WillScot Mobile Mini (WSC)2023-02-22 19:19Financial Data and Key Metrics Changes - For the full year 2022, revenue reached $2.14 billion, an increase of 28% year-over-year, with net income of $276 million, up 141%, and adjusted EBITDA of $884 million, up 36% year-over-year, all representing company records [8][26][28] - In Q4 2022, total revenues were $591 million, up 28%, and adjusted EBITDA increased 43% to $268 million, with an adjusted EBITDA margin expanding by 480 basis points to over 45%, a company record [26][29] - Free cash flow for Q4 was $123 million at a 20% margin, with a full-year free cash flow margin of 14% [27][35] Business Line Data and Key Metrics Changes - The Modular team achieved an 18% year-over-year increase in average monthly rates in 2022, while the Storage team delivered 24% year-over-year growth [13][14] - Value-Added Products and Services (VAPS) opportunities alone support $500 million of future growth, with the Modular team exceeding $400 of VAPS revenue per month per module unit delivered [9][10] - Delivery and installation revenue increased by 23% in Q4 due to strong pricing and volumes, contributing to gross margin expansion [31] Market Data and Key Metrics Changes - The company reported a 3.1x net debt to EBITDA ratio pro forma for the U.K. divestiture, the lowest level in the last 10 years [28][37] - The weighted average cost of debt is 5.5%, with 60% of the debt being fixed rate [38] Company Strategy and Development Direction - The company has divested the Tank and Pump and U.K. segments, focusing on its core modular space and storage solutions in North America [5][6] - The strategy emphasizes safe and frugal growth in lease revenues through driving units on rent, rate optimization, and value-added products and services [6][20] - The company plans to continue its disciplined M&A strategy, having closed 13 acquisitions in 2022, with a strong pipeline for future acquisitions [18][80] Management's Comments on Operating Environment and Future Outlook - Management expects revenue growth of 9% to 16% in 2023, with adjusted EBITDA projected to be between $1 billion and $1.05 billion, reflecting a stable market environment [43][44] - The company anticipates low single-digit volume growth in the Modular business and 3% to 4% growth in the Storage business, with a focus on maintaining pricing and value-added products [44][67] - Management expressed confidence in achieving and surpassing milestones in 2023, despite potential macroeconomic uncertainties [51][49] Other Important Information - The company has created $1.6 billion of capital availability on a leverage-neutral basis over the last 12 months, with significant capital allocated to net CapEx and share repurchases [39][40] - The company expects to see a reduction in net CapEx by about $25 million or 7% in 2023, driven by a more normal seasonal pattern [47][76] Q&A Session Summary Question: Demand outlook and compounding pace - Management noted that while demand expectations have moderated, there is still significant backlog and robust customer expectations for the year [56][57] Question: EBITDA margin expansion sources - Management indicated that EBITDA margin expansion is expected to come roughly half from gross margin improvements and half from SG&A leverage [59][61] Question: Pricing dynamics in Storage - Management acknowledged strong seasonal impacts on pricing in Q4, with expectations for moderation in Q1 but confidence in sustaining double-digit rate growth over the long term [68][71] Question: CapEx guidance and asset classes - Management outlined that approximately half of CapEx will go into Modular refurbishment, with a focus on maintaining balance sheet neutrality [74][76] Question: M&A activity outlook - Management expressed a continued appetite for acquisitions, with a strong pipeline supporting ongoing investment [82][95] Question: Logistics and delivery margin initiatives - Management highlighted that the majority of margin improvements in 2022 were rate-driven, with further potential for cost efficiencies in the future [85][86]