McGrath RentCorp

What they do

McGrath rents relocatable modular buildings, portable storage containers, and electronic test equipment, and also sells equipment in the normal course of business. The company reports four segments: Mobile Modular, Portable Storage, TRS-RenTelco (electronic test equipment), and Enviroplex (classroom manufacturing). Rental products have long useful lives relative to typical rental terms, and the company states original investment is typically recovered in about four years for modulars and about three years each for containers and electronic test equipment.

Revenue drivers

• Mobile Modular — Modular building rentals plus rental-related services and sales; in Q2 2026 it reported rental revenues of $81.9 million, rental related services revenues of $34.8 million, and sales revenues of $31.2 million.
• TRS-RenTelco — Electronic test equipment rentals; management cited 17% rental revenue growth in Q2 2026, supported by data center buildout projects.
• Portable Storage — Portable storage container rentals; Q2 2026 rental revenues were $16.9 million, flat versus the prior year, with soft commercial construction activity.
• Enviroplex — Manufactures and sells modular buildings used primarily as classrooms in California; Q2 2026 company sales revenues fell 34% to $46.4 million, partly on lower Enviroplex sales.

Recent performance

For the quarter ended June 30, 2026, total revenues were $221.1 million, down 6% year over year, and net income was $33.7 million, or $1.37 per diluted share, versus $36.0 million, or $1.46 per diluted share, a year earlier. Rental operations revenues rose 6% to $172.5 million, while sales revenues fell 34% to $46.4 million; the company attributed the net income decline primarily to lower gross profit on sales revenues. Income from operations decreased 7% to $53.3 million, and Adjusted EBITDA decreased 4% to $82.8 million. Management said Modular and TRS grew rental revenue and improved utilization sequentially, while delays shifted several new sales projects to the second half of the year.

Strategy

The company's business model is to invest capital in rental products and recover that investment through rents less cash operating expenses relatively quickly compared to the product's rental life. Management highlighted momentum in its two largest rental businesses, progress on regional expansion efforts in modular, and continued growth from the commercial customer base. TRS-RenTelco benefited from demand tied to new data center buildout. McGrath terminated its merger agreement with WillScot Mobile Mini in September 2024, receiving a $180.0 million termination payment, and has since operated as an independent rental company.

Risks

• Sales revenue volatility — Sales revenues fell 34% in Q2 2026 to $46.4 million, and the timing and mix of equipment sales can swing gross profit and earnings.
• Construction market softness — Portable Storage rental revenues were flat in Q2 2026 because commercial construction project activity remained soft, pressuring margins.
• Macro and customer budget constraints — The company cites general economic conditions, customer budgetary constraints, and seasonality among factors that can cause operating results to fluctuate.
• Cost inflation — Management flagged higher equipment preparation, trucking, and sales coverage costs pressuring Portable Storage margins in the quarter.

Outlook

Management said modular utilization improvement and execution on strategic growth initiatives set the company up well for the second half of the year. It noted delays pushed several new sales projects from Q2 into the second half. Management also said challenges remain in the macro environment and that it is focused on growth levers within its control.