WillScot Mobile Mini Holdings Corp. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The filing registrant is WillScot Mobile Mini Holdings Corp. The company provides modular workspace and portable storage leasing, sales, delivery, and related services, primarily in North America. Results reflect the continuing Modular and Storage businesses; the UK Storage Solutions and Tank and Pump businesses are reported as discontinued operations.
Key financial results
| Metric | Q2 2023 | Change vs. Q2 2022 | Six months 2023 | Change vs. 2022 |
|---|---|---|---|---|
| Revenue | $582.1 million | +11.3% | $1,147.6 million | +17.8% |
| Gross profit | $327.9 million; 56.3% margin | +19.1%; up 3.7 percentage points | $651.0 million; 56.7% margin | +27.8%; up 4.4 percentage points |
| Operating income | $166.5 million | +$52.4 million | $318.2 million | +$122.4 million |
| Income from continuing operations | $87.7 million; diluted EPS $0.43 | $60.1 million; diluted EPS $0.26 | $164.0 million; diluted EPS $0.78 | $99.1 million; diluted EPS $0.44 |
| Net income | $87.7 million | $73.4 million, including discontinued operations, in prior-year quarter | $298.6 million | $124.5 million, including discontinued operations, in prior-year period |
| Adjusted EBITDA from continuing operations (non-GAAP) | $261.3 million; 44.9% margin | +25.3%; margin up 5.0 percentage points | $508.2 million; 44.3% margin | +35.0%; margin up 5.7 percentage points |
Higher leasing prices and value-added product penetration drove growth and margin expansion, more than offsetting lower units on rent. Q2 leasing revenue grew 16.3%; average total units on rent declined 5.2%, and utilization fell for both modular and portable storage. Average monthly rental rates increased 19.2% for modular space and 27.0% for portable storage.
Cash flow, debt, and liquidity
- Six-month cash from operating activities was $350.9 million, versus $333.9 million a year earlier. Non-GAAP free cash flow was $262.5 million, compared with $124.0 million; Q2 free cash flow was $159.6 million.
- Investing activities provided $158.5 million, principally reflecting $404.0 million of proceeds from the UK business sale, partly offset by acquisitions and capital spending. Financing activities used $520.3 million, including $456.3 million of share repurchases.
- Cash was $7.7 million at June 30. Total debt carrying value was $3.049 billion, including $1.943 billion under the ABL Facility; the company reported approximately $2.0 billion of ABL principal outstanding. ABL weighted-average borrowing cost, after swaps, was 6.11%.
- Available ABL borrowing capacity was $1.0 billion. The company said cash, operating cash flows, and financing access should be sufficient for anticipated needs over the next 12 months. It reported compliance with debt covenants.
- Debt principal due within 12 months was $14.0 million; operating lease payments due within 12 months were $63.7 million.
Material changes and unusual items
- The company completed the UK Storage Solutions sale on January 31, 2023, for $418.1 million cash. Six-month net income includes a $176.1 million gain on discontinued operations; this materially boosts reported net income and is not continuing operating performance.
- Five regional and local storage and modular asset acquisitions cost $149.4 million net of cash acquired in the first half. The acquired assets included approximately 1,800 storage units and 700 modular units.
- The company repurchased 9.995 million shares for $454.9 million during the first half and had $854.1 million remaining under an expanded $1.0 billion authorization at June 30.
- Interest expense rose 42.2% in Q2 and 44.5% in the first half, primarily due to higher benchmark rates and debt balances. Swaps hedge $750 million of variable-rate debt through June 2027; management estimated a 100-basis-point rate increase would add approximately $12.2 million to interest expense for the quarter based on current borrowings.
Outlook, commentary, and risks
No specific financial forecast or numerical guidance is provided in the supplied filing text. Management emphasizes recurring lease revenue, pricing and VAPS growth, acquisitions, customer experience, and capital returns. It says inflation has increased labor, materials, transportation, and fleet costs, but pricing gains have supported margin improvement; significant supply-chain disruption had not occurred to date. Management also cited lower 2023 demand and utilization, particularly in portable storage, compared with strong 2022 levels.
Risks highlighted include economic and end-market demand changes, competition, labor and input-cost pressures, variable interest rates and substantial indebtedness, customer credit and collections, acquisition integration, IT and cybersecurity disruption, currency exposure, and access to capital. Ordinary-course legal matters were not expected by management to have a material adverse effect, though outcomes remain uncertain. Disclosure controls were deemed effective as of June 30, 2023.
Important facts for investors to verify
- How lower unit utilization and on-rent volumes affect leasing growth if pricing increases moderate.
- Whether continuing-business cash generation and free cash flow can sustain acquisitions and buybacks alongside debt service and fleet investment.
- The sensitivity of interest expense and leverage to borrowing rates, given the ABL exposure and debt load.
- The effect of the UK sale and its one-time gain when comparing reported net income across periods.
- Management’s non-GAAP definitions and reconciliations for Adjusted EBITDA and free cash flow; these measures are not substitutes for GAAP results or cash available for discretionary use.