WillScot Mobile Mini Holdings Corp. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. The registrant’s legal name is WillScot Mobile Mini Holdings Corp. The company provides modular space, portable storage, and tank and pump solutions across the U.S., Canada, Mexico, and the U.K. Unless noted, amounts below are in U.S. dollars; financial statements are unaudited.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $490.6m | $417.3m | $1,377.0m | $930.0m |
| Operating income | $96.9m | $25.0m | $242.8m | $91.5m |
| Net income attributable to WillScot Mobile Mini | $61.1m | $(6.1)m | $85.9m | $70.3m |
| Diluted EPS | $0.26 | $(0.03) | $0.37 | $0.15 |
| Adjusted EBITDA (non-GAAP) | $190.1m | $163.6m | $529.2m | $350.6m |
Q3 revenue rose 17.6% year over year, with leasing revenue up 21.1%. Q3 gross margin was 51.7%, versus 50.2%; Adjusted EBITDA margin was 38.8%, down 0.5 percentage point. For the nine-month period, gross margin was 50.1%, versus 45.8%. Q3 diluted EPS and earnings comparisons were affected by significant merger-related costs and tax benefits in the 2020 period.
Comparability: Q3 2020 and Q3 2021 both include Mobile Mini following the July 1, 2020 merger. Reported nine-month 2020 results exclude Mobile Mini’s first six months. On a supplemental pro forma basis, nine-month 2021 revenue increased 13.4% and Adjusted EBITDA increased 13.4% from 2020; pro forma net income declined 26.4% to $85.9m from $116.7m.
Cash flow, debt and liquidity
- Nine-month operating cash flow was $392.1m, versus $175.1m; reported Free Cash Flow, a non-GAAP measure, was $251.7m, versus $74.8m. Q3 Free Cash Flow was $78.5m.
- Nine-month rental equipment purchases and refurbishments were $178.2m. Investing cash outflow totaled $196.6m, including $56.2m net cash used for acquisitions.
- Cash was $11.3m at September 30, 2021. Total debt carrying value, including finance leases, was $2.617bn; long-term debt was $2.598bn. Current assets of $477.5m were below current liabilities of $541.8m.
- ABL borrowings were approximately $1.6bn, with $831.6m of available borrowing capacity. The company reported compliance with its debt covenants. Management said available liquidity and operating cash flows should cover operating, debt-service, and capital needs for the next 12 months.
- Nine-month financing outflow was $208.9m, including $320.6m of share and warrant repurchases. The company repurchased 11.7m shares and stock equivalents for $322.6m and completed acquisitions for $56.3m in cash. An October 2021 board action authorized a new buyback program of up to $1.0bn.
Business developments and management commentary
- Management attributed Q3 growth to higher rental rates, improved portable-storage utilization and units on rent, and recovering delivery activity. Average portable-storage units on rent increased 13.5% and utilization rose to 83.9% from 73.2%. Average modular-space rental rates rose 19.8%; modular utilization edged down to 70.1% from 70.6%.
- All four segments reported higher Q3 revenue and Adjusted EBITDA. NA Storage and UK Storage showed particularly strong growth; Tank and Pump utilization improved as end-market activity recovered.
- In September, the company acquired three businesses’ assets, including approximately 11,000 storage units and 400 modular units, for $56.3m. Management said it continues to review acquisition opportunities and views acquisitions, organic investment, debt management, and shareholder returns as capital-allocation priorities.
- The company completed migration to a single ERP system in Q2 2021; management said disclosure controls were effective at September 30.
Outlook, risks and unusual items
- No specific financial guidance or quantified forecast is provided. Management described demand recovery as continuing and said COVID-19’s adverse effects were diminishing, while noting economic and market uncertainty.
- Variable-rate ABL debt exposes the company to interest-rate changes. A 100-basis-point rate increase was estimated to add about $2.7m to quarterly interest expense, after the effect of swaps. The company had a $400m interest-rate swap; it reported no foreign-currency hedging.
- Risks include economic and end-market demand, COVID-19 and workforce impacts, integration and acquisition execution, labor and input-cost increases, customer credit and collections, interest and currency fluctuations, suppliers, cybersecurity and IT disruption, and natural disasters. The filing added a risk concerning potential employee attrition or labor shortages from government COVID-19 vaccination or testing requirements.
- Hurricane Ida caused losses in the Gulf Coast; management’s preliminary estimate of Q3 impact net of insurance recoveries was immaterial, though Q3 other expense included $1.5m primarily related to Ida. Ordinary-course legal matters were not expected to have a material adverse effect, but outcomes remain uncertain.
- Nine-month results included a $26.6m warrant fair-value loss and $6.0m debt-extinguishment loss. No 2015 warrants remained outstanding at quarter-end; remaining 2018 warrants were equity-classified. The Q3 2021 effective tax rate benefited from a $12.8m reversal of reserves for uncertain tax positions. 2020 comparisons included large merger-related costs and discrete tax benefits.
Important facts for investors to verify
- Assess underlying growth using the company’s pro forma comparisons, since reported nine-month 2020 revenue and earnings do not include Mobile Mini for the first half.
- Review the composition and sustainability of Free Cash Flow and Adjusted EBITDA, both non-GAAP measures, alongside fleet investment, working-capital movements, and debt service.
- Monitor ABL borrowings, borrowing-base availability, variable-rate exposure, and planned debt repayment against ongoing buybacks and acquisitions.
- Track utilization, rental-rate trends, and delivery activity, especially the differing recovery in modular space and portable storage.
- Evaluate the impact of ERP integration, merger synergies, acquisition execution, labor availability, and the new $1.0bn repurchase authorization.