The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand
WillScot Corporation ("WillScot"), our operations and our present business
environment. Unless the context otherwise requires, "we," "us," "our" and the
"Company" refers to WillScot and its subsidiaries. MD&A is provided as a
supplement to, and should be read in conjunction with, our financial statements
and the accompanying notes thereto, contained in Part I, Item 1 of this report.
The consolidated financial statements were prepared in conformity with
accounting principles generally accepted in the US ("GAAP"). We use certain
non-GAAP financial information that we believe is important for purposes of
comparison to prior periods and development of future projections and earnings
growth prospects. This information is also used by management to measure the
profitability of our ongoing operations and analyze our business performance and
trends. Reconciliations of non-GAAP measures are provided in the Other Non-GAAP
Financial Data and Reconciliations section.
On December 31, 2019, the 2019 financial statement amounts were adjusted for the
adoption ASU 2016-02, Leases (Topic 842) ("ASC 842"), effective retroactively to
January 1, 2019, and therefore may not agree to the Quarterly Reports filed on
Form 10-Q for the respective periods of 2019.
Executive Summary and Outlook
We are a leading provider of modular space and portable storage solutions in the
United States ("US"), Canada and Mexico. As of March 31, 2020, our branch
network included approximately 120 locations and additional drop lots to service
our more than 50,000 customers across the US, Canada and Mexico. We offer our
customers an extensive selection of "Ready to Work" modular space and portable
storage solutions with over 125,000 modular space units and over 25,000 portable
storage units in our fleet.
Equipment leasing is our core business. Over 90% of new lease orders are on our
standard lease agreement, pre-negotiated master lease or national account
agreements. The initial lease periods vary, and our leases are customarily
renewable on a month-to-month basis after their initial term. Our Modular Lease
Revenue is highly predictable due to its reoccurring nature and the underlying
stability and diversification of our lease portfolio. Our average minimum
contractual lease term at the time of delivery is over 11 months. However, given
our customers value flexibility, they consistently extend their leases or renew
on a month-to-month basis such that the average effective duration of our lease
portfolio is 34 months.
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We remain focused on our core priorities of growing modular leasing revenues by
increasing modular space units on rent, both organically and through our
consolidation strategy, delivering "Ready to Work" solutions to our customers
with value added products and services ("VAPS"), and on continually improving
the overall customer experience.
Our customers operate in a diversified set of end-markets, including commercial
and industrial, construction, education, energy and natural resources,
government and other end-markets. We track several market leading indicators
including those related to our two largest end markets, the commercial and
industrial segment and the construction segment, which collectively accounted
for approximately 83% of our revenues in the three months ended March 31, 2020.
Significant Developments
Pending Mobile Mini Merger
On March 2, 2020, we announced that we entered into an Agreement and Plan of
Merger with Mobile Mini, Inc. ("Mobile Mini"). The pending merger with Mobile
Mini is subject to customary closing conditions, including receipt of regulatory
approvals and stockholder approvals from the Company's and Mobile Mini's
stockholders. We are working collaboratively with our counterparts at Mobile
Mini to satisfy these closing conditions and plan the integration of the two
businesses with the expectation of closing in the third quarter of 2020. We
believe that the merger will result in strategic and financial benefits by
combining the two industry leaders in the complementary modular space and
portable storage solutions markets.
COVID-19 Impact on Business
During the three months ended March 31, 2020, financial results for our
operations were not significantly impacted by the COVID-19 outbreak as we are
considered an essential business in most jurisdictions and as such have
continued to operate normally with additional safety protocols in place.
However, there have been significant changes to the global economic situation as
a consequence of the COVID-19 pandemic, and since the declaration by the World
Health Organization on March 11, 2020 of COVID-19 as a global pandemic, our
operations have been adversely impacted and we expect our financial results may
be adversely impacted in the future. The global pandemic is resulting in
significant global social and business disruption, and in response we are
modifying the way we communicate and conduct business with our customers,
suppliers and employees. The following summarizes many of the key actions we
have taken in response to the pandemic.
Employee Safety and Health
The Company has implemented various employee safety measures to contain the
spread of COVID-19, including domestic and international travel restrictions,
the promotion of social distancing and work-from-home practices, extensive
cleaning protocols, daily symptom assessments, and enhanced use of personal
protective equipment such as masks. We are closely monitoring all guidance
provided by public agencies such as the Centers for Disease Control and
Prevention in the US or the Public Health Agency of Canada to ensure the safety
of our employees, vendors, and customers as our top priority.
Sales and Leasing Operations
The Company is responding to shelter-in-place and similar government orders,
which vary significantly across our geographic markets. As a result of the
shelter-in-place orders and increased social distancing, some of our markets,
such as special events and sports and entertainment, have experienced immediate
reductions in demand for new projects. Other sectors such as health care have
seen increased demand, and other sectors such as construction have remained
active but with varying degrees of project disruption. We are also responding to
demand across our end markets from customers in need of additional office space
to facilitate social distancing. As the Company serves many critical sectors of
the economy, the Company will continue to help support customers who remain
operational, as well as those who are actively engaged in the COVID-19 response.
We believe that our branch locations are considered essential businesses in most
jurisdictions and as such have continued to operate normally with the
aforementioned safety protocols in place, while our customer service and sales
teams are working closely with customers to meet current demand. The impact on
future demand for new projects will depend greatly on the degree and duration to
which governments restrict business and personal activities going forward and
when businesses resume normal operations.
Cost Reductions
In anticipation of a potential decline in demand for new projects, the Company
has implemented a range of actions aimed at temporarily reducing costs and
preserving liquidity. These actions include suspending previously planned
compensation increases for its corporate and shared services employees until the
third quarter of 2020, putting a temporary freeze on hiring, significant planned
reductions to overtime and external variable labor costs, and significant
reductions in other discretionary spending including marketing, travel and
entertainment, outside professional fees and other aspects of the business.
Reduced demand for new projects allows the Company to reduce or delay capital
spending, including new fleet purchases, refurbishments of existing equipment,
and improvements to branch infrastructure. The Company monitors new project
demand on a daily basis, and given the flexibility in our cost structure, can
adjust costs and capital spending rapidly to align with demand levels.

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First Quarter Highlights
For the three months ended March 31, 2020, key drivers of financial performance
included:
•Total revenues increased by $2.1 million, or 0.8%, as compared to the same
period in 2019, driven by a $12.2 million, or 5.4% increase in our core leasing
and services revenues primarily due to pricing growth, partially offset by lower
units on rent. Increases in our core leasing and services revenues were
partially offset by new and rental unit sales which decreased by $5.2 million,
or 35.1% and by $4.8 million, or 41.4%, respectively, driven by higher demand in
2019.
-Consolidated modular space average monthly rental rate increased to $653
representing a 13.6% increase year over year.
-Consolidated average modular space units on rent decreased 5,320 or 5.7% year
over year, and average modular space utilization decreased 320 basis points
("bps") year over year to 69.2%.
•Modular - US segment revenues, which represented 91.4% of revenue for the three
months ended March 31, 2020, increased by $3.7 million, or 1.6%, as compared to
the same period in 2019, through:
-Modular space average monthly rental rate of $659, increased 14.2% year over
year. Improved pricing was driven by a combination of our price optimization
tools and processes, as well as by continued growth in our "Ready to Work"
solutions and increased VAPS penetration across our customer base.
-Average modular space units on rent decreased 4,961, or a 5.9% year over year
decrease.
-Average modular space monthly utilization decreased 330 bps to 71.5% for the
three months ended March 31, 2020, as compared to the three months ended March
31, 2019.
•Modular - Other North America segment revenues which represented 8.6% of
revenues for the three months ended March 31, 2020, decreased by $1.5 million,
or 6.4% as compared to the same period in 2019. Decreases were driven primarily
by decreased new and rental unit sales and decreased modular delivery and
installation revenues which decreased by $1.4 million, or 34.1%, and by $0.5
million, or 12.5%, respectively, driven by higher demand in 2019. These
decreases were partially offset by net increases in modular leasing revenues
through:
-Average modular space monthly rental rate increased 8.7% to $600.
-Average modular space units on rent decreased by 359 units, or 4.1% as compared
to the same period in 2019.
-Average modular space monthly utilization decreased by 230 bps as compared to
the same period in 2019 to 52.8%.
•Generated consolidated net loss of $3.7 million for the three months ended
March 31, 2020, which included $12.7 million of discrete costs expensed in the
period related to acquisition and integration activities, including $9.4 million
of transaction costs related to the announced Mobile Mini merger, $1.7 million
of integration costs, and $1.6 million of lease impairment and other related
charges and restructuring costs.
•Generated Adjusted EBITDA of $89.5 million for the three months ended March 31,
2020, representing an increase of $6.1 million or 7.3% as compared to the same
period in 2019, which includes continued realization of commercial and cost
synergies associated with the ModSpace acquisition. Adjusted EBITDA for the
Modular - US segment and the Modular - Other North America segment,
respectively, was $81.7 million and $7.8 million for the three months ended
March 31, 2020.
•Generated Free Cash Flow of $7.8 million for the three months ended March 31,
2020, representing an increase of $34.4 million as compared to the same period
in 2019, as net cash provided by operating activities of $38.3 million was
reinvested primarily in value added products and fleet refurbishments to support
growth of modular leasing revenues (net cash used in investing activities of
$30.5 million).


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