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Introduction & Market Context
McGrath RentCorp (NASDAQ:MGRC) presented its Q3 2025 results on October 23, revealing mixed performance with growth in rental operations counterbalanced by declining sales revenue. The company reported total revenues of $256.4 million, representing a 4% year-over-year decrease, while adjusted EBITDA fell 7% to $96.4 million. Following the earnings announcement, McGrath’s stock declined 1.49% to $122.20 in after-hours trading, reflecting investor disappointment with results that missed analyst expectations.
Despite the overall revenue decline, rental operations revenues increased by 4% to $178.1 million, demonstrating resilience in McGrath’s core business amid what management described as "challenging market conditions." The company’s performance varied significantly across its three business segments, with TRS-RenTelco emerging as the standout performer.
As shown in the following overview of key company highlights, McGrath continues to emphasize its long-term shareholder value creation, including a 16% shareholder return CAGR since its IPO and 34 consecutive years of dividend increases:
Quarterly Performance Highlights
McGrath’s Q3 2025 results revealed divergent performance across its business segments. While rental revenues showed modest growth, total revenues declined due to an 18% drop in sales revenue compared to Q3 2024. The company attributed this performance to continued softness in non-residential construction markets while highlighting positive momentum in certain areas.
The following chart summarizes McGrath’s key operating results for Q3 2025:
Breaking down the performance by segment, Mobile Modular – which represents 75% of total revenues and 67% of adjusted EBITDA – saw rental revenues increase by 2% year-over-year, driven by growth in the commercial customer base and strategic initiatives. Revenue per unit on rent increased by 6%, while revenue per new unit shipped rose by 3% on a last-twelve-months basis.
Portable Storage achieved a 1% increase in rental revenues, marking its first year-over-year growth since Q1 2024. Meanwhile, TRS-RenTelco emerged as the strongest performer with rental revenues increasing by 9%, which the company attributed to "broad-based improvement in market demand."
The following detailed financial table provides a comprehensive view of McGrath’s operating results for both the three-month and nine-month periods:
Detailed Financial Analysis
A closer examination of McGrath’s rental revenue trends reveals steady improvement across all segments in Q3 2025 compared to previous quarters. The following chart illustrates the quarterly progression of rental revenues for each business unit:
However, adjusted EBITDA performance was more mixed. While TRS-RenTelco showed improvement, both Mobile Modular and Portable Storage experienced year-over-year declines in adjusted EBITDA for Q3 2025. This divergence suggests varying levels of profitability and operational efficiency across segments.
Mobile Modular, McGrath’s largest segment, faced utilization challenges with average utilization declining from 77.1% in Q3 2024 to 72.6% in Q3 2025. However, the company successfully implemented pricing increases, with average rental rates rising from 2.84% to 2.88% year-over-year. The segment’s adjusted EBITDA decreased from $71.4 million in Q3 2024 to $64.6 million in Q3 2025, representing a 10% decline.
For Portable Storage, utilization rates stabilized somewhat at 61.4% in Q3 2025 compared to 62.8% in Q3 2024, following steeper declines in previous quarters. However, adjusted EBITDA for this segment decreased by 14% year-over-year.
TRS-RenTelco stood out with strong performance metrics across the board. The segment’s adjusted EBITDA increased by 7% year-over-year, while utilization rates improved significantly from 56.5% in Q1 2024 to 64.8% in Q3 2025. The following chart details TRS-RenTelco’s operating results:
Strategic Initiatives
McGrath continues to focus on strategic growth opportunities, particularly in its Mobile Modular and Portable Storage segments. The company highlighted several initiatives driving revenue growth, including Mobile Modular Plus and Site Related Services, which have achieved compound annual growth rates of 26% and 33%, respectively, since 2022.
The following chart demonstrates the strong growth trajectory of these value-added service offerings:
For Mobile Modular specifically, the company is seeing positive pricing trends despite utilization challenges. Revenue per unit on rent increased by 6% year-over-year, while revenue for new shipments rose by 3%, indicating McGrath’s ability to command premium pricing in the market.
McGrath’s growth strategy emphasizes geographic expansion, particularly in the Midwest and Northeast regions, as well as broadening its service solutions. The company maintains a disciplined approach to capital allocation, balancing investments in organic growth with strategic acquisitions while continuing its commitment to shareholder returns through dividends and share repurchases.
Forward-Looking Statements
Based on its performance through Q3 2025, McGrath has narrowed its full-year guidance. The company now expects total revenues between $935 million and $955 million, compared to the previous range of $925 million to $960 million. Adjusted EBITDA guidance has been revised to $350 million to $357 million, slightly higher than the previous range of $347 million to $356 million.
The following chart details McGrath’s updated financial outlook:
During the earnings call, CEO Joe Hanna expressed optimism about the company’s positioning despite market challenges, stating, "We’re well-positioned with resources out in the field to take advantage of these projects." CFO Keith Pratt highlighted efforts to mitigate headwinds, noting, "We’ve done a pretty good job this year of counterbalancing some of those headwinds."
Looking ahead, McGrath faces both opportunities and challenges. The company’s rental operations continue to show resilience, particularly in the TRS-RenTelco segment, while Mobile Modular and Portable Storage navigate more challenging market conditions. Management’s focus on strategic growth initiatives, geographic expansion, and value-added services positions McGrath to capitalize on long-term opportunities while managing near-term headwinds in the construction and modular building markets.
Full presentation:
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