McGrath RentCorp: The Inflection Is Real, and Data Centers Are the Engine
Modular utilization turns for the first time since 2022; TRS rides the data center wave while Enviroplex timing skews the quarter.
MGRC · Earnings Call · 2026-07-29
The Inflection Point
The headline from McGrath RentCorp's second-quarter 2026 call is not the 6% year-over-year decline in total revenue, but a quiet turning point in the company's largest business. Management reported that Mobile Modular's utilization improved sequentially for the first time since 2022, and units on rent have now increased for four consecutive months. CEO Philip Hawkins framed it as a genuine shift in trajectory:
Utilization improved sequentially for the first time since 2022. Units on rent have increased the last 4 months in a row and we ended the quarter with more units on rent than at the beginning of the year.
The momentum is driven by the mega projects that have been a theme in the company's recent quarters, especially data-center construction. In the Q&A, Hawkins noted that the inflection is being led by "more mega project wins" combined with geographic expansion efforts. The company's own inflection keyword saw a momentum spike in the most recent quarter, reflecting this new narrative. The shift is still small—average utilization sits at 70.6% versus 73.7% a year ago—but the direction matters after years of decline.
Chief Financial Officer Keith Pratt added context: "These are very encouraging signs. But they are just the beginning of the turn." That caution is appropriate; the nonresidential construction market remains mixed, and portable storage—the most cyclical business—is still struggling. Yet the modular turn is reason for optimism.
TRS and the Data Center Wave
The clearest growth story is TRS RenTelco, which delivered 17% rental revenue growth and a 29% increase in adjusted EBITDA. The business is levered to data center buildouts, a theme that is also prominent in the global market context. Hawkins described the demand as "healthy across several key end markets, including data centers, aerospace and defense, and semiconductors." This is not a new thread—the company has been calling out data centers for several quarters—but the strength is accelerating. TRS ended the quarter with utilization at 68.9%, the highest since 2021, and management raised the rental CapEx guidance to fund further growth.
The market tape confirms the resonance: the 360-day advancers list for the whole market is topped by data-center-adjacent themes like "high bandwidth memory" and "co-packaged optics," and several reporters this quarter (e.g., CLS, ASM.AS, 2303.TW) cited data-center-driven demand. McGrath is riding a broader wave, but its unique position in electronic test equipment rental gives it a specific angle. In the prior quarter's call, Hawkins already noted that "it still feels like early to mid-innings on the whole data center play," a view that has now translated into tangible results.
Capital Allocation and the Back Half
The quarter also featured a notable pivot in capital allocation: the company repurchased 250,000 shares and closed a small tuck-in acquisition to deepen its Midwest footprint. Management is clearly prioritizing organic growth in modular and TRS, balancing that with shareholder returns. The balance sheet remains healthy, with leverage at 1.65x as of quarter end. Pratt said, "We have a lot of flexibility and we still want to be prudent," while Hawkins highlighted the continued pipeline for strategic M&A.
The one drag this quarter was Enviroplex, where sales timing pushed revenue from Q2 into the second half. Management reiterated that full-year performance should be in line with 2024, implying a strong H2 for that business. The revenue dip is visible in the fundamental trend: Total revenue fell to $199M in Q1 2026 (the latest filed quarter) from $257M in Q4 2025, reflecting the seasonal and timing pressures management described. The company's own guidance for full-year revenue and adjusted EBITDA is unchanged at the midpoint, with the expectation that strength at TRS and modular rental momentum will offset weaker portable storage and lumpy sales.
The strategic narrative is coherent: the modular inflection is real, TRS is riding a structural tailwind, and capital is being deployed to accelerate both. The risk is that the modular turn is still early and the small-local-market weakness in portable storage persists. As Hawkins said in the Q&A, "We may not see this move up every single quarter consistently, but we do believe we turn the corner on the trend." That is as clear a signal as a CEO can give without promising linear growth.