WillScot Mobile Mini Holdings Corp. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The company provides modular space, portable storage, and tank and pump solutions across the U.S., Canada, Mexico, and the U.K. Mobile Mini merged with WillScot on July 1, 2020, so reported year-over-year results include Mobile Mini in 2021 but not in Q1 2020.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data, percentages, and where noted.
| Metric | Q1 2021 | Comparison / context |
|---|---|---|
| Revenue | $425.3 | $255.8 reported in Q1 2020 (+66.3%); merger inclusion drove $159.1 of the increase. On a pro forma combined basis, revenue was $406.4 in Q1 2020, making the increase 4.7%. |
| Gross profit / margin | $213.4 / 50.2% | $106.2 / 41.5% reported in Q1 2020. Gross margin excluding rental-equipment depreciation was 63.3%, versus 59.5%. |
| Operating income | $75.3 | Compared with $25.4 in Q1 2020 reported results. |
| Net income / diluted EPS | $4.4 / $0.02 | Q1 2020 reported net income was $91.7; results were heavily affected by a $95.3 warrant fair-value gain in 2020 versus a $27.2 loss in 2021. Q1 2021 net income excluding warrant fair-value changes, a company-defined non-GAAP measure, was $31.7. |
| Adjusted EBITDA | $163.6; 38.5% margin | Up 82.8% from reported Q1 2020 Adjusted EBITDA of $89.5. Against pro forma Q1 2020 Adjusted EBITDA of $149.4, it increased 9.5%. |
| Operating cash flow / free cash flow | $122.1 / $91.2 | Compared with $38.3 / $7.8 in Q1 2020. Free cash flow is a non-GAAP measure defined by the company and includes proceeds from asset sales. |
| Cash / debt | $26.9 / $2,470.3 | Debt carrying value includes $1,327.0 of ABL borrowings, $573.9 of 2025 notes, $491.8 of 2028 notes, and $77.6 of finance leases. ABL availability was approximately $1.0 billion. |
| Current assets / current liabilities | $404.1 / $448.6 | At March 31, 2021. The company cited operating cash flow and ABL availability as liquidity sources. |
Material changes and notable items
- The merger expanded the business and its reported revenue base. On a pro forma basis, Q1 2021 revenue rose 4.7% and Adjusted EBITDA rose 9.5% versus Q1 2020.
- Organic performance varied by segment: NA Modular revenue increased 4.1% and Adjusted EBITDA 8.7% on a pro forma comparison; UK Storage revenue increased 33.7%; Tank and Pump revenue declined 9.7% amid weak oil, gas, refining, and jet-fuel-related demand.
- Management reported higher rental rates and utilization across several acquired fleets. In NA Modular, average modular units on rent fell 3.6%, while average monthly rental rates rose 12.9% to $737.
- The company redeemed $65.0 million of 6.125% 2025 secured notes, funding the repayment with cash and ABL borrowings. It recorded a $3.2 million debt-extinguishment loss.
- The company repurchased 3.1 million shares and equivalents for $81.6 million, including 2.75 million shares bought from major shareholder Sapphire Holdings for $73.7 million. The remaining repurchase authorization was $133.9 million at quarter-end; on April 29, 2021, the board increased the program authorization to $500 million.
- Q1 2020 comparative financial statements were restated for warrant accounting. Restated Q1 2020 net income attributable to the company was $91.8 million, versus a previously reported net loss of $3.5 million.
Outlook, risks, and contingencies
- No specific full-year earnings or revenue guidance is provided. Management said activity had stabilized in Q4 2020 and Q1 2021 and expected modest activity growth in Q2 and Q3 2021 as the economy recovered.
- Management stated that available liquidity and operating cash flows were expected to meet operating, debt-service, and capital needs over the next 12 months. It also described acquisition, investment, deleveraging, and shareholder-return priorities.
- COVID-19 continued to affect demand in certain end markets, although the company said its operations generally continued and it viewed adverse effects on liquidity as immaterial to date. Key risks include economic and end-market weakness, successful merger integration and ERP conversion, customer credit and collections, interest-rate and foreign-currency exposure, costs, and the ability to redeploy rental equipment.
- Interest expense was $30.0 million. The company had $1.4 billion of ABL principal outstanding and had a swap fixing interest exposure on $400 million; management estimated a 100-basis-point rate increase would raise quarter-to-date interest expense by approximately $2.2 million at current borrowings.
- The effective tax rate was 70.2%, primarily reflecting the tax treatment of warrant mark-to-market accounting. The company reported compliance with debt covenants and no material pending legal proceedings; management said ordinary-course claims were not expected to materially affect results.
- Management said disclosure controls were effective and the previously reported warrant-accounting material weakness had been remediated, with operational effectiveness to be tested during 2021. The filing also notes that merger purchase-price allocations remained provisional.
Important facts for investors to verify
- Use pro forma comparisons when assessing underlying year-over-year growth; reported Q1 2020 excludes Mobile Mini and was restated for warrant accounting.
- Separate operating performance from warrant-liability fair-value changes, debt-extinguishment costs, merger integration costs, and restructuring charges; review the company’s non-GAAP reconciliations and definitions.
- Track integration progress, including the planned second-quarter 2021 ERP conversion, and whether anticipated merger benefits are realized.
- Monitor leverage, ABL availability, interest-rate exposure, capital spending, and cash returned through repurchases, including the related-party purchase from Sapphire Holdings.
- Assess continuing demand and utilization trends by segment, especially COVID-affected NA Modular activity and Tank and Pump end markets, alongside management’s stated modest near-term activity-growth expectation.