McGrath Rentp(MGRC) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights Overall Company Performance (Q2 2025 vs Q2 2024) McGrath RentCorp reported an 11% increase in total revenues for Q2 2025, reaching $235.6 million, driven by higher rental operations and sales. Net income significantly improved by 74.8% to $36.0 million, with diluted EPS rising to $1.46 | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :----------------------- | :----------------- | :----------------- | :--------- | | Total Revenues | $235.6 | $212.6 | 10.87% | | Net Income | $36.0 | $20.6 | 74.76% | | Diluted EPS | $1.46 | $0.84 | 73.81% | CEO Commentary & Operational Overview President and CEO Joe Hanna expressed satisfaction with Q2 results, highlighting company-wide revenue growth from rental operations and sales. Modular rental revenues increased despite softer market demand, while Portable Storage showed sequential improvement. TRS-RenTelco experienced strong, broad-based demand growth. The company reduced new equipment capital spending and focused on preparing existing fleet - Companywide revenues increased 11%, driven by higher rental operations and sales revenues[3] - Modular rental revenues increased 5% year-over-year, with growth in commercial and education sectors, despite softer market demand. New equipment capital spending was reduced, focusing on preparing available fleet[4] - Portable Storage rental revenues grew 5% sequentially but were down 5% year-over-year, facing challenges from lower commercial construction activity[5] - TRS-RenTelco reported a strong quarter with rental revenues up 7% year-over-year, benefiting from broad-based market demand improvement[5] Key Consolidated Financial Highlights (Q2 2025) For the second quarter of 2025, McGrath RentCorp achieved significant growth in rental and sales revenues, leading to an 11% increase in total revenues. Income from operations and Adjusted EBITDA also saw positive growth, and the company maintained its dividend rate | Metric | Q2 2025 (Millions) | YoY Change (%) | | :-------------------------- | :----------------- | :------------- | | Rental operations revenues | $163.5 | +5% | | Sales revenues | $69.8 | +28% | | Total revenues | $235.6 | +11% | | Income from operations | $57.2 | +5% | | Adjusted EBITDA | $86.5 | +3% | | Dividend rate per share | $0.485 | - | Division Performance Overview (Q2 2025 vs Q2 2024) Mobile Modular Division The Mobile Modular division reported a slight decrease in Adjusted EBITDA for Q2 2025 compared to the prior year, despite increases in rental and rental-related services revenues. Gross profit on rental revenues saw a modest increase, while sales revenues and associated gross profit also grew, albeit with a reduced gross margin due to a higher mix of new equipment sales | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Adjusted EBITDA | $53,088 | $53,418 | -0.62% | | Rental Revenues | $81,909 | $78,039 | +4.96% | | Rental Related Services Rev | $32,172 | $28,920 | +11.25% | | Sales Revenues | $40,484 | $35,930 | +12.67% | | Gross Profit on Rental Rev | $47,178 | $46,779 | +0.85% | | Gross Profit on Sales Rev | $12,903 | $13,758 | -6.21% | | Gross Margin on Sales | 32% | 38% | -6 ppts | - Selling and administrative expenses for Mobile Modular increased by $3.5 million to $36.8 million, primarily due to higher employee salaries and benefits, allocated corporate expenses, and marketing costs[11] Portable Storage Division The Portable Storage division experienced a decrease in Adjusted EBITDA and rental revenues in Q2 2025 compared to the prior year. While sales revenues increased, the gross margin on sales declined. Gross profit on rental revenues also saw a decrease | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Adjusted EBITDA | $9,834 | $11,015 | -10.72% | | Rental Revenues | $16,939 | $17,823 | -4.96% | | Rental Related Services Rev | $4,394 | $4,640 | -5.30% | | Sales Revenues | $1,712 | $1,266 | +35.23% | | Gross Profit on Rental Rev | $13,983 | $15,295 | -8.45% | | Gross Profit on Sales Rev | $664 | $550 | +20.73% | | Gross Margin on Sales | 39% | 43% | -4 ppts | - Selling and administrative expenses for Portable Storage increased by $0.1 million to $7.5 million in Q2 2025[11] TRS-RenTelco Division TRS-RenTelco demonstrated strong performance in Q2 2025, with increases across Adjusted EBITDA, rental revenues, and sales revenues. The division saw a significant rise in gross profit on rental revenues, driven by strengthening end markets and higher average rental equipment on rent, despite a decrease in depreciation expense | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Adjusted EBITDA | $19,314 | $18,001 | +7.29% | | Rental Revenues | $27,137 | $25,314 | +7.20% | | Sales Revenues | $7,713 | $5,845 | +32.00% | | Gross Profit on Rental Rev | $11,879 | $9,017 | +31.74% | | Gross Profit on Sales Rev | $3,641 | $3,129 | +16.35% | | Gross Margin on Sales | 47% | 54% | -7 ppts | - Depreciation expense for TRS-RenTelco decreased by 14% in Q2 2025, contributing to the increase in gross profit on rental revenues[11] - Selling and administrative expenses for TRS-RenTelco increased by $0.7 million to $7.3 million in Q2 2025[11] Enviroplex Division The Enviroplex business had a strong Q2 2025, particularly in new modular sales within the education market. The division significantly increased its sales revenues and gross profit on sales compared to the prior year - Enviroplex business had a strong quarter of new modular sales in the education market[4] | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | Change (%) | | :------------------------ | :------------------ | :------------------ | :--------- | | Sales Revenues | $19,866 | $11,373 | +74.68% | | Gross Profit on Sales Rev | $6,087 | $2,856 | +113.13% | | Adjusted EBITDA | $4,290 | $1,238 | +246.53% | Financial Outlook Full-Year 2025 Guidance Update McGrath RentCorp updated its full-year 2025 financial outlook, slightly increasing the lower end of its total revenue and Adjusted EBITDA guidance ranges, while maintaining gross rental equipment capital expenditures | Metric | Previous Guidance (Millions) | Current Guidance (Millions) | | :-------------------------------- | :--------------------------- | :-------------------------- | | Total revenue | $920 to $960 | $925 to $960 | | Adjusted EBITDA | $343 to $355 | $347 to $356 | | Gross rental equipment capital expenditures | $115 to $125 | $115 to $125 | Company Information About McGrath RentCorp McGrath RentCorp is a leading North American business-to-business rental company, founded in 1979. Its core operations focus on modular solutions through Mobile Modular and Mobile Modular Portable Storage, and electronic test equipment rental via TRS-RenTelco. The company emphasizes customer experience, profitable growth, and has a history of over 30 consecutive years of annual dividend increases - McGrath RentCorp is a leading business-to-business rental company in North America, specializing in modular solutions (Mobile Modular, Mobile Modular Portable Storage) and electronic test equipment rental (TRS-RenTelco)[14] - The company has a strong record of profitable growth and has increased annual dividends to shareholders for over 30 consecutive years[14] Investor Resources & Conference Call Investors can access company information, including SEC filings, on McGrath's website. A conference call was scheduled for July 24, 2025, to discuss the second quarter results, with replay and webcast options available - McGrath RentCorp hosted a conference call on July 24, 2025, at 5:00 p.m. ET to discuss Q2 2025 results, with dial-in and webcast options available[16] - Additional information and SEC filings are available on the company's investor relations website[15][16] Financial Statements (Unaudited) Condensed Consolidated Statements of Income The condensed consolidated statements of income show McGrath RentCorp's financial performance for the three and six months ended June 30, 2025, compared to the same periods in 2024, detailing revenues, costs, gross profit, operating income, and net income | (in thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues: | | | | | | Rental | $125,985 | $121,176 | $246,098 | $241,508 | | Rental related services | $37,483 | $34,358 | $71,399 | $63,938 | | Sales | $69,775 | $54,414 | $108,701 | $89,483 | | Total revenues | $235,616 | $212,611 | $431,032 | $400,438 | | Gross profit: | $110,714 | $103,415 | $207,150 | $196,683 | | Income from operations: | $57,171 | $54,412 | $102,738 | $106,497 | | Net income: | $35,973 | $20,618 | $64,181 | $43,466 | | Diluted EPS: | $1.46 | $0.84 | $2.61 | $1.77 | | Cash dividends declared per share: | $0.485 | $0.475 | $0.970 | $0.950 | Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of McGrath RentCorp's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Assets: | | | | Total assets | $2,327,009 | $2,277,584 | | Rental equipment, net | $1,393,682 | $1,387,659 | | Liabilities: | | | | Total liabilities | $1,163,848 | $1,154,216 | | Notes payable | $572,525 | $590,208 | | Shareholders' Equity: | | | | Total shareholders' equity | $1,163,161 | $1,123,368 | | Retained earnings | $1,047,270 | $1,007,115 | Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows outline the cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2025, and 2024, showing a net increase in cash for the current period | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $109,694 | $138,629 | | Net cash used in investing activities | $(61,598) | $(133,885) | | Net cash (used in) provided by financing activities | $(47,434) | $3,775 | | Net increase in cash | $662 | $8,519 | | Cash balance, end of period | $1,469 | $9,396 | - Purchases of rental equipment decreased significantly from $145.3 million in H1 2024 to $50.2 million in H1 2025, reflecting a focus on preparing available fleet rather than new capital spending[4][26] Business Segment Data (Unaudited) Three Months Ended June 30, 2025 This section provides detailed unaudited business segment data for the three months ended June 30, 2025, breaking down revenues, costs, gross profit, and Adjusted EBITDA by Mobile Modular, Portable Storage, TRS-RenTelco, and Enviroplex divisions | (dollar amounts in thousands) | Mobile Modular | Portable Storage | TRS RenTelco | Enviroplex | Consolidated | | :---------------------------- | :------------- | :--------------- | :----------- | :--------- | :----------- | | Total revenues | $155,988 | $23,346 | $36,416 | $19,866 | $235,616 | | Total gross profit | $73,226 | $15,038 | $16,363 | $6,087 | $110,714 | | Income from operations | $36,449 | $7,491 | $9,043 | $4,188 | $57,171 | | Adjusted EBITDA | $53,088 | $9,834 | $19,314 | $4,290 | $86,525 | | Average utilization | 73.7% | 61.1% | 64.8% | - | - | Three Months Ended June 30, 2024 This section presents the unaudited business segment data for the three months ended June 30, 2024, serving as a comparative baseline for the current quarter's performance across the company's divisions | (dollar amounts in thousands) | Mobile Modular | Portable Storage | TRS RenTelco | Enviroplex | Consolidated | | :---------------------------- | :------------- | :--------------- | :----------- | :--------- | :----------- | | Total revenues | $144,546 | $24,022 | $32,670 | $11,373 | $212,611 | | Total gross profit | $71,286 | $16,302 | $12,971 | $2,856 | $103,415 | | Income from operations | $38,047 | $8,837 | $6,386 | $1,142 | $54,412 | | Adjusted EBITDA | $53,418 | $11,015 | $18,001 | $1,238 | $83,672 | | Average utilization | 78.4% | 66.1% | 56.5% | - | - | - Transaction costs of $12.4 million related to a terminated merger agreement were reclassified from Selling and administrative expenses to a separate non-operating expense under the Corporate segment for Q2 2024[33] Six Months Ended June 30, 2025 This section details the unaudited business segment data for the six months ended June 30, 2025, providing a year-to-date view of divisional performance in terms of revenues, costs, gross profit, and Adjusted EBITDA | (dollar amounts in thousands) | Mobile Modular | Portable Storage | TRS RenTelco | Enviroplex | Consolidated | | :---------------------------- | :------------- | :--------------- | :----------- | :--------- | :----------- | | Total revenues | $287,906 | $44,612 | $71,435 | $27,079 | $431,032 | | Total gross profit | $138,694 | $28,981 | $31,238 | $8,237 | $207,150 | | Income from operations | $67,929 | $13,880 | $16,480 | $4,449 | $102,738 | | Adjusted EBITDA | $100,719 | $18,421 | $37,248 | $4,653 | $161,041 | | Average utilization | 74.2% | 60.6% | 63.0% | - | - | Six Months Ended June 30, 2024 This section presents the unaudited business segment data for the six months ended June 30, 2024, offering a comparative year-to-date view of divisional performance | (dollar amounts in thousands) | Mobile Modular | Portable Storage | TRS RenTelco | Enviroplex | Consolidated | | :---------------------------- | :------------- | :--------------- | :----------- | :--------- | :----------- | | Total revenues | $272,131 | $48,782 | $66,433 | $13,092 | $400,438 | | Total gross profit | $133,131 | $33,405 | $26,846 | $3,301 | $196,683 | | Income from operations | $72,499 | $19,450 | $14,765 | $(216) | $106,497 | | Adjusted EBITDA | $96,745 | $22,538 | $36,481 | $(24) | $155,740 | | Average utilization | 78.6% | 67.8% | 56.4% | - | - | - Transaction costs of $21.7 million related to a terminated merger agreement were reclassified from Selling and administrative expenses to a separate non-operating expense under the Corporate segment for H1 2024[40] Non-GAAP Financial Measures & Reconciliations Adjusted EBITDA Definition and Rationale Adjusted EBITDA is a non-GAAP financial measure defined as net income before interest expense, income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation, transaction costs, gains on property sales, and non-operating transactions. Management uses it to evaluate operating performance, compliance with financial covenants, and liquidity, believing it provides useful information to investors when viewed alongside GAAP results - Adjusted EBITDA is defined 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[41] - Management uses Adjusted EBITDA to evaluate period-to-period operating performance, compliance with financial covenants, and the company's ability to meet future capital expenditure and working capital requirements[42] - Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures, as it does not reflect all amounts associated with operations or accurately reflect real cash flow[43] Reconciliation of Net Income to Adjusted EBITDA This section provides a reconciliation of net income, a GAAP measure, to Adjusted EBITDA for the three, six, and twelve months ended June 30, 2025, and 2024, illustrating the adjustments made to arrive at the non-GAAP metric | (dollar amounts in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | LTM 2025 | LTM 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------- | :------- | | Net income | $35,973 | $20,618 | $64,182 | $43,466 | $252,448 | $115,848 | | Provision for income taxes | $13,484 | $8,359 | $22,689 | $15,406 | $89,202 | $42,234 | | Interest expense | $7,795 | $13,037 | $15,954 | $25,741 | $37,454 | $48,892 | | Depreciation and amortization | $26,339 | $26,944 | $52,739 | $54,131 | $106,063 | $108,548 | | Share-based compensation | $2,779 | $2,347 | $5,322 | $4,556 | $10,268 | $9,449 | | Transaction costs | $155 | $12,367 | $155 | $21,721 | $41,593 | $23,306 | | Adjusted EBITDA | $86,525 | $83,672 | $161,041 | $155,740 | $357,028 | $335,378 | | Adjusted EBITDA margin | 37% | 39% | 37% | 38% | 38% | 38% | Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA This section reconciles net cash provided by operating activities to Adjusted EBITDA for the three, six, and twelve months ended June 30, 2025, and 2024, providing an alternative view of the company's cash-generating performance adjusted for non-operating and non-cash items | (dollar amounts in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | LTM 2025 | LTM 2024 | | :---------------------------- | :------ | :------ | :------ | :------ | :------- | :------- | | Net cash provided by operating activities | $55,812 | $79,209 | $109,694 | $138,629 | $345,440 | $158,903 | | Change in accounts receivable, net | $24,919 | $5,429 | $14,459 | $(9,989) | $16,422 | $25,438 | | Gain on sale of used rental equipment | $10,281 | $8,182 | $16,674 | $15,537 | $36,222 | $32,929 | | Income taxes paid, net of refunds received | $5,762 | $(5,078) | $5,786 | $(4,599) | $46,909 | $80,035 | | Interest paid | $6,837 | $12,210 | $15,982 | $26,394 | $37,912 | $48,195 | | Adjusted EBITDA | $86,525 | $83,672 | $161,041 | $155,740 | $357,026 | $335,378 | Additional Information Forward-Looking Statements This section contains forward-looking statements regarding McGrath RentCorp's future expectations, strategies, prospects, or targets. These statements are subject to significant risks and uncertainties, including economic factors, market health, competition, and operational challenges, which could cause actual results to differ materially from projections. The company disclaims any obligation to update these statements - The press release contains forward-looking statements regarding future expectations, strategies, prospects, or targets, particularly in the 'Financial Outlook' section[17] - These statements are not guarantees of future performance and involve significant risks and uncertainties, such as tariff impacts, market health (education, commercial, semiconductor), competition, and operational execution[18] - The company assumes no obligation to update any forward-looking statements, which are based on management's reasonable assumptions that can be wrong or affected by known or unknown risks[19][20]