McGrath RentCorp Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 24, 2025

Key Takeaways

  • Positive Sentiment: Solid second quarter financial results with total revenues up 11% to $235.6 million and adjusted EBITDA rising 3% to $86.5 million.
  • Positive Sentiment: Mobile Modular segment delivered 8% revenue growth, healthy quote activity and a year-over-year backlog increase despite macro uncertainties.
  • Positive Sentiment: Modular sales revenues rose 13%, while ancillary services like Mobile Modular Plus and site related services achieved double-digit growth and Enviroplex posted strong margins.
  • Positive Sentiment: TRS RenTelco rental revenues increased 7%, utilization improved to 65%, and a stronger rental pipeline suggests the rebound is sustainable.
  • Positive Sentiment: Raised full-year guidance to $925–960 million in revenues and $347–356 million in adjusted EBITDA, reflecting confidence in improving market conditions.
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Earnings Conference Call
McGrath RentCorp Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Speaker 4

This conference call is being recorded today, Thursday, July 24, 2025. Before we begin, note that the matters that the Company management will be discussing today that are not statements of historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the Company's expectations, strategies, prospects, backlog, or targets. These forward looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed under risk factors in the Company's Form 10-K and other SEC filings. Forward looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any forward looking statements.

Speaker 4

In addition to the press release issued today, the Company also filed with the SEC the earnings release on Form 8-K and its Form 10-Q for the quarter ended June 30, 2025. Speaking today will be Joe Hanna, Chief Executive Officer, and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hanna. Please go ahead, sir.

Operator

Thank you, Jess. Good afternoon everyone, and thank you for joining us today for McGrath RentCorp second quarter 2025 earnings call. We are pleased to be together today and look forward to providing additional perspective on our results. I will start with some overall comments on the quarter, and Keith will provide additional detail in his financial review before we open the call up for questions. The company delivered solid second quarter results. Rental operations grew by 5%, and adjusted EBITDA grew by 3%. We continue to execute well across all our business units with our overall strategy of being a modular solutions provider at the core of our efforts. I would like to thank all of our team members for their steadfast attention to our customers and their consistent focus on excellent project execution.

Speaker 2

During the quarter.

Operator

Our Mobile Modular division continued to perform well with total revenues increasing by 8%. We realized rental revenue growth in both our commercial and education sectors. With uncertainty in the macro environment, we have seen some customers move more cautiously in starting planned projects. While some of our customers were slow to initiate projects, quote activity was healthy and our June rental revenue backlog was.

Speaker 2

Up year over year.

Operator

We continue to have strong customer interest in our product and service offerings. Despite ongoing softness in indicators like the Architecture Billings Index, or ABI, commercial wins continue to be centered around larger infrastructure projects across all our geographies. We also saw more activity in the general construction market with several different market verticals growing in the quarter. Funding for the education business remains solid as the need for classroom modernization and growth in select areas remains consistent. We had good order flow during the quarter for education rental projects and are now busy completing deliveries for our customers. Modular sales revenues were higher for the quarter, up 13%. Our new Modular Sales Growth Initiative continued to be on a positive trajectory from increasing interest in modular solutions for construction projects across many market segments.

Operator

Mobile Modular Plus and site related services performed well and saw healthy increases in the quarter, helping to offset lower units on rent. Enviroplex, our classroom manufacturing business in California, had a good quarter. Sales revenues and margins were strong for the quarter and the team executed well to efficiently complete projects for our customers. Portable storage rental revenues decreased 5% year over year but sequentially improved 5% from the first quarter of this year. Recent shipment trends have been encouraging. All our market verticals showed improvement in the quarter and we are encouraged by the levels of quote activity. We are seeing close ratios and rental rates are holding steady and we are maintaining our discipline on winning new orders. Turning to TRS-RenTelco, rental revenues grew by 7%. Both our general purpose and communications rental revenues increased and the positive start to the year continued through the second quarter.

Operator

Utilization improved both sequentially and year over year and we ended the quarter at 65%. Our rental pipeline is stronger than a year ago, giving us further confidence that this rebound appears sustainable. On the M&A front, we have an active pipeline to support our modular growth strategy. During the quarter we closed two tuck-in acquisitions, one a modular company in the Midwest and the other a portable storage company in the Southeast. These acquisitions provide additional fleet, team members, and customer relationships which help accelerate our pace of growth. We have a capable team and are working to close more opportunities. Tuck-ins help us achieve scale and improve margins more quickly in markets where we do not have a footprint or where we are small and have growth potential.

Operator

We are also able to leverage Mobile Modular Plus and site-related services with these new additions, as smaller operators typically don't provide such services. I will now turn from second quarter performance highlights to provide some additional insight into our outlook for the remainder of 2025. Now that we have completed half of the year, we are encouraged that the uncertain market conditions earlier in the year have not deteriorated significantly, and currently we are seeing slight improvements. The ABI has improved somewhat. Construction backlogs also grew slightly in June. At present, we have good activity levels in the field related to current projects. This gives us more confidence going into the second half of 2025, and therefore we are upwardly adjusting our outlook. We have been clear in the past quarters that our strategic focus is on the modular business and expanding the value of our modular solutions capabilities.

Operator

Geographic expansion allows us to bring these solutions to customers in metro areas where we don't currently have rental fleet or a dedicated sales presence. In the first half of this year, we added new sales representatives in several markets. The hires were completed ahead of schedule, and we now have more horsepower in the field. This larger team will yield results in future quarters and years, and we have been very pleased with the quality and capabilities of the people we have brought on board. We also continue to enhance our capabilities for larger and more complex modular building rentals and sales. This allows us to engage with the customer early in the project life cycle and deliver value in more areas from project design through installation.

Operator

We believe this is an expanding part of the market, and we have the ability to meet customer demand across the full spectrum of modular building needs, from single wide units to large multi-floor and multi-story facilities for a wide swath of market verticals. In closing, we are successfully navigating an uncertain economic environment as we continue to deliver value to our customers. This year we are in our summer months, and this is our most active time of the year. Our teams in the office and in the field are fully engaged and working hard to complete projects safely, on time, and with great customer service. We are cautiously optimistic that economic conditions will improve as we move through the next two quarters. As always, we will be working diligently to maximize opportunities to keep the business strong and deliver results for our shareholders.

Operator

With that, I will turn the call over to Keith, who will take you through the financial details of our quarter and our updated outlook for the full year.

Speaker 2

Thank you, Joe, and good afternoon, everyone. As Joe highlighted, we delivered solid results in the second quarter. Total revenues increased 11% to $235.6 million, and adjusted EBITDA increased 3% to $86.5 million. Reviewing Mobile Modular's operating performance as compared to the second quarter of 2024, Mobile Modular total revenues increased 8% to $156 million. All operational revenue streams grew, with 5% higher rental revenues, 11% higher rental related services revenues, and 13% higher sales revenues. The quarter included higher inventory center expenses to prepare available fleet for new shipment demand, which allowed us to minimize rental equipment capital spending. We also incurred higher SG&A expenses as we completed strategic hiring for broader sales coverage and long-term growth, as Joe described earlier. As a result, adjusted EBITDA decreased 1% to $53.1 million.

Speaker 2

Despite the revenue growth with softer demand conditions, we saw lower average fleet utilization of 73.7% compared to 78.4% a year earlier. Despite the softer market demand, second quarter monthly revenue per unit on rent increased 6% year over year to $840. For new shipments over the last 12 months, the average monthly revenue per unit increased 4% to $1,168. We continue to make progress with our modular services offerings. Mobile Modular Plus revenues increased to $9.2 million from $7.5 million a year earlier, and site related services increased to $6.5 million, up from $5.8 million. Turning to the review of portable storage, adjusted EBITDA for portable storage was $9.8 million, a decrease of 11% compared to the prior year, but an increase of 15% sequentially from the first quarter of this year. During the quarter, we saw lower rental and rental related services revenues compared to a year ago.

Speaker 2

Lower commercial construction project activity continued to make demand conditions challenging. Higher sales revenues partly offset rental weakness, resulting in a total revenue decrease of 3% to $23.3 million. Rental revenues for the quarter decreased 5% to $16.9 million but grew 5% sequentially from the first quarter. Rental margins were 83% compared to 86% a year earlier, and average utilization for the quarter was 61.1% compared to 66.1% a year ago. Turning now to the review of TRS-RenTelco, TRS had a strong quarter with adjusted EBITDA of $19.3 million, an increase of 7% compared to last year. Total revenues increased $3.7 million or 11% to $36.4 million, primarily driven by higher sales revenues and higher rental revenues. Rental revenues for the quarter increased by 7% as the industry experienced improved demand conditions from end markets.

Speaker 2

Average utilization for the quarter was 64.8% compared to 56.5% a year ago, and rental margins improved to 44% from 36% a year ago. The remainder of my comments will be on a total company basis. Second quarter selling and administrative expenses increased $4.5 million to $53.5 million as we completed planned strategic hiring for long term business growth and invested in information technology projects. Interest expense was $7.8 million, a decrease of $5.2 million as the result of lower average interest rates and lower average debt levels during the quarter. The second quarter provision for income taxes was based on an effective tax rate of 27.3% compared to 28.8% a year earlier. Turning to our year to date cash flow highlights, net cash provided by operating activities was $110 million compared to $139 million in the prior year as higher net income was offset by working capital changes.

Speaker 2

Rental equipment purchases were $50 million, down from $145 million last year, consistent with lower fleet utilization and our plans to use available fleet to satisfy customer orders. We paid $22 million during the second quarter for the two tuck-in acquisitions Joe discussed. These small acquisitions will support the long term growth of our modular and portable storage businesses. At quarter end, we had net borrowings of $573 million and the ratio of funded debt to the last 12 months actual adjusted EBITDA was 1.6 to 1. Wrapping up the financial review, while there is still uncertainty in the demand environment, we are pleased with the results for the first half of the year and we have seen some encouraging positive trends as we enter the second half.

Speaker 2

As a result, we have upwardly revised our full year financial outlook and we currently expect total revenue between $925 and $960 million, adjusted EBITDA between $347 and $356 million, and gross rental equipment capital expenditures between $115 and $125 million for the remainder of this year. We expect adjusted EBITDA to be at a similar level in the third and fourth quarters. This outlook is largely driven by the expected timing of sales revenues and related gross profit in the second half of this year. We are proud of McGrath RentCorp's second quarter performance and we are fully focused on solid execution for the remainder of the year. That concludes our prepared remarks. Jess, you may now open the lines for questions.

Speaker 4

Thank you. At this time, if you would like to ask a question, please press Star one on your telephone keypad. You may remove yourself from the queue at any time by pressing Star two. Once again, that is Star one to ask a question. We will go first to Scott Schneeberger with Oppenheimer.

Operator

Thanks very much.

Speaker 1

Good afternoon. I got a few questions, guys. First off, just on the last thing you said there, Keith, about the balance of third and fourth quarter and the EBITDA, sounds like you have a little bit more to share there on sales timing.

Speaker 2

Could you just take us a little?

Speaker 1

Deeper on what you're alluding to?

Speaker 2

Sure, Scott. If you look at last year, we had a big third quarter. If you look at the primary driver of that, we had a lot of sales gross profit in the third quarter, and then we sort of saw a drop off when we went to Q4 of last year. When we look at this year, I think it's going to be more balanced, and that contribution of sales gross profit is going to be somewhat similar in the third and fourth quarter. It is just a sort of timing issue. The other thing I'd point out is we've actually had very good sales contributions already in the first half of the year. Specifically, the comment was when you look at Q3 and Q4, adjusted EBITDA we expect will be broadly similar in each of those two quarters. Thanks.

Speaker 1

You're speaking specifically in the Mobile Modular segment. How far out do you have visibility? Do you at this point have visibility through year end, or is it a little bit fluid at this point?

Speaker 2

It's a bit fluid. This is one of the areas we've mentioned. With the current demand environment, there can be delays, there can be uncertainty. We spend a lot of time assessing the pipeline and assessing what we think will get realized before the end of the year. That's all part of our normal forecasting process. Thanks.

Speaker 1

That was the question on sales, which is I think how you answered it and clarify if not. Switching over real quick just on rentals, I think with classrooms now you have full visibility to what this year is going to look like. Could you speak to that and then any other relevant comments on commercial modular techs?

Operator

Sure, Scott. I think our education year this year is going to be good. We realized orders a little bit later in the year because sometimes districts just take longer in certain years. Every year is different and this year we got orders a little bit later, but we're happy with the volume of orders we got. I think we're going to finish the year in a good space there. As far as commercial business, we're seeing increases in a number of different market verticals. Of course, there's large projects like data centers and industrial projects. There's been some petrochem business, government, healthcare. All these verticals were pretty vibrant in the quarter and I don't see that changing for the remainder of the year.

Speaker 2

Thanks, Jim.

Speaker 1

I have a lot more, but I'll leave some for others. I think just a couple more here for now. One is just the outperformance in the quarter on EBITDA was meaningful, the increase to adjusted EBITDA guidance less meaningful. I think you all were also very cautious back in the first quarter with your guidance, probably overly cautious in retrospect now. That was tariff uncertainty related.

Speaker 2

Could you just speak to what would.

Speaker 1

Put you at the high end or the low end of this current guidance range? How you came to it.

Speaker 2

Yeah, a lot of moving parts, Scott. I think first of all, the sales piece of the business can always move around a lot more than the rental revenue piece. That tends to move a little bit more steadily. That's the first comment. You can have some positive or negative impact from sales activity in the second half of any year, and that's always a given. If you look really across the lines of business, we've had a really encouraging start with TRS-RenTelco. It looked pretty good in the first quarter of the year. We were feeling good as we exited the first quarter. That has really continued through the second quarter. I would say we're not being aggressive in what we're assuming for the second half of the year there. If things go well, we might be better than we're currently expecting and sort of factoring into our outlook.

Speaker 2

Similarly, I would say with portable storage, it had a very tough year last year. First quarter was hard to really get any conclusive signs of a recovery. I feel in the second quarter, as Joe mentioned, we felt more encouraged. There's still a long way to go and it's still a tricky environment. That's another area where I think we're realistic in what we've got in the guide. If things break a little bit more in our favor, we might do better there. Then modulars, which, as you know, has the characteristic of the longest rental terms that tends to move more gradually. We've had a good first half. Given the backdrop of the demand environment, I think we'll see rental revenue growing in the second half of the year. I think we've at this point got a realistic view around that based on what we know today.

Speaker 2

We try to think it through carefully. You've sort of seen all the moving parts there. We're trying to manage expenses priority prudently, but at the same time, as Joe highlighted, we're investing for growth for beyond this year as we look at building the company's presence, particularly in more geographic regions over time and also using opportunities for tuck-in M&A and other initiatives to help bring that to fruition. That's sort of a long-winded way to say I think we've got the right outlook at this point in the year. We always try to do better, but we have to be cognizant of the environment which is still mixed in some areas.

Speaker 1

That was really comprehensive, Keith, and thanks, I think very helpful as well. The last one for me right now will be just on this new federal tax legislation. I imagine it will have a favorable impact on your free cash flow.

Speaker 2

Have you all.

Operator

Done the work on.

Speaker 1

Can you come out with any quantification of that that you can share with us right now?

Speaker 2

Yes, very preliminary. Let me start by saying as you know, Scott, at the beginning of the year we highlighted for everyone in this environment where fleet utilization is a bit lower at modulars and portable storage, we're not spending as much money on new capital for new rental equipment. It's a lower year in that regard. Some of the benefits with the new treatment on the rental equipment depreciation for tax purposes, some of that benefit is less pronounced this year. We have run some numbers. The benefit to free cash flow for us this year is probably somewhere in the $10 to $15 million range. It is a positive but it's not a massive needle mover for us this year. Thanks, Keith.

Speaker 1

Just a follow on on that. Probably another full two years after this current year. If there's a need to step up the CapEx, that a similar type of tax benefit will be in place. Is that fair?

Speaker 2

Should be, or perhaps greater, if we're spending more heavily.

Speaker 1

Thanks. I'll turn it over. Thanks so much, guys.

Speaker 4

We'll go next to Daniel Moore with CJS Securities.

Operator

Hi, this is Willen for Dan.

Speaker 2

Can you provide an update on the.

Operator

Pricing gap between current spot rates for new modular rentals versus the average rate on existing contracts? Is it still 40% or more?

Speaker 2

Is it beginning to narrow?

Operator

How have spot rates been trending more generally thus far year to date?

Speaker 2

Sure. I highlighted some of those metrics as we went through the presentation. I'll try and cover all your topics and do follow up if I don't hit them all. I think for modular spot rates are generally fairly stable overall. With all the variety of regional branches that we have, the different types of product offering in certain regions, there's a lot of moving parts and a lot of impact from mix. When I make that overall it is a generality, but that's based on the data that we review and sort of trends that we see in the market. If you look at the gap between the dollars per unit on rent that we quoted, and that was the $840, up 6% from the same quarter a year ago, that is still about 39% lower than the LTM rate on new shipments that was $1,168.

Speaker 2

The gap is slightly different. I think when we looked at the same statistics a quarter ago, but order of magnitude still similar.

Operator

That is super helpful.

Speaker 2

Thank you.

Operator

Could you add some more color to portable storage? Would you describe demand as bouncing along?

Speaker 2

The bottom, or are you seeing really?

Operator

Meaningful signs of improvement? Yeah, we're definitely seeing signs of improvement. As we shared, even though rents were down 5% year over year, sequentially they were up. Quote volumes are up. We actually shipped the most units in June that we had done since January 24. We're seeing improvements in the business. I think we're on an upward trajectory and we're very pleased about that.

Speaker 2

Thank you.

Speaker 4

We'll go next to Steven Ramsey with Thompson Research Group.

Speaker 3

Hi, good evening. On Modular, good to hear that you're adding sales folks. Can you maybe talk about some of the geographical focus of the new hires, or if it's more project or vertical focus, kind of what you're trying to.

Speaker 2

Achieve, and if this is a focal.

Speaker 3

Point for you guys through the rest of this year?

Operator

Sure. Very important initiative in the company. Through the acquisitions that we've done over the last several years, that has opened up locations for us where we have a small presence, and what we like to do in some of those locations and in some new locations that are adjacent, we want to have additional sales power. Those sales assets would be selling either the commercial business or the education business or both. It just depends on what our focus is in each of those markets. We are very interested in adding that sales power and increasing our geographic coverage. We've been making fleet investments to support that growth, so important to the company.

Speaker 2

Okay, helpful.

Speaker 3

Maybe somewhat related, Mobile Modular Plus continues to show very strong growth. Can you talk about what's driving that? If this type of 20% year over year growth is embedded in the second half or something lower is embedded, and maybe on the people side of this equation, how are you training folks in the adoption of your own sales team?

Operator

Pushing the Mobile Modular Plus solution to customers? Yeah, that's also an important initiative for us, and training is a key part of that. We've been consistently doing that over time to get the sales force comfortable with selling those products to our customers. We've been adding to the available list of products that we can provide to our customers, and we're glad to see that.

Speaker 2

The year-over-year growth that we.

Operator

Realized, it was up 22% as you had mentioned, it was healthy growth. We anticipate being able to keep up that pace. We've got a lot of ground to cover still. We've got a lot of customers that appreciate those services, and we're working in earnest to keep that momentum up.

Speaker 3

Okay, that's helpful.

Speaker 4

Maybe going back to the.

Speaker 3

Guidance, this has been brought up a couple of times, but when you think about the stabilization and growth now in TRS-RenTelco, confirming up in storage, modular being consistent and June backlogs up, Enviroplex doing well, I put that all together. The guide raise seems pretty modest. Maybe what I'm thinking about is does some of this support 2026 and it's just a timing issue of when some of the pipelines convert to rental starts.

Speaker 2

Yeah, I think that's a good observation. I would just remind you, as we accommodated the start of the year, two investment areas. One is in that direct cost of rental operations, particularly for the modular business, where we expect to spend more readying existing fleet and not really using as much new fleet. That's reflected in a substantial drop in the new equipment capital spending for the year. That's an expense increase for the year. That does hurt EBITDA, but it's absolutely the right thing to do for running the business. In parallel with that, we do have more elevated SG&A. You'll see that in the current run rate that will continue and edge up slightly in the second half of the year.

Speaker 2

That's running with a bigger team where we've made some of these strategic hires that support long term growth and support initiatives in the company, like some of our IT projects. These are all things that we planned on doing. They're important, they're going to pay dividends far beyond 2025, but they are things that we have to absorb in terms of in the cost structure and IT pressures the EBITDA just a little bit in a year like this where the demand environment is, as we've said, a little mixed in some areas. Overall I think we're doing well and we're always striving to deliver the absolute most that we can in future quarters.

Speaker 4

Understood. Last one for me now.

Speaker 3

It's a small part of the business, but Enviroplex continues to show very strong growth on top of strong growth. The EBITDA margin profile in the quarter was very strong. Can you talk about the operating leverage in that business? Are you operating at max capacity when you're performing at this type of run rate? Is this something that is embedded in the guidance, the success of it, or are you trying to be conservative on that segment?

Operator

Yeah, I would say it's embedded in the guidance. We're happy to see our margins actually in a good place in that business. It's improved over time, and a lot of that has to do with the project mix. There could be projects in a given quarter that have more features and features that they might want to have in the buildings that they order that allow us to actually price in additional margin in the job. You have that, and then you have the fact that the plant's full. We're moving a lot of product through the plant. It gets more efficient the more product that we get online. I think that's just reflective in our performance at this point. We've been very happy with how that business has performed so far this year.

Speaker 2

Steven, if I could just add, I think you're spot on by observing that Enviroplex was a good contributor to the quarter and its metrics look very positive. That's a business where, just as Joe said, when we're very busy, we're actually in a position where the phasing of deliveries is more balanced by quarter. If you look at the first half of this year, we had two good quarters of contribution from Enviroplex and I would think of the second half of the year in a similar way, more balanced across the quarters than in the past. In certain years it's been a big spike in the third quarter and much softer demand levels or activity levels in the other quarters. Here we're very busy. The business is having a good year and we're seeing it as a smoother contribution by quarter.

Speaker 2

It sort of relates to some of my comments earlier about the outlook for the second half.

Speaker 3

That's all very helpful. Thank you for the color.

Speaker 4

Once again, if you would like to ask a question, it is Star one on your telephone keypad. We'll go next to Mark Riddick with Sidoti.

Speaker 2

Good afternoon.

Operator

I wanted to touch a little bit, maybe could spend a little time on the commentary around the technology investments that you mentioned. You mentioned some of the hiring, but maybe talk a little bit about some of the focus areas that you have.

Speaker 2

There and what that might look like.

Operator

Sure, Mark. You know, technology continues to refresh and advance all the time. We always work to be a supplier that is easy to do business with. That requires us to have the latest technology in terms of our IT systems. They need to be upgraded, they need to be moved from on-premises capabilities to cloud systems. Last year we put in a new CRM. There are AI things that are important that we pay attention to and incorporate in the business. You combine all those things together and it's just an expense that is there and that we're going to make sure that we are a relevant player in the industry. In order to do that, we need to have up-to-date IT systems. We just continue to make those investments as each quarter passes. Okay, great.

Operator

I was wondering if you could touch briefly on some of the tuck-in opportunities. Maybe you could talk a little bit about the overall pipeline, what it looks like currently, and has that changed much over the last six months or so? Sure, we have an active pipeline. It's something that we're paying close attention to. Whether these businesses come up for sale typically depends on whether there's a seller that has a life-changing event or they want to monetize their business or something. You can't always plan those things to take place on a regular cadence. What we try to do is to be in front of these folks and have relationships with them. When those businesses come up for sale and come on the market, we want to be at the table.

Operator

We've got a nice pipeline of opportunities, a lot of conversations going on, and we're looking forward to being able to close more of these in future quarters. Okay, so only a couple more from me. One, I was sort of curious about the commentary around portable storage. Maybe you could talk a little bit about the pacing. Is that something that improved through the quarter or how should we think about it from a monthly basis perspective?

Speaker 2

Yes, I think, Mark, I tried to touch on this earlier. Encouraging signs in the second quarter. We don't want to get ahead of ourselves. It's still an environment where commercial construction is softer than a year ago. Even though we've seen a few positive signs, we're sort of measured in our enthusiasm. I think things will progress a little better from here and we'd be delighted if it was even stronger than that. That's sort of the way we're looking at the outlook. I think it's appropriate because one pretty good quarter after everything we've been through over the last five or six quarters, it's appropriate to be measured and see further evidence of a build and an improvement in utilization, demand, and overall revenue and profitability. That's what we're working hard to achieve, but it's going to be gradual. Okay.

Operator

The last for me, I was sort of, I'm not sure. I think the interest expense was a.

Speaker 2

Little lower than I thought it would be for the quarter.

Operator

Maybe you could touch a little bit on what you're looking at there.

Speaker 2

For run rate or through the remainder.

Operator

Of the year and debt reduction efforts.

Speaker 2

That would be helpful.

Operator

Sure.

Speaker 2

We benefited from lower rates. Rates a year ago were about 6.6%. This year, more like 5.6%. We had $232 million less debt in the quarter. Both those things were a substantial benefit. It let the interest expense come in just below $8 million for the quarter, and that's down from $13 million a year ago. That was definitely a good easing of the burden. I think if you look at the current run rate, that's a pretty good indicator of what we're seeing. Obviously, it depends with any investments in the business in the second half where the debt level ends up at the end of the year. The current run rate is indicative of the neighborhood that we would expect to be in. Great.

Operator

Thank you very much.

Speaker 4

A final reminder, it was Star One. If you had a question, ladies and gentlemen, that appears to be our last question. Let me now turn the call back over to Mr. Hanna for any additional or closing remarks.

Operator

I'd like to thank everyone for joining us on the call today and for your continuing interest in our company. We look forward to speaking with you again in late October to review our third quarter results.

Speaker 4

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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