WillScot Mobile Mini (WSC) - 2021 Q1 - Quarterly Report

PART I Item 1. Financial Statements Unaudited condensed consolidated financial statements for WillScot Mobile Mini Holdings Corp. are presented, reflecting the Mobile Mini merger and prior-year warrant accounting restatements Condensed Consolidated Balance Sheets Total assets slightly decreased to $5.54 billion, while liabilities increased and shareholders' equity declined to $2.01 billion due to share repurchases Condensed Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2021 (unaudited) | December 31, 2020 (as restated) | | :--- | :--- | :--- | | Total current assets | $404,056 | $419,492 | | Total long-term assets | $5,134,819 | $5,152,713 | | Total assets | $5,538,875 | $5,572,205 | | Total current liabilities | $448,614 | $448,667 | | Total long-term liabilities | $3,084,372 | $3,059,665 | | Total liabilities | $3,532,986 | $3,508,332 | | Total shareholders' equity | $2,005,889 | $2,063,873 | | Total liabilities and equity | $5,538,875 | $5,572,205 | Condensed Consolidated Statements of Operations Total revenues significantly increased to $425.3 million due to the Mobile Mini merger, but net income sharply decreased to $4.4 million primarily from a fair value loss on warrant liabilities Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 (as restated) | | :--- | :--- | :--- | | Total revenues | $425,323 | $255,821 | | Gross profit | $213,380 | $106,190 | | Operating income | $75,284 | $25,373 | | Fair value loss (gain) on common stock warrant liabilities | $27,207 | $(95,329) | | Net income | $4,447 | $91,655 | | Diluted EPS | $0.02 | $(0.05) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $122.1 million, while financing activities used $89.2 million primarily for share repurchases Condensed Consolidated Statements of Cash Flows Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 (as restated) | | :--- | :--- | :--- | | Net cash provided by operating activities | $122,071 | $38,348 | | Net cash used in investing activities | $(30,911) | $(30,540) | | Net cash used in financing activities | $(89,220) | $(5,582) | | Net change in cash and cash equivalents | $1,997 | $1,597 | Notes to the Condensed Consolidated Financial Statements These notes provide detailed information on the Mobile Mini merger, revenue recognition, debt, equity changes, warrant accounting, segment reporting, and earnings per share - The company merged with Mobile Mini, Inc. on July 1, 2020, with WillScot as the accounting acquirer, for a total purchase price of approximately $1.35 billion[21][31] - As a result of the merger, the company now operates and reports in four segments: NA Modular, NA Storage, UK Storage, and Tank and Pump[121][122] - The company's financial statements for the quarter ended March 31, 2020, were restated to correct the accounting for warrants, resulting in a $95.3 million increase in net income for that period[27] - Total debt outstanding was $2.47 billion as of March 31, 2021, primarily consisting of the ABL Facility and Senior Secured Notes[63] - During Q1 2021, the company repurchased 3.1 million shares of common stock and equivalents for $81.6 million under its authorized repurchase program[82][253] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, highlighting the Mobile Mini merger's impact on revenues and segment structure, alongside liquidity, capital resources, and the stabilizing COVID-19 impact Executive Summary and Outlook The company, a leading provider of flexible workspace and portable storage, completed its merger with Mobile Mini, and anticipates modest growth as COVID-19 impacts stabilize - The company operates a network of approximately 270 branch locations, servicing over 85,000 customers with a fleet of over 157,000 modular space units and 195,000 portable storage units[141] - On July 1, 2020, the company closed its merger with Mobile Mini, creating a combined leader in modular space and portable storage solutions[145] - The company repurchased 2,750,000 shares of its Common Stock for $73.7 million on March 1, 2021[148] - The impact of COVID-19, which caused reduced delivery demand in mid-2020, has stabilized, with modest activity growth expected in Q2 and Q3 2021[149] Consolidated Results of Operations Q1 2021 total revenue increased 66.3% to $425.3 million due to the Mobile Mini merger, while net income significantly declined to $4.4 million from warrant fair value changes Consolidated Results of Operations (in thousands) | Metric | Q1 2021 | Q1 2020 (as restated) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $425,323 | $255,821 | $169,502 | 66.3% | | Gross profit | $213,380 | $106,190 | $107,190 | 100.9% | | Operating income | $75,284 | $25,373 | $49,911 | 196.7% | | Net income attributable to WillScot Mobile Mini | $4,447 | $91,785 | $(87,338) | -95.2% | - The increase in revenue was primarily driven by the addition of Mobile Mini's revenues, which accounted for $159.1 million of the year-over-year increase[153] - The significant decrease in net income was primarily attributable to a $27.2 million loss on the change in fair value of common stock warrant liabilities, compared to a $95.3 million gain in the prior-year period[165] Business Segment Results The company's four segments show varied Q1 2021 performance, with strong growth in UK Storage, modest growth in NA Modular and Storage, and declines in Tank and Pump Q1 2021 Adjusted EBITDA by Segment (in thousands) | Segment | Q1 2021 Adjusted EBITDA | Q1 2020 Pro Forma Adjusted EBITDA | % Change | | :--- | :--- | :--- | :--- | | NA Modular | $97,371 | $89,544 | 8.7% | | NA Storage | $46,322 | $43,994 | 5.3% | | UK Storage | $11,064 | $6,405 | 72.7% | | Tank and Pump | $8,828 | $9,477 | (6.8)% | | Total | $163,585 | $149,420 | 9.5% | - NA Modular (legacy WillScot) saw revenue growth driven by a 12.9% increase in average modular space monthly rental rates, offsetting a 3.6% decrease in units on rent[171] - UK Storage performance was very strong, with revenue up 24.3% in local currency, driven by increased fleet utilization and rental rate growth[198][199] - Tank & Pump segment revenue declined due to lower activity in mid- and down-stream oil and gas and petrochemical refining, impacted by COVID-19[203] Liquidity and Capital Resources The company's liquidity is supported by strong operating cash flow of $122.1 million and its $2.4 billion ABL facility, with $1.02 billion available capacity - As of March 31, 2021, the company had $1.02 billion of available borrowing capacity under its $2.4 billion 2020 ABL Facility[210] Cash Flow Summary (in thousands) | Cash Flow | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $122,071 | $38,348 | | Net cash from investing activities | $(30,911) | $(30,540) | | Net cash from financing activities | $(89,220) | $(5,582) | - Free Cash Flow for Q1 2021 was $91.2 million, an increase of $83.4 million from the prior year, driven by higher operating cash flow[217] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its ABL Facility, partially hedged, and foreign currency exchange rates impacting international operations - The company is exposed to interest rate risk on its ABL Facility, which had $1.4 billion outstanding at March 31, 2021[240] - An interest rate swap agreement effectively converts $400 million of variable-rate debt to a synthetically fixed rate of 4.93%[241] - A hypothetical 100 basis point increase in interest rates would increase quarterly interest expense by approximately $2.2 million[242] - Foreign currency risk exists from operations in Canada and the United Kingdom, primarily impacting the translation of revenues and expenses into U.S. dollars[243] Item 4. Controls and Procedures Management concluded disclosure controls were effective, and the material weakness in internal control over financial reporting related to warrant accounting has been remediated - Management concluded that disclosure controls and procedures were effective as of March 31, 2021[246] - The company believes it has remediated the material weakness related to the accounting for warrants, which was identified as of December 31, 2020[246][247] - The remediation plan involved implementing a new control to reassess the classification of warrants at each reporting date, consistent with SEC Staff guidance[248] PART II Item 1. Legal Proceedings There were no material pending legal proceedings involving the company or its subsidiaries as of March 31, 2021 - There were no material pending legal proceedings as of March 31, 2021[251] Item 1A. Risk Factors No material changes to risk factors have occurred since the Annual Report on Form 10-K/A for the year ended December 31, 2020 - Risk factors have not materially changed from those discussed in the Annual Report on Form 10-K/A for the year ended December 31, 2020[252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 3.1 million shares for $81.6 million in Q1 2021, with the Board subsequently increasing the stock repurchase authorization to $500 million Q1 2021 Share Repurchases | Period | Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | March 1 - 31, 2021 | 3.1 | $26.00 | - As of March 31, 2021, $133.9 million remained available under the $250 million share repurchase authorization[253] - On April 29, 2021, the Board of Directors increased the stock repurchase program authorization to $500 million[254] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[255] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[256] Item 5. Other Information The company reports no other information for this item - None[257] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits include CEO and CFO certifications (Sections 302 and 906) and XBRL Interactive Data Files[258]