McGrath (MGRC) Q1 2026 Earnings Transcript

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DATE

Wednesday, April 29, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• CEO — Philip Hawkins
• EVP & CFO — Keith E. Pratt

TAKEAWAYS

• Total Revenue -- $199 million, up 2%, driven by rental growth across all divisions.
• Adjusted EBITDA -- $74 million, down 1%, primarily due to higher equipment preparation expenses and lower Enviroplex sales.
• Mobile Modular Revenue -- $134 million, up 2%, with 4% growth in rental revenues and 4% gain in rental-related services; partially offset by 7% lower sales revenues.
• Mobile Modular Rental Margins -- 56%, down from 60%, reflecting $3.2 million higher inventory center costs and lower fleet utilization.
• Mobile Modular Average Monthly Revenue per Unit -- $889, up 7%; shipments over the last twelve months averaged $1,208, up 1%.
• Mobile Modular Fleet Utilization -- 70%, down from 74.6% due to returns outpacing shipments.
• Mobile Modular Plus Revenues -- $10.3 million, up from $8.6 million; site-related services at $5.3 million, up from $4.1 million.
• Portable Storage Revenue -- $22 million, up 3%, with rental revenues of $16.3 million, up 1%.
• Portable Storage Rental Margins -- 80%, down from 84%; adjusted EBITDA of $7 million, down 17% due to cost and margin pressures.
• Portable Storage Utilization -- 58.6%, down from 60.2%.
• TRS RenTelco Revenue -- $39 million, up 11%, led by 13% rental revenue growth and a 16% rise in adjusted EBITDA.
• TRS RenTelco Rental Margins -- 45%, versus 40%; average utilization 66.1%, up from 61.6% and highest for a first quarter since 2021.
• TRS RenTelco Sales Revenue -- $8 million, up 1%, with gross margins at 55% versus 47%.
• Enviroplex Sales Revenue -- $3.7 million, down 51%; adjusted EBITDA declined to a loss of $1.1 million from a profit of $0.4 million.
• SG&A Expense -- $53.5 million, up by $2.6 million, mainly from higher salaries and benefit costs.
• Interest Expense -- $6.5 million, down by $1.7 million, reflecting lower average debt and rates.
• Tax Rate -- Effective rate at 26.7%, up from 24.6%.
• Operating Cash Flow -- $42 million, down from $54 million; rental equipment purchases $45 million, up from $12 million.
• Dividends and Share Repurchases -- $12 million each paid and repurchased; first share buyback since 2020.
• Net Borrowings -- $546 million; funded debt/EBITDA ratio at 1.51x.
• Full-Year Guidance -- Revenue $945-$995 million, adjusted EBITDA $360-$378 million, gross rental equipment capital expenditures $180-$200 million.
• Small Modular Acquisition -- Closed in early April; share repurchases also executed in the quarter.
• Quote and Booking Levels -- Higher than the prior year due to expanded sales coverage and geographic reach.

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RISKS

• CEO Hawkins warned that "Recent developments in the Middle East had no material impact in the first quarter. This could change as the year progresses, and may increase uncertainty or result in customers delaying projects."
• Philip Hawkins added that sustained "higher energy prices for an extended period may start to impact operating costs," but impact remains uncertain.
• Declining fleet utilization in Mobile Modular (70% vs. 74.6%) and Portable Storage (58.6% vs. 60.2%) indicates ongoing demand headwinds as returns continue to outpace shipments.
• Enviroplex sales dropped 51%, with adjusted EBITDA turning negative, highlighting project timing volatility and early-year loss risk in this segment.

SUMMARY

McGrath RentCorp (NASDAQ:MGRC) delivered broad-based rental revenue gains, supported by pricing improvements and multi-segment commercial activity, while absorbing margin pressures from higher equipment preparation expenses. Capital allocation priorities included organic investment, a small modular acquisition closure, and the company's first share repurchases since 2020. Management maintained its 2026 guidance amid continued positive internal booking trends, while noting ongoing macroeconomic uncertainty and segment-specific demand variability.

• CEO Hawkins clarified that increased demand in core customer verticals, such as government, manufacturing, health care, and data centers, primarily reflects larger "mega project" activity, without singling out any single driver.
• Modular education segment bookings were "roughly flat year-over-year" after adjusting for last year's wildfire-related surge, per CEO Hawkins.
• EVP & CFO Pratt explained rental revenue growth in Mobile Modular resulted from 7% higher average revenue per unit offset by 3% fewer units on rent, highlighting ongoing net churn.
• Share buyback authorization remains above 1.8 million shares, with management describing repurchases as a "capital allocation toolkit" component actively considered going forward.
• TRS RenTelco capital investment will rise, with management targeting capacity increases in response to utilization levels above 68% and rising data center demand.
• Both Portable Storage and Enviroplex continue to face a challenging, flattish market backdrop, with the latter's sales volatility described by EVP & CFO Pratt as "more timing related than indicative of a fundamental shift in demand."
• Management reported passing most fuel cost fluctuations to customers through pricing, minimizing short-term margin impact from potential external energy shocks.

INDUSTRY GLOSSARY

• ABI (Architecture Billings Index): A leading indicator measuring nonresidential construction activity based on architectural firm billings.
• Mobile Modular Plus: McGrath RentCorp's modular services offering, which includes value-added site and project services beyond basic building rental.
• TRS RenTelco: A business segment focused on electronic test equipment rentals for technology, industrial, and data center projects.

Full Conference Call Transcript

Philip Hawkins: Thank you, Stephanie. Good afternoon, everyone, and thank you for joining us today for McGrath RentCorp first quarter 2026 earnings call. I am pleased to report on our performance over the past quarter and to provide an update on our outlook for this year. We will also address current economic conditions and the possible effects of the Middle East conflict on the business. First, our quarterly results. Total company revenues increased 2%, and adjusted EBITDA decreased 1% compared to the prior year first quarter. This performance was driven by continued progress from our modular strategic growth initiatives and strength at TRS RenTelco. We delivered rental revenue growth in each of our businesses, despite some challenging market conditions.

Higher equipment preparation expenses and lower sales at Enviroplex were headwinds to profitability for the quarter, yet we still managed to deliver adjusted EBITDA essentially flat with last year. At Mobile Modular, rental revenues grew 4%. Our commercial market segments were the primary drivers of our growth. These included government, manufacturing, health care, and data center projects. Education demand levels remain steady. As we prepared existing units to meet demand, our operating expenses increased. These higher costs supported increased shipments in the first quarter and beyond. Architecture Billings Index, or ABI, and other macro indicators for construction-related demand remain subdued.

Despite this, our quote and booking levels were higher than a year ago, with our geographic expansion efforts and additional sales coverage contributing to these positive trends. Our services expansion initiatives, Mobile Modular Plus and site-related services, saw solid increases in the quarter, helping to offset lower utilization. Modular equipment sales were lower in the quarter, reflecting quarter-to-quarter sales revenue fluctuations. Turning to our Portable Storage business. Rental revenues increased slightly with steady demand while higher costs compressed profitability for the quarter. At TRS, rental revenues continued their recent growth trajectory and were up 13%. Demand continued to be strong across a broad spectrum of our equipment, and we benefited from projects supporting build-out of new data centers.

Overall, I am pleased with our start to the year. Turning to the broader macro environment. Recent developments in the Middle East had no material impact in the first quarter. This could change as the year progresses, and may increase uncertainty or result in customers delaying projects. Additionally, higher energy prices for an extended period may start to impact operating costs. As always, we remain vigilant and we will be ready to make adjustments as needed. Summing up, I believe McGrath RentCorp remains well positioned. We grew first quarter rental revenues across all divisions, despite some challenging market demand conditions.

Our strong balance sheet gives us the flexibility to fund organic growth opportunities, support a steadily increasing dividend, and retain capacity for strategic M&A and share repurchases. We continued to demonstrate this in the first quarter. Capital spending increased to fund organic growth in new modular geographic markets, and we increased investment at TRS to support strong market demand. We also worked on a small modular acquisition which we closed in early April. In addition, we completed share repurchases during the quarter. I am confident we have the right team and discipline in place to drive shareholder value in the years ahead.

I would like to thank our team for your engagement in delivering these results and our customers and shareholders for your trust in our company. With that, I will turn the call over to Keith, who will take you through the financial details of our quarter and our outlook for the full year.

Keith E. Pratt: Thank you, Phil, and good afternoon, everyone. As Phil highlighted, first quarter results demonstrated steady progress with rental revenue growth in each of our divisions. Looking at the overall corporate results for the first quarter, total revenues increased 2% to $199 million and adjusted EBITDA decreased 1% to $74 million. Reviewing Mobile Modular's operating performance as compared to 2025, total revenues for Mobile Modular increased 2% to $134 million and adjusted EBITDA decreased 1% to $47 million. The business saw 4% higher rental revenues, driven by growth from our commercial customer base and 4% higher rental-related services revenues due to higher site-related services projects. The growth in rental operations was partly offset by 7% lower sales revenues.

Inventory center costs increased by $3.2 million as we prepared equipment to support higher shipment levels. This expense compressed rental margins to 56%, down from 60% a year ago. Sales revenues decreased $1.6 million to $20.9 million as a result of lower new and used sales projects during the quarter. Average fleet utilization was 70%, compared to 74.6% a year ago, consistent with the challenging demand environment. First quarter monthly revenue per unit on rent increased 7% to $889. For new shipments over the last twelve months, the average monthly revenue per unit increased 1% to $1,208. There is still a positive pricing tailwind opportunity as our fleet reprices. We continue to make progress with our modular services offerings.

Mobile Modular Plus revenues increased to $10.3 million from $8.6 million a year earlier and site-related services increased to $5.3 million, up from $4.1 million. Turning to the review of Portable Storage in the first quarter. Total revenues for portable storage increased 3% to $22 million and adjusted EBITDA was $7 million, a decrease of 17% compared to the prior year. Rental revenues for the quarter increased 1% to $16.3 million and rental margins were 80%, down from 84% a year earlier. Adjusted EBITDA was lower as a result of several cost and margin pressures in the quarter. Inventory center costs increased as we prepared equipment to support higher shipment levels.

Rental-related services margins for deliveries and pickups were pressured in a very competitive environment. SG&A expense increased in part because we invested in sales coverage to support longer term utilization improvement across the current branch network. Average utilization for the quarter was 58.6%, compared to 60.2% a year ago. Turning now to the review of TRS RenTelco. TRS had a strong quarter, with total revenues up 11% to $39 million and adjusted EBITDA up 16% to $21 million. Rental revenues increased 13% to $29 million as the industry continued to experience improved demand conditions and the business benefited from projects supporting data center build-outs. Rental margins improved to 45% from 40% a year ago.

Average utilization for the quarter was 66.1%, up from 61.6% a year ago and the highest first quarter level since 2021. Sales revenues increased 1% to $8 million and gross margins were 55%, compared to 47% a year ago. Lastly, on Enviroplex, compared to a very strong first quarter in 2025, Enviroplex total sales revenue decreased 51% to $3.7 million and adjusted EBITDA declined to a loss of $1.1 million from a profit of $0.4 million. The remainder of my comments will be on a total company basis. First quarter selling and administrative expenses increased $2.6 million to $53.5 million, primarily due to higher salaries and benefit costs.

Interest expense was $6.5 million, a decrease of $1.7 million as a result of lower average debt levels and lower interest rates during the quarter. The first quarter provision for income taxes was based on an effective tax rate of 26.7%, compared to 24.6% a year earlier. Turning to our year-to-date cash flow highlights. Net cash provided by operating activities was $42 million compared to $54 million in the prior year. Rental equipment purchases were $45 million compared to $12 million in the prior 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 $12 million in shareholder dividends, and to complete $12 million of share repurchases. At quarter end, we had net borrowings of $546 million and the ratio of funded debt to the last twelve months actual adjusted EBITDA was 1.51 to one. For the full year, our outlook remains unchanged, and we expect total revenue between $945 million and $995 million, adjusted EBITDA between $360 million and $378 million, and gross rental equipment capital expenditures between $180 million and $200 million. We are encouraged by the progress made during the first quarter, and we are fully focused on solid execution for the remainder of 2026.

That concludes our prepared remarks.

Operator: We will now open the call for questions. The floor is now open for questions. Thank you. We will take our first question from Manav Patnaik, Barclays. Please go ahead. Your line is open.

Ronen Kennedy: Hi, good afternoon. This is Ronen Kennedy on for Manav. Thank you for taking my questions. Can I just ask some follow-ups to start on demand trends in end markets? I think you called out strength across government, healthcare, data centers. Which of these are the largest contributors, and how are the trends in terms of the momentum in each? And then further, on the education end market, I think you had indicated demand is steady. Has that changed at all in terms of project size, timing, or funding visibility?

Philip Hawkins: Thanks, Ron. Appreciate that. I think those modular products customer segment areas that we called out, government, manufacturing, healthcare, data center, the majority of that work would fall into what you would call the mega project category. So I would not call out one of those buckets over another other than we are seeing that large project demand in several of those verticals, a piece of that being data centers. On the education side of the business, we spend a lot of time internally drilling into our performance by market, and there are a lot of headlines out there about decreasing student populations.

I think the important thing to remember there is there is still increasing demand for modernization work due to aging school infrastructure. And so when we look at Q1, adjusting out the abnormal demand we saw last year related to Southern California wildfires, our first quarter education bookings were roughly flat year-over-year, kind of that steady demand level with those two offsetting macro factors contributing to that.

Ronen Kennedy: Got it. Thank you. And another on macro commentary and potentially early signals. I think you indicated that the Middle East situation had no impact in Q1, but could increase uncertainty or delay projects. Have you seen any early signs of customer caution or changes in quoting or booking behavior since the quarter end? And then I think you also flagged a risk of higher energy prices impacting costs. Where would that show up? Would that be in the equipment prep, delivery logistics, or broader operating expenses?

Philip Hawkins: Maybe I will just start by saying we actively monitor and manage these types of geopolitical events and the impact they have both on our cost structure and our supply chain. We have not seen any material impact, as I mentioned, in the first quarter or here in the early months of April. I think the place that you would probably see that occur first, if this is extended, would be in the fuel cost area or fuel exposure, and even there, the majority of those costs we are able to pass through to customers, and we manage those pricing increases in real time through our pricing optimization tools.

We have not seen any further delays or customer questions at this point. I think it is still too early to see that, and we will keep monitoring to understand if there is any longer term downward pressure on demand.

Keith E. Pratt: I think, Ronen, the other thing to keep an eye on is just more broadly, higher energy costs can be a driver for just broad-based inflation, and ultimately that can weave its way into material costs and other things. It is just way too early to get any read if that is going to be an issue and to what extent. And as Phil said, we will be vigilant. We will look to make adjustments if we need to. So very early days, but no impact at this point.

Ronen Kennedy: Got it. And then on the booking strength versus macro indicators, going back to demand, I think ABI and macro indicators remain subdued, but internal booking activity is improving. Can you talk about how that reconciles—internal strength versus weaker indicators? And then I think quote and booking levels were higher, yet utilization declined and revenue growth remained modest. Can you reconcile those dynamics as well, and if we should anticipate a change in conversion timing from bookings to shipments to revenue, etc.?

Philip Hawkins: Yes. I think I will start with the bookings—there was a lot to unpack there. But our higher booking levels in Modular are encouraging. There are several factors that helped us in the quarter. We talked about the growth of our sales teams. We had more sales reps in more markets. We closed several of the data center and other large industrial project opportunities that we referenced, and we continue to see growth in government opportunities. So that is on the booking side. And as you know, we close orders and then there is some period of time that can be months before those project sites are ready and we are actually delivering.

And so I think what you are seeing is the normal lead times and sales cycles between closing and delivering and billing projects. Keith, anything else you would like to highlight there?

Keith E. Pratt: Yes. I think that answers it. I think, Ronen, to reconcile the utilization comment as well, what we are seeing is good leading indicators in terms of the bookings and the activity levels, and we are actually shipping more. But offsetting that, we are still getting returns that are higher than the ships, and that is why you are seeing the utilization metric under pressure, as it has been for multiple quarters now in this overall softer macro environment, softer with fewer of the local construction projects. So again, positive with new business, but not enough to offset the returns that occur in the normal course for projects that started in previous periods.

Ronen Kennedy: Got it. Thank you. Appreciate it. Thank you both, Phil and Keith.

Philip Hawkins: Thanks, Ron.

Keith E. Pratt: Thank you.

Operator: We will take our next question from Scott Schneeberger with Oppenheimer.

Scott Schneeberger: Thanks very much. Good afternoon, all. Real nice quarter. You beat us top to bottom, and I love that you grew all the segments in rental revenue. That was impressive in the quarter. And I guess first—this would normally be a later question, but intriguing because of how infrequently you all make buybacks—but you did share repurchases in the quarter. It has been many, many years since the last time you did that. I guess, Keith, first question for you: care to elaborate on that and is that something that we should expect to persist?

Keith E. Pratt: Yes. I would say share repurchases are something we review on a regular basis. It is part of our capital allocation framework. As you know, we look at our capital requirements for organic investment and that has been our primary use of capital over the years. We also in recent years are more active in M&A. So we have an active pipeline. We are constantly reviewing opportunities in that pipeline that have potential—what potential size and timing they could have—and all the normal things you would expect in terms of looking at dividend plans and other items. So you are right, we have not done any repurchasing since the COVID era back in 2020.

When we look at where we are today, and especially with leverage being a little bit lower, the business being extremely healthy, and then some attractive levels in terms of where the equity markets were trading in March, we felt it was a good time to be active. We will continue to monitor opportunities in the market and we have a very large authorization with over 1.8 million shares available and authorized for repurchase under the current plan. So this is a good tool in our capital allocation toolkit and one that we are absolutely willing to use under the right circumstances.

Scott Schneeberger: Thanks. Appreciate that. Following up on Ronen’s questions in Modular and Portable Storage, what kind of trends are you seeing in April? You tend to get a bit more of a seasonal uptick and we are now largely through the month. You maintained the guidance for the total company and we will talk about TRS in a second. But how is the seasonal uptick occurring? Are you seeing what you want to see to anticipate a good year? I know you guarded a little bit on the Middle East conflict and what that could be, but not seeing it yet. So that aside, is it developing and shaping as you would have expected?

Philip Hawkins: I think everything we have seen so far through the month of April in our activity levels is consistent with what we experienced in Q1. So solid bookings in Mobile Modular, still kind of flattish at Portable Storage, and continued strength at TRS. So what we are seeing helps us feel good about the guide for the rest of the year.

Scott Schneeberger: Thanks. Appreciate that. And real nice to see in Modular the new shipments at plus one—that is a good sign for the upcoming year. I want to ask about cadence of sales in Modular. It was a little lighter in the quarter on a year-over-year basis and that was due to comp, year-over-year comp. How should we think about the cadence over the course of this year? And how impactful can sales be, I guess, Keith, for you, to the model on a quarterly basis and then, pulling up and thinking about it on an annual basis?

Keith E. Pratt: Sure. It is actually one of the tougher parts of the business to give an answer against. Sales—we feel very good about our capabilities in the area. As you know, we have described this as an initiative area. It is very complementary to a lot of our customer engagement on larger rental opportunities. So we feel good about it as that sort of plank of our activities and as an initiative area. The sales side of the business is not immune from some of those macro factors that impact rentals. We have seen examples where projects are planned and get delayed or there are issues in the field with permitting.

So we often run into situations where we have good visibility on future projects, but being really confident about which month or even which quarter we are going to see the revenue—that can be a lot more tricky. So I think if you look at our guidance range for the year and you see that breadth of the range on revenue, that in part reflects a lot of possibilities on the sales side. It could be a flat year to last year or even down a bit. It could also be a very positive year and up from last year. Really, at this point, it is a pretty wide spectrum of possibilities.

And then when you look at it by quarter, I would say it is more typically more significant in the second half of the year than the first half. And you can look from the outside, just as we look from the inside, at past patterns as to how the sales have been recognized by quarter, but it is one of the trickier areas. But it is part of the business that we are focused on. We have a good team. We see good long-term opportunity.

Scott Schneeberger: Great. Thanks. And then last for me—over to TRS, really strong first quarter of the year and it is a continuation of a lot of momentum. The question is, how much more momentum should we anticipate, or should we anticipate this level of sustained momentum going forward, and how long? Because you guys kind of are a data center story now. I know you do not share exact numbers of how much—and it is actually hard to record for you how much is data center related—but I know you are getting a lot in TRS. Does that mean that you have a long tail to this model, given the long tail we would expect of activity at data centers?

Philip Hawkins: Scott, I will take that one. We understand that everybody is looking more closely at TRS as they contribute to our performance in a more meaningful way. And we do not have a crystal ball on these things. But our team has been through many technology cycles, and they know how to manage them well. I think our view of demand, even though we have shorter rental terms in this space, is pretty solid for the rest of the year. And thus, it still feels like early to mid-innings on the whole data center play. And so we feel good about TRS demand through the end of this year.

Operator: Thank you. We will take our next question from Daniel Moore with CJS Securities. Please go ahead. Your line is open.

Daniel Moore: Thanks, Phil, and thanks, Keith, for the color and for taking the questions. Apologize if you had this in the slides and I missed it. But of the 4% growth in Mobile Modular, can you just talk about price versus volume and your outlook for growth for the next several quarters?

Keith E. Pratt: Sure. One way to look at that, Dan, is if you look at the 4% growth in rental revenues, you can also see in both the commentary today and in our investor relations pack that for the average unit on rent in the fleet, we are getting 7% more revenue per unit, and I referred to that in my prepared remarks. So how do you get from a 4% rental revenue growth if you have had a 7% lift in the revenue per unit? And the answer is we had roughly 3% fewer units on rent. And that is how you sort of bridge those numbers. Those trends are fairly consistent with what we have seen in recent quarters.

And I think they are positive. And certainly, the opportunity here is when we get to the point where units on rent are not declining and they are flat and at some point we hope increasing, there will be even more horsepower in those dynamics.

Daniel Moore: And from a margin perspective, sticking with Mobile Modular, gross profit 13% growth was impressive. Just talk about the drivers and the sustainability of continuing to expand margins year-on-year, at least as embedded in your guidance for the remainder of this year?

Keith E. Pratt: Yes. I think the thing that we always work through over the course of a year are the expenses we incur to get units ready to ship from the modular fleet. So again, we mentioned just for Q1, we keep a very close eye on the gross margin on rental revenues at Modular. That was compressed, but it was compressed, I think, for the right reason, which is we are busy getting equipment to go out on rent. Some of those units went out in the first quarter. Others will go out in the months ahead. That is normal in the business.

Those expenses tend to be heavier typically the first couple of quarters, even the first March of the year, depending on the ebb and flow of shipment activity. We look at it on a full-year basis. Margins, I would say, should be stable compared to last year. And if the expense investment moderates, we could have some opportunity to expand slightly. But I would characterize things as fairly stable given that we are making the right investments in the fleet and supporting higher levels of activity.

Daniel Moore: Appreciate it. And shifting to Portable Storage—you know, obviously, a lot of work has been done on penetrating newer geographies. You generated 1% growth in a flat to down market. I think you said April flattish. Are you seeing green shoots that could indicate a return to growth in the next few quarters? And just talk about your confidence and the ability to continue to outpace the market.

Philip Hawkins: Yes. I look at that flattish activity level, slight increase on revenue as positive given the macro conditions in nonresidential construction and the higher commercial construction exposure that business has. I do not think that we have seen significant green shoots that cause us to feel like that market is improving significantly. We are holding our own in the current environment. The last couple of ABI prints are closer to 50 but still below, and so we pay close attention to that. We use our geographic expansion and services offerings—all those things to try and capture more than our fair share of the projects that are out there.

But I would not point to significant green shoots in the near term.

Keith E. Pratt: And Dan, if I could just add, when we are in that flattish and relatively stable demand environment, that is certainly a positive compared to seeing reduced revenue and reduced shipments. On the other hand, when things are flat, it does create challenges in absorbing some of the normal expense increases in the cost structure that every business has to fight. And so we have a lot of work to do and we are fully aware of it—trying to manage the costs closely and efficiently. And during this flattish period, it does mean earning even a flat adjusted EBITDA is going to take some work.

So we are focused on it and it is an important part of the journey this year to do as well as we can. Certainly, if the demand environment edges in our favor at any point, that is going to really help a lot.

Daniel Moore: Understood. Last for me. Enviroplex sales, you know, obviously can be lumpy. Are you seeing any kind of slowing in demand? Or was the decline in Q1 sales just a little bit more episodic?

Keith E. Pratt: Relatively modest amounts of revenue being recognized, and it is not uncommon to have a loss in that part of the business in the early part of the year. If you look historically, that happens on a fairly regular basis. So again, the results we had this year in Q1 are fine. But compared to the very strong prior year comp, the decline is more timing related than indicative of a fundamental shift in demand.

Daniel Moore: Thanks. Wanted to start with the very good elaboration in the Q&A on cross-selling and services trends. On bookings growth amidst units coming back off rent—kind of a multiyear headwind of units coming off of rent—do you think we crossed the river on that in 2026, or do you see a pathway that maybe that shapes up in 2027? [inaudible]

Philip Hawkins: I think if you look at the change in units on rent, the decline was a little less in Q1 than maybe the last few quarters. I think the short answer is we are not 100% sure when that crossover will come. What we can work on is the front end, which is work with customers, win projects, continue to try and drive success in the market. The returns, as you can appreciate, we do not control when a customer finishes up a project and it is time to return things.

But at some point, logically, if demand is as healthy as it was a few years ago, you would think those two things start to balance out between shipments and returns. Hard to tell if we will see it by the end of this year. We would certainly like it to be the case, but we are not making strong assumptions that there is a big shift there in the near term.

Daniel Moore: Fair enough. Okay. And thinking about TRS—demand rising, utilization rising—yet the fleet size still in that 22,000 unit range the past five quarters. Do you feel like, or does the CapEx guide embed, an increase in units in the TRS fleet for 2026?

Keith E. Pratt: Yes, all good observations. The first thing I would acknowledge is we have an outstanding team in that business. They did a wonderful job when they went through a part of the cycle where demand was decreasing, and they very artfully reduced the size of the equipment pool. They successfully sold used equipment at very strong margins. They really did a wonderful job in difficult business conditions. The nice thing is the business conditions have now shifted. We had a very good year last year. We followed that with a very good start to this year. As we have discussed earlier on the call, we are getting some benefits from data center related work.

So where we stand today is that team is doing an excellent job running the business. Utilization, as I mentioned, was the best first quarter utilization since 2021. And we are more than happy now to add capital. We actually ended the quarter—you can see these details in the 10-Q—with utilization at TRS above 68%. So when we are at that kind of a level, that is very high for that business on any kind of historical basis. We are more than happy to put more capital to work, and if the healthy demand continues, that is what we are going to be doing.

And you are correct in saying that one of the reasons we increased the gross CapEx guide for this year is that we saw the probability that this good opportunity at TRS would continue and we would want to deploy more capital into that business.

Philip Hawkins: I would also just add to that, I would pay more attention, like Keith was saying, to the actual dollars of CapEx and fleet size than units in that business. There is high variability in cost per unit. So if demand is growing in the more expensive equipment, you are not going to see it in the units, but you will see it in the size of the inventory and the CapEx numbers, and I think you are seeing that.

Daniel Moore: Okay. Thank you both there. And then last one for me. TRS serving data centers—first, is more rental happening for this activity than your customers owning this equipment? And then secondly, is the margin profile serving data centers comparable or superior to the segment result?

Philip Hawkins: I will start with the work that we are doing in data centers. It is the same work that we are doing on a smaller scale for the other customers that we work with every day. And so there is nothing unique happening in the data center environment—just that there is a whole lot more of it happening all at one time. So it is a volume play versus there not being anything really strange and unique happening. We are just able to provide that to more customers and they need more equipment at once. So no changes in rent versus buy model there that we can see.

It is just that there are more rental needs than there were before because of the size of these facilities. The other thing I would say on margin—and Keith, you can add your comments here—I think we are still in the early days where getting the equipment and getting the data center up and running are high priority; things are happening fast. And so there may be less focus on price and more focus on speed of delivery and getting things up and running. I think that goes through a natural cycle, and so there may be some [inaudible].

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