WillScot Mobile Mini (WSC) - 2024 Q1 - Quarterly Report

PART I Financial Information This section provides the company's financial statements, including balance sheets, statements of operations, and cash flows, along with detailed notes Item 1. Financial Statements For the first quarter ended March 31, 2024, total revenues increased by 3.8% to $587.2 million, while income from continuing operations decreased to $56.2 million, and diluted EPS fell to $0.29 Condensed Consolidated Balance Sheets As of March 31, 2024, total assets slightly increased to $6.18 billion, total liabilities marginally decreased to $4.86 billion, and total shareholders' equity rose to $1.32 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $575,363 | $569,096 | | Total assets | $6,180,334 | $6,137,915 | | Total current liabilities | $595,793 | $562,020 | | Total liabilities | $4,860,208 | $4,876,665 | | Total shareholders' equity | $1,320,126 | $1,261,250 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2024, total revenues increased to $587.2 million, but operating income declined to $129.9 million, and diluted EPS from continuing operations decreased to $0.29 Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenues | $587,181 | $565,468 | | Gross profit | $316,888 | $323,128 | | Operating income | $129,946 | $151,647 | | Income from continuing operations | $56,240 | $76,271 | | Net income | $56,240 | $210,884 | | Diluted EPS from continuing operations | $0.29 | $0.36 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $208.7 million, while net cash used in investing activities was $111.0 million, and net cash used in financing activities substantially decreased to $95.6 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $208,676 | $148,765 | | Net cash (used in) provided by investing activities | ($110,967) | $271,949 | | Net cash used in financing activities | ($95,622) | ($423,087) | | Net change in cash and cash equivalents | $2,189 | ($1,856) | Notes to the Condensed Consolidated Financial Statements Key notes include a change to a single reportable segment, the pending acquisition of McGrath RentCorp, the 2023 divestiture of the UK Storage Solutions business, and details on debt and derivatives - In January 2024, the company unified its go-to-market structure, resulting in the aggregation of its two operating segments (US and Other North America) into a single reportable segment[26] - On January 28, 2024, the company entered into an agreement to acquire McGrath RentCorp, a transaction expected to close in 2024[33] - The company sold its UK Storage Solutions segment on January 31, 2023, for $418.1 million, with results now reported in discontinued operations for 2023[35] - As of March 31, 2024, total debt was approximately $3.5 billion, primarily consisting of an ABL Facility and various secured notes[61][155] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 3.8% increase in Q1 2024 revenue to $587.2 million, driven by higher rental rates and VAPS penetration, which offset a 15.1% decrease in average total units on rent First Quarter Highlights Q1 2024 revenue grew 3.8% year-over-year, while income from continuing operations fell by $20.0 million, and Adjusted EBITDA remained stable at $248.0 million Q1 2024 Key Metrics vs. Q1 2023 | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $587.2M | $565.5M | +3.8% | | Income from continuing operations | $56.2M | $76.3M | -26.3% | | Adjusted EBITDA | $248.0M | $246.8M | +0.5% | | Avg. modular space monthly rental rate | $1,149 | $1,031 | +11.4% | | Avg. portable storage units on rent | 131,014 | 167,403 | -21.7% | Consolidated Results of Operations Total revenue for Q1 2024 increased by $21.7 million due to improved pricing, while gross profit decreased by $6.2 million, and SG&A expenses rose by $16.7 million primarily from acquisition-related legal fees - Leasing revenue increased by $20.7 million (4.7%) due to improved pricing and VAPS penetration, offsetting a decrease of 40,398 average total units on rent[117] - Gross profit decreased by $6.2 million (1.9%), impacted by a $15.8 million increase in depreciation expense and a $9.1 million drop in delivery and installation gross profit[120] - SG&A increased by $16.7 million (11.1%), with $12.4 million of the increase attributed to discrete costs, primarily legal and professional fees for the McGrath acquisition[122] Reconciliation of Non-GAAP Financial Measures The company provides reconciliations for non-GAAP measures, with Adjusted EBITDA at $248.0 million and Adjusted Gross Profit at $391.8 million for Q1 2024 Reconciliation of Income from Continuing Operations to Adjusted EBITDA (in thousands) | Line Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Income from continuing operations | $56,240 | $76,271 | | Income tax expense | $17,118 | $30,510 | | Interest expense | $56,588 | $44,866 | | Depreciation and amortization | $92,828 | $76,329 | | Other Adjustments (Currency, Integration, Stock Comp, etc.) | $25,235 | $18,866 | | Adjusted EBITDA from continuing operations | $248,009 | $246,842 | Liquidity and Capital Resources The company maintains strong liquidity with $1.3 billion available under its $3.7 billion ABL Facility, and Free Cash Flow for Q1 2024 increased by 40% to $143.9 million - As of March 31, 2024, the company had $1.3 billion of available borrowing capacity under its ABL Facility[144] Free Cash Flow Calculation (in thousands) | Line Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $208,676 | $148,765 | | Net CAPEX | ($64,776) | ($45,825) | | Free Cash Flow | $143,900 | $102,940 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to interest rate risk, managed through interest rate swaps on $1.25 billion notional variable-rate debt, and foreign currency risk from operations in Canada and Mexico - The company manages interest rate risk on its ABL Facility with swap agreements covering an aggregate of $1.25 billion in notional variable-rate debt[164] - Foreign currency risk is present due to operations in Canada and Mexico, which generate approximately 6% of consolidated net revenues[165] Item 4. Controls and Procedures As of March 31, 2024, the company's disclosure controls and procedures were deemed effective, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[167] PART II Other Information This section covers legal proceedings, risk factors, and details on unregistered sales of equity securities and the use of proceeds Item 1. Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business, which are not expected to have a material adverse effect on its financial position - The company believes that outstanding legal matters will not, individually or in aggregate, have a material adverse effect on its financial condition or results of operations[170] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - Risk factors discussed in the 2023 Annual Report on Form 10-K have not materially changed[171] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its Common Stock during Q1 2024, with $498.2 million remaining available under its $1.0 billion share repurchase authorization - No common stock was repurchased during Q1 2024[172] - As of March 31, 2024, $498.2 million remained available under the company's $1.0 billion share repurchase authorization[172]