WillScot Mobile Mini Holdings Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless stated otherwise. The company provides temporary modular space and portable storage solutions across the U.S., Canada and Mexico. It reported one consolidated segment following a January 2024 operating-structure realignment.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total revenue | $587.2 million | $565.5 million; up 3.8% |
| Gross profit / margin | $316.9 million / 54.0% | $323.1 million / 57.1% |
| Operating income | $129.9 million | $151.6 million |
| Income from continuing operations | $56.2 million; diluted EPS $0.29 | $76.3 million; diluted EPS $0.36 |
| Net income | $56.2 million | $210.9 million, including $134.6 million income from discontinued operations, principally the UK business sale |
| Adjusted EBITDA and margin | $248.0 million; 42.2% | $246.8 million; 43.7% |
| Operating cash flow | $208.7 million | $148.8 million |
| Free cash flow (non-GAAP) | $143.9 million | $102.9 million |
| Net CAPEX (non-GAAP) | $64.8 million | $45.8 million |
| Cash and cash equivalents | $13.1 million | $11.0 million at December 31, 2023 |
| Total debt | $3.485 billion | $3.557 billion at December 31, 2023 |
| ABL borrowing availability | $1.3 billion | At March 31, 2024 |
Revenue growth reflected higher lease rates and value-added product penetration, partly offset by fewer units on rent and lower delivery and installation revenue. Modular space revenue rose 8.2%; storage product revenue fell 7.8%. Average modular units on rent declined 4.0%, with utilization down 3.2 percentage points to 62.5%; average portable storage units on rent fell 21.7%, with utilization down 16.6 percentage points to 62.1%. Rental rates increased 11.4% for modular space and 22.4% for portable storage.
Material changes and notable items
- Gross profit fell $6.2 million. Higher rental-equipment depreciation, labor costs and weaker delivery and installation gross profit outweighed improved leasing gross profit. Adjusted gross profit margin (non-GAAP) declined to 66.7% from 67.6%.
- SG&A increased 11.1% to $167.6 million, including $12.4 million of primarily McGrath-related legal and professional fees. Reported discrete costs totaled $16.0 million, including those fees, $2.9 million of integration costs and $0.7 million of lease impairment charges.
- Interest expense rose 26.1% to $56.6 million, attributed to higher benchmark rates and debt balances. The company had $1.9 billion outstanding under its variable-rate ABL Facility and used interest-rate swaps covering $1.25 billion of variable-rate debt.
- Operating cash flow increased $59.9 million, mainly from changes in operating assets and liabilities. Rental-equipment purchases and refurbishment spending increased; the company spent $43.4 million, net of acquired cash, on a local modular and storage business acquisition.
- Q1 2023 net income and investing cash flow included the UK Storage Solutions divestiture. The company sold that business in January 2023, so headline net-income and investing-cash-flow comparisons are not like-for-like.
Outlook, capital allocation and risks
The filing gives no specific financial guidance. Management said it believes liquidity is sufficient for anticipated operating, debt-service and capital needs over the next twelve months and foreseeable future, citing cash generation and ABL availability. Management’s priorities include organic investment, acquisitions, maintaining leverage within its stated range and returning capital to shareholders.
The proposed McGrath RentCorp acquisition, announced January 28, 2024, was expected to close in 2024, subject to regulatory approval, McGrath shareholder approval and other customary conditions. Consideration may be $123 per McGrath share in cash or 2.8211 WillScot shares; McGrath shareholders were expected to own about 12.6% of the combined company. Financing commitments included bridge facilities and a proposed increase in ABL capacity to $4.5 billion. The filing notes risks to closing, financing, integration and anticipated synergies.
The company reported compliance with debt covenants and $19.2 million of debt due within twelve months. Other stated risks include weaker end-market demand, lower utilization, inflation and labor costs, interest-rate exposure, credit and collection risk, access to financing, acquisition execution and operational disruptions. A 100-basis-point increase in ABL rates would have increased quarter-to-date interest expense by approximately $6.3 million, based on current borrowings. Ordinary-course legal proceedings were not expected by management to have a material adverse effect, though outcomes are uncertain.
No shares were repurchased in Q1; $498.2 million remained under the $1.0 billion authorization at March 31. The filing says repurchases resumed in April 2024. Management concluded disclosure controls were effective as of March 31, 2024, with no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- McGrath transaction status, required approvals, financing terms, dilution and integration expectations.
- Portable storage demand and utilization trends, and whether pricing gains can offset lower units on rent.
- Future labor, fleet depreciation, refurbishment and capital-spending effects on margins and free cash flow.
- Debt balances, borrowing-base availability, interest-rate exposure and compliance with covenants.
- Basis and reconciliation of non-GAAP measures, especially Adjusted EBITDA, Net CAPEX and Free Cash Flow.