WillScot Mobile Mini (US:WSC)2021-05-02 09:02Financial Data and Key Metrics Changes - The company reported Q1 2021 adjusted EBITDA of $164 million, representing a 38.5% margin and a 350 basis points expansion year-over-year [17][30] - Revenue for Q1 2021 was $425 million, an increase of $19 million year-over-year on a pro forma basis, with a sequential decline of $13 million due to normal seasonality [29][30] - Free cash flow generated in Q1 was $91 million, with a free cash flow margin of 21%, consistent with the previous quarter's run rate [18][33] Business Line Data and Key Metrics Changes - North American modular and storage leasing revenues increased by 6% year-over-year on a pro forma basis, with average monthly rental rates in the modular segment up 13% year-over-year [11][12] - North America Storage saw a 5% increase in average monthly rates, marking the highest increase in the last 13 quarters [13] - The company achieved a 22% year-over-year increase in average monthly rental rates for North America Modular VAPS [14] Market Data and Key Metrics Changes - The Architectural Billing Index (ABI) was reported at 55 in March, indicating continued growth potential in the construction sector [19] - Deliveries in North America Modular increased by 0.4% year-over-year in Q1, with March 2021 deliveries up 8% compared to March 2020 [23] - The UK market showed strong price performance, with utilization levels approaching 90% and significant price improvements over the last three quarters [52] Company Strategy and Development Direction - The company is focused on capital allocation prioritizing growth, deleveraging, and share repurchases, with an updated share repurchase authorization of $500 million [18][43] - The ERP migration is expected to enhance operational efficiencies and support the execution of cost synergies from the merger [22][60] - The company is exploring additional VAPS opportunities in both modular and storage segments, with a focus on expanding value-added products [14][90] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, raising full-year 2021 guidance for revenue, adjusted EBITDA, and net CapEx due to strong Q1 performance and increasing demand [8][39] - The company anticipates a robust growth environment driven by a balanced mix of volumes, pricing, and value-added products [40] - Management noted that the macroeconomic outlook is improving, which is expected to support growth in 2022 and beyond [42] Other Important Information - The SEC introduced new interpretations regarding SPAC warrants, leading to a restatement of prior financial statements, but this does not impact key operating metrics or capital structure [34][36] - The company redeemed $55 million of senior notes, reducing principal outstanding and refinancing at a lower rate, contributing to a decline in leverage to 3.7 times [37][38] Q&A Session Summary Question: Increase in VAPS market opportunity - Management confirmed the increase in VAPS penetration and pricing, with a potential additional $35 million EBITDA opportunity from ground-level offices [50] Question: Business trends in March - Management noted strong March deliveries in storage, the highest since June 2019, and improvements in order and delivery timing [57] Question: SAP cut-over details - Management provided insights into the extensive planning and testing for the SAP cut-over, emphasizing the operational benefits expected post-migration [60] Question: Core spot rates and pricing assertiveness - Management indicated sustained double-digit rate growth in North American Modular, with core pricing and VAPS contributing significantly [67] Question: Free cash flow contributions from real estate sales - Management clarified that real estate sales are not a core driver of free cash flow, with $11 million from sales in Q1 being higher than normal [71] Question: M&A strategy and share repurchase - Management reassured that the increase in share repurchase authorization does not signal a shift away from M&A, emphasizing a balanced approach to growth [78] Question: UK market developments - Management attributed positive developments in the UK to strong leadership and a tight market environment, with plans for expansion [81]