McGrath RentCorp Q2 Earnings Call Highlights

Key Points

• Second-quarter revenue and earnings declined: Total revenue fell 6% year over year to $221 million and adjusted EBITDA dropped 4% to $83 million, mainly due to lower equipment sales and delayed project completions. Rental operations revenue still grew 6%.
• Mobile Modular showed signs of recovery, while TRS-RenTelco led growth: Mobile Modular bookings rose 11% and utilization improved, suggesting a turnaround after a prolonged decline. TRS-RenTelco revenue increased 17% and adjusted EBITDA climbed 29%, supported by data center, aerospace, defense and semiconductor demand.
• Full-year guidance was maintained as capital spending increased: McGrath kept midpoint expectations for revenue of $955 million–$985 million and adjusted EBITDA of $363 million–$375 million, while raising gross rental equipment capital expenditure plans to $200 million–$220 million. Portable storage remains weak and Enviroplex sales are being pushed into later periods due to project delays.

McGrath RentCorp NASDAQ: MGRC reported second-quarter results that reflected continued growth in rental operations, led by its Mobile Modular and TRS-RenTelco businesses, while lower equipment sales and delayed project completions weighed on total revenue and earnings.

Total revenue declined 6% year over year to $221 million, while adjusted EBITDA fell 4% to $83 million. Rental operations revenue increased 6%, but the gains were offset by lower new-equipment sales at Enviroplex and Mobile Modular, Chief Executive Officer Phil Hawkins said during the company’s July 29 earnings call.

“We delivered rental operations revenue growth in a mixed demand environment,” Hawkins said, adding that the company sees momentum heading into the second half of 2026.

Mobile Modular Sees Utilization Turn

Mobile Modular revenue declined 4% to $150 million and adjusted EBITDA decreased 4% to $51 million in the quarter. However, rental revenue rose 2%, supported by commercial customers and an 8% increase in rental-related services revenue.

Bookings increased 11% from a year earlier, while average fleet utilization improved sequentially to 70.1% from 70.0% in the first quarter. Utilization ended the quarter at 70.6%, as shipments exceeded returns. The company said units on rent increased for four consecutive months, ending the quarter above the level at the start of the year.

Hawkins characterized the development as a meaningful shift after a lengthy period of declining utilization, though management cautioned that improvement may not occur in a straight line each quarter.

“We do believe we turned the corner on a trend on the modular side and have strong momentum entering the second half of the year,” Hawkins said.

Management attributed the improvement to a combination of larger commercial project wins and the company’s geographic expansion efforts. It cited the Pacific Northwest, Midwest and Northeast as areas where McGrath is gaining traction after adding sales coverage and deploying fleet capital.

Monthly revenue per unit on rent increased 7% to $902. For units shipped during the past 12 months, average monthly revenue per unit was up 7% to $1,252, which Chief Financial Officer Keith Pratt said provides a pricing tailwind as the fleet turns over.

Mobile Modular Plus revenue rose to $10.5 million from $9.2 million a year earlier. Site-related services revenue was $6 million, down from $6.5 million in the prior-year quarter but ahead of 2025 levels on a year-to-date basis.

Rental margins at Mobile Modular declined to 55% from 58%, as inventory center costs rose $2.1 million to prepare equipment for anticipated stronger demand and shipment activity in the second half.

Project Timing Pressures Sales Revenue

Mobile Modular sales revenue decreased $9.3 million to $31.2 million, largely because several new sales projects shifted into the second half of the year. Enviroplex revenue fell to $4.6 million from $19.9 million in the prior-year period, while adjusted EBITDA moved to a $0.5 million loss from a $4.3 million profit.

Pratt said the Enviroplex decline was primarily a timing issue involving contracted projects, including delays related to site readiness, permits, foundation work and utility connections. He said the company expects Enviroplex’s full-year performance to be closer to its 2024 revenue of $46 million than its 2025 revenue of $57 million.

“These aren’t projects canceling and falling out of the pipeline, just completion date shifting from when we originally expected it,” Hawkins said. He added that management sees underlying new modular sales demand as stable and consistent with a year ago.

TRS-RenTelco Growth Offsets Storage Weakness

TRS-RenTelco delivered the company’s strongest segment results. Total revenue increased 17% to $43 million, adjusted EBITDA rose 29% to $25 million, and rental revenue climbed 17% to $32 million.

Demand remained healthy in data centers, aerospace and defense, and semiconductor-related end markets. Average utilization increased to 68.1% from 64.8% a year earlier and ended the quarter at 68.9%, the segment’s highest level since the first quarter of 2021.

Rental margins improved to 48% from 44%, while sales revenue increased 13% to $8.7 million and gross margin rose to 66% from 47%.

Hawkins said data center activity remains a meaningful contributor to TRS-RenTelco’s growth, with the company viewing the current build-out as still in its early-to-middle stages. The company increased its rental equipment capital expenditure outlook in part to support additional investment in TRS.

By contrast, portable storage rental revenue was flat at $17 million amid weak small local commercial construction markets. Total portable-storage revenue rose 1% to $24 million, but adjusted EBITDA fell 23% to $8 million. Average utilization declined to 58.3% from 61.1%, while rental margins decreased to 80% from 83%.

Hawkins said lower industry utilization and heightened competition remain the primary challenges in portable storage. The company does not expect a meaningful recovery in the smaller nonresidential construction market this year.

Outlook Maintained as Capital Spending Rises

McGrath tightened its full-year ranges while maintaining the midpoints of its prior revenue and adjusted EBITDA outlook. The company now expects:

• Total revenue of $955 million to $985 million.
• Adjusted EBITDA of $363 million to $375 million.
• Gross rental equipment capital expenditures of $200 million to $220 million.

Pratt said stronger-than-expected TRS-RenTelco performance is expected to offset weaker portable-storage results, while Enviroplex is still projected to perform similarly to 2024.

For the first half, McGrath generated $106 million in operating cash flow, compared with $110 million a year earlier. Rental equipment purchases rose to $124 million from $50 million, reflecting investments in modular expansion and TRS demand. The company also paid $25 million in dividends and repurchased $27 million of stock during the period.

At quarter-end, net borrowings totaled $590 million and funded debt was 1.65 times trailing 12-month adjusted EBITDA. Management said its balance sheet provides flexibility to fund organic expansion, dividends, acquisitions and share repurchases.

About McGrath RentCorp (NASDAQ:MGRC)

McGrath RentCorp, through its subsidiaries, provides rental, sales, and servicing of equipment for commercial, industrial, environmental, and residential markets. The company operates primarily through two segments—mobile storage and water management—offering flexible solutions for customers requiring on-site storage, water transport, treatment, and dewatering services.

In its mobile storage segment, McGrath RentCorp supplies portable storage containers and modular office units to sectors including construction, retail, government, and disaster restoration.

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