WillScot Mobile Mini Holdings Corp. — Q1 2023 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2023. WillScot Mobile Mini leases, sells, delivers, and installs modular workspace and portable storage solutions across North America. Following the sales of Tank and Pump in 2022 and UK Storage Solutions in January 2023, continuing operations comprise its North American Modular and Storage segments. Unless noted, financial amounts below are in U.S. dollars.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue from continuing operations | $565.5 million | $451.2 million |
| Gross profit / gross margin | $323.1 million / 57.1% | $234.1 million / 51.9% |
| Operating income | $151.6 million | $81.7 million |
| Income from continuing operations | $76.3 million | $39.0 million |
| Adjusted EBITDA from continuing operations | $246.8 million | $167.8 million |
| Adjusted EBITDA margin | 43.7% | 37.2% |
| Operating cash flow | $148.8 million | $145.5 million |
| Free cash flow (non-GAAP) | $102.9 million | $54.6 million |
Revenue increased 25.3%; leasing revenue rose 25.1% and delivery and installation revenue rose 24.7%. Net income was $210.9 million, including $134.6 million of income from discontinued operations and a $176.1 million gain on sale; it should not be read as the result of ongoing operations. Basic and diluted EPS were $1.02 and $1.00, respectively, including discontinued operations.
Material changes and balance sheet
- Both segments grew revenue: Modular increased 21.2% to $349.7 million and Storage increased 32.7% to $215.8 million. Higher rental rates and portable-storage units on rent drove growth; average modular units on rent declined slightly.
- Average modular-space utilization fell to 66.0% from 68.5%, and portable-storage utilization fell to 78.7% from 83.1%. Monthly rental rates increased 19.7% for modular space and 30.1% for portable storage.
- Interest expense increased 46.7% to $44.9 million, principally reflecting higher weighted-average interest rates. Currency losses were $6.8 million, largely associated with settlement of the UK-sale-related forward contract.
- Total debt was $2.89 billion at March 31, down from $3.08 billion at year-end. Cash was $15.9 million. The company reported $1.1 billion of available ABL borrowing capacity and compliance with debt covenants.
- Q1 investing cash flow included $404.0 million of proceeds from the UK divestiture; financing cash flow included $558.3 million of debt repayments and $215.1 million of share repurchases. The company repurchased 4.59 million shares for $215.7 million, with $415.1 million remaining under its authorization.
Outlook, commentary, and risks
Management provided no specific numerical full-year guidance in the filing. It said operating cash flows, cash, and ABL access should be sufficient for anticipated requirements over the next 12 months. Management cited pricing, value-added products and services, and fleet redeployment as growth and margin drivers, while noting inflation in materials, labor, transportation, and fuel. It reported no significant supply-chain issues to date.
The company acquired two regional businesses’ assets for $79.6 million and plans to continue evaluating acquisitions and other capital-allocation priorities. It described share repurchases as an ongoing priority, while also identifying organic investment, acquisitions, and maintaining leverage within its stated range as priorities. A $750 million interest-rate swap program hedges part of the variable-rate ABL debt; management estimated a 100-basis-point rate increase would add approximately $10.8 million to quarter-to-date interest expense based on current borrowings and swaps.
Risks highlighted include economic and end-market demand changes, interest-rate and foreign-currency exposure, inflation and labor costs, acquisition integration, customer credit and collections, access to capital, substantial indebtedness and related covenants, cybersecurity and IT disruption, and natural disasters. Ordinary-course litigation was considered not reasonably likely to have a material adverse effect, though outcomes remain uncertain. Management said disclosure controls were effective at quarter-end and risk factors had not materially changed from the 2022 Form 10-K.
Important facts for investors to verify
- Separate recurring continuing-operations earnings from the UK sale gain and discontinued-operation results when assessing profitability and EPS.
- Track utilization and units on rent alongside pricing increases, particularly the year-over-year declines in utilization across both product categories.
- Assess the effect of higher interest costs, variable-rate debt, and the extent of protection provided by the swaps.
- Reconcile reported free cash flow and operating cash flow with fleet investment, acquisitions, debt repayments, and share repurchases; free cash flow and Adjusted EBITDA are non-GAAP measures.
- Monitor use of remaining repurchase authorization, acquisition integration and returns, and management’s assumptions about liquidity and leverage.