WillScot Mobile Mini Holdings Corp. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The company provides leased modular workspace, portable storage, and tank and pump solutions across the U.S., Canada, Mexico, and the U.K.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $508.9 million | $425.3 million | +19.7% |
| Gross profit / margin | $266.8 million / 52.4% | $213.4 million / 50.2% | +25.1%; margin +2.2 pts |
| Operating income | $97.9 million | $75.3 million | +30.1% |
| Net income | $51.2 million | $4.4 million | +$46.7 million |
| Adjusted EBITDA, non-GAAP | $191.8 million | $163.6 million | +17.2% |
| Adjusted EBITDA margin | 37.7% | 38.5% | -0.8 pts |
| Operating cash flow | $145.5 million | $122.1 million | +$23.4 million |
| Free cash flow, non-GAAP | $54.6 million | $91.2 million | -$36.6 million |
Leasing revenue rose 24.5% to $393.2 million and delivery and installation revenue rose 20.1% to $100.3 million. Unit sales declined: rental-unit revenue fell 42.1% and new-unit revenue fell 40.0%. Average portable storage units on rent increased 24.0%, with utilization rising to 84.0% from 74.4%; average modular-space monthly rent increased 18.1% to $802, while modular utilization decreased to 68.9% from 70.3%.
Balance sheet, debt and liquidity
- At March 31, 2022, cash was $11.3 million, total assets $5.86 billion, and shareholders’ equity $1.97 billion. Current assets of $495.6 million were below current liabilities of $529.3 million.
- Debt carrying value was $2.81 billion, including $1.71 billion outstanding under the ABL Facility. The company reported $646.9 million of available ABL borrowing capacity and compliance with debt covenants.
- Operating cash flow increased, but investing cash outflow rose to $148.4 million, principally reflecting higher fleet investment and a $57.5 million acquisition. Capital expenditures for rental equipment and refurbishments were $95.2 million.
- Free cash flow fell mainly because of increased fleet purchases and lower proceeds from property sales. The company returned $77.4 million through share and warrant repurchases; $879.3 million remained under its $1.0 billion authorization.
Material changes, outlook and risks
- Revenue growth reflected improved rental pricing, higher rental volumes, and acquisitions. Management estimated recent acquisitions contributed about $12.0 million of Q1 revenue. In March, the company acquired assets primarily comprising approximately 400 blast-resistant modular units for $57.5 million.
- Net income comparisons are affected by prior-year unusual items: Q1 2021 included a $27.2 million warrant fair-value loss and a $3.2 million debt-extinguishment loss; neither recurred in Q1 2022. Q1 2022 included $4.1 million of integration costs and $0.3 million of lease impairment and related charges.
- Management cited higher variable costs and inflationary pressure as contributors to lower Adjusted EBITDA margin. SG&A increased 28.0%, including higher personnel and variable compensation costs.
- No quantified earnings or revenue guidance is provided in the filing. Management stated that cash, operating cash flow, and revolving-credit availability should be sufficient for anticipated requirements over the next 12 months and the foreseeable future.
- Interest-rate exposure is material: the ABL Facility is variable-rate, with $1.7 billion of principal outstanding. A $400 million swap was scheduled to terminate May 29, 2022; the filing estimated that a 100-basis-point rate increase would add approximately $2.7 million to quarter-to-date interest expense at then-current borrowings.
- Risks identified include economic and end-market demand changes, inflation and labor/material availability, interest and foreign-exchange movements, customer credit and collections, acquisition integration, and access to capital. Ordinary-course legal matters were not expected to have a material adverse effect, though outcomes remain uncertain. Management reported effective disclosure controls and no material change in internal controls.
Investor verification priorities
- Assess recurring organic growth separately from acquisition contributions and the prior-year segment reclassification of portable storage operations.
- Reconcile reported net income and Adjusted EBITDA to cash generation, including the impact of non-GAAP adjustments and capital spending.
- Check debt levels, ABL availability, interest-rate exposure, and the status of the expiring $400 million swap.
- Monitor utilization, rental pricing, and inflation-related costs, particularly the decline in modular-space utilization and Adjusted EBITDA margin.
- Review the returns and funding implications of acquisitions and the ongoing share-repurchase program.