WillScot Mobile Mini Holdings Corp. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company provides modular workspace and portable storage solutions across North America. Results are for continuing operations unless noted; prior periods include discontinued businesses where indicated.
Financial and operating highlights
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $604.8M | $578.0M | $1,752.4M | $1,552.1M |
| Gross profit / margin | $339.7M / 56.2% | $297.9M / 51.5% | $990.7M / 56.5% | $807.2M / 52.0% |
| Operating income | $178.1M | $144.5M | $496.3M | $340.3M |
| Income from continuing operations | $91.5M | $78.2M | $255.5M | $177.3M |
| Net income | $91.5M | $128.6M | $390.1M | $253.1M |
| Adjusted EBITDA from continuing operations | $265.5M | $239.4M | $773.7M | $615.8M |
| Adjusted EBITDA margin | 43.9% | 41.4% | 44.1% | 39.7% |
| Operating cash flow | $191.0M | $210.4M | $541.9M | $544.2M |
| Free cash flow (non-GAAP) | $147.8M | $83.4M | $410.3M | $207.4M |
- Leasing revenue grew 9.1% in Q3 and 16.3% in the first nine months, supported by higher rates and value-added product penetration. Total revenue increased 4.6% and 12.9%, respectively.
- Average units on rent declined 11.9% in Q3 year over year; portable-storage utilization fell to 70.0% from 88.7%, and modular utilization to 64.2% from 68.7%. Higher average rental rates more than offset lower volumes in revenue and gross profit.
- Interest expense rose 41.6% to $53.8M in Q3 and increased $44.2M to $145.9M for the nine-month period, reflecting higher benchmark rates and debt balances.
- Q3 net income was lower than the prior year despite improved continuing operations, because Q3 2022 included income from discontinued operations, including a sale gain. Nine-month 2023 net income included a $176.1M gain on the UK Storage Solutions divestiture; these sale-related and discontinued-operation items make reported net income less comparable.
Balance sheet, liquidity and capital allocation
- At September 30, 2023, cash was $5.8M; total debt carrying value was $3.48B, compared with $3.08B at December 31, 2022. Total liabilities were $4.76B and shareholders’ equity was $1.31B.
- The ABL Facility had approximately $1.9B outstanding and $1.3B of available borrowing capacity. The company reported compliance with debt covenants. Management said cash, operating cash flows, the revolving facility and debt-market access should meet anticipated requirements over the next 12 months.
- In September, a subsidiary issued $500M of 7.375% secured notes due 2031 and used most proceeds to repay ABL borrowings. The ABL’s weighted-average rate, after swaps, was 6.20% at quarter-end. Swaps covered $750M of variable-rate debt; management estimated a 100-basis-point rate increase would raise quarterly interest expense by about $11.4M, based on current borrowings.
- The company repurchased 15.0M shares for $674.8M in the first nine months, excluding excise tax; $634.2M remained under the $1.0B authorization. Nine-month financing cash use was $337.1M, including $678.2M of share repurchases and cancellations.
- Investing activity included $482.2M of acquisitions, net of cash acquired, and $404.0M of proceeds from discontinued-operations sales. Rental-equipment and refurbishment purchases were $166.1M for the nine-month period, down from $360.5M a year earlier.
Outlook, management commentary and risks
- No specific numerical earnings or revenue guidance is provided in the filing. Management emphasized growing leasing revenue, improving customer experience and value-added offerings, pursuing acquisitions, maintaining leverage within its stated range, and returning capital where appropriate.
- Management said pricing performance and scale helped offset inflation in materials, labor, transportation and fuel. It also attributed margin expansion to pricing and cost management; Q3 Adjusted EBITDA margin increased 250 basis points year over year.
- Management cited weaker demand and lower utilization, particularly in portable storage, including fewer retail remodels and differing seasonal timing. The construction and commercial/industrial sectors accounted for approximately 86% of nine-month revenue.
- Key disclosed risks include economic and end-market demand changes, interest-rate and commodity-price movements, credit losses and collections, acquisition integration, labor and input-cost pressures, competition, currency exposure, cybersecurity and IT disruption, and substantial indebtedness. Ordinary-course legal matters were not expected by management to have a material adverse effect, though outcomes are uncertain.
- The UK Storage Solutions sale closed January 31, 2023 for $418.1M; the Tank and Pump segment had been sold in 2022. The company also completed acquisitions of cold-storage and modular businesses in Q3 for $332.8M, net of cash acquired; purchase-price allocations remained preliminary.
Most important facts for investors to verify
- Whether pricing and value-added product gains can continue to offset lower units on rent and falling utilization, especially in portable storage.
- How interest expense and variable-rate exposure evolve as debt balances, market rates and swap coverage change.
- Whether reported free cash flow remains sustainable after fleet investment needs, acquisitions, debt service and share repurchases; Free Cash Flow and Adjusted EBITDA are non-GAAP measures and are not substitutes for GAAP cash flow or net income.
- The final purchase-price allocations and realized operating contribution from recent acquisitions, and the effects of the divestitures on comparable results.
- The filing reports rising credit-loss provisions and trade receivables; verify subsequent collection trends and allowance adequacy.