McGrath RentCorp (MGRC): BCG Matrix [Dec-2025 Updated]

You need a clear map of where McGrath RentCorp is winning and where it's struggling, so here is the BCG Matrix based on their late 2025 performance. Honestly, the picture shows Mobile Modular firmly established as a Star, fueled by an 8.5% market CAGR and recent acquisition strength, while the core rental business acts as a reliable Cash Cow, underpinning a 34-year dividend increase streak. Still, you can't ignore the Dogs; the Portable Storage segment saw revenues dip 13% early in the year, and the high-potential TRS-RenTelco, our Question Mark, needs significant investment to move beyond its current 10% revenue contribution. Dive in to see the specific numbers driving these strategic positions.

Background of McGrath RentCorp (MGRC)

You're looking at McGrath RentCorp (MGRC), a business-to-business rental player that's been around since 1979, serving North America from its headquarters in Livermore, California. Honestly, they've built a solid business model around the circular economy, renting and selling things like relocatable modular buildings, portable storage containers, and electronic test equipment.

McGrath RentCorp organizes its operations into four main reportable segments, which is key for our analysis later. These are Mobile Modular, Portable Storage, TRS-RenTelco, and Enviroplex, which focuses on manufacturing modular classrooms, especially in California. To give you a sense of scale, based on 2024 figures, the Mobile Modular segment alone was responsible for about 75% of the total revenue and 67% of the adjusted EBITDA.

Let's look at the most recent hard numbers we have, which come from their Q3 2025 results, covering the period ending September 30, 2025. Total revenues for that quarter came in at $256.4 million, which was actually a 4% decrease compared to the same time last year. That top-line softness was largely driven by sales revenues, which dropped a hefty 18% to $76.1 million.

But here's where the core business shows its stickiness: the rental operations revenue actually increased 4% to $178.1 million. That's the resilience we look for. Specifically, TRS-RenTelco was the standout performer, with rental revenues jumping 9%. Mobile Modular rental revenues managed a 2% increase, and Portable Storage rental revenues ticked up 1%, marking its first year-over-year growth since Q1 2024.

On the profitability side for Q3 2025, the company posted an Adjusted EBITDA of $96.5 million, down 7% year-over-year, and diluted Earnings Per Share (EPS) landed at $1.72. Still, despite the quarterly revenue miss, management felt confident enough to narrow and slightly raise their full-year 2025 guidance. They now project total revenue for the full year to land between $935 million and $955 million, with Adjusted EBITDA expected between $350 million and $357 million.

McGrath RentCorp (MGRC) - BCG Matrix: Stars

The Stars quadrant represents business units with a high market share in a high-growth market. For McGrath RentCorp, the Mobile Modular (MM) segment clearly occupies this position, driving the company's strategic focus and future Cash Cow potential.

The underlying market dynamics support this classification. The modular construction market is forecasted to grow at an 8.5% Compound Annual Growth Rate (CAGR) through 2029. This high-growth environment provides the necessary tailwind for the MM segment to maintain its leadership position, which was significantly bolstered by the $400 million cash purchase price paid for VESTA Modular in February 2023. This acquisition accelerated McGrath RentCorp's strategic focus, increasing its modular revenue mix to 80% of total modular revenue as of the transaction date.

While the segment is a leader, its high-growth nature means it consumes significant cash to support expansion and fleet deployment. The latest available figures from the third quarter of 2025 show strong underlying rental momentum, even as sales revenues softened. Total company rental operations revenues rose 4% in Q3 2025, with growth coming from all three rental businesses, but MM remains the largest piece, accounting for 75% of total revenues in fiscal year 2024.

Here's a quick look at the Mobile Modular segment's performance in the third quarter of 2025 compared to the third quarter of 2024:

The focus on higher-margin services is a clear indicator of investment to maximize revenue per asset, a key characteristic of managing a Star. The growth in these ancillary services is outpacing the core rental revenue growth. For instance, Mobile Modular Plus revenues reached $9.7 million, up from $7.9 million the prior year, and site-related services revenues were $15.6 million, up from $12.7 million.

The strategy involves maintaining market share leadership through focused investment, which is evident in the pricing power demonstrated by the increase in revenue per unit. The monthly revenue per unit on rent rose 6% year-over-year to $865 in Q3 2025. This pricing strength, coupled with steady project activity in key areas like energy and data centers, helps offset softer demand in the general construction market. The company's full-year 2025 total revenue guidance is currently set between $935 million and $955 million, reflecting confidence in this core segment to drive overall results.

Key investment and performance indicators for the Star segment include:

• Modular construction market CAGR: 8.5%.
• Mobile Modular Plus Q3 2025 revenue: $9.7 million.
• Mobile Modular Site-Related Services Q3 2025 revenue: $15.6 million.
• Average monthly revenue per unit on rent: $865.
• Acquisition cost for market share expansion: $400 million (VESTA Modular).

If McGrath RentCorp sustains this success until the high-growth modular market inevitably slows, this segment is positioned to transition into a Cash Cow, generating substantial, less capital-intensive returns. Finance: draft 13-week cash view by Friday.

McGrath RentCorp (MGRC) - BCG Matrix: Cash Cows

You're looking at the engine room of McGrath RentCorp's financial stability, the segment that funds the gambles on Question Marks and keeps the lights on. This is where high market share meets a mature, predictable market.

Core Mobile Modular rental operations are definitely the primary source of cash. This segment generated the bulk of the cash flow, accounting for 75% of McGrath RentCorp's total revenues in 2024, which totaled $911 million that year. That's a massive anchor for the business.

The profitability here is what makes it a true Cash Cow. You see high rental margins, reaching up to 60% in the first quarter of 2025. This strong margin performance provides the stable capital base needed to support the rest of the company's portfolio. For context, the Mobile Modular segment's Q1 2025 rental revenues increased by 3%, and its adjusted EBITDA grew by 10% to $47.6 million.

This segment's reliability is what underpins McGrath RentCorp's status as a Dividend Champion. The company has now achieved 34 consecutive years of dividend increases as of June 2025. The stability directly supports shareholder returns, evidenced by the quarterly cash dividend declared at $0.485 per share for the first quarter of 2025.

Here's a quick look at how this dominant segment maps against the company's current expectations for the full year 2025. We use the 2024 revenue weighting to estimate the expected cash generation, which is what supports the overall guidance.

The company's full-year 2025 Adjusted EBITDA guidance is set between $350 million to $357 million, and honestly, that projection is largely underpinned by the predictable, high-margin cash flow from this segment. You want to invest here to maintain that productivity, not necessarily to chase massive growth, because the market is mature.

The focus for management, therefore, should be on efficiency, not necessarily on heavy promotion. You should be looking at:

• Maintaining high utilization rates, which were 74.6% in Q1 2025 for the Mobile Modular rental fleet.
• Maximizing revenue per unit on rent, which was $831 monthly in Q1 2025.
• Investing selectively in infrastructure that drives down operating costs.
• Supporting the growth in higher-margin ancillary services, like Mobile Modular Plus revenues reaching $8.6 million in Q1 2025.

This segment is the bedrock. Finance: draft the 13-week cash flow view by Friday, focusing on the expected cash conversion from this segment.

McGrath RentCorp (MGRC) - BCG Matrix: Dogs

The Portable Storage segment of McGrath RentCorp clearly fits the profile of a BCG Matrix Dog. This unit operates in a market segment, commercial construction, that has shown persistent weakness, translating directly into low growth and, by extension, low relative market share within the company's overall portfolio. Dogs are units where capital investment is generally discouraged, as expensive turn-around plans rarely yield sufficient returns to justify the outlay.

This segment represented a relatively small portion of the overall business in the prior year, contributing only 15% of McGrath RentCorp's total revenues in 2024. This smaller scale, combined with its performance trajectory, mandates a focus on minimizing cash consumption and maximizing capital efficiency, rather than aggressive expansion.

The financial performance in early 2025 underscored these challenges. Specifically, rental revenues for Portable Storage saw a sharp contraction, declining by 13% year-over-year in the first quarter of 2025. While there was a slight stabilization, showing a modest 1% growth in rental revenues in the third quarter of 2025, this single positive quarter doesn't negate the segment's overall low-growth status.

Overcapacity was a significant issue, evidenced by the fleet utilization rate falling to a low of approximately 60% in Q1 2025. This metric, specifically recorded at 60.2%, signals that a substantial portion of the asset base was not generating revenue, tying up valuable capital. The impact on profitability was immediate and severe.

Here's a quick look at the segment's recent financial metrics, which strongly suggest a cash trap scenario:

The steep drop in profitability in Q1 2025, where Adjusted EBITDA fell by 25% year-over-year to $8.6 million, highlights the segment's inability to absorb fixed costs in a low-demand environment. Even the Q3 2025 Adjusted EBITDA of $9.2 million represented a 14% year-over-year decline.

Strategic implications for this Dog unit center on minimizing exposure and maximizing cash recovery, not reinvestment. You should be looking at the following actions:

• Divestiture Candidates: Identify older, lower-margin assets within the fleet for immediate sale.
• Capital Expenditure Freeze: Halt all non-essential capital expenditures for fleet expansion.
• Margin Pressure: Note the rental margin decline to 84% in Q1 2025 from 87% the prior year.
• Cash Trapped: The 60.2% utilization in Q1 2025 means capital is tied up in idle assets.
• Focus on Breakeven: The primary goal is to manage costs to ensure the unit neither consumes nor requires significant new cash infusions.

To be defintely clear, the segment's contribution to 2024 total revenues was only 15%, making it a prime candidate for divestiture if a viable buyer emerges, thereby freeing capital for the Stars or Cash Cows.

Finance: Draft a capital allocation proposal prioritizing zero new CapEx for Portable Storage for H1 2026 by next Wednesday.

McGrath RentCorp (MGRC) - BCG Matrix: Question Marks

The TRS-RenTelco division of McGrath RentCorp fits the Question Mark quadrant, operating in a high-growth niche market, which the company has identified as including sectors like aerospace and defense. This segment is characterized by high growth prospects but currently holds a low relative market share within the overall McGrath RentCorp portfolio.

As of the 2024 reporting period, the TRS-RenTelco segment represented 10% of McGrath RentCorp total revenues, indicating its smaller footprint relative to other business units. This small market share in a growing area is the hallmark of a Question Mark.

Demand in this segment is clearly accelerating, requiring significant capital deployment to capture market share. For the third quarter of 2025, TRS-RenTelco rental revenues increased by a strong 9% year-over-year, reaching $28.0 million. This growth signals that buyers are beginning to discover and adopt the offerings in this expanding market.

The operational metrics support this view of increasing demand. Average utilization for the TRS-RenTelco fleet improved to 64.8% in Q3 2025, up from 57.3% in Q3 2024. This improved utilization, coupled with a 7% increase in Adjusted EBITDA to $20.2 million in Q3 2025, shows returns are beginning to materialize, though the segment still consumes cash to fuel expansion.

The strategy here is clearly focused on investment to quickly increase market share before the segment risks becoming a Dog. The improved gross profit on rental revenues, which rose 28% to $12.1 million in Q3 2025, and rental margins improving to 43% from 37% year-over-year, show the potential is being unlocked. However, this growth trajectory necessitates sustained capital expenditure to expand the fleet size to meet this rising demand and transition into a Star.

Here are the key comparative figures for the TRS-RenTelco division:

The current financial reality for TRS-RenTelco involves high cash consumption relative to its current revenue base, which is typical for a Question Mark needing heavy investment to scale. The company is managing this by reducing rental equipment capital spending overall, focusing on preparing available fleet to satisfy new shipments, which increased operating expenses for the quarter.

The key operational indicators showing the segment's potential are:

• Rental revenue growth of 9% in Q3 2025.
• Utilization improving to 65% (or 64.8%).
• Gross profit on rental revenues increasing 28% to $12.1 million in Q3 2025.
• Rental margins improving to 43% in Q3 2025.