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Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp third quarter 2026 earnings call. At this time, I'll conduct a question and answer session. At that time, if you have a question, you will need to press the star key followed by the one key on your telephone. This conference is being recorded today, Wednesday, October 28, 2026. Before we begin, note that the matters the company management will be discussing today that are not statements of historical facts are forward-looking statements within the meaning of the time, including statements relating to the company's expectations, strategies, prospects, backlog, or targets. These forward-looking statements are not guarantees of future performance and involve significant risk and uncertainties that could cause our actual results to differ materially from those projected. Important companies' expectations are disclosed under risk factors in the company's Form 10-K and other SEC filings. forward-looking statements are made only as of this date hereof. Except as otherwise required by law, we assume no obligation to update any forward-looking statements. In addition to the press release issued today, the company all needs K and its Form 10-Q for the quarter ended September 30, 2026. Speaking today will be Phil Hawkins, Chief Executive Officer, and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hawkins. Go ahead, sir.

Thank you, Leslie. Good afternoon, everyone, and thank you for joining us today for Grath RentCorp's third quarter 2026 of the past quarter and to provide an update on our outlook for the remainder of this year. I will discuss market demand conditions, review the progress we made during the quarter, and share how our increased rental fleet investments are helping us pursue our strategic growth opportunities. Focusing first on our quarterly results, we were pleased to see rental operation revenues up 6% year-over-year, driven by continued momentum in our two largest rental businesses. Both Mobile Modular and T-Suite during the quarter. Overall, total company revenues increased 7% and adjusted EBITDA increased 10%. At Mobile Modular, we saw sustained momentum in our rental operations. Rental revenues grew 4% in the quarter and both rental bookings and backlog were higher than a year ago. I was pleased with the wins we secured at Expansion Markets. These successes allowed us to deploy standard fleet at attractive rates on long-term rental contracts. The strength and quality of our rental pipeline and confidence in demand levels supported our decision to increase investment in the rental fleet. Sales of eModular equipment were lower for the quarter. Despite having a healthy major backlog of secure projects, we experienced longer lead times for project completions. Challenging demand conditions continued in smaller, local commercial construction projects, which are a large component of the mix for this business. Our team remained focused on improving utilization by both selling equipment and redeploying existing fleet to new markets. While we continue to work hard on these efforts, progress is likely to be gradual until market demand improves. Lastly, turning to TRS, rental revenues continue to strong demand across several PN markets. The AI infrastructure and data center investment cycle is generating new business opportunities for TRS. The scope of the opportunity extends across the supply chain. It ranges from semiconductor R&D supporting next-generation ship development to field testing verification work as equipment is installed in new data centers. Based on what we're seeing in our business and what we're hearing from customers and OEM partners, we increasingly view this as an attractive multi-year opportunity. are all consistent with this view. Summing up, we believe McGrath has multiple avenues to create shareholder value. While this isn't an easy operating environment, we've made meaningful progress against our most compelling growth opportunities during the quarter. At Mobile Modular, we've improved in our geographic expansion markets. We also applied our large commercial project capabilities to win data center, manufacturing, and infrastructure projects at TRIs created by AI infrastructure and data center build-outs. Looking ahead, we will continue to invest capital behind these opportunities to support our customers and position the company for sustained long-term growth. Our capital allocation priorities start with organic investments across multiple rental equipment categories. Our strong balance sheet gives us flexibility to fund this organic growth, support a steadily increasing dividend, and retain capacity for strategic M&A and share repurchases. I will close by recognizing our team for your focus, passion, and commitment to delivering value for our customers, viewers, and shareholders for your continued partnership, trust, and investment in our company. With that, I will turn the call over to Keith. We'll take you through the financial details of our quarter and our updated outlook for the full year. Thank you, Phil, and good afternoon, everyone. As Phil highlighted, our third quarter results reflected continued revenues increased 7% to $275 million, and adjusted EBITDA increased 10% to $106 million. Reviewing Mobile Modular's operating performance as compared to the third quarter of 2025, Total revenues for mobile modular decreased 1% to $180 million, and adjusted EBITDA decreased 3% to $63 million. We are driven by growth from our commercial customer base and geographic expansion initiatives. Thank you for joining us. Thank you for joining us. For new shipments over the last 12 months, the average monthly revenue per unit increased 7% to $1,271. There is a positive pricing table and opportunity as our fleet churns. Sales revenues decreased $5.3 million to $47.1 million, despite a healthy mid-year sales backlog. Turning to the review of portable storage. Total revenues for portable storage decreased 3% to $24 million, and adjusted EBITDA decreased 20% to $7 million. Thank you for joining us. and investments in sales coverage to support future growth. Average utilization for the quarter was 50% a year ago and up sequentially from 58.3% in the second quarter. Turning now to the review of the TRS on telco, PRS delivered another strong quarter, with total revenues up 23% to $45 million to $26 million. Rental revenues increased 26% to $35 million, benefiting from improved demand conditions, including projects supporting data center build-outs. Rental margins improved to 48% from 43% a year ago. Average utilization for the quarter was 69.9%. Ended the quarter at 71.9%, the highest level in the past 20 years. Given the strong demand environment and record high utilization level, as Phil discussed, We continue to invest in additional fleet to support growth. Bills rest margins for 56%, consistent with last year. Lastly, a look on EnviroPlex. EnviroPlex delivered a very strong third quarter. Sales revenue increased to $25.7 million from $13.7 million and adjusted EBITDA. High gross margins strengthened performance in the quarter. The remainder of my comments will be on a total company basis. Third quarter, selling and administrative expenses increased $4.4 million to $56.9 million, primarily due to investments to support our modular geographic expansion initiative. $6.2 million reflecting lower effective interest rates during the quarter, partly offset by higher debt levels. The third quarter provision for income taxes was based on an effective tax rate of 26%. compared to 27.7% a year earlier. Turning to our year-to-date cash flow highlights, net cash provided by operating activities was less than a million in the prior year. Rental equipment purchases were $219 million compared to $92 million in the prior year as we increased investment to support geographic expansion and large commercial project wins at Mobile Modular and higher demand at TRS. In addition to investments in youth fleet, Healthy Cash Generation, along with $34 million of share repurchases. At quarter end, we had net borrowings of $618 million, and the ratio of funded debt to the last 12 months' actual adjusted EBITDA was 1.68 to 1. Lastly, we are updating our outlook for 2026. The demand for our rental businesses remains strong and TRS. As a result, we are narrowing our adjusted EBITDA range with no change to midpoint expectations and increasing our gross rental equipment capital expenditure outlook. While lower than expected modular new equipment sales activity is reducing our revenue outlook for the year, the strength of our rental operations continues. We now expect total revenue between $945 and $960 million, adjusted EBITDA between $365 and $373 million, and Gross Rental Equipment Capital Expenditures between $270 and $290 million. We are focused on solid execution for the remainder of the year. That concludes our prepared remarks. Leslie, you may now open the lines for questions.

The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you pick up your hands. Our first question is from Manav Patnik with Barclays. Please go ahead.

Hi, good afternoon. This is Ronan Kennedy from MNOP. Thank you for taking our questions. If I may start with stepping back, I think the demand environment still seems fairly bifurcated, healthy activity across larger projects, but continued pressure in the smaller inflection and broader non-resi activity, and specifically in that smaller local project.

Good afternoon, everyone. I think the macro theme has been really consistent, like we've been sharing the last few quarters. Those smaller local projects, that environment is stable, but they aren't increasing significantly. But we continue to see ample opportunities for the large commercial projects. So we aren't seeing any strong indications, haven't seen any

Thank you. And then the new modular unit sales came in below the expectations I think. Look, how are you thinking about that level of sales activity in 4Q? And as you look further out, is there anything else you're seeing today that changes how we should think about the opportunity for new unit sales even into 2017?

Yeah, take one step at a time, Ronan. I think with the updated outlook we had expected for the third quarter, and we've sort of reduced our outlook for the fourth quarter on the new modular equipment sales. As we mentioned in some of the remarks, we had a healthy backlog at the mid-year point. We went through our normal process. And what we actually experienced was it's taking longer to see those projects that are under contract Get Completed, and that's really the root cause of us taking the numbers down in that area. These are really issues with a customer. There's nothing on our subplan. We do know customers can run into issues. We discussed that last quarter as well, but the overall experience we've had is everything's taking longer than we would have expected to complete. And that's the root cause for taking that part of the business cycle a little lower.

Got it. Thank you. And then on the rental equipment capex, the guy raised, I believe, about $700,000. Help us understand how much of that is mobile modular versus TRS within each. What specifically are you investing behind?

Yeah, Ronan, let me give a couple of comments on that. If you go way back to the February initial outlook for CapEx, the midpoint at that time was $190 million. With our October update, we're now still alluded to this in its comments. Good strength in the demand environment for certain product categories at the modular side and at TRS. In both businesses, there is an uptick, but the majority of that change from the beginning of your view to sort of the view we have today, the majority of that increase is occurring at TRS. And just to frame that for you a little bit, if you look into the details in the queue, we ended the third quarter at TRS with essentially utilization of 72% on a fleet that were the size of $380 million of OACs. Thank you for joining us. AI slash data center opportunity that Phil described that has assets that range from work done in the R&D lab all the way through to people who are turning up equipment in a data center, multiple product categories, probably tilts more towards what we call the communication side. for geographic expansion and opportunities for more of those larger mega projects which tend to use more of the complex floors where we're adding equipment where our existing utilization is already very high. So that gives you the overview. Again, it all speaks to the rental operations opportunities. I would just add, over 80% of that modular year-to-date capex has gone out on contracts with initial action of rental equipment with solid returns.

Very good. Thank you. If I may, just one more on modular. Can you talk about how would you frame the building blocks for mobile modular growth between backlog conversion and geographic expansion pricing services? even underlying market demands, and kind of building blocks for 4Q into 27, please.

It starts with the opportunity we have in geographic expansion and the visibility we see out into the market for these larger commercial projects. Again, customer feedback and factory feedback. There's a sustained backlog there. So we have our own internal backlog. Thank you for joining us. and our ability in Q3 and beyond to perform in that. And we, as we talked about before, check a lot of the boxes to make us highly successful in that type of project category.

Very good. Thank you both very much. Greatly appreciate it. I'll turn it over.

Thank you. Our next question comes from Scott Schneeberger with Oppenheimer. Please go ahead.

Thank you for joining us. You all cited just the ways in the sales of large projects and with sales on what type of projects these are and what the holdups typically are because it's kind of meaningful. I'm just kind of curious, is it going to impact how you're thinking about next year as well when you and no you're not going to guide on this call but on the fourth quarter call for next year's sales just how does it affect how you're thinking about sales next year? Thanks.

Thank you for joining us. The slower overall non-residential construction market is having an impact at the higher interest rate and specifically the projects that we've had tend to be the larger commercial projects where we've experienced difficulty, customers experience difficulty in permitting, getting their site ready, challenges getting all the other subcontracts in place, the things that we typically see on large construction projects. I think it's been happening, but we still believe that this is a solid opportunity for us over time, long term. We completed a significant number of projects this year. We continue to have a healthy backlog of awarded contracts, and we have good engagement with customers who are planning future projects. Thanks, so I'm going to just... Scott, I think you asked this one too early to really say anything there. I will say, you know, we've experienced this part of the business is harder to forecast. We spend a lot of time on it. We're experiencing that things take longer from contract signing to completion and our opportunity to see the revenue, you know, come to McGrath. And so I think we'll be careful about Thank you for joining us. Thank you for joining us. Thank you for joining us.

What I think away from both is maybe some issues from the smaller projects, but I feel like, Phil, from your commentary, maybe some of these large projects that are originally considering new sales are opting to rent. Is that a meaningful part of the answer here or not as much?

I think we've seen examples for that thing, but in a high interest rate environment, you do typically see some shift towards lease from the buy side. Again, I wouldn't attribute most of this as related to items around specific projects and not a market shift away from sales. Got it. Thanks. I should be here a little bit just with sales.

You hit this a little bit already, but with TRM Street and Telco really ripping, can you just exactly to end market? But it's predominantly data centers and large projects that's driving this. Are you seeing... Are there any other aspects of TRS that are, is that the only driver I guess is what I'm asking versus are there other areas that are pushing it as well?

I think there's a few areas. One, I would not just, we talked about the AI supply chain, not just labs, all the way through to that final data center build out. So there's several types of equipment and types of customers and Thank you for joining us.

I appreciate that. Following up on Ronan's question on CapEx, it sounds like the majority is going to TRS, and you also elaborated well on the drivers of modular, and it sounds very logical and very good in both situations. I'm curious, is this a pull forward for next year, or is this just, wow, we're doing so much business, we just have to fund this now? And it did sound good, you saying that a lot of the modular you had on three-year-ish contracts going right out the door. But I'm just kind of curious, is this going to affect the way you think about CapEx next year? Thanks.

Yeah, it's a reasonable question, Scott. It's also just a little months as we get our plans lined up for next year. I think TRS, you've heard the dynamic. I mean, we've seen this momentum building over a number of quarters and really, as you rightly said, accelerated in the last quarter. and the more we look to get verification from what OEMs are saying, from what we hear from Sincere Opportunity here and it's one that we want the funds. So, you know, we should end 2026 owning a lot of equipment Hopefully it's highly utilized, and that gives us a very good starting point for next year. Then it's all going to be a matter of where do we go from here. Is there incrementally more business, different opportunity areas? That's all stuff we're going to assess. in the months ahead, and more CapEx to the overall budget for the year. It's not as much that we added there. We had a pretty healthy budget for the year. We knew we were going to do the things that Phil described. I would say they've gone incrementally more positively than we expected, and we believe those are worthwhile things to put on.

It sounds good. Thanks, guys. I'll turn it over.

CJS Securities, please go ahead.

Thank you. Good afternoon, Phil and Keith, and thanks for all the color. Last quarter, shipments exceeded returns for the first time in quite a while. Just provide a little bit more color on what you saw in that front in Q3, and obviously that trend enhances your pricing tailwind. What are the expectations for Q4 into Q27?

Yes, Daniel. Our utilization, it's good to see that trend continue a little bit. The units on rent were relatively flat in Q3. That shipments versus returns kind of balanced out, and we expect to be positioned well to continue those incremental utilization. We're headed in the right direction. I think the other part is a little bit on the pricing side. I mean, I think overall for the modular side of the business, similar to our comments last quarter, for individual product categories in particular, but overall I would characterize it as base pricing being relatively stable. And then the M&M Plus, the services side of attachments, Thank you for joining us. which is a significant gap as trends that we've seen over the last 12 months continue. I think there's an opportunity for those numbers over time to continue to increase. Again, mix factors can be very important here. Everything from what the product is, which region it's in, the length of the contract, all those things can impact The revenue per month opportunity, but we've made good progress. We're trying to price very thoughtfully as we continue to train. EnviroPlex last quarter experienced some delays.

Clearly, they came through in Q3 as sales doubled year over year. How much of that was pushed out? How much of The recovery of that push out, was there any pull forward from Q4 and just talk to the drivers in general in terms of the outlook for growth there?

Q2 that moved to Q3, and they got completed as planned. And then typically third quarter for this business, for the EnviroPlex business, is a busy quarter, and that's also reflected in the good numbers. One notable item that I mentioned in the prepared remarks, we had very strong gross margins Thank you for joining us. for the quarter and for year-to-date. So a number of things worked in our favor with the business mix, the project mix, and the execution that enabled that to happen, but that was another big positive and now part of the business.

One CapEx to OpEx, that was a little bit of a headwind to margins. With CapEx increasing, should we start... I'd say it's still a little too early to tell.

Our utilization is still much lower than we'd like, and so what you've seen happening is utilization opportunities in some of our more mature branches, and so there's plenty of equipment still there to Thank you for joining us. And we've mentioned this in the past, it's really in the details of the line items. But when you look at that line, the direct cost of rental operations, that line item that we describe is primarily inventory center costs. That was up in the third quarter compared to a year ago. About two-thirds of the increase is really already in our fleet. But I want to remind you about a third of the increase is actually related to items that we rent, we re-rent from others that support our MM Plus initiative. And we saw, you know, good activity in MM Plus. We saw growth in that area. and for those assets that we don't own, and there are quite a few categories where we do not own the asset, we have a cost that's associated as some cost to that line item. And that was about a third of the increase in the third quarter. And again, it's a reflection of that part of the business is doing well. It does in turn put a slight compression on the margins for our rental revenue stream because the margin we get for those re-rented items is not a strong additional color there.

Really helpful. Maybe just the last one. Any update on kind of the outlook and demand trends on the education side of your business? Thank you again.

I'll take that one, Dan. Thank you. Our year-to-date education activity was not as strong as last year. We said last quarter that education bookings were lower than a year ago, and that drove shipments that weren't as high as last year's levels. Returns exceeded shipments years. So back to your question around utilization, those things strong. Thank you again for all the telling.

Thank you. Once again, if you do have a question, you may press star and one on your telephone keypad now. Our next question is from Stephen Ramsey, Thompson Research Group. Please go ahead.

Hi, good evening, or good afternoon there. Wanted to dig in a little bit on the modular revenue per unit up 8%, and that's with the actually, that implies mega project demand is up significantly. Am I thinking directionally correct there?

I just want to be sure that we're all thinking about it the same way, Stephen. So the rate we get or the revenue per unit, it certainly encompasses also in the mega project commercial. I'm going to say, again, the rate you get on any particular project depends on a lot of different things, which assets. are involved. The term of the contract could be an important element as well. So I would look more at that statistic, the 8% increase, as directionally it fits the pricing and more situations where we're attaching the MN Plus services. That would be the big headline. I don't know that there's as much to read into this around local versus mega project pricing differences.

Okay, that's helpful, that's helpful. But thinking about TRS revenue, the rental revenue growth far outpaced the units in the fleet, and I get the volume helping TRS rental revenue.

I would say at TRS, the pricing environment is stable. That's how I characterize it. As you look at that published rate factor that we provide, you'll see that that's up year over year for that part of the business. That's really reflecting mix. And so, as Phil mentioned, with some of the work that we're seeing related to AI slash data centers, Thank you for joining us. But it's because those types of units in the communications arena have a short life, so we charge more per unit for those units. And you'll see that metric, it was up to 4.33% a year earlier, but it's mainly mixed. It's really more of the equipment on rent that is shorter-lived equipment. And that's a shift we see periodically. It's this balance between general-purpose equipment that is a longer life and where the risk factor tends to be lower, and then communications equipment, shorter useful life, the risk factor is higher, tends to be more the mix of those two parts of the business. Again, I'll come back to the original comment, pricing relatively stable.

Okay, that's great color. And then TRS, thinking long-term here, with more semiconductor fabrication plants being built in the U.S., is this a secular positive for TRS demand with Intel, Taiwan, Sydney, etc.?

I would say it was. still wanting to understand that more fully. In general, more of our equipment is going to be used in the R&D side versus the manufacturing, but manufacturing does present some opportunities. We'll see how that plays out over the next several years.

Last quick one for cash, yet you're also raising CapEx. Do you feel like buybacks are something that you would continue to do, assuming the stock price is fair in relation to your assessment of value, or do you see that you would pull back on the buybacks and raise the CapEx potentially?

Yeah, I think the good news, Stephen, is we've got flexibility in position. We funded a lot of organic capex this year. We did one little tuck-in earlier in the year. I don't think there's any restriction on share repurchases. Thank you for joining us. is just below 1.7 million shares still authorized for repurchase over time. So, again, we've got good flexibility, and we think it's a good thing to do for the shareholder when we see attractive opportunities in the market.

Excellent. Thank you for all the time. This is from Mark Riddick with Sedoti. Please go ahead.

Good evening. I guess maybe I'll just piggyback off of the end of the last question and maybe talk a little bit about what we're seeing as far as potential acquisition pipeline and maybe what that looks like, what valuations look like, and the opportunity and appetite levels for tokens during the year.

I'll take the M&A pipeline. We have a very active pipeline that includes opportunities of all sizes. We feel good about that. It's a key part of our strategy. And as I said before, it takes the stars to line up of a good business with good assets, good people, and an owner's desire to sell at We've had a reasonable valuation, and so we haven't had as many of those over the last few years, three small tuck-ins, but there are plenty of opportunities out there. We continue to work those tuck-in opportunities that we remain a buyer of choice because of the way we've executed and followed through on commitments and brought those businesses and integrated those businesses into our organization. So I feel good about that. It's active. I wanted to circle back on a couple of comments around education.

Maybe talk a little bit about levels.

and with the elections coming up next week, if there's any particular call-outs that you're looking at in the election cycle that could help slash in your education funding environments and key markets.

It's a good question, Mark. There's always local bond measures that can be helpful to us. It's really about the demographic trends and enrollment, and those local budgets are most influenced by the number of students in seats. And so you have some markets where enrollment's down, and so those schools have more difficult budget environments. and they have to navigate through those and sometimes that means closing a campus which can sometimes increase partnering with local charter schools so there's those dynamics differ across each of the regions we play in but the biggest driver on the funding side that we're seeing right now is really the demographic trend That also is partially offset by the modernization opportunities that continue to increase as schools age, need upgrades and replacement. So those are the two main dynamics and in this year that demographic enrollment shift was greater than the modernization opportunity.

And then last one for me, and this is sort of maybe a bigger picture question, but it's been quite a while since we've seen TRS utilization, well, obviously, historical levels that you're at now. And currently, I guess at the end of the quarter, from a historical perspective, some of the big... What moves that we've seen with TRS in the past and some of the drivers and how that compares, maybe if that's that mixed differential that you were talking about earlier with communications and the like, but how you might compare what you're seeing in TRS now vis-a-vis some of the big cars that have strength.

I guess I would just start, Mark, by saying that over the last couple of decades, the utilization we're seeing right now is record high and not an area where we would expect to be able to sustain over a long term, whether it's early innings of a new cycle, call it three years, Thank you for joining us. I appreciate it. Thank you very much.

Thank you. Once again, if you do have a question, you may press star and 1 on your telephone keypad now. There appears to be no other questions. Let's floor over to Mr. Hawkins for closing remarks.

I'd like to thank everyone for joining us on the call today and for your continuing interest in our company. We look forward to speaking with you again in late February to review our fourth quarter results.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.