Mcgrath Rentcorp Q4 FY2025 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Fourth Quarter 2025 Earnings Call. This conference call is being recorded today, Wednesday, February 25, 2026. Before we begin, note that the matters the company management will be discussing today are not statements of historical facts or forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, 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 K 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 earnings release form on Form 8-K and its Form 10-K in the year ended December 31, 2025. Speaking today will be Joe Hanna, Chief Executive Officer; Phil Hawkins, Chief Operating Officer; and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hanna. Go ahead, sir.

Thank you, Stephanie, and good afternoon, everyone. We appreciate you joining us for McGrath RentCorp's Fourth Quarter and Full Year 2025 Earnings Call. This is a particularly meaningful call for me personally. It will be my final earnings call as CEO of McGrath. As many of you saw in our February 5 press release, I will retire as CEO effective April 3, but remain a Director on the McGrath Board. I want to start by expressing my deep gratitude to our customers, our team members, our Board, and our shareholders. It's been an honor to lead this organization. I'm very proud of our company culture, our reputation with customers, and the growth we have realized over the past 9 years. Our Board invested considerable time developing a thoughtful CEO succession plan and is confident that Phil Hawkins is the best leader to succeed me, given his industry stature and experience at McGrath since 2004, most recently as Chief Operating Officer. Phil is a seasoned industry professional who embodies the core values of our company, and his experience will enable him to continue the execution of the company's strategy and maintain its positive growth trajectory. I've had the pleasure of working with Phil for over 20 years, and I could not be happier to have Phil succeed me as CEO. For today's call, I will cover our fourth-quarter and full-year 2025 results. Phil will then provide comments on our business outlook and plans for 2026. Keith will share the financial details, including our financial outlook for 2026. And then we'll open the call for questions. I should also highlight that our Board of Directors today announced our company's quarterly cash dividend for the quarter ending March 31, 2026. This will be McGrath's 35th consecutive annual dividend increase. Now for the fourth quarter 2025 total company revenues rose 5%, driven by rental operations revenue growth across all 3 of our rental businesses. Adjusted EBITDA increased 14% from a year ago. I am pleased with this performance, which was driven by strong results at Mobile Modular and TRS-RenTelco. Across the company, our rental businesses performed well in a mixed demand environment. At Mobile Modular, activity was steady, portable storage showed continued stabilization, and TRS maintained the healthy momentum we saw throughout the year. Looking first at our Mobile Modular business. Rental revenues increased 2%. Our Mobile Modular Plus offerings and our geographic expansion efforts gave us opportunities to grow in a slow nonresidential construction market. We continue to benefit from the shift in demand towards mega projects, which helped to offset lower demand across other nonresidential construction categories. Sales of new modular units were down in the fourth quarter and for the full year as a challenging nonresidential construction market presented fewer opportunities. In contrast, our Enviroplex business had a very strong fourth quarter and full year with healthy education demand, growing revenues with high gross margins. Turning to Portable Storage. We continue to realize gradual top line improvement, while broader commercial construction remains soft. We benefited from seasonal retail business and geographic expansion progress. In the quarter, rental revenues increased 3% year-over-year. Finally, TRS-RenTelco, rental revenue grew by an impressive 13% in the fourth quarter. This business completed a notable year of recovery ending with sustained utilization in the low to mid-60s and healthy demand across both general purpose and communications segments. As I reflect on 2025, our company had a strong fourth quarter, which played an important role in delivering a solid full year result in a mixed environment. Over the course of 2025, weakness in nonresidential construction created headwinds for the company but our strategic initiatives made a positive contribution and helped offset those pressures, as well as the performance at TRS and Enviroplex, which bolstered our overall results. I want to thank each of our team members for your accomplishments and steadfast commitment to delivering the highest quality service to our customers. Our culture at McGrath is a driving force behind our growth, and it shines through in every customer interaction. Phil, over to you to comment on our business outlook and our 2026 plans.

Thank you, Joe, and good afternoon, everyone. I appreciate the opportunity to join the call today and to share more perspective on the business. I'd like to start by saying McGrath has been my home for more than 20 years, and I've had the opportunity to work across nearly every part of the organization. I worked closely with both Joe and Keith with a shared focus on disciplined execution and building long-term shareholder value. Joe is behind an impressive legacy of leadership and service commitment that he has thoroughly ingrained throughout our company. It is a great honor to succeed Joe as CEO and to continue leading our capable team. As CEO, I look forward to building upon that foundation, continuing to strengthen our market positions, and leading McGrath to capture long-term opportunities that lie ahead of us while delivering value for our shareholders. Now let's look at the year ahead. The key drivers of our performance in 2026 will be continued progress from our modular growth initiatives and building on the market recovery at TRS. I'll discuss those further after I outline the overall demand environment for our businesses. In the modular business, uncertain market conditions persist; nonresidential construction indicators such as the Architectural Billings Index (ABI) remain soft. While we do not expect meaningful improvement in the environment this year, we have proven our ability to grow in these conditions. At Mobile Modular, we started 2026 with lower utilization but with some solid momentum driven by the ongoing success of our services and geographic expansion initiatives. In our commercial business, mega projects such as large industrial projects, data centers, and government work remain active. Our fleet size and modification capabilities provide a competitive advantage in these opportunities, and these strengths are helping our pipeline and bookings. In education, we expect a stable market this year. Overall, our education markets and modernization backlogs are healthy. The modular business remains our largest long-term growth opportunity. Turning to portable storage, we remain hopeful that market demand has stabilized. While industry utilization remains low, our order activity has shown some positive momentum, and we are starting 2026 with a slightly higher rental revenue run rate than at the beginning of 2025. At the same time, profitability remains a key challenge in this highly competitive market. We are laser-focused on improving sales effectiveness to get more units out on rent while protecting margin. We will continue to invest in growing our presence in existing markets, expanding into new locations aligned with demand, and pursuing tuck-in acquisitions that support our growth. TRS is entering 2026 with good momentum. We see continued strength in aerospace and defense, data centers, and semiconductor segments. Our 2026 performance will be accomplished through a strong leadership team with deep technical expertise and the ability to deploy capital effectively. In summary, across McGrath, we are entering 2026 in a healthy position. We are confident our strategy is sound, and we have the right team to execute. With that, I will turn the call over to Keith, who will take you through the financial details of the quarter and our outlook for 2026.

Thank you, Phil, and good afternoon, everyone. Before discussing the financial details and outlook for 2026, I want to acknowledge Joe for his leadership and many years of service to McGrath. Joe has been instrumental in shaping the company's strategy, driving results, and positioning the business for long-term success. I also want to congratulate Phil on his well-deserved appointment to CEO. Phil and I have collaborated closely, and he possesses extensive strategic, operational, and financial expertise in the business. I'm confident he will provide strong leadership as we execute our strategy. Now, let's look at the financial highlights. As Joe indicated, we achieved solid results in the fourth quarter, with increased revenue across all our businesses and strong adjusted EBITDA performance at Mobile Modular and TRS-RenTelco. In total, revenues for the fourth quarter grew by 5% to $257 million, with rental operations up 6% and sales revenues rising by 5%. Adjusted EBITDA increased by 14% to $105 million. Focusing on Mobile Modular’s performance compared to the fourth quarter of 2024, it was a good quarter with adjusted EBITDA rising 13% to $68.7 million and total revenues up 2% to $175.8 million. The business saw a 2% increase in rental revenue and a 10% increase in rental-related services revenue, driven mainly by higher site-related service projects, though partially offset by a 1% decrease in sales revenues. Total gross profit for the quarter grew by 9%, thanks to a higher mix of used equipment sales, which carry better margins than new sales. Rental-related services also contributed to the growth, providing higher margins than last year. Average fleet utilization stood at 71.3%, down from 76% a year ago, reflecting the challenging demand environment. In the fourth quarter, returns of rental units outpaced new shipments. Monthly revenue per unit on rent rose 6% year-over-year to $874, while average monthly revenue per unit for new shipments fell by 3% to $1,169. We continue to advance our modular services offerings, with Mobile Modular Plus revenues increasing to $10.5 million from $8.4 million a year earlier, and site-related services revenue rising to $10 million from $6.9 million. Overall, Mobile Modular had a solid quarter, making strides in our growth strategy for modular solutions. In Portable Storage, adjusted EBITDA was $9.6 million, a decrease of 3% from last year, mainly due to lower margins on delivery and pickup services in a competitive market. Rental revenues for the quarter grew by 3% to $17.3 million, benefiting from some seasonal retail business, while commercial construction activity remained sluggish. Average utilization for the quarter was 61.2%, consistent with the previous year. This steady utilization throughout the year suggests demand conditions may be stabilizing. Turning to TRS-RenTelco, adjusted EBITDA reached $23.1 million, a 21% increase from last year. TRS reported another strong quarter, with total revenues rising 19% to $40.6 million, fueled by increases in rental and sales revenues. Rental revenues grew 13% to $28.7 million as the industry saw improved demand conditions, which remained strong throughout the quarter despite a slight seasonal dip at year-end. Average utilization was 64.5%, up from 59.1% a year ago, and rental margins improved to 44% from 40% last year. Sales revenues were particularly robust, surging 42% to $10.3 million, with gross margins increasing to 64% from 58%. Regarding total company metrics, fourth quarter selling and administrative expenses rose by $2.7 million to $54.4 million. Interest expense decreased by $2.4 million to $6.5 million due to lower average interest rates and reduced average debt levels. The effective tax rate for the fourth quarter was 26.4%, compared to 25% a year ago. Now, here are some cash flow highlights for the full year. Net cash provided by operating activities was $256 million, down from $374 million the previous year, primarily due to the absence of a $180 million nonrecurring merger termination payment received from WillScot in 2024. Rental equipment purchases totaled $143 million, compared to $191 million last year. Our healthy cash generation enabled us to pay $48 million in dividends to shareholders. By the quarter's end, we had net borrowings of $515 million, and the ratio of funded debt to the last 12 months' adjusted EBITDA was 1.42:1. Looking ahead to our 2026 financial outlook, we expect total revenue to be between $945 million and $995 million, adjusted EBITDA between $360 million and $378 million, and gross rental equipment expenditures between $180 million and $200 million. Our outlook for each business is as follows: We anticipate solid opportunities at Mobile Modular, with multiple growth initiatives underway and expectations for adjusted EBITDA growth in 2026. Current utilization levels allow us to meet demand in most established markets, though we expect to incur approximately $5 million to $8 million in increased operating expenses to prepare our fleet for customer orders this year. Last year, we expanded our sales team to enhance our geographic coverage, and as we enter 2026, we see positive momentum in new regional markets where we plan to invest in new rental equipment. For Portable Storage, there are signs of more stable demand within a competitive landscape. However, until utilization improves, growing adjusted EBITDA will be challenging, and we expect 2026 performance to mirror that of 2025. In TRS, market conditions improved last year, and we anticipate further growth in 2026. TRS is expected to contribute increased adjusted EBITDA this year as we plan to raise capital investments in the sector in response to recent high utilization levels and our growth expectations. Our Enviroplex business, which focuses on new modular classroom units, performed strongly in 2025, showing significant revenue growth and better gross margins than the previous year. For 2026, we expect revenues, margins, and adjusted EBITDA to return to more normalized levels, closer to those of 2024. Additionally, our 2026 outlook includes expectations for rental equipment depreciation expense of $85 million to $89 million, direct rental operations costs of $122 million to $126 million, SG&A expenses of $225 million to $229 million, and interest expense in the range of $26 million to $29 million. In summary, we are dedicated to building long-term shareholder value through a well-defined strategic focus, disciplined capital investment, and consistent execution. I will now turn the call over to Joe.

Thank you, Keith. Before we open the call for questions, this company has been a major part of my life for 22 years, and I'm incredibly proud of what we've built together. I'm excited about where McGrath is headed. We have the right strategy, the right teams, and the right leadership. I would like to specifically call out the executive team and thank them for their support during my tenure. To our team members, thank you for your dedication. To our customers, thank you for your trust. To our shareholders, thank you for your investment in our company. Stephanie, you may now open the lines for questions.

We'll take our first question from Scott Schneeberger with Oppenheimer.

It's Daniel on for Scott. First off, congrats to Joe and Phil and best of luck going forward to both of you. Jumping into the questions. Historically, you guys have guided the initial guide pretty conservatively out of the gate. How do you see the drivers this year that could potentially take you above that guidance range?

Daniel, it's Keith. Let me make a couple of comments. I think the first thing is it's always hard to develop the financial outlook. I think right now, in particular, the macro presents some challenges. We've talked at length about the nonresidential construction market, some of the challenges there. We're not assuming a change in those conditions this year, and obviously, I outlined looking across our businesses, there's a little bit of a different outlook in the context for each business. If you look at what things can present upside in our year, it’s really looking at each of the businesses and each of the initiatives we have underway and saying we do more, we made greater progress than is reflected in the initial guide, that's not an easy thing to do. Our team did a phenomenal job last year, particularly right through the fourth quarter. But that gives you some context. We have a lot to work with. It's early in the year. We are clear on strategy, and we have a team that knows how to execute, but it's still not an easy environment. One other thing I will say, when you look at the revenue range being quite wide, what would push you to the upper end, it's really the sales activity in our Mobile Modular business. That's an area where if you look at the details of last year, we actually took a step back; we didn't sell as much on the new equipment side, even though our used equipment sales were up a bit. But if we look at that part of the business, we have a good team. We have a lot of good opportunities we see in the market. We think it's a great long-term opportunity. But it's very hard to predict exactly where that can land. So we're assuming some growth there. If we do well, it could be pushing us more towards the upper end. On the other hand, if it's a difficult year, it could push us lower within our range from a revenue point of view.

Got it. That's a helpful overview. Switching gears to your initiatives in Mobile Modular. We saw a real nice acceleration in the growth there for both Mobile Modular Plus and Site Related Services, I mean, despite being in a pretty tough environment now, could you speak to the accelerated momentum you've seen for those offerings?

Thanks. This is Phil. We're happy with the progress we're making in capturing additional profitability on every project with these service offerings. Our product and service offerings come with the building, that's Mobile Modular Plus and our construction services outside the building. Site Related Services continue to grow at double-digit rates. We have several customers that see value in having one provider provide those activities while our units are on the job site and before units get there.

Got it. And switching to TRS. Rental revenue growth really accelerated nicely in the quarter. Could you please elaborate on what drove that acceleration? And what type of visibility do you have to sustain this momentum into '26?

We were very pleased with the performance of TRS. There are two main components to our rental business: the general purpose fleet and the communications fleet. The general purpose fleet experienced growth in the aerospace, defense, and semiconductor sectors, driven by a recovery in projects from those customers. On the communications side, we are seeing strong demand from data centers. Given the numerous connections and the extensive testing required to get data centers operational, we supply a significant amount of testing equipment necessary for that process. This has positioned us as the preferred provider in that space, which contributed positively to our performance throughout the year, particularly in the fourth quarter.

Yes. One thing I'd add is in that business, we typically see some slowdown in activity as we get to the period from Thanksgiving to year-end. This year, business remained strong with really very little drop-off in activity through December 31. There was a little bit of a dip right at the end, but I would characterize that as a very healthy, consistent fourth quarter and finish to the year. And a good example of where things really broke in our favor in that business for the final quarter of the year.

We'll take our next question from Manav Patnaik with Barclays.

This is Ronan and Kennedy on for Manav. Congratulations to both Joe and Phil. The CEO transition, it sounds like it was thoughtful, should be smooth to seamless. Phil, you spoke of strategic continuity and continued disciplined execution. Are there any areas, whether it's portfolio management or mix, M&A appetite, capital returns where your approach may differ even if subtly for Joe's once you step into the CEO role?

Thanks, Ronan. I think Joe, Keith, and I have worked closely together along with other members of our leadership team to craft our current strategy and refresh that over the last several years. Those strategic initiatives are in progress, and we're happy with the products we're making, and I don't expect any near-term changes.

Got it. And beyond the performance of TRS and Enviroplex, on a total company basis, which specific strategic initiatives were most impactful in offsetting the nonres headwinds and which do you anticipate will be most impactful for '26?

I would say geographic expansion, the additional salespeople we added into the market in 2025 that we talked about on prior calls, and the momentum we have in those markets coming into 2026 are one of the biggest drivers in offsetting the impact that we're seeing from some of the more challenged areas of the commercial market.

Appreciate it. And then with the Mobile Modular starting 26% lower utilization, but guiding to the adjusted EBITDA growth, even with higher operating expenses and CapEx to repair fleet. Can you walk us through the bridge on that? And what the key drivers are there, whether it's pricing, utilization, the Mobile Modular, Site Related mix, or from take standpoint cost absorption? And then what's the incremental margin on the Mobile Modular Plus and Site Services versus base rental?

Yes, there’s a lot to discuss. As Phil mentioned, we have multiple initiatives in progress that we're optimistic about. There are various potential outcomes, and we aim to maximize each initiative. Geographic expansion is a key area, as we have seen over 25% growth, and we're confident in our market traction. We plan to invest new capital, especially in regions where we either lack equipment or don't have the appropriate equipment in our fleet. Regarding margins, I don't anticipate significant changes across the different revenue streams, such as Mobile Modular Plus and Site Related Services. Historically, margins have remained relatively stable. The biggest uncertainty is the sales aspect of the business. In the fourth quarter, although Mobile Modular sales dipped slightly, we managed to increase our gross profit from sales due to a higher proportion of used sales. Looking ahead to 2026, there are many possibilities. We have provided our best estimates, considering various sensitivities. It’s hard to predict, but we believe that we have a realistic midpoint that indicates ongoing progress in Mobile Modular sales, likely with less focus on used sales and more on new sales, which might impact margins slightly. Let us know if you need more details, as we covered many topics.

No, that's great. And then ask on the monthly revenue per unit. I think you rose 6% year-over-year, while new shipment revenue per unit fell 3%. Could you talk about the drivers there, whether it's mix drive pricing, customer-driven and potential implications for the portfolio and future economics as the portfolio churns.

Sure. I’d probably start with the 6% increase in the revenue per unit on rent. So that’s really looking at all of our assets that are held by customers and are at work, so to speak. That is really the key metric, and you see that 6% lift is very good in this environment. We’re very pleased with that. The offset was fewer units being on rent, and that netted out to about 2% rental growth for the quarter. In terms of new activations, based on an LTM look at new shipments, the number there was down by 3%. So it was down from $1,203 to $1,169. I think there's a few things going on there. First, we are making progress with MM Plus. If we look at the base rent, that is actually lower, and that's for a couple of reasons. The primary reason is mix related when we look at the types of units, the regions they're in, the contracts they're on, mix plays a big factor there in making the base rent lower, but in addition, we're also seeing parts of the market for modulars are very competitive. Others are more stable, but there’s definitely a lot of competition in the marketplace. So that’s how I would sort of summarize what we’re seeing. I think when we look at the economic opportunity, there’s still a significant gap between the revenue we’re getting for units in our fleet today and where we’re executing new shipments. That combination of discipline on base unit pricing, good progress with services, there’s still an opportunity over time to raise that fleet rate by as much as 33%.

Joe, congratulations going out on a strong note, so to speak. And Phil, congratulations to you. I look forward to working more closely going forward. CapEx or purchases of new rental equipment, you touched on several times, tick higher in Q4 as well as our guide for 26. Is that primarily kind of expanding into new geographies? And just talk about the confidence that you have to turn on the CapEx to get a little bit more required rental equipment in this environment?

Dan, this is Phil. The primary driver of that higher CapEx on the modular side of the business is definitely geographic expansion, where we're growing our fleet in a newer market. There are some product areas of our portfolio in mature markets where we'd also be adding, and then TRS, the health of the TRS business is another place where the CapEx will be likely higher than it was a year ago.

Yes. And Dan, always good to look at history when you look at that number; it really takes us back to a level similar to what we spent in 2024. It's still lower than what we spent in 2023. One other comment I will make is that the portion of additional spend also includes maintenance CapEx on some of our modular units, where we're doing a long-term refurb on the unit, and we're not really adding any units to the fleet. And so think of a number, order of magnitude around $20 million in that CapEx guide, that is really extending the life of units we already own as opposed to adding units.

Got it. That's helpful. Any color, Keith, kind of the cadence of growth in margins embedded in the 26 guide, starting with Q1, how do we see kind of revenue and EBITDA growth? And how do you see it progressing over the course of the year?

Yes. The way I would look at it is we're not assuming business conditions get any better anytime soon. So I would look at the first quarter as maybe being more comparable to how we started last year, second quarter, probably more of the same. Then in the second half of the year, by then, I think we're likely to be seeing more impact from deploying some of that new capital, particularly in some of the new modular markets. That’s sort of how we characterize it at a very high level.

Very good. See if I have one more. I guess just from a capital allocation perspective, obviously picked up the dividend. Balance sheet's in great shape. Maybe talk about the M&A pipeline for '26 and kind of strategic priorities from a capital allocation perspective this year?

We continue to have an active M&A pipeline. We're consistently looking for opportunities, particularly in those geographic areas that we would like to enter. The timing on those is always uncertain based on finding the right assets, right business in the right geography at the right valuation. It continues to be part of our financial allocation model and a place that we spend a lot of time.

We'll move now to Steven Ramsey with Thompson Research Group.

I extend my congratulations as well. When thinking about the geographic expansion, can you give a little bit more flavor on how the ingredients for how you go to market if it’s Modular and Storage, how you're thinking about going to densely populated areas versus mega project-oriented areas? And then maybe lastly, in the areas with success how much is Modular Plus and SRS a factor or attaching to those wins?

When considering geographic expansions, we focus on metro areas that present strong opportunities for our Modular Solutions platform, which includes modular units, portable storage, and various service offerings. Our objective when entering a new market is to offer all these services. Having large projects in these regions can serve as a solid foundation, but we are confident in our ability to enter markets like we did in the Pacific Northwest after Design Space and the Midwest after Vesta. We can bring in skilled personnel and processes, invest in capital expenditures, and capture market share. We intend to benefit from the growth in those areas. Regarding Mobile Modular Plus, while it constitutes a small part of revenue on a unit basis, its impact increases as more units are rented in those markets, and we're witnessing that momentum build over time. Thus, I wouldn’t consider it a significant driver early in the process.

Okay. That's helpful. And then maybe to continue on SRS and modulars showing such great growth makes up $74 million or 16% of Modular segment rental revenue. Do you expect the strong double-digit growth of those product lines to continue in 2026?

We believe there is a strong long-term opportunity ahead. As we increase our penetration in the Mobile Modular Plus area, we are able to add more services to that offering. We see potential for continuous improvement and growth. However, the site-related services might be more variable, as they are tied to larger revenue items associated with specific projects, which can lead to variability similar to sales. We are confident that there is still room for growth in this area, but we need to be cautious about the growth trajectory and how sustainable the high growth we are experiencing will be.

Yes, Steven, one thing I'd point out is we've been doing this for a few years. As we anniversary some of the success of earlier MM Plus contracts, sometimes we'll have returning units, which actually bring the number down because they come back and they had MM Plus on the contract. So simply replacing that with another contract that is MM Plus is necessary to hold the line. So Again, we've made a lot of progress. We think there's more opportunity. We've broadened the offering, those are all good long-term drivers. But keep in mind, as we start rotating here, some of our earlier success has to be replaced.

Okay. That's helpful perspective. And then last one for me, serving data centers with TRS. Can you talk about how much you can do to grow intentionally that product set? Or how much of it is following customers? And then with data centers being supportive of TRS growth can you put the data center vertical into some kind of context of size within total TRS revenue?

I don't think we want to try to give a specific size of that related to TRS, but I would characterize that word as following existing customers that are doing fiber connections or other communications type of testing and electrical testing into that data center space. So this is the work that we do every day across many different project types. There just happens to be a lot more of it in these data center projects.

We'll take our next question from Marc Riddick of Sidoti.

So first of all, I want to start, Joe, thank you so much. It's been a pleasure working with you over all these years and certainly wish you the best on your retirement. You've worked with us at Sidoti for many years, and it's certainly been a pleasure to do so with you and certainly looking forward to having a very positive retirement well. I know you're not completely going to do here but it's good for you and, it's been a pleasure. So full congratulations there.

Thank you, Marc.

Phil, we look forward to working more closely with you in the future and wish you the best. We really appreciate the insights you and your team have shared during the call. I wanted to explore the topic of expansion further. You mentioned organic growth and geographic expansion. Could you also discuss the possibilities of acquisitions? The pace of acquisition activity seems to have slowed compared to what we experienced previously with WillScot and similar companies. It would be helpful if you could share your perspectives on current market valuations and appetite, or any additional insights you might have.

Maybe I'll start with a reminder that we did 2 small deals related to our geographic expansion efforts last year, one in portable storage and one on the modular side of the business. Those are examples of the type of opportunities and transactions that represent our pipeline and that we look for. A couple of things to think about are we don't determine the timing of those; the owners do. A lot of our pipeline are people that we keep in close contact with when they're ready to sell or their first call, but they may not be ready at a particular time that we're having conversations with them. And for ones that are ready, there's a process to go through diligence, evaluating fleets, and making sure it's the right fit for us, and then the valuation starts to have to align. We are rigorous in that process. We don't feel compelled to do deals. We look for ones that make sense for us, again, based on the market, the valuation, and the timing of the opportunity. So those are the 2 we found this year. We continue to be hopeful that there's more. It's not something that we bake into our earnings guidance or our plan.

Okay, great. I have a quick follow-up. Regarding the timing of investments and capital expenditures, is there anything we should consider about whether these will be concentrated in any particular part of the year, or do you expect them to remain at a consistent level throughout 2026?

Yes, Marc, it’s a good question. I would say, generally, it's likely to be front-loaded. So the first couple of quarters, the spend is likely to be heavier because, as you heard us describe in some of the earlier Q&A, one of our opportunities with the geographic expansion is building the revenue base, particularly in the second half. So capital will generally be flowing earlier in the year. You’re going to see that if all goes according to plan, showing up in the revenue streams, particularly in the second half.

Ladies and gentlemen, that appears to be the last question. Let me now turn the call back over to Mr. Hanna for any closing remarks.

Thank you, Stephanie. Now Phil, how about if you finish the closing remarks.

It would be my pleasure. On behalf of Joe and Keith and the entire team here at McGrath, 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 April to review our first quarter results.

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