McGrath RentCorp (MGRC) Q2 2026 Earnings Report, Transcript and Summary

You for your continued patience. Your meeting will begin shortly. Assistance at any time, please press 0 and a member of our team will be happy to help you. Press 0, and a member of our team will be happy to help you. Please standby. Your meeting is about to begin. Ladies and gentlemen, thank you for standing by. Welcome to the McGrath Rent Corp Second Quarter 26 Earnings Call. At this time, all conference participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, This conference call is being recorded today. Wednesday, July 29, 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 Private Securities Litigation Reform Act of 2000 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 risks and uncertainties that could cause our actual results to differ materially from those projected. Important factors that could cause actual results to differ materially from the company's expectations are disclosed under Risk Factors in the company's Form 10-Ks and other SEC filings. Forward looking statements are made only as of the 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 also filed with the SEC the earnings release on Form 8-K and its Form 10 Q for the quarter ended June 30, 2026. Speaking today will be Philip Hawkins, Chief Executive Officer and Keith E. Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hawkins. Go ahead, sir.

Thank you, Chloe. Good afternoon, everyone. And thank you for joining us today. For McGrath Rent Corp.'s Second Quarter 2026 Earnings Call. I am glad to be here to report on our performance over the past quarter. To provide an update on our outlook for this year. I will discuss current market demand conditions and share our progress on strategic growth initiatives. First, our quarterly results. We are pleased to see rental operations revenues up 6 percent year over year, driven by continued momentum in our 2 largest rental businesses, both Mobile Modular and TRS RenTelco grew rental revenues and improved utilization sequentially during the quarter. Offsetting these positive rental operations results lower new equipment sales at Enviroplex, and Mobile Modular. And several projects pushed to the second half of the year. As a result, total company revenues decreased 6 percent. And adjusted EBITDA decreased 4 percent. Focusing first on Mobile Modular. We saw growing momentum in our rental operations. Rental revenues grew 2 percent in the quarter and bookings increased 11 percent compared to a year ago. While demand conditions remain mixed, our larger commercial project opportunities continue to be strong. And activity in smaller local markets has been more stable. We are also having success in the geographic expansion markets where we added sales coverage, and deployed capital. I am particularly encouraged by the positive operational trends in the Modular business. 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. This inflection and higher year over year bookings in the first half of 2026, I feel positive about the outlook for the 0.5 to 1.5% year over year. Site related services revenues were down slightly from the quarter, higher for the first half. Looking at the market for new modular sales, overall demand and pipeline activity, remained stable. And similar to last year. Turning to our Portable Storage business. Rental revenues were flat We continue to see challenging demand conditions in local commercial construction markets, which are a larger component of the mix for this business. Our team remains focused on getting more units out on rent, through expanding sales coverage and targeting adjacent geographic markets. Lastly, turning to TRS, rental revenues continued their impressive growth trajectory and were up 17 percent. Demand remained healthy across several key end markets. Including data centers, aerospace and defense, and semiconductors. Team is executing well in a strong market environment and is entering the second half of the year with solid momentum in the business. Summing up, across the McGrath businesses, we delivered rental operations revenue growth in a mixed demand environment. I am pleased with our momentum going into the second half of the year. Our modular geographic and services expansion initiatives are providing us with several growth opportunities that are not dependent on recovery the nonresidential construction market. And our strong balance sheet gives us the flexibility to fund organic growth, support a steadily increasing dividend and retain capacity for strategic M&A and share repurchases. I would like to thank our team for your dedication, deep expertise and customer engagement that are truly competitive differentiators. And our customers and shareholders for your trust and investment in our company. With that, I will turn the call over to Keith to take you through the financial details of our quarter and our updated outlook for the full year.

Thank you, Philip, and good afternoon, everyone. As Phil highlighted, second quarter results reflected continuing growth in rental operations revenue offset by lower sales revenue at Enviroplex and Mobile Modular. Total revenues decreased 6 percent to $221 million and adjusted EBITDA decreased 4 percent to $83 million Reviewing Mobile Modular's operating performance as compared to the second quarter of 2025, total revenues for Mobile Modular decreased 4 percent to $150 million and adjusted EBITDA decreased 4 percent to $51 million Rental operations showed steady progress and saw 2 percent higher rental revenues driven by growth from our commercial customer base, and 8 percent higher rental related services revenues. Inventory center costs increased by $2.1 million as we invested to prepare equipment to meet stronger demand and higher shipment levels, in the second half. This expense compressed rental margins to 55% down from 58% a year ago. Sales revenues decreased $9.3 million to $31.2 million primarily due to lower new sales projects during the quarter as several projects shifted to the second half of the year. Average fleet utilization was 70.1%, compared to 73.7% a year ago. Utilization modestly improved from 70% in the first quarter and ended the second quarter at 70.6% as shipments exceeded returns during the quarter. While these were small incremental changes, we view them as positive indicators as we return to growth in units on rent. Revenue per unit trends were favorable. Second quarter monthly revenue per unit on rent increased 7% to $922 For new shipments over the last 12 months, the average monthly revenue per unit increased 7 percent to $12.52 There is still a positive pricing tailwind opportunity as our fleet churns. We continue to make progress with our modular services offerings Mobile Modular Plus revenues increased to $10.5 million from $9.2 million a year earlier. Site related services revenues were $6 million compared to $6.5 million in the prior year, but remained above 2025 on a year to date basis. Turning to the review of portable storage. Total revenues for portable storage increased 1 percent to $24 million and adjusted EBITDA was $8 million a decrease of 23 percent compared to the prior year. Rental revenues were $17 million flat compared to last year and rental margins were 80%, down from 83% a year earlier. As Phil mentioned, demand conditions in small local commercial construction markets remain challenging. Adjusted EBITDA was impacted by higher fleet preparation costs pressure on rental related services margins in a competitive environment, and investments in sales coverage to support future growth. Average utilization for the quarter was 58.3%, compared to 61.1% a year ago. Turning now to the review of TRS RenTelco. TRS delivered another strong quarter. With total revenues up 17 percent to $43 million and adjusted EBITDA up 29 percent to $25 million Rental revenues increased 17 percent to $32 million benefiting from improved demand conditions including projects supporting data center build outs. Rental margins improved to 48% from 44% a year ago. Average utilization for the quarter was 68.1%, up from 64.8% a year ago. PRS utilization ended the quarter at 68.9%, Our highest utilization level since the first quarter of 21. Sales revenues increased 13 percent to $8.7 million and gross margins were 66% compared to 47% a year ago. Lastly, on Enviroplex, compared to a very strong second quarter in 2025, Enviroplex total sales revenue decreased to $4.6 million from $19.9 million and adjusted EBITDA declined to a loss of $500 thousand from a profit of $4.3 million The decline was primarily driven by project timing, with several project completions shifting to the second half of the year. The remainder of my comments will be on a total company basis. Second quarter selling and administrative expenses increased $2.9 million to $56.4 million primarily due to investments to support our modular geographic expansion. Interest expense was $7.1 million a decrease of $700 thousand as a result of lower interest rates during the quarter. The second quarter provision for income taxes is based on an effective tax rate of 27%. Compared to 27.3% a year earlier. Turning to our year to date cash flow highlights. Net cash provided by operating activities was $106 million compared to $110 million last year Rental equipment purchases were $124 million compared to $50 million last year as we increased investment in modular geographic expansion opportunities and to support higher demand at TRS. In addition to investments in new fleet, healthy cash generation allowed us to pay $25 million in shareholder dividends and to complete $27 million of share repurchases. At quarter end, we had net borrowings of $590 million and the ratio of funded debt to the last 12 months actual adjusted EBITDA was 1.65 to 1 Lastly, we are updating our outlook for 2026. The midpoints for our revenue and adjusted EBITDA ranges are unchanged. While we tightened up the ranges, now that we are halfway through the year. We have also increased our gross rental equipment CapEx to support incremental investment in TRS. Relative to our original outlook, we continue to expect strength in the Modular business. Stronger than expected performance of TRS, should offset weaker performance at portable storage. And at Enviroplex, we continue to expect performance to be similar to 2024. We now expect total revenue between $955 million and $985 million adjusted EBITDA between $363 million and $375 million and gross rental equipment capital expenditures between $200 million and $220 million As we entered the second half of the year, our focus remains on disciplined execution, prudent capital allocation, and delivering long term shareholder value. That concludes our prepared remarks. Chloe, you may now open the lines for questions.

Thank you. The floor is now open for questions. Again, we ask that you pick up your handset Our first question is coming from Manav Patnaik with Barclays.

Hi, this is Ronen Kennedy on for Manav. Thank you for taking our questions. Noted shipments exceeded returns in each month of the quarter. Could you provide some color on the extent to which that was driven primarily by large commercial projects and specific end markets versus the regional expansion efforts or broader improvement across the customer base? Also interested in your comments as to whether that trend has continued into July. And a final part to the question, if I may, if not mistaken, I think Philip had mentioned inflection. So curious as to how you would characterize it. Is this the long awaited inflection utilization? Are we in the recovery? And your thoughts there?

Sure, Ronen. I will start there. And then Keith can weigh in a little bit. Starting with the utilization trend, I am optimistic about the sequential utilization improvement that we have had in modulars. Here in the second quarter. As we mentioned, that is the first time in 4 years. it is really being driven by more mega project wins as you mentioned, commercial. A combination of that with our geographic expansion initiatives. So that is getting a nice lift to our commercial utilization. And partially offsetting some net returns in the education side. We kind of jumping to your inflection, I think we feel good that kind of the trends changed. We may not see this move up every single quarter consistently, but we do believe we turn the corner on the trend on the modular side. And have strong momentum there in the second half of the year. Keith, anything you would like to add there?

Yes. Again, we would emphasize these are very encouraging signs. But they are just the beginning of the turn. I think Philip is spot on with saying we want to build on this. But it is small shifts. And we hope to build on that as we go forward. I do not think it will necessarily be linear every single month. But it is definitely a shift in the trend that we have seen over a number of quarters and over a number of years.

Got it. And then obviously, continued weakness within portable storage. Mean what is it beyond the end market weakness and the bifurcation in the market that is consistently being spoken to by your peers and reflected in the industry data? Is there anything else beyond end market weakness? Is there certain things happening in certain geographies? Or exposures, competitive dynamics? And then are there leading indicators we can look to, to suggest perhaps it improves in 2027 versus remaining stuck in the current demand dynamics?

Sure. I can take that. I think that is consistent days for portable storage are all around that smaller local market project dynamic, the 1 that we have been talking about for several quarters. And combined with industry utilization being lower, so a highly competitive market, lots of people trying to get units out on rent. So nothing's changed there. there is not any regional dynamics or differences. That I would call out as material. it is really those 2 macro themes. And I think you are really talking about needing improvement in the nonresidential construction those small local project markets before we see any kind of meaningful move there. That would be a nice accelerator for portable solar GaN modules when it happens. We are not expecting that to take place this year. Got it. Thank you.

And then can you remind us if you have either characterized or provided color around your exposure to those large long duration projects whether it be mega and also data center specific?

We have not quantified that, Ronen. But I think what I would say there is we are they are a meaningful part of our new business volume. And the bookings there, as we have talked about, have remained strong. Thing I like to highlight is those projects really play directly to our strengths. The deep experience of our team, capabilities of our operating infrastructure and the scale of our modular solutions offerings, which are with very few competitors. Can bring all that together in the way we can. The other opportunity with those mega projects, data centers in particular, opportunity to bring all of our rental products to that site. So we have got everything from modular buildings, modular kitchen dormitories and electronic test equipment in the case of data centers. So, it is important, part of the new business, in the scale of the overall fleet and revenue mix. Mix. Keith, anything you want to add there?

Yes. I think that is a good summary. And Ronan, as we track the data, and you will see in our IR pack, we have got a good view of the different end markets that we serve. We just do not have mega projects or even data centers as an identified item. Sometimes it is captured in our systems as another project with a large contractor that we have a relationship with and frequently do projects with. So, again, I think Bill characterized it appropriately, it is a strong part of the new business flow. But we have a big fleet and so it is takes a lot to move the needle on that big fleet.

Got it. And if I may, I will just, I will finish with a question with a multi parter. On the sales decline. Are you helping with how to think how much of that was the Enviroplex versus the mobile modular? And then I think you indicated it is primarily due to lower used sales in several modular sales transactions that were expected in the year shifted into the second half. So any further color or context on the drivers there? And then what gives you confidence in that timing shift? Is there anything to read through with regards to broader demand it sales activity tends to be more sensitive to project timing and customer CapEx decisions in rental, anything you have to be mindful of, just for the context of that. Sale of the client.

Sure. Absolutely, I will jump in and sort of get the topic started. Really what we ran into are things that we often see in this part of the business. And these are new sales projects at Enviroplex or on the modular side of the business. And frequently we will run into site readiness issues. This could be the customer has to get a permit. It could be they are dealing with issues that have to be completed before we start like foundation work, things like that. And then at the end of a project, there are also other things that have to be done before we can complete the project. An example would be the local utility putting a power hookup at the site. So these are things we went into. I would say when we looked at this quarter, we had several of those that impacted projects that were a little larger and caused them to shift. In some cases, the shift is just a matter of weeks. In others, it is several months. But these are all projects that we have under contract. Going to complete them. And I think the cadence by quarter was maybe a little different from what we have seen in the past. And a little bit different maybe from what we expected. But nothing highly unusual in terms of the factors that caused the delays. That would be the sort of overall comment. Philip, I do not know if there is anything you would like to add.

I think you described it well. Maybe I will just add these are not projects canceling and falling out of the pipeline, just completion dates shifting. From when we originally expected it. there is really nothing in the underlying market demand that we are worried about. We really see that as being solid, consistent with where it was a year ago. And I am sure just the size and scope of these sale projects that sometimes are difficult to predict. Given things outside of our scope on the site.

Yes. We did foreshadow Ronin that Enviroplex would have a lower sales year. We commented on that back in February. And again, just to calibrate things, Enviroplex had a very strong revenue year in 2025. They had $57 million in revenue. We commented we thought this year would be much closer to 2024 when they did $46 million We have still got that same view. If you look year to date, we just have not recognized a lot of those sales. For EnviroPlex, we have recognized $8 million year to date. A year ago, it was $27 million year to date. So a big part of the difference this year is the timing around those Enviroflex sales. There will be less of them for the full year and they are definitely more weighted to the second half. And then with modulars sort of similar comments, but not as big of a shift in the numbers. Got it.

Thank you very much, both of you, for all of that. Great. Appreciate it. I will pass it on now. Thank you.

We will take our next question from Scott Schneeberger with Oppenheimer. Your line is open.

Thank you. Good afternoon. I think I will start in Mobile Modular or in rental, your Slide 33, always 1 of attention for pricing. It looks like you have a spread of 39 percent from total portfolio on rent versus trailing 12 months of modules on rent. So still very, very strong on that spread. Could you speak to that and to the spot pricing and maybe differentiate large and small projects in that out? Thanks.

Yes. Scott, I will jump in and take a crack at it. I think you are correct with the observations. there is still a good spread. Between the average revenue per unit on rent and then what we are seeing with shipments over the last 12 months. And that is-- we view that as a good thing for the business, a sort of positive tailwind over time. Couple of things at play, I would say spot pricing, it kind of varies around the country. It varies by type of product. It varies by length of contract. All those things go into the mix. it is a fairly complicated algorithm when you look at understanding pricing at a very granular level. But the way we would characterize pricing that we have been experiencing is overall, fairly stable. There are some pluses and minuses in different categories in different regions, and that is typical in the business. But overall, relatively stable. And then the services piece is really something we have been working to grow over the last few years, and that is giving us more revenue opportunity per unit. We are being in achieving that with the new shipments, and it is gradually working its way into the installed base or rental units. So all those trends are things we have seen for many quarters. And they continue to be healthy and we are very pleased about that. I do not think there is anything unusual regarding mega project or small local markets. There are dynamics around terms, size of project, that can influence how we view the pricing that is appropriate. But those are all normal things we, and I think others, take into consideration when they look at new business. Okay. Thanks. Appreciate that. I am going to crack at TRS.

Oh, I am sorry. Were you saying something?

No.

Go ahead, Scott.

Thanks. Yes. I want to go over and dig into TRS because I think we saw it accelerate now in the high teens year over year. And that is against a tough comp rental revenue growth. So very impressive to see. I think if you could just elaborate on the trends there, the sustainability of the trends. And, yes, a little bit of extra CapEx in that business. there is a lot of sustainability, yes, I think it certainly justifies that CapEx and then some. If you could just speak on that decision making process and how hot that market is for you? Thanks.

Yes. I am happy to answer that, Scott. We really see that demand remains strong across several end markets. And there is no immediate sign of slowing. Data centers a main contributor to that growth. It feels like we are still in the early to mid-innings of that data center build out. We ended utilization higher, but equipment levels are still lower than they have been. Over the last several years. So there is opportunity to add CapEx and participate in that growth. We do not have a crystal ball for any of this, but our teams are very familiar in managing these technology cycles. We know the things to watch for and they manage them well. So, we believe we have got good runway, feel good about the place of cycle we are in. And maybe the thing I will just add specific to TRS and data centers is we still do not have a good feel for what the ongoing maintenance requirements will be for electronic test equipment as these things are installed and there is some type of maintenance and refresh process over time. So, nothing there that gives us any concern Yes, good last point, Ronan. Certainly a nice opportunity for you long term.

I will just do 1 more. You have been buying back stock, first quarter, second quarter, at a decent clip. Just curious the rationale of buybacks and consideration for M&A. Obviously, you are doing your geographical build out. With investment, which can impact margins You can kind of bypass that on successful acquisitions. So just kind of curious on strategy of the continued geographic expansion organic versus M&A? And then just a little comment on buybacks. Thanks.

Keith, you want to start with the buybacks and then I will talk about geographic expansion and M&A? Okay. Yes. Scott, it is an important topic. Topic and 1 that we are frequently reviewing, which is cash and capital allocation opportunities in which ones we should fund I think the good news is leverage at 1.65 at the end of June We have a lot of flexibility and we still want to be prudent And you are seeing the focus on organic investment We have good opportunities at Modulars and TRS and we are funding them. And at the same time, to manage utilization very carefully but still in light of market conditions, it is obviously a different story in each line of business. So that is the first comment. We did 1 small tuck in You may recall, we commented on it on the April call that deal was closed back on April 1. We are going to continue to work the pipeline. Philip can elaborate on that. And then we look at the buyback as another tool in the toolkit. We do not telegraph how much and when. But we have not purchased shares both in the first and second quarter. We have purchased a total of 250 thousand shares year to date. And we are in a position to do more. Our authorization which was put in place in September 2024 was for 2 million shares. We still got 1.75 million shares available under that authorization for repurchase. So clearly, another tool in the toolkit, the dividend, we have got a good track record of healthy dividend and an ability to increase it steadily. As the business continues to grow and be profitable.

I will just add relative to geographic expansion. We are executing well there. You can see that in the rental momentum that we have. that is 1 of the drivers of that. We do that primarily organically through CapEx, as Keith mentioned, but we are able to utilize smart M&A as an accelerator. The acquisition that we closed this quarter is 1 example of that where we expanded our reach into the Midwest with a small tuck in modular acquisition. So it provides us additional density, a facility that we can leverage to further scale in that part of the country. And we will be able to add value to the existing customer base, by providing Mobile Modular Plus services that were not being offered previously. As well as expanding from that kind of commercial construction customer base to adding classrooms, portable storage, larger commercial complexes, product offerings that they did not have in their toolkit. So we have an active pipeline of those types and other types of opportunities. We work that regularly, and we are feel good about where we are at in that process. Thanks, Scott.

Take our next question from Dan Moore with CJS Securities. Your line is open.

Thank you. Good afternoon, Philip and Keith, for all the color and taking questions. Wanted to just go back to Enviroplex. Curious if any of those delayed sales have now been executed and your prior comments would imply based on what we have seen in H1 that H2, we think, would be up slightly year over year. Just curious of your expectations for sales kind of Q3 and then the remainder of the year there?

Yes. I would say, as I mentioned a moment ago, some of those delays, I think it is a matter of weeks. Others just a few months. But those are in the case of Enviroplex, those are all contracted projects. And usually, a customer has decided to do something in the construction side, they actually want to get it done as quickly as possible. So we and our customers are very aligned. This particular year, I think we will see for Enviroplex, just to make the math work that I outlined earlier, if they hit a revenue number somewhere in the neighborhood of mid 40s, they have a lot of business to get completed in the second half. I do not want to really get into handicapping how much in Q3 versus Q4. Several of the things that were a little late to finish in the second quarter, it is a matter of moving from June to July. But there is other projects that will take a little longer to get completed. So I would say Enviroplex is likely to have a very strong second half. Whether some of those projects are completed in Q3 versus Q4, I want to be a little careful. About pinning a sign on that, but most likely both quarters will show healthy Enviroplex sales. Very helpful.

And then I am curious just from a sort of-- we have talked about large customers or smaller in-- or smaller geographies. But just looking from a geographic perspective, any regions that are either picking up faster or conversely slowing down a little bit? And maybe just a little bit more color about the success that you are having with your geographic or regional penetration strategy?

I will take that, Dan. just where I would start is, obviously, we have more strength where we are entering the market. New to the market, did not have fleet. We are able to participate in all the opportunities there. Not depending on market growth. We are able to grow even though the overall construction market may be contracting a little bit from a square footage standpoint. So those geographies that we talked about where we are small and growing, Pacific Northwest, Midwest, Northeast, would be examples where there is relative strength for us. Not an indication of whether those markets are performing better overall. And then the other dynamic you have is, I mean, our legacy markets just where we have been longer, we have larger fleets. And so those places, even though the markets may be as healthy, as the new geographic markets. We just have much more inventory to deploy. And we are more impacted by the slowdown in those smaller local construction projects. But there is no markets that I would call out where we are extremely strong in 1 region of the country versus another. The exception would be obviously wherever you see these large data centers Mega projects, those tend to be in the Midwest, South, but we see those all over the country. So where those are happening, there is obviously pockets of strength. But in general, I would not call anything out geographically unique beyond our own internal geographic expansion initiative. Really helpful.

Maybe just 1 more. Just you touched on it in the prepared remarks, but give us a little bit more color update on the traction you are seeing, both Mobile Modular Plus as well as site related services? And how do we think about kind of incremental growth you can generate from both of those relative to the market over the next 2, 3, 5 years?

I think we are happy with the penetration that we are getting there. We talked about the quarter over quarter growth rate, particularly in Mobile Modular Plus still being strong in our cumulative growth rates in both those initiatives continue to be in the continue to be strong. So, we feel good about our ability to continue to penetrate with the existing offerings. So increasing the amount of the current product offerings, furniture, holding tanks, those kinds of things as the fleet churns, have opportunity to sell in the new orders where the old fleet that is on rent did not have that opportunity. So 1 level is increased penetration. At the same time, we are adding services and offerings to that Mobile Modular Plus lineup that give us more ways to add value to the customer. And increase revenue per order. So, more recently, we have seen things like cell phone service, janitorial services, air care, filter replacement type programs. We are adding those capabilities. So, we see lots of opportunities, still opportunity to move the needle on penetration, and still opportunity to move the needle on services that we are offering And then if you think back to what Keith, of course-- what Keith talked about just on pricing churn over time, think about that services happening over a similar timeframe, right, multi year as the fleet churns and things that have been out on rent for 3, 4, or 5 years come back, and we are able to get those back out on rent with a new level of service offerings.

We will take our next question from Steven Ramsey with Thompson Research Group. Your line is open.

Hi, good evening. I wanted to hear a bit more on modular shipments exceeding returns. Definitely good to see that. Maybe talk to how much of that is less units coming in versus more going out? Do you feel like the returns headwind is behind you or at least sloping in the right direction?

Yes. I do not think it takes both sides of the equation, right? The shipments need to be growing and returns are bigger. So I think we have seen a little bit of both. Historically, talked about it, if you think back 3 ish years ago, peak construction markets, kind of lines up with our average term. We feel like that shift is in the process of happening and that last 4 months of consistently seeing shipments exceed returns is a nice indicator for us. So then you can have a larger return from a single customer that might throw that off in a month. Or a quarter. But we do feel like kind of the worst is behind us in terms of the lower shipment levels combined with higher return levels and that we have got a trend here that is going to give us some solid momentum going forward.

Okay. that is great. On TRS, been talked about how good the results were. And utilization hitting very high levels and it looks like raising CapEx. You feel like the high utilization constrained the results that you potentially could have put up and then this larger equipment base is it contributing meaningfully in the second half? Or is this something that it rolls into the second half and helps 2027?

Yes. All good comments Stephen. A couple of things. First of all, I do not think we were constrained in the second quarter. We have got a really good team. They are just very nimble in how they react to market opportunities. They have been doing a remarkable job here for many quarters of capitalizing on our on a healthy demand environment and at the same time managing the fleet assets very effectively from a return on capital point of view. So that is the first comment I would make. And given the healthy demand, as Philip mentioned earlier, we think the outlook is positive for this business. We are happy to add more capital. It is also a business that when we see shifts in demand and we had this 2 or 3 years ago when circumstances were very different, we had the ability to very thoughtfully reduce the size of the fleet and turn it into cash. And again, if you look at the history of the last 12 quarters, you can see this business has that ability to reduce fleet size and turn it into cash fairly quickly and we have done it before. But right now, we are in a very different part of the cycle. there is opportunity. We are managing the fleet extremely well from a utilization point of view. And we are absolutely at that level in many product categories where it makes sense to invest more capital and keep in pace with the good growth and demand. And that should be a positive certainly for the rest of the year and hopefully beyond. But that is the way I talk about it. This is a high velocity business and we have the team and the systems to manage that business very effectively.

Okay. that is all great. And then 1 last 1 for me sticking to TRS. Can you talk about pricing and how and if that is a positive for 2026 and maybe just put into context the pricing environment of this good cycle versus prior good cycles?

I will take that 1, Stephen. I think pricing in the TRS world is very disciplined. it is typically a pretty tight range around percent of list. The possible lift that can come is in a high demand environment like this. Or manufactured or increasing list prices that could give opportunities for a little bit of pricing improvement as list prices on equipment goes up. But we compete on we have to be in the zone, but this is not as dynamic a pricing environment as you see in our other businesses. Keith, anything else you would like to add there?

No, that is fine. Yes. I will just point out, Stephen, you have probably seen, we have got what we call the RIC factor. that is the defined term we provided across each of our rental segments. That rate factor was up nicely at TRS RenTelco, 4.52 compared to 4.22 a year ago. However, the primary reason for the increase is the mix of business that we are doing. it is essentially shifting a little bit more towards communications side. Those communications products in general have a shorter useful life. So, when we look at the cash we have to receive, it is a higher amount of cash per month given our view that the equipment will have a shorter useful life compared to some of the general-- general purpose products that we have. So the headline I would give you is our metric looks better it is largely mix driven. And as Philip said, the pricing is generally pretty disciplined and stable.

Excellent. Thank you both. Thanks, Steven.

We will move next to Marc Riddick with Sidoti. Your line is open.

Hi, good evening. So Keith, I really appreciated the tail end of the commentary there around the mix that sort of delves into sort of where I was going to initially go with 1 of my questions. But the TRS utilization commentary it certainly seems to have indicated it was going through the quarter sequentially, I guess, and monthly, what have you. Is there sort of a general thought as to comfort levels as to not necessarily a feeling, but maybe sort of talk a little bit about comfort levels of utilization within TRS? And then I have a follow-up.

Yes. Again, we try to manage that very carefully, balancing having equipment available for customers for the next order versus high utilization and strong return on invested capital. Those are things we are always calibrating in the business. I think we are comfortable where we are, but we are absolutely at that point where it makes sense to add more capital in certain product categories where the demand is strong. And our view is that strength will continue for many months. So that is where we are at. And again, we have got a good team. They look at it very closely. This business has a lot of SKUs. So there are a lot of different items that we hold in inventory, and we are constantly evaluating should we add to 1 SKU or should we sell off at another? that is all part and parcel of being in this business. And our team does a really good job. Great.

And then I know there is been a lot of and I really appreciate all the color that you have already provided. Maybe 1 of the things we did not touch on is on education. Maybe you can sort of give us a bit of an update as to what you are seeing there as to activity levels and progress maybe relative to historicals as well as how you are feeling about funding environments in key markets there?

Thanks, Marc. Appreciate the question. At the national level, education drivers, I would characterize as neutral. You have got decreasing public school enrollment. That we have been talking about being offset by increasing modernization opportunities and our geographic expansion efforts, right, we are entering into new markets where we have classroom opportunities When we look at 2026, our education bookings were not as strong as they were last year. But we continue to view education as a attractive long term vertical. We like our market position there. It just is not likely to be the growth driver for us in the near term, right? that is all coming from the commercial side of the business, and that is more than offsetting what we are seeing on the education side. Okay, great. And then, I know you touched a little on this as to the acquisition, the smaller acquisition earlier in the year, maybe touch a bit on just general views as to maybe what you are seeing out there currently, valuation levels and what the how the pipeline looks as far as levels of attractiveness at point? I can take this. I think there is plenty of opportunities out there. What we always talk about is the 3 things that need to align. You need a willing seller, you need a high quality assets and business, and you need the right valuation. And the 3 of those things do not line up in our world incredibly often, and you see that in our history. But we have an active pipeline, opportunities of all shapes and sizes that we are regularly working, meeting with, we believe we are a buyer of choice and attractive acquirer. But again, you need all those 3 things to line up. We are not in a hurry. We are glad to grow organically. And proven we can do that. In all of our markets. And where we find the right opportunity, it is a nice accelerator for us. So nothing's changed there. Good pipeline, good process, we have got the right playbooks around that. But we are not depending on it. Great. Thank you very much.

Thank you. There appears to be no other questions. This concludes the Q and A portion of today's call. I would now like to turn the floor over to Mr. Hawkins for closing remarks.

I would like to thank everyone for joining us on the call today. And for your continued interest in our company. We look forward to speaking with you again in late October to review our third quarter results.

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