage of statewide and local facility bond measures and believe these are essential to our business.

The state of California is our largest market for classroom rentals. The strength of this market depends heavily on public funding from voter passage of both state and local facility bond measures, and the ability of the state to sell such bonds in the public market. A lack of passage of state and local facility bond measures, or the inability to sell bonds in the public markets in the future could reduce our revenues and operating income, and consequently have a material adverse effect on the Company’s financial condition. Furthermore, even if voters have approved facility bond measures and the state has raised bond funds, there is no guarantee that individual school projects will be funded in a timely manner.

To the extent public school districts’ funding is reduced for the rental and purchase of modular buildings, our business could be harmed and our results of operations negatively impacted. We believe that interruptions or delays in the passage of facility bond measures or completion of state budgets, an insufficient amount of state funding, a significant reduction of funding to public schools, or changes negatively impacting enrollment may reduce the rental and sale demand for our educational products. Any reductions in funding available to the school districts from the states in which we do business may cause school districts to experience budget shortfalls and to reduce their demand for our products despite growing student populations, class size reduction initiatives and modernization and reconstruction project needs, which could reduce our revenues and operating income and consequently have a material adverse effect on the Company’s financial condition.

Public policies that create demand for our products and services may change, resulting in decreased demand for or the pricing of our products and services, which could negatively affect our revenues and operating income.

Various states that we operate enacted laws and constitutional amendments to provide funding for school districts to limit the number of students that may be grouped in a single classroom. School districts with class sizes in excess of state limits have been and continue to be a significant source of our demand for modular classrooms. In California, efforts to address aging infrastructure and deferred maintenance have resulted in modernization and reconstruction projects by public school districts including seismic retrofitting, asbestos abatement and various building repairs and upgrades, which has been another source of demand for our modular classrooms. The most recent economic recession caused state and local budget shortfalls, which reduced school districts’ funding and their ability to comply with state class size reduction requirements. If educational priorities and policies shift away from class-size reduction or modernization and reconstruction projects, demand and pricing for our products and services may decline, not grow as quickly as, or not reach the levels that we anticipate. Significant equipment returns may result in lower utilization until equipment can be redeployed or sold, which may cause rental rates to decline and negatively affect our revenues and operating income.

Failure to comply with applicable regulations could harm our business and financial condition, resulting in lower operating results and cash flows.

Similar to conventionally constructed buildings, the modular building industry, including the manufacturers and lessors of portable classrooms, are subject to regulations by multiple governmental agencies at the federal, state and local level relating to environmental, zoning, health, safety, energy efficiency, labor and transportation matters, among other matters. Failure to comply with these laws or

regulations could impact our business or harm our reputation and result in higher capital or operating expenditures or the imposition of penalties or restrictions on our operations.

As with conventional construction, typically new codes and regulations are not retroactively applied. Nonetheless, new governmental regulations in these or other areas may increase our acquisition cost of new rental equipment, limit the use of or make obsolete some of our existing equipment, or increase our costs of rental operations.

Building codes are generally reviewed every three years. All aspects of a given code are subject to change including, but not limited to, such items as structural specifications for earthquake safety, energy efficiency and environmental standards, fire and life safety, transportation, lighting and noise limits.

Compliance with building codes and regulations entails a certain amount of risk as state and local government authorities do not necessarily interpret building codes and regulations in a consistent manner, particularly where applicable regulations may be unclear and subject to interpretation. These regulations often provide broad discretion to governmental authorities that oversee these matters, which can result in unanticipated delays or increases in the cost of compliance in particular markets. The construction and modular industries have developed many “best practices” which are constantly evolving. Some of our peers and competitors may adopt practices that are more or less stringent than the Company’s. When, and if, regulatory standards are clarified, the effect of the clarification may be to impose rules on our business and practices retroactively, at which time, we may not be in compliance with such regulations and we may be required to incur costly remediation. If we are unable to pass these increased costs on to our customers, our profitability, operating cash flows and financial condition could be negatively impacted.

Expansions of our modular and portable storage operations into new markets may negatively affect our operating results.

In the past we have expanded our modular and portable storage operations into new geographies and states. There are risks inherent in the undertaking of such expansion, including the risk of revenue from the business in any new markets not meeting our expectations, higher than expected costs in entering these new markets, risk associated with compliance with applicable state and local laws and regulations, response by competitors and unanticipated consequences of expansion. In addition, expansion into new markets may be affected by local economic and market conditions. Expansion of our operations into new markets will require a significant amount of attention from our management, a commitment of financial resources and will require us to add qualified management in these markets, which may negatively impact our operating results.

We are subject to laws and regulations governing government contracts. These laws and regulations expose us to business volatility and risks, including government budgeting cycles and appropriations, potential early termination of contracts, procurement regulations, governmental policy shifts, audits, investigations, sanctions and penalties. Furthermore, these laws and regulations make these government contracts more favorable to government entities than other third parties and any changes in these laws and regulations, or our failure to comply with these laws and regulations could harm our business.

Mobile Modular and Portable Storage derive a portion of its revenues from contracts with U.S. federal government entities, government prime contractors, state entities and local entities, including school districts. Contracts with government entities are subject to budgetary constraints, and our continued performance under our contracts with these agencies and their prime contractors, or award of additional contracts from these agencies or their prime contractors, could be jeopardized by spending reductions or budget cutbacks at these agencies. Such contracts are also subject to unique laws and regulations, and the adoption of new laws or regulations relating to government contracting or changes to existing laws or regulations. New laws, regulations or procurement requirements, or changes to current ones, can significantly increase our costs and risks and reduce our profitability. In addition, any failure on the part of the company to comply with applicable government contract laws and regulations might result in administrative penalties or even in the termination or suspension of these contracts and as a result, the loss of the related revenues, which would harm our business.

Furthermore, the laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing terms and conditions that are not applicable to private contracts such as clauses that allow government entities not to perform on contractual obligations in the case of a lack of fiscal funding. Also, in the educational markets we serve, we are able to utilize “piggyback” contracts in marketing our products and services and ultimately to book business. The term “piggyback” contract refers to contracts for portable classrooms or other products entered into by public school districts following a formal bid process that allows for the use of the same contract terms and conditions with the successful vendor by other public school districts. As a result, “piggyback” contracts allow us to more readily book orders from our government customers, primarily public school districts, and to reduce the administrative expense associated with booking these orders. The governmental statutes and regulations that allow for use of “piggyback” contracts are subject to change or elimination in their entirety. A change in the manner of use or the elimination of “piggyback” contracts would likely negatively impact our ability to book new business from these government customers and could cause our administrative expenses related to processing these orders to increase significantly. In addition, any failure to comply with these laws and regulations might result in administrative penalties or even in the suspension of these contracts and as a result, the loss of the related revenues which would harm our business and results from operations.

Seasonality of our educational business may have adverse consequences for our business.

A significant portion of the modular sale and rental revenues is derived from the educational market. Typically, during each calendar year, our highest numbers of classrooms are shipped for rental and sale orders during the second and third quarters for delivery and installation prior to the start of the upcoming school year. The majority of classrooms shipped in the second and third quarters have rental start dates during the third quarter, thereby making the fourth quarter the first full quarter of rental revenues recognized for these transactions. Although this is the historical seasonality of our business, it is subject to change or may not meet our expectations, which may have adverse consequences for our business.

We face strong competition in our modular building and portable storage markets and we may not be able to effectively compete.

The modular building leasing industry is highly competitive in our states of operation and we expect it to remain so. The competitive market in which we operate may prevent us from raising rental fees or sales prices to pass any increased costs on to our customers. We compete on the basis of a number of factors, including equipment availability, quality, price, service, reliability, appearance, functionality and delivery terms. We may experience pricing pressures in our areas of operation in the future as some of our competitors seek to obtain market share by reducing prices.

Some of our competitors in the modular building leasing industry have greater range of products and services, greater financial and marketing resources, larger customer bases, and greater name recognition than we have. These competitors may be better able to respond to changes in the relocatable modular building and portable storage container markets, to finance acquisitions, to fund internal growth and to compete for market share, any of which could harm our business.

We may not be able to quickly redeploy modular and container units returning from leases, which could negatively affect our financial performance and our ability to expand, or utilize, our rental fleet.

As of September 30, 2024, 62% of our modular and 58% of our container portfolios had equipment on rent for periods exceeding the original committed term. Generally, when a customer continues to rent the units beyond the contractual term, the equipment rents on a month-to-month basis. If a significant number of our rented units were returned during a short period of time, particularly those units that are rented on a month-to-month basis, a large supply of units would need to be remarketed. Our failure to effectively remarket a large influx of units returning from leases could negatively affect our financial performance and our ability to continue expanding our rental fleet. In addition, if returned units stay off rent for an extended period of time, we may incur additional costs to securely store and maintain them.

Significant increases in raw material and labor costs could increase our acquisition cost of new modular rental units and repair and maintenance costs of our fleet, which would increase our operating costs and harm our profitability.

We incur labor costs and purchase raw materials, including lumber, siding and roofing and other products to perform periodic repairs, modifications and refurbishments to maintain physical conditions of our modular units. The volume, timing and mix of maintenance and repair work on our rental equipment may vary quarter-to-quarter and year-to-year. Generally, increases in labor and raw material costs will also increase the acquisition cost of new modular units and increase the repair and maintenance costs of our fleet. We also maintain a fleet of service trucks and use subcontractor companies for the delivery, set-up, return delivery and dismantle of modulars for our customers. We rely on our drivers and subcontractor service companies to meet customer demands for timely shipment and return, and the loss or inadequate number of driver and subcontractor service companies may cause prices to increase, while negatively impacting our reputation and operating performance. During periods of rising prices for labor, raw materials or fuel, and in particular, when the prices increase rapidly or to levels significantly higher than normal, we may incur significant increases in our acquisition costs for new modular units and incur higher operating costs that we may not be able to recoup from our customers, which would reduce our profitability.

Failure by third parties to manufacture our products timely or properly may harm our reputation and financial condition.

We are dependent on third parties to manufacture our products even though we are able to purchase products from a variety of third-party suppliers. Mobile Modular purchases new modulars from various manufacturers who build to Mobile Modular’s design specifications. With the exception of Enviroplex, none of the principal suppliers are affiliated with the Company. During 2023, Mobile Modular purchased 30% of its modular product from one manufacturer. The Company believes that the loss of any of its primary manufacturers of modulars could have an adverse effect on its operations since Mobile Modular could experience higher prices and longer delivery lead times for modular product until other manufacturers were able to increase their production capacity.

Failure to properly design, manufacture, repair and maintain the modular product may result in impairment charges, potential litigation and reduction of our operating results and cash flows.

We estimate the useful life of the modular product to be 18 years with a residual value of 50% and containers to be 25 years with a residual value of 62.5%. However, proper design, manufacture, repairs and maintenance of the products during our ownership is required for the product to reach their useful lives and residual values. If we do not appropriately manage the design, manufacture, repair and maintenance of our modular product, or otherwise delay or defer such repair or maintenance, we may be required to incur impairment charges for equipment that is beyond economic repair costs or incur significant capital expenditures to acquire new modular product to serve demand. In addition, such failures may result in personal injury or property damage claims, including claims based on presence of mold, and termination of leases or contracts by customers. Costs of contract performance, potential litigation, and profits lost from termination could accordingly reduce our future operating results and cash flows.

Our warranty costs may increase and warranty claims could damage our reputation and negatively impact our revenues and operating income.

Sales of new relocatable modular buildings not manufactured by us are typically covered by warranties provided by the manufacturer of the products sold. We provide ninety-day warranties on certain modular sales of used rental units and one-year warranties on equipment manufactured by our Enviroplex subsidiary. Historically, our warranty costs have not been significant, and we monitor the quality of our products closely. If a defect were to arise in the installation of our equipment at the customer’s facilities or in the equipment acquired from our suppliers or by our Enviroplex subsidiary, we may experience increased warranty claims. Such claims could disrupt our sales operations, damage our reputation and require costly repairs or other remedies, negatively impacting revenues and operating income.

SPECIFIC RISKS RELATED TO OUR ELECTRONIC TEST EQUIPMENT BUSINESS SEGMENT:

Market risk and cyclical downturns in the industries using test equipment may result in periods of low demand for our product resulting in excess inventory, impairment charges and reduction of our operating results and cash flows.

TRS-RenTelco’s revenues are derived from the rental and sale of general purpose and communications test equipment to a broad range of companies, from Fortune 500 to middle and smaller market companies, in the aerospace, defense, communications, manufacturing and semiconductor industries. Electronic test equipment rental and sales revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and maintenance. Historically, these industries have been cyclical and have experienced periodic downturns, which can have a material adverse impact on the industry’s demand for equipment, including our rental electronic test equipment. In addition, the severity and length of any downturn in an industry may also affect overall access to capital, which could adversely affect our customers and result in excess inventory and impairment charges. During periods of reduced and declining demand for test equipment, we are exposed to additional receivable risk from non-payment and may need to rapidly align our cost structure with prevailing market conditions, which may negatively impact our operating results and cash flows.

Seasonality of our electronic test equipment business may impact quarterly results.

Generally, rental activity declines in the fourth quarter month of December and the first quarter months of January and February. These months may have lower rental activity due to holiday closures, particularly by larger companies, inclement weather and its impact on various field related communications equipment rentals, and companies’ operational recovery from holiday closures which may impact the start-up of new projects coming online in the first quarter. These seasonal factors historically have impacted quarterly results in each year’s first and fourth quarter, but we are unable to predict how such factors may impact future periods.

Our rental test equipment may become obsolete or may no longer be supported by a manufacturer, which could result in an impairment charge.

Electronic test equipment is characterized by changing technology and evolving industry standards that may render our existing equipment obsolete through new product introductions, or enhancements, before the end of its anticipated useful life, causing us to incur impairment charges. We must anticipate and keep pace with the introduction of new hardware, software and networking technologies and acquire equipment that will be marketable to our current and prospective customers.

Additionally, some manufacturers of our equipment may be acquired or cease to exist, resulting in a future lack of support for equipment purchased from those manufacturers. This could result in the remaining useful life becoming shorter, causing us to incur an impairment charge. We monitor our manufacturers’ capacity to support their products and the introduction of new technologies, and we acquire equipment that will be marketable to our current and prospective customers. However, any prolonged economic downturn could result in unexpected bankruptcies or reduced support from our manufacturers. Failure to properly select, manage and respond to

the technological needs of our customers and changes to our products through their technology life cycle may cause certain electronic test equipment to become obsolete, resulting in impairment charges, which may negatively impact operating results and cash flows.

If we do not effectively compete in the rental equipment market, our operating results will be materially and adversely affected.

The electronic test equipment rental business is characterized by intense competition from several competitors some of which may have access to greater financial and other resources than we do. Although no single competitor holds a dominant market share, we face competition from these established entities and new entrants in the market. We believe that we anticipate and keep pace with the introduction of new products and acquire equipment that will be marketable to our current and prospective customers. We compete on the basis of a number of factors, including product availability, price, service and reliability. Some of our competitors may offer similar equipment for lease, rental or sale at lower prices and may offer more extensive servicing, or financing options. Failure to adequately forecast the adoption of, and demand for, new or existing products may cause us not to meet our customers’ equipment requirements and may materially and adversely affect our operating results.

If we are not able to obtain equipment at favorable rates, there could be a material adverse effect on our operating results and reputation.

The majority of our rental equipment portfolio is comprised of general purpose test and measurement instruments purchased from leading manufacturers. We depend on purchasing equipment from these manufacturers and suppliers for use as our rental equipment. If, in the future, we are not able to purchase necessary equipment from one or more of these suppliers on favorable terms, we may not be able to meet our customers’ demands in a timely manner or for a rental rate that generates a profit. If this should occur, we may not be able to secure necessary equipment from an alternative source on acceptable terms and our business and reputation may be materially and adversely affected.

If we are not able to anticipate and mitigate the risks associated with operating internationally, there could be a material adverse effect on our operating results.

Currently, total foreign country customers and operations account for less than 10% of the Company’s revenues. In recent years some of our customers have expanded their international operations faster than domestic operations, and this trend may continue. Over time, the amount of our international business may increase if we focus on international market opportunities. Operating in foreign countries subjects the Company to additional risks, any of which may adversely impact our future operating results, including:

•

international political, economic and legal conditions including tariffs and trade barriers;

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our ability to comply with customs, anti-corruption, import/export and other trade compliance regulations, together with any unexpected changes in such regulations;

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greater difficulty in our ability to recover rental equipment and obtain payment of the related trade receivables;

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additional costs to establish and maintain international subsidiaries and related operations;

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difficulties in attracting and retaining staff and business partners to operate internationally;

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language and cultural barriers;

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seasonal reductions in business activities in the countries where our international customers are located;

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difficulty with the integration of foreign operations;

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longer payment cycles;

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currency fluctuations; and

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potential adverse tax consequences.

Unfavorable currency exchange rates may negatively impact our financial results in U.S. dollar terms.

We receive revenues in Canadian dollars from our business activities in Canada. Conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates. If the currency exchange rates change unfavorably, the value of net receivables we receive in foreign currencies and later convert to U.S. dollars after the unfavorable change would be diminished. This could have a negative impact on our reported operating results. We currently do not engage in hedging strategies to mitigate this risk.

GENERAL RISKS:

Our effective tax rate may change and become less predictable as our business expands, or as a result of federal and state tax law changes, making our future earnings less predictable.

We continue to consider expansion opportunities domestically and internationally for our rental businesses. Since the Company’s effective tax rate depends on business levels, personnel and assets located in various jurisdictions, further expansion into new markets or acquisitions may change the effective tax rate in the future and may make it, and consequently our earnings, less predictable going forward. Further, the enactment of future tax law changes by federal and state taxing authorities may impact the Company’s current period tax provision and its deferred tax liabilities. In addition, the amount and timing of stock-based compensation may also impact the Company’s current tax provision.

Changes in financial accounting standards may cause lower than expected operating results and affect our reported results of operations.

Changes in accounting standards and their application may have a significant effect on our reported results on a going-forward basis and may also affect the recording and disclosure of previously reported transactions. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred in the past and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

Adverse economic conditions in the United States and globally, as well as geopolitical tensions, could have a negative effect on our business, results of operations, financial condition and liquidity.

Adverse macroeconomic conditions in the United States and globally, including inflation, slower than expected growth or recession, changes to fiscal and monetary policy, tightening of the credit markets, higher interest rates and currency fluctuations, could negatively impact our business, financial condition, results of operations and liquidity. These factors could negatively affect demand for our business.

Adverse economic conditions in the United States and globally have from time to time caused or exacerbated significant slowdowns in our industry and in the markets in which we operate, which have adversely affected our business and results of operations. Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses, and may make it more difficult to refinance debt.

Furthermore, sustained uncertainty about, or worsening of, geopolitical tensions, including further escalation of war between Russia and Ukraine, further escalation of trade tensions between the U.S. and China, escalation of tensions between China and Taiwan, further escalation in the conflict between the State of Israel and Hamas, as well as further escalation of tensions between the State of Israel and various countries in the Middle East and North Africa, could result in a global economic slowdown and long-term changes to global trade. Any or all of these factors could negatively affect our revenue and could materially adversely affect our business, results of operations, financial condition and growth.

Environmental, social and governance (ESG) matters may impact our business and reputation.

Governmental authorities, non-governmental organizations, customers, investors, external stakeholders and employees are increasingly sensitive to ESG concerns. This focus on ESG concerns may lead to new requirements that could result in increased costs for our business. Our ability to compete could also be affected by changing customer preferences and requirements, such as growing demand for more environmentally friendly products, supplier practices, or by failure to meet such customer expectations or demand. We risk negative shareholder reaction, including from proxy advisory services, as well as damage to our reputation, if we do not act responsibly, or if we are perceived to not be acting responsibly in key ESG areas. If we do not meet the ESG expectations of our investors, customers and other stakeholders, we could experience reduced demand for our products, loss of customers, and other negative impacts on our business and results of operations.

We have begun to report our prior modular building and portable storage segment in two separate segments of modular building and portable storage container. This segment reporting structure has been in effect for a limited period of time, and there are no assurances that we will be able to successfully operate the prior segment in two distinct segments, and the change could be confusing to investors and may not have the desired effects.

During the quarter ended December 31, 2023, we began reporting our prior modular building and portable storage segment as two distinct segments of modular buildings and portable storage containers. Managing these changes has required, and may continue to require, significant expenditures and allocation of valuable management resources. We have provided disclosures about this new segment reporting structure, but there is no guarantee that investors or the market will understand this change to our financial reporting. There is also no guarantee that this change will have the desired effect. Failure of investors or analysts to understand our revised segment

reporting structure may negatively affect their ability to understand our business and operating results which could adversely affect our stock price. In addition, we test for goodwill impairment at the reporting segment level and consider the difference between the fair value of a reporting segment and its’ carrying value, when determining whether any impairment exists. There can be no assurance that the change to our segment reporting structure will not result in impairment charges in future periods.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Common Stock Purchase

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 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 and nine months ended September 30, 2024 and 2023. As of September 30, 2024, 2,000,000 shares were authorized for repurchase under the Repurchase Plan.

The table below sets forth the information with respect to repurchases of our common stock during the three months ended September 30, 2024:


	(a) TOTAL NUMBER OF SHARES REPURCHASED		AVERAGE PURCHASE PRICE PER SHARE		TOTAL NUMBER OF SHARES REPURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS		MAXIMUM NUMBER OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS (2)

July 1, 2024 to July 31, 2024		—	$	—		—		2,000,000

August 1, 2024 to August 31, 2024		—	$	—		—		2,000,000

September 1, 2024 to September 30, 2024		—	$	—		—		2,000,000

Total		—				—

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, an increase from the 1,309,805 remaining shares authorized for repurchase under the Repurchase Plan established in August 2015.

The number represents the number of shares of our common stock that remain available for repurchase pursuant to our Repurchase Plan.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits


10.1	Termination Agreement, dated as of September 17, 2024, by and among WillScot Holdings Corporation, Brunello Merger Sub I., Inc., Brunello Merger Sub II, LLC and McGrath RentCorp (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on September 18, 2024).

15.1	Awareness Letter From Grant Thornton LLP.

31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Title 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Title 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following materials from McGrath RentCorp’s Quarterly report on Form 10-Q for the quarter ended September 30, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Balance Sheet, (iii) the Condensed Consolidated Statement of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: October 24, 2024	McGrath RentCorp

	By:	/s/ Keith E. Pratt
		Keith E. Pratt
		Executive Vice President and Chief Financial Officer

	By:	/s/ David M. Whitney
		David M. Whitney
		Vice President, Controller and Principal Accounting Officer