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OFFON

WILLSCOT MOBILE MINI HOLDINGS CORP.

(WSC)
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WILLSCOT MOBILE MINI : 10-K/A - Management's Discussion and Analysis of Financial Condition and Results of Operations

05/10/2021 | 12:14pm EDT
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand
WillScot Mobile Mini Holdings Corp. ("WillScot Mobile Mini"), formerly known as
WillScot Corporation ("WillScot"), our operations and our present business
environment. 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 II, Item 8 of this report. The discussion of results of
operations in this MD&A is presented on a historical basis, as of or for the
year ended December 31, 2020 or prior periods. As the Merger was completed on
July 1, 2020, unless the context otherwise requires, the terms "we", "us", "our"
"Company" and "WillScot Mobile Mini" means WillScot and its subsidiaries when
referring to periods prior to July 1, 2020 (prior to the Merger) and to WillScot
Mobile Mini and its subsidiaries when referring to periods on or after July 1,
2020 (after the Merger).
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
performance 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.

Executive Summary
We are a leading business services provider specializing in innovative flexible
work space and portable storage solutions. We service diverse end markets across
all sectors of the economy throughout the United States ("US"), Canada, Mexico,
and the United Kingdom ("UK"). We are also a leading provider of specialty
containment solutions in the US with over 12,500 tank and pump units in our
fleet. As of December 31, 2020, our branch network included approximately 275
branch locations and additional drop lots to service our over 85,000 customers.
We offer our customers an extensive selection of "Ready to Work" modular space
and portable storage solutions with over 157,000 modular space units and over
197,000 portable storage units in our fleet.
We primarily lease, rather than sell, our modular and portable storage units to
customers, which results in a highly diversified and predictable recurring
revenue stream. 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 lease revenue is highly
predictable due to its recurring nature and the underlying stability and
diversification of our lease portfolio. However, given that 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 32
months. We complement our core leasing business by selling both new and used
units, allowing us to leverage scale, achieve purchasing benefits and redeploy
capital employed in our lease fleet.
We remain focused on our core priorities of growing leasing revenues by
increasing 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.
The year ended December 31, 2020 was another transformational year for WillScot
Mobile Mini as we completed the Merger with Mobile Mini on July 1, 2020 at which
time Mobile Mini became a wholly-owned subsidiary of WillScot. Concurrent with
the closing of the Merger, we changed our name to WillScot Mobile Mini Holdings
Corp.
For the year ended December 31, 2020, key drivers of our financial performance
included:
•Total revenues increased by $303.9 million, or 28.6%, attributable to the
addition of Mobile Mini's revenues to our consolidated results once the Merger
closed on July 1, 2020.
•Leasing revenue increased $257.2 million, or 34.6%, delivery and installation
revenue increased $54.1 million, or 24.6%, rental unit sales decreased $1.4
million, or 3.5%, and new sales revenue decreased $6.0 million, or 10.2%.
Key leasing revenue drivers include:
-Average modular space units on rent increased 7,844 units, or 8.6%, and average
portable storage units on rent increased 67,270 units, or 398.6%. Both increases
were primarily driven by the Mobile Mini Merger.
-Average modular space monthly rental rate increased $44, or 7.2%, to $658
driven by a $71, or 11.6% increase in the NA Modular segment, offset partially
by the dilutive impact of lower rates due to mix on the Mobile Mini modular
space units.
-Average portable storage monthly rental rate increased $12, or 10.0%, to $132
driven primarily by the accretive impact of higher rates from the Mobile Mini
portable storage fleet.
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-Average utilization for modular space units decreased 180 basis points ("bps")
to 70.2% and average utilization for portable storage units increased to 75.9%,
or 10.1 percentage points, driven by higher utilization of the Mobile Mini
portable storage units.
•NA Modular segment revenue, which represents the activities of WillScot prior
to the Merger and represented 76.9% of consolidated revenue for the year ended
December 31, 2020, decreased $12.5 million, or 1.2%, to $1,051.2 million driven
by decreased sales volumes of $26.6 million, or 26.8%, and a $12.0 million, or
5.5%, reduction in delivery and installation revenues as a result of reductions
in demand for new project deliveries. However, these reductions were partially
offset by an increase in leasing revenue of $26.1 million, or 3.5%, due to
continued growth of pricing and value-added products. NA Modular revenue drivers
for the year ended December 31, 2020 include:
-Modular space average monthly rental rate of $685 for the year, increased 11.6%
representing a continuation of the long-term price optimization initiative and
VAPS penetration opportunities across our portfolio.
-Average modular space units on rent for the year decreased 4,808 units, or 5.2%
driven by lower deliveries, including reduced demand for new project deliveries
as a result of the COVID-19 pandemic in 2020. Average modular space units on
rent dropped 0.5% sequentially from Q3 into Q4 to 86,011, which compares to a
1.3% drop from Q3 to Q4 in 2019, as delivery volumes returned to prior year
levels and return volumes remained lower than 2019 levels.
-Average modular space monthly utilization decreased 310 basis points to 68.9%
for the year ended December 31, 2020, but only dropped 10 basis points
sequentially from Q3 into Q4.
•Generated consolidated net income of $75.3 million for the year ended December
31, 2020, represented an increase of $196.5 million, and included a $42.4
million loss on extinguishment of debt related to our recent financing
activities and $93.8 million of discrete costs expensed in the period related to
transaction and integration activities, partly offset by a $51.5 million
non-cash income tax benefit. Net income also included a $3.5 million fair value
gain on common stock warrant liabilities in the current period, while there was
a $109.6 million fair value loss on common stock warrant liabilities in the
prior period. Discrete costs in the period included $64.1 million of Merger
transaction costs, $18.3 million of integration costs, and $11.4 million of
restructuring costs, lease impairment expense and other related charges. As
discussed in Note 14 to the consolidated financial statements, the $51.5 million
income tax benefit was primarily driven by the reversal of $54.6 million of the
federal valuation allowance and certain state valuation allowances during the
year ended December 31, 2020 due to the Merger, which partly offset these other
discrete costs.
•Generated Adjusted EBITDA of $530.3 million for the year ended December 31,
2020, representing an increase of $173.8 million, or 48.8%, as compared to 2019.
Of this increase, $135.5 million was driven by the addition of Mobile Mini to
our consolidated results and the remainder was driven by strong organic growth
in our NA Modular segment.
-Adjusted EBITDA in our NA Modular segment, which represents the activities of
WillScot prior to the Merger, increased $38.3 million, or 10.7% primarily driven
by increases in leasing gross profit driven by increased pricing, including
VAPS, and significant cost reductions both from acquisition synergy realization
and actions taken to reduce variable costs in a reduced demand environment
during the second and third quarters of 2020.
-Consolidated Adjusted EBITDA Margin was 38.8% and increased 530 bps versus
prior year driven by a 410 bps increased in the NA Modular segment, as well as
the addition of the higher margin Mobile Mini operations.
•Generated Free Cash Flow of $162.3 million for the year ended December 31,
2020, representing an increase of $142.3 million as compared to 2019. Net cash
provided by operating activities increased $132.2 million to $304.8 million.
Additionally, net cash used in investing activities, excluding cash acquired
from the Merger, decreased $10.0 million as a result of reduced capital spending
needs across all segments given reduced demand for new project deliveries.
Excluding the impact of $64.1 million of Merger transaction costs paid during
the year, we generated $226.3 million of free cash flow for year ended December
31, 2020 and have repaid approximately $162.4 million of the 2020 ABL Facility
since the Merger that closed on July 1, 2020. This was possible due to our
resilient lease revenues and strong margin expansion and capex reductions across
the NA Modular, NA Storage, and UK segments, as well as reduced interest costs
due to our financing activity during the year. Free cash flow increased
sequentially to $87.4 million in the fourth quarter of 2020, including $7.4
million of integration costs, which is the best indicator of our run-rate
heading into 2021.
In addition to using GAAP financial measurements, we use Adjusted EBITDA and
Free Cash Flow, which are non-GAAP financial measures, to evaluate our operating
results. As such, we include in this Annual Report on Form 10-K reconciliations
to their most directly comparable GAAP financial measures. These reconciliations
and descriptions of why we believe these measures provide useful information to
investors as well as a description of the limitations of these measures are
included in "Item 6. Selected Financial Data."

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Recent Developments
Refer to the Recent Developments section in Part I, Item 1, Business, herein for
further information about the Mobile Mini Merger and certain related financing
transactions and the impact of COVID-19 on our business.

Business Environment and Outlook
Our customers operate in a diversified set of end markets, including
construction, commercial and industrial, retail and wholesale trade, education,
energy and natural resources, government and healthcare. We track several market
leading indicators in order to predict demand, including those related to our
two largest end markets, the commercial and industrial sector and the
construction sector, which collectively accounted for approximately 85% of our
revenues in the year ended December 31, 2020. Market fundamentals underlying
these end markets were impacted in 2020 as a result of the COVID-19 pandemic
which resulted in delivery volume declines, primarily in the second and third
quarters, in response to shelter-in-place orders and other market restrictions.
Gross Domestic Product ("GDP") in the US, where the majority of our revenues are
generated, is estimated to have declined by over 2% in 2020, and estimates from
Dodge Data & Analytics suggest that non-residential construction square footage
starts in the US declined by over 15% as compared to 2019. Based on our analyses
of industry forecasts and macroeconomic indications, we expect modest market
recovery in 2021 following the declines experienced in 2020, and expect both GDP
and non-residential construction square footage starts in the US to grow 2-3% in
2021.
Core to our operating model is the ability to redeploy standardized assets
across end markets, and we have recently serviced emerging demand in the
healthcare and government sectors related to COVID-19, as well as expanded space
requirements related to social distancing. Current improving market conditions,
potential market catalysts such as increased infrastructure spending, and
idiosyncratic growth levers such as continued penetration of our customer base
with our VAPS offering, long-term pricing tailwinds, cross-selling between our
Modular and Storage segment customers, and other commercial best practice
sharing between our segments provide us confidence in our continued organic
growth outlook.

Our Business and Growth Strategies
We will maintain a leading market position and continue pursuing the following
strategies, all of which we have demonstrated in our historical results and are
contributing to our growth, expanding profitability and free cash flow, and
overall growth in return on invested capital:
Optimize Pricing Across Fleet
We continue to advance multiple pricing strategies across our fleet to drive
revenue growth. Leveraging our expertise developed in NA Modular, we plan to
implement dynamic pricing, customer segmentation, and contract standardization
in our other segments. Our long history of success, demonstrated by 13
consecutive quarters of double-digit rate growth as of December 31, 2020 in the
U.S. within our NA Modular segment, gives us confidence that we can successfully
deploy this strategy. The turnover of our fleet, with average lease durations of
nearly three years, creates natural and recurring opportunities to capture
incremental price increases. As the market leader in our industry, with an
estimated 45% market share in the modular sector and 25% market share in the
storage sector, we offer the broadest fleet portfolio, the most differentiated
turnkey VAPS, and the most consistent service capabilities across the largest
branch network to help our customers be 'Ready to Work'.
Expand Penetration of Value-Added Products and Services
As of December 31, 2020, we estimate that we have over $150 million of annual
organic revenue growth opportunity as the average VAPS rate of our units on rent
in our NA Modular segment converges over time to the VAPS price and penetration
levels achieved on our most recently delivered units, and as we begin to
cross-sell this offering into our NA Storage segment ground level office fleet.
We believe this growth opportunity could be substantially larger if we
successfully penetrate more of our modular space orders, and expand our VAPS
offering for portable storage units.
Enhance Cross-Selling Between Segments
The combination of WillScot and Mobile Mini created a leading business services
provider specializing in innovative flexible work space and portable storage
solutions. At the outset of the merger, we recognized that there was 80%
end-market overlap and 40% customer overlap, a clear strategic opportunity for
our complementary product lines. By offering a combined product suite, we
simplify our customers' procurement needs and enable productivity from start to
finish for projects. We believe cross-selling will also increase utilization and
yield of our combined fleet. Our sales force is optimally positioned to improve
efficiency by leveraging our management information systems and using real-time
information to monitor and optimize conversion of customer opportunities across
our core segments. In turn, we expect that our broadened and enhanced fleet will
attract new customers, increase customer retention, and increase margins and
return on invested capital.
Generate Cash Flow Through Operational Efficiencies, Cost Reductions, and
Technology
We are implementing many initiatives designed to improve operations and increase
profitability. We continually assess our branch operating footprint, vendor
base, and operating structure to maximize revenue generation while minimizing
costs. The Merger provides us with increased scale, numerous operational best
practices from both the legacy WillScot and
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legacy Mobile Mini businesses, and a state-of-the-art SAP ERP platform, all of
which we believe will significantly improve the operating efficiency of the
combined businesses. We have a proven track record of efficiently integrating
acquisitions and quickly eliminating operational redundancies while maintaining
acquired customer relationships.
Deploy Capital to Strategically Support Organic Growth and Optimize Returns
We maintain a disciplined focus on our return on capital and the Merger allows
us to invest opportunistically across multiple attractive asset classes
prioritizing our investments to where we see the strongest potential returns. We
continually assess both our existing lease fleet and customer demand for
opportunities to deploy capital more efficiently. We manage our maintenance
capex and growth capex to align with the economic conditions in which we
operate. Within our existing lease fleet, we examine the potential cash and
earnings generation of an asset sale versus continuing to lease the asset. In
addition, we examine the relative benefits of organic expansion opportunities
versus expansion through acquisition to obtain a favorable return on capital.
Leverage Scale and Organic Initiatives with Accretive Acquisitions
Our markets for modular space and portable storage solutions are fragmented. We
estimate that approximately 55% of the modular market and approximately 75% of
the portable storage market in North America are supplied by regional and local
competitors. We have the broadest network of operating branches in North
America, as well as a scalable corporate center and information technology
systems, which position us to continue to acquire and integrate other companies
while expanding the products and services available and offered to acquired
customers. Furthermore, we have realized over $60 million of cost synergies from
acquisitions in the past three years and have identified nearly $60 million of
additional cost reductions that we have yet to execute. We expect to pursue
acquisitions opportunistically that will provide further scale efficiencies and
allow us to improve returns generated by the acquired assets. We continually
evaluate our portfolio of businesses to ensure that our operations remain in
line with our broader strategic goals.
Use Free Cash Flow to Drive Value Creation
Free cash flow generation has accelerated rapidly in recent years, and we expect
this trend to continue as we execute our strategy. While we see numerous organic
and inorganic opportunities to re-invest in our core businesses, we believe we
can generate surplus free cash flow with which we can both reduce leverage and
return capital to shareholders over time. We view this as an additional powerful
value creation lever, and we are committed to deploying this capital as
productively as possible in the interests of our shareholders.

Components of Our Consolidated Historical Results of Operations
Revenue
Our revenue consists mainly of leasing, services and sales revenue. We derive
our leasing and services revenue primarily from the leasing of modular space and
portable storage units. Included in leasing revenue are VAPS, such as furniture,
steps, ramps, basic appliances, internet connectivity devices, and other items
our customers use in connection with our products. Delivery and installation
revenue includes fees that we charge for the delivery, site work, installation,
disassembly, unhooking and removal, and other services to our customers for an
additional fee as part of our leasing and sales operations.
The key drivers of changes in our leasing revenue are:
•the number of units in our lease fleet;
•the average utilization rate of our lease units; and
•the average monthly rental rate per unit, including VAPS.
The average utilization rate of our lease units is the ratio of (i) the average
number of units in use during a period (which includes units from the time they
are leased to a customer until the time they are returned to us) to (ii) the
average total number of units available for lease in our fleet during a period.
Our average monthly rental rate per unit for a period is equal to the ratio of
(i) our rental income for that period including VAPS but excluding delivery and
installation services and other leasing-related revenues, to (ii) the average
number of lease units rented to our customers during that period.
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The table below sets forth the average number of units on rent in our lease fleet, the average utilization of our lease units, and the average monthly rental rate per unit, including VAPS:

                                                                    Year Ended December 31,
(in thousands, except unit numbers and rates)         2020                      2019                  2018
Modular space units on rent (average during the
period)                                               99,526                     91,682                70,257
Average modular space utilization rate                  70.2   %                   72.0  %               71.6  %
Average modular space monthly rental rate       $        658               $        614          $        552
Portable storage units on rent (average during
the period)                                           84,148                     16,878                15,480
Average portable storage utilization rate               75.9   %                   65.8  %               68.9  %
Average portable storage monthly rental rate    $        132               $        120          $        119
Average tank and pump solutions rental fleet
utilization based on original equipment cost            61.7   %                      -  %                  -  %


In addition to leasing revenue, we also generate revenue from sales of new and
used modular space and portable storage units to our customers, as well as
delivery, installation, maintenance, removal services and other incidental items
related to accommodation services for our customers. Included in our sales
revenue are charges for modifying or customizing sales equipment to customers'
specifications.
Gross Profit
We define gross profit as the difference between total revenues and cost of
revenues. Cost of revenues associated with our leasing business includes payroll
and payroll-related costs for branch operations personnel, material and other
costs related to the repair, maintenance, storage and transportation of rental
equipment. Cost of revenue also includes depreciation expense associated with
our rental equipment. Cost of revenues associated with our new unit sales
business includes the cost to purchase, assemble, transport and customize units
that are sold. Cost of revenues for our rental unit sales consist primarily of
the net book value of the unit at date of sale.
Selling, General and Administrative Expense
Our selling, general and administrative ("SG&A") expense includes all costs
associated with our selling efforts, including marketing costs, marketing
salaries and benefits, as well as the salary and commissions of sales personnel.
It also includes the leasing of facilities we occupy, professional fees and
information systems, our overhead costs, such as salaries of management,
administrative and corporate personnel, and integration costs associated with
acquisitions and business combinations.
Transaction Costs
Transaction costs include discrete expenses incurred related to the Merger and
the 2018 acquisition of ModSpace.
Other Depreciation and Amortization
Other depreciation and amortization includes depreciation of our property, plant
and equipment, as well as the amortization of our intangible assets.
Impairment Losses on Long-Lived Assets
We recognize property, plant, and equipment impairment charges when an indicator
of impairment is present and the carrying value of assets exceeds the estimated
undiscounted cash flows and fair value of the assets.
Lease Impairment Expense and Other Related Charges
  Lease impairment expense and other related charges include impairment of
right-of-use ("ROU") assets, gain or loss on the exit of a leased property
generally associated with lease termination payments and rent expense for
locations which have been closed but have not been abandoned or impaired.
Restructuring Costs
Restructuring costs include charges associated with exit or disposal activities
that meet the definition of restructuring under Financial Accounting Standards
Board ("FASB") ASC Topic 420, Exit or Disposal Cost Obligations ("ASC 420"). Our
restructuring plans are generally country or region specific and are typically
completed within a one-year period. Prior to the adoption of FASB ASC Topic 842,
Leases ("ASC 842") effective January 1, 2019, restructuring costs incurred under
these plans included (i) one-time termination benefits related to employee
separations, (ii) contract termination costs and, (iii) other related costs
associated with exit or disposal activities including, but not limited to, costs
for consolidating or closing facilities. After the adoption of ASC 842,
restructuring costs include one-time termination benefits related to employee
separation costs. The restructuring costs incurred in 2020, 2019 and 2018
primarily relate to the integration of our acquisitions. Costs related to the
integration of acquired businesses that do not meet the definition of
restructuring under ASC 420, such as employee training costs, duplicate facility
costs, and professional services expenses, are included within SG&A expense.
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Currency (Gains) Losses, Net
Currency (gains) losses, net include unrealized and realized gains and losses on
monetary assets and liabilities denominated in foreign currencies other than our
functional currency at the reporting date.
Other Income, Net
Other income, net primarily consists of the gain (loss) on disposal of
non-operational property, plant and equipment, other financing related costs and
other non-recurring charges.
Interest Expense
Interest expense consists of the costs of external debt including the Company's
ABL credit facility, 2022 Secured Notes, 2023 Secured Notes, 2025 Secured Notes,
2028 Secured Notes, and the senior unsecured notes due November 15, 2023 (the
"Unsecured Notes") and interest on obligations under finance leases.
Fair Value (Gain) Loss on Common Stock Warrant Liabilities
Fair value (gain) loss on common stock warrant liabilities consists of non-cash
gains and losses recorded related to changes in the fair value of common stock
warrant liabilities as the common stock warrant liabilities are marked-to-market
liabilities. It also includes gains and losses recorded related to the
settlement of common stock warrant liabilities.
Loss on Extinguishment of Debt
In connection with the Merger and related financing transactions in 2020, using
proceeds from the 2025 Secured Notes, we redeemed all of our 2022 Secured Notes.
We also completed a private offering of our 2028 Secured Notes in August 2020
and used the offering proceeds to repay our 2023 Secured Notes. As a result of
these transactions, we recorded losses on extinguishment of debt.
Income Tax Benefit
We are subject to income taxes in the US, Canada, Mexico and the UK. Our overall
effective tax rate is affected by a number of factors, such as the relative
amounts of income we earn in differing tax jurisdictions, tax law changes, and
certain non-deductible expenses such as compensation disallowance. The rate is
also affected by discrete items that may occur in any given year, such as
legislative enactments. These discrete items may not be consistent from year to
year. Income tax expense (benefit), deferred tax assets and liabilities and
liabilities for unrecognized tax benefits reflect our best estimate of current
and future taxes to be paid.

Consolidated Results of Operations
Our consolidated statements of net income (loss) for the years ended December
31, 2020, 2019, and 2018 are presented below. The below results only include
results from Mobile Mini and ModSpace for the periods subsequent to their
acquisition dates and do not include any incremental unrealized cost savings,
revenue growth, or pro forma adjustments that management expects to result from
the integration of the acquired businesses.
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                                                            Years Ended December 31,                            2020 vs. 2019         2019 vs 2018
                                              2020                    2019                    2018                  Change               Change
in thousands                              (as restated)           (as restated)           (as restated)
Revenues:
Leasing and services revenue:
Leasing                                 $    1,001,447          $      

744,185 $ 518,235 $ 257,262 $ 225,950 Delivery and installation

                      274,156                 220,057                 154,557               54,099               65,500
Sales revenue:
New units                                       53,093                  59,085                  53,603               (5,992)               5,482
Rental units                                    38,949                  40,338                  25,017               (1,389)              15,321
Total revenues                               1,367,645               1,063,665                 751,412              303,980              312,253
Costs:
Costs of leasing and services:
Leasing                                        227,376                 213,151                 143,120               14,225               70,031
Delivery and installation                      220,102                 194,107                 143,950               25,995               50,157
Costs of sales:
New units                                       34,841                  42,160                  36,863               (7,319)               5,297
Rental units                                    24,772                  26,255                  16,659               (1,483)               9,596
Depreciation of rental equipment               200,581                 174,679                 121,436               25,902               53,243
Gross profit                                   659,973                 413,313                 289,384              246,660              123,929

Expenses:

Selling, general and administrative            360,626                 271,004                 234,820               89,622               36,184
Transaction costs                               64,053                       -                  20,051               64,053              (20,051)
Other depreciation and amortization             43,249                  12,395                  13,304               30,854                 (909)
Impairment losses on long-lived assets               -                   2,848                   1,600               (2,848)               1,248
Lease impairment expense and other
related charges                                  4,876                   8,674                       -               (3,798)               8,674
Restructuring costs                              6,527                   3,755                  15,468                2,772              (11,713)
Currency (gains) losses, net                      (355)                   (688)                  2,454                  333               (3,142)
Other income, net                               (1,718)                 (2,200)                 (4,574)                 482                2,374
Operating income                               182,715                 117,525                   6,261               65,190              111,264
Interest expense                               119,886                 122,504                  98,433               (2,618)              24,071
Fair value (gain) loss on common stock
warrant liabilities                             (3,461)                109,622                 (23,830)            (113,083)             133,452
Loss on extinguishment of debt                  42,401                   8,755                       -               33,646                8,755
Income (loss) before tax                        23,889                (123,356)                (68,342)             147,245              (55,014)
Income tax benefit                             (51,451)                 (2,191)                (38,600)             (49,260)              36,409
Net income (loss)                               75,340                (121,165)                (29,742)             196,505              (91,423)
Net income (loss) attributable to
non-controlling interest, net of tax             1,213                    (421)                 (4,532)               1,634                4,111

Net income (loss) attributable to
WillScot common shareholders            $       74,127          $     (120,744)         $      (25,210)         $   194,871          $   (95,534)



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Comparison of Years Ended December 31, 2020 and 2019
Revenue: Total revenue increased $303.9 million, or 28.6%, to $1,367.6 million
for the year ended December 31, 2020 from $1,063.7 million for the year ended
December 31, 2019. The increase was driven primarily by the addition of Mobile
Mini's revenues to our consolidated results. The Merger closed on July 1, 2020
and drove $316.5 million of the year over year increase. Leasing revenue
increased $257.2 million, or 34.6%, as compared to the same period in 2019
driven by an increase of 75,114 average modular space and portable storage units
on rent as a result of the Merger, and improved pricing and value-added products
in our NA Modular segment. Delivery and installation revenues increased $54.1
million, or 24.6%, due to increased overall activity as a result of the Merger,
but was partially offset by lower delivery volumes due to the impact of new
project cancellations and delays in the second and third quarter of 2020 as a
result of the COVID-19 pandemic. New unit sales decreased $6.0 million, or
10.2%, and rental unit sales decreased $1.4 million, or 3.5%, as a result of
lower demand in 2020.
Total average modular space and portable storage units on rent for the years
ended December 31, 2020 and 2019 were 183,674 and 108,560, respectively. The
increase was due primarily to the units acquired as part of the Merger,
partially offset by lower delivery volumes in the NA Modular segment, including
reduced demand for new projects as a result of the COVID-19 global pandemic
disruption on social and business activities. In total, modular space average
units on rent increased 7,844 units, or 8.6%, for the year ended December 31,
2020 as compared to the year ended December 31, 2019. Modular space average
monthly rental rates increased 7.2% to $658 for the year ended December 31,
2020. Improved pricing was driven by a continuation of the long-term price
optimization and VAPS penetration opportunities across our portfolio, partially
offset by the dilutive impact of lower rates on the Mobile Mini modular space
units due to product mix. Portable storage average units on rent increased by
67,270 units, or 398.6%, for the year ended December 31, 2020. Average portable
storage monthly rental rates of $132 represented an increase of $12, or 10.0%,
compared to the year ended December 31, 2019. This increase was driven by the
accretive impact of higher rates from the Mobile Mini portable storage fleet.
The average modular space unit utilization rate during the year ended December
31, 2020 was 70.2%, as compared to 72.0% during the same period in 2019. This
decrease was driven by lower demand as a result of the COVID-19 pandemic,
partially offset by higher utilization on units acquired as part of the Merger.
The average portable storage unit utilization rate during the year ended
December 31, 2020 was 75.9%, as compared to 65.8% during the same period in
2019. The increase in average portable storage utilization rate was driven by
higher utilization on the acquired Mobile Mini units.
Gross Profit: Our gross profit percentage was 48.3% and 38.9% for the years
ended December 31, 2020 and 2019, respectively. Our gross profit percentage,
excluding the effects of depreciation ("adjusted gross profit percentage"), was
62.9% and 55.3% for the years ended December 31, 2020 and 2019, respectively.
Gross profit increased $246.7 million, or 59.7%, to $660.0 million for the year
ended December 31, 2020 from $413.3 million for the year ended December 31,
2019. The increase in gross profit is a result of a $243.0 million increase in
leasing gross profit, increased delivery and installation gross profit of $28.1
million, and increased new and rental unit sale margins of $1.5 million. These
increases were primarily a result of increased revenues due to the Merger and to
favorable average monthly rental rates in the NA Modular segment on modular
space units, as well as modular leasing cost savings due to lower delivery
volumes that were achieved as a result of actions we took to scale back variable
labor and material costs in response to lower demand for new project deliveries.
These increases were offset partially by lower delivery and installation
activity volumes in the NA Modular segment in the second and third quarters of
2020 due to reduced delivery demand and by increased depreciation of $25.9
million as a result of fleet acquired in the Merger and capital investments made
over the past twelve months in our existing rental equipment.
SG&A Expense: SG&A expense increased $89.6 million, or 33.1%, to $360.6 million
for the year ended December 31, 2020, compared to $271.0 million for the year
ended December 31, 2019. The primary driver of the increase is related to
additional SG&A expense as a result of operating a larger business due to the
Merger. SG&A expense for the NA Storage, UK Storage, and Tank and Pump segments
totaled $90.8 million for the year ended December 31, 2020.
Transaction Costs: Transaction costs increased $64.1 million for the year ended
December 31, 2020. Transaction costs were related to the Merger.
Other Depreciation and Amortization: Other depreciation and amortization
increased $30.8 million, or 248.4%, to $43.2 million for the year ended December
31, 2020, compared to $12.4 million for the year ended December 31, 2019. $18.2
million of the increase was driven by increased Other depreciation as a result
of the inclusion of Mobile Mini beginning in the third quarter of 2020 and $13.4
million was driven by the amortization of the customer relationship intangible
asset acquired in the Merger.
Impairment losses on Long-Lived Assets: Impairment losses on long-lived assets
were $2.8 million for the year ended December 31, 2019 related to the valuation
of properties classified as assets held for sale as a result of the ModSpace
acquisition. No similar impairments occurred during the year ended December 31,
2020.
Lease Impairment Expense and Other Related Charges: Lease impairment expense and
other related charges were $4.9 million for the year ended December 31, 2020 as
compared to $8.7 million for the year ended December 31, 2019. The decrease in
Lease impairment expense and other related charges of $3.8 million in 2020 is a
result of fewer remaining closed locations in 2020 due to successful lease exits
related to the ModSpace acquisition.
Restructuring Costs: Restructuring costs were $6.5 million for the year ended
December 31, 2020 as compared to $3.8 million for the year ended December 31,
2019. The restructuring charges in the year ended December 31, 2020 were
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primarily due to employee terminations costs as a result of the Merger and, to a
lesser extent, reductions in force across our branch network in response to
COVID-19 economic conditions. The restructuring charges in the year ended
December 31, 2019 related primarily to employee termination costs related to the
ModSpace and Acton acquisitions and integrations.
Currency (Gains) Losses, net: Currency (gains) losses, net decreased by $0.3
million to a $0.4 million gain for the year ended December 31, 2020 compared to
a $0.7 million gain for the year ended December 31, 2019. The decrease in
currency (gains) losses, net, are primarily attributable to the impact of
foreign currency exchange rate changes on loans and borrowings and intercompany
receivables and payables denominated in a currency other than the subsidiaries'
functional currency.
Other Income, Net: Other income, net was $1.7 million and $2.2 million for the
year ended December 31, 2020 and 2019, respectively. Other income, net of $1.7
million for the year ended December 31, 2020 was primarily related to the
reversal of non-operating liabilities of $2.5 million. Other income, net of $2.2
million for the year ended December 31, 2019 was driven primarily by the receipt
of $3.2 million of insurance proceeds related to assets damaged during Hurricane
Harvey.
Interest Expense: Interest expense decreased $2.6 million, or 2.1%, to $119.9
million for the year ended December 31, 2020 from $122.5 million for the year
ended December 31, 2019. The decrease was driven by lower interest rates on our
ABL facilities, the repayment of our 10% Unsecured Notes in 2019 and the lower
interest rates on our 2025 Secured Notes and 2028 Secured Notes, partially
offset by an $800 million increase in debt outstanding as a result of the
Merger.
Fair Value (Gain) Loss on Common Stock Warrant Liabilities: The fair value of
common stock warrant liabilities increased $113.1 million, to a $3.5 million
gain for the year ended December 31, 2020 from a $109.6 million loss for the
year ended December 31, 2019. The increase was primarily attributable to the
change in estimated fair value of common stock warrant liabilities.
Loss on Extinguishment of Debt: As a result of the Merger and the related
financing transactions, we recorded a loss on extinguishment of debt of $42.4
million in the year ended December 31, 2020. This loss on extinguishment of debt
was comprised of the redemption premium and write off of unamortized deferred
financing costs associated with the following: (i) $15.2 million due to the
redemption of the 2022 Secured Notes, (ii) $22.7 million due to the redemption
of the 2023 Secured Notes, and (iii) $4.4 million associated with the 2017 ABL
Facility. For the year ended December 31, 2019, we recorded $8.8 million of
losses on extinguishment of debt consisting of $1.5 million related to the $30
million redemption of the 2022 Secured Notes at a redemption price of 103% and
$7.2 million related to the redemption of the 2023 senior unsecured notes at a
redemption price of 102.0%, plus a make-whole premium of 1.1%, for total
premiums of 3.1%.
Income Tax Benefit: Income tax benefit increased $49.3 million to a $51.5
million benefit for the year ended December 31, 2020 compared to a $2.2 million
benefit for the year ended December 31, 2019. The increase in income tax benefit
was driven by a reversal of our valuation allowance of $56.5 million based on
our assessment of deferred tax assets, a reduction of reserves for uncertain tax
positions of $11.2 million, partially offset by tax expense from pre-tax income
and non-deductible expense in the year ended December 31, 2020 as compared to
discrete benefits recorded in the year ended December 31, 2019.

Comparison of Years Ended December 31, 2019 and 2018
Revenue: Total revenue increased $312.3 million, or 41.6%, to $1,063.7 million
for the year ended December 31, 2019 from $751.4 million for the year ended
December 31, 2018. The increase was primarily the result of a 43.3% increase in
leasing and services revenue driven by increased volumes from acquisitions and
improved pricing. Improved volumes were driven by units acquired as part of the
ModSpace acquisition, as well as, increased modular delivery and installation
revenues on the combined rental fleet of 42.4% due to increased transaction
volumes and higher revenues per transaction. Average modular space monthly
rental rates increased 11.2% for the year ended December 31, 2019, and average
modular space units on rent increased 21,425 units, or 30.5%, due to the impact
of an additional 8.5 months of contribution from the ModSpace acquisition.
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, offset partially by the
average modular space monthly rental rates on acquired units for ModSpace. The
increase in leasing and services revenues was further complemented by an
increase of $5.5 million, or 10.3%, in new unit sales as compared to 2018. This
increase was primarily driven by increased sales as a result of the ModSpace
acquisition. Rental unit sales increased $15.3 million, or 61.2%, as compared to
2018.
Total average units on rent for the years ended December 31, 2019 and 2018 were
108,560 and 85,737, respectively. The increase was due to units acquired as part
of the ModSpace acquisition, with modular space average units on rent increased
by 21,425 units, or 30.5%, for the year ended December 31, 2019. Modular space
average monthly rental rates increased 11.2% for the year ended December 31,
2019. Portable storage average units on rent increased by 1,398 units, or 9.0%,
for the year ended December 31, 2019. Average portable storage monthly rental
rates increased 0.8% for the year ended December 31, 2019. The average modular
space unit utilization rate for the year ended December 31, 2019 was 72.0%, as
compared to 71.6% in 2018. The increase in average modular space utilization
rate was driven by a reduction in the combined modular space unit fleet size
across the combined WillScot and ModSpace fleet in 2019. The average portable
storage unit utilization rate during the year ended December 31, 2019 was 65.8%,
as compared to 68.9% in 2018. The decrease in average portable storage
utilization rate was driven by organic declines in the number of portable
storage average units on rent in the Modular - US segment.
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Gross Profit: Our gross profit percentage was 38.9% and 38.5% for the years
ended December 31, 2019 and 2018, respectively. Our gross profit percentage,
excluding the effects of depreciation ("adjusted gross profit percentage"), was
55.3% and 54.7% for the years ended December 31, 2019 and 2018, respectively.
Gross profit increased $123.9 million, or 42.8%, to $413.3 million for the year
ended December 31, 2019 from $289.4 million for the year ended December 31,
2018. The increase in gross profit is a result of a $291.5 million increase in
modular leasing and services revenue and increased new unit sales gross profit
of $0.2 million, offset by increases of $120.2 million in modular leasing and
services costs. Increases in modular leasing and services revenues and costs
were primarily as a result of increased revenues due to additional units on rent
as a result of recent acquisitions as well as increased margins due to favorable
average monthly rental rates on modular space units and increased delivery and
installation margins driven primarily by higher pricing per transaction. These
increases were partially offset by increased depreciation of $53.3 million as a
result of additional rental equipment acquired as part of the ModSpace
acquisition, as well as continued capital investment in our existing rental
equipment.
SG&A Expense: SG&A expense increased $16.1 million, or 6.3%, to $271.0 million
for the year ended December 31, 2019, compared to $254.9 million for the year
ended December 31, 2018. Employee costs increased $19.5 million driven by the
increased size of the workforce, offset partially by employee savings achieved
as a result of restructuring activities; and occupancy costs increased $10.3
million largely due to the expansion of our branch network and storage lots,
including a portion of the expected cost savings as we have now exited
approximately 85% of redundant real estate locations.
Discrete items included in SG&A expense decreased for the year ended December
31, 2019, compared to the year ended December 31, 2018, by $17.7 million as
decreases in transaction and integration costs related to the ModSpace and Acton
acquisitions and subsequent integrations of $20.1 million and $4.0 million,
respectively, were partially offset by increases in stock compensation expense
and other acquisition-related activities of $3.3 million and $3.1 million,
respectively.
The remaining increases of $4.0 million are primarily related to increased
professional fees, insurance, computer, travel, office and other expenses
related to operating a larger business as a result of our recent acquisitions
and our expanded employee base and branch network.
We estimate incremental cost synergies of approximately $36.0 million related to
the ModSpace and Acton acquisitions were realized in 2019, which compares to
approximately $6.4 million of synergies realized in 2018 related to the Acton
and Onsite Space LLC (d/b/a Tyson Onsite ("Tyson") acquisitions, bringing
cumulative synergies related to the Acton, Tyson, and ModSpace acquisitions from
the dates of the acquisitions to December 31, 2019 to approximately $42.4
million. These cost synergies are consistent with our integration plans and we
expect to achieve annual recurring cost savings of over $70.0 million once our
integration plans are fully executed and in our annual results.
Transaction Costs: Transaction costs decreased $20 million for the year ended
December 31, 2019. Transaction costs in 2018 were related to the ModSpace
acquisition that closed on August 15, 2018.
Other Depreciation and Amortization: Other depreciation and amortization
decreased $0.9 million, or 6.8%, to $12.4 million for the year ended December
31, 2019, compared to $13.3 million for the year ended December 31, 2018. The
decrease in other depreciation and amortization was driven primarily by lower
depreciation as a result of the decrease in property, plant and equipment.
Property, plant and equipment decreased as a result of the transfer of
non-producing branches to assets held for sale which are no longer depreciated
and the impact of the adoption of ASC 842 which resulted in the reversal of
branch assets previously accounted for as failed sale-lease back locations which
are compliant sales under ASC 842.
Impairment losses on Long-Lived Assets: Impairment losses on long-lived assets
were $2.8 million for the year ended December 31, 2019 as compared to $1.6
million for the year ended December 31, 2018. In 2019 and 2018, we reclassified
certain branch facilities from property, plant and equipment to assets held for
sale and recognized an impairment on these assets as the estimated fair value
was less than the carrying value of the facilities.
Lease Impairment Expense and Other Related Charges: Lease impairment expense and
other related charges was $8.7 million for the year ended December 31, 2019.
Effective January 1,2019, in connection with the adoption of ASC 842, we
recorded $4.2 million in ROU asset impairments, $2.6 million in rent on closed
locations and $1.9 million in lease termination fees.
Restructuring Costs: Restructuring costs were $3.8 million for the year ended
December 31, 2019 as compared to $15.5 million for the year ended December 31,
2018. The 2019 restructuring charges related primarily to employee termination
costs as a result of the ModSpace acquisition and integration. The 2018
restructuring charges are comprised of employee termination and lease breakage
costs related to the Acton and ModSpace acquisitions and integrations. Prior to
the adoption of ASC 842 effective January 1. 2019, the costs associated with
leases exited as a result of a restructuring plan were recorded in restructuring
expense.
Currency (Gains) Losses, net: Currency (gains) losses, net were a $0.7 million
gain for the year ended December 31, 2019 compared to a $2.5 million loss for
the year ended December 31, 2018. The decrease in currency losses was primarily
attributable to the impact of foreign currency exchange rate changes on loans
and borrowings and intercompany receivables and payables denominated in a
currency other than the subsidiaries' functional currency.
Other Income, Net: Other income, net was $2.2 million for the year ended
December 31, 2019 and $4.6 million for the year ended December 31, 2018. The
decrease in other income was driven by the receipt of insurance proceeds related
to
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assets damaged during Hurricane Harvey and other settlements which contributed
$5.6 million to other expense, net for the year ended December 31, 2018, offset
by the receipt of $2.4 million in insurance proceeds related to assets damaged
during hurricanes and the receipt of a $0.9 million settlement during the year
ended December 31, 2019.
Interest Expense: Interest expense increased $24.1 million, or 24.5%, to $122.5
million for the year ended December 31, 2019 from $98.4 million for the year
ended December 31, 2018. The increase in interest expense is attributable to the
increased financing costs for the full year in 2019, as a result of the ModSpace
acquisition which occurred in the third quarter of 2018, offset in part by the
one-time bridge financing and upfront commitment fees expensed in 2018 and lower
interest costs due to the redemption of our Unsecured Notes in June 2019. In the
third quarter of 2018, as part of financing the ModSpace acquisition, we upsized
our 2017 ABL Facility to $1.425 billion, issued the 2023 Secured Notes, and
issued the Unsecured Notes and incurred bridge financing fees and upfront
commitment fees of $20.5 million which were recorded to interest expense.
Fair Value (Gain) Loss on Common Stock Warrant Liabilities: The fair value of
common stock warrant liabilities decreased $133.5 million, to a $109.6 million
loss for the year ended December 31, 2019 from a $23.8 million gain for the year
ended December 31, 2018. The decrease was primarily attributable to the change
in estimated fair value of common stock warrant liabilities.
Loss on Extinguishment of Debt: $1.5 million related to the $30 million
redemption on December 13, 2019 of the 2022 Secured Notes at a redemption price
of 103% and $7.2 million related to the redemption on June 19, 2019 of the 2023
senior unsecured notes. Refer to Part II, Item 8, Note 11 for further
information.
Income Tax Benefit: Income tax benefit decreased $36.4 million to $2.2 million
for the year ended December 31, 2019 compared to $38.6 million for the year
ended December 31, 2018. The decrease in tax benefit was driven by the lower
loss before income tax for the year ended December 31, 2019, approximately $17.0
million less tax benefit, and discrete tax benefits in 2018 related to a
reduction in the valuation allowance, tax benefit of $11.9 million, and a tax
benefit of $7.0 million related to a change in the Company asserting indefinite
re-investment in certain of its foreign businesses.

Business Segments
As a result of the Merger, we evaluated our operating structure and,
accordingly, our segment structure and determined we operate in four reportable
segments as follows: NA Modular, NA Storage, UK Storage and Tank and Pump. The
NA Modular segment represents the activities of WillScot prior to the Merger.
The NA Storage, UK Storage and Tank and Pump segments align to the three
segments reported by Mobile Mini prior to the Merger.
The following tables and discussion summarize our reportable segment financial
information for the years ended December 31, 2020, 2019 and 2018. Consistent
with the presentation of our consolidated financial statements, the below
segment results only include results from ModSpace and Mobile Mini for the
periods subsequent to the respective acquisition and Merger and do not include
any unrealized incremental cost savings, revenue growth or pro forma adjustments
that management expects to result from the integration of the acquired and
merged businesses.
A Summary Business Segment Supplemental Unaudited Pro Forma Financial
Information section has been included in this MD&A in order to provide period
over period comparable financial information for the NA Storage, UK Storage and
Tank and Pump reporting segments, as these segments were not included in our
2019 reported results.

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Business Segment Results
Years Ended December 31, 2020, 2019 and 2018
                                                                           Year Ended December 31, 2020
(in thousands, except for units on rent
and rates)                                 NA Modular          NA Storage         UK Storage         Tank and Pump             Total
Revenue                                  $ 1,051,162          $ 221,829          $  46,361          $      48,293          $ 1,367,645
Gross profit                             $   451,642          $ 156,785          $  27,642          $      23,904          $   659,973
Adjusted EBITDA                          $   394,805          $  99,837    

$ 17,822 $ 17,843 $ 530,307 Capex for rental equipment

               $   153,327          $  14,969     

$ 1,693 $ 2,394 $ 172,383 Average modular space units on rent

           86,874              8,333              4,319                      -               99,526
Average modular space utilization rate          68.9  %            80.6  %            80.8  %                   -  %              70.2  %
Average modular space monthly rental
rate                                     $       685          $     526          $     367          $           -          $       658
Average portable storage units on rent        15,823             56,415             11,910                      -               84,148
Average portable storage utilization
rate                                            63.5  %            78.2  %            85.9  %                   -  %              75.9  %
Average portable storage monthly rental
rate                                     $       122          $     147          $      76          $           -          $       132
Average tank and pump solutions rental
fleet utilization based on original
equipment cost                                     -  %               -  %               -  %                61.7  %              61.7  %


                                                                              Year Ended December 31, 2019
(in thousands, except for units on rent
and rates)                                 NA Modular           NA Storage            UK Storage            Tank and Pump             Total
Revenue                                  $ 1,063,665          $        -            $        -            $         -             $ 1,063,665
Gross profit                             $   413,313          $        -            $        -            $         -             $   413,313
Adjusted EBITDA                          $   356,548          $        -            $        -            $         -             $   356,548
Capex for rental equipment               $   205,106          $        -            $        -            $         -             $   205,106
Average modular space units on rent           91,682                   -                     -                      -                  91,682
Average modular space utilization rate          72.0  %                -    %                -    %                 -     %              72.0  %
Average modular space monthly rental
rate                                     $       614          $        -            $        -            $         -             $       614
Average portable storage units on rent        16,878                   -                     -                      -                  16,878
Average portable storage utilization
rate                                            65.8  %                -    %                -    %                 -     %              65.8  %
Average portable storage monthly rental
rate                                     $       120          $        -            $        -            $         -             $       120
Average tank and pump solutions rental
fleet utilization based on original
equipment cost                                     -  %                -    %                -    %                 -     %                 -  %


                                                                            Year Ended December 31, 2018
(in thousands, except for units on rent
and rates)                                NA Modular          NA Storage            UK Storage            Tank and Pump            Total
Revenue                                  $ 751,412          $        -            $        -            $         -             $ 751,412
Gross profit                             $ 289,384          $        -            $        -            $         -             $ 289,384
Adjusted EBITDA                          $ 215,533          $        -            $        -            $         -             $ 215,533
Capex for rental equipment               $ 160,883          $        -            $        -            $         -             $ 160,883
Average modular space units on rent         70,257                   -                     -                      -                70,257
Average modular space utilization rate        71.6  %                -    %                -    %                 -     %            71.6  %
Average modular space monthly rental
rate                                     $     552          $        -            $        -            $         -             $     552
Average portable storage units on rent      15,480                   -                     -                      -                15,480
Average portable storage utilization
rate                                          68.9  %                -    %                -    %                 -     %            68.9  %
Average portable storage monthly rental
rate                                     $     119          $        -            $        -            $         -             $     119
Average tank and pump solutions rental
fleet utilization based on original
equipment cost                                   -  %                -    %                -    %                 -     %               -  %



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NA Modular Segment
Comparison of Years Ended December 31, 2020 and 2019
Revenue: Total revenue decreased $12.5 million, or 1.2%, to $1,051.2 million for
the year ended December 31, 2020 from $1,063.7 million for the year ended
December 31, 2019. The decrease was primarily driven by declines in new unit
sales revenue, which decreased $17.2 million, or 29.1%, compared to 2019, and by
declines in rental unit sales revenue, which decreased $9.4 million, or 23.3%.
Additionally, delivery and installation revenues declined $12.0 million, or
5.5%, driven by lower delivery volumes related to the impact of new project
cancellations and delays as a result of COVID-19 global pandemic disruption on
social and business activities. These declines were partially offset by an
increase in leasing revenue of $26.1 million, or 3.5%. Average modular space
monthly rental rates increased 11.6% for the year ended December 31, 2020 to
$685 driven by continuation of the long-term price optimization and VAPS
penetration opportunities across our portfolio. Improved pricing was partially
offset by lower volumes as average modular space units on rent decreased by
4,808 units, or 5.2% year over year. The decrease was driven primarily by lower
delivery volumes, including reduced demand for new projects since mid- March of
2020 as a result of COVID-19.
Gross Profit: Gross profit increased $38.3 million, or 9.3%, to $451.6 million
for the year ended December 31, 2020 from $413.3 million for the year ended
December 31, 2019. The increase in gross profit was driven by a $44.9 million
increase in leasing gross profit driven by improved pricing and VAPS, as well as
by lower modular leasing cost due to lower delivery demand in the second and
third quarter of 2020 and reduced variable costs. The increase in gross profit
from leasing revenues was partially offset by a $7.9 million increase in
depreciation of rental equipment primarily as a result of capital investments
made over the past twelve months in our existing rental equipment for the year
ended December 31, 2020.
Adjusted EBITDA: Adjusted EBITDA increased $38.3 million, or 10.7%, to
$394.8 million for the year ended December 31, 2020 from $356.5 million for the
year ended December 31, 2019. The increase was driven by higher leasing gross
profits discussed above, partially offset by increases in SG&A, excluding
discrete and other items, of $6.8 million. SG&A increases were primarily related
to increases in occupancy and office costs, insurance costs, and increased bad
debt expense, partially offset by decreased travel and entertainment costs due
to the COVID-19 pandemic.
Capex for rental equipment: Capex for rental equipment decreased $51.8 million,
or 25.3%, to $153.3 million for the year ended December 31, 2020 from
$205.1 million for the year ended December 31, 2019. Net CAPEX also decreased
$31.3 million, or 20.5%, to $121.3 million. The decreases for both were driven
by decreased spend for refurbishments and VAPS due to less constrained fleet and
reduced demand as a result of the COVID-19 pandemic, and cost improvements
experienced over the prior year related to better unit selection and scoping on
refurbishments. Decrease to Net CAPEX was also partially driven by lower demand
for sales of rental units.
Comparison of Years Ended December 31, 2019 and 2018
Revenue: Total revenue increased $312.3 million, or 41.6%, to $1,063.7 million
for the year ended December 31, 2019 from $751.4 million for the year ended
December 31, 2018. The increase was primarily the result of a 43.3% increase in
leasing and services revenue driven by increased volumes from acquisitions and
improved pricing. Improved volumes were driven by units acquired as part of the
ModSpace acquisition, as well as, increased modular delivery and installation
revenues on the combined rental fleet of 42.4% due to increased transaction
volumes and higher revenues per transaction. Average modular space monthly
rental rates increased 11.2% for the year ended December 31, 2019, and average
modular space units on rent increased 21,425 units, or 30.5%, due to the impact
of an additional 8.5 months of contribution from the ModSpace acquisition.
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, offset partially by the
average modular space monthly rental rates on acquired units for ModSpace. The
increase in leasing and services revenues was further complemented by an
increase of $5.5 million, or 10.3%, in new unit sales as compared to 2018. This
increase was primarily driven by increased sales as a result of the ModSpace
acquisition. Rental unit sales increased $15.3 million, or 61.2%, as compared to
2018.
Total average units on rent for the years ended December 31, 2019 and 2018 were
108,560 and 85,737, respectively. The increase was due to units acquired as part
of the ModSpace acquisition, with modular space average units on rent increased
by 21,425 units, or 30.5%, for the year ended December 31, 2019. Modular space
average monthly rental rates increased 11.2% for the year ended December 31,
2019. Portable storage average units on rent increased by 1,398 units, or 9.0%,
for the year ended December 31, 2019. Average portable storage monthly rental
rates increased 0.8% for the year ended December 31, 2019. The average modular
space unit utilization rate for the year ended December 31, 2019 was 72.0%, as
compared to 71.6% in 2018. The increase in average modular space utilization
rate was driven by a reduction in the combined modular space unit fleet size
across the combined WillScot and ModSpace fleet in 2019. The average portable
storage unit utilization rate during the year ended December 31, 2019 was 65.8%,
as compared to 68.9% in 2018. The decrease in average portable storage
utilization rate was driven by organic declines in the number of portable
storage average units on rent in the Modular - US segment.
Gross Profit: Our gross profit percentage was 38.9% and 38.5% for the years
ended December 31, 2019 and 2018, respectively. Our gross profit percentage,
excluding the effects of depreciation ("adjusted gross profit percentage"), was
55.3% and 54.7% for the years ended December 31, 2019 and 2018, respectively.
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Gross profit increased $123.9 million, or 42.8%, to $413.3 million for the year
ended December 31, 2019 from $289.4 million for the year ended December 31,
2018. The increase in gross profit is a result of a $291.5 million increase in
modular leasing and services revenue and increased new unit sales gross profit
of $0.2 million, offset by increases of $120.2 million in modular leasing and
services costs. Increases in modular leasing and services revenues and costs
were primarily as a result of increased revenues due to additional units on rent
as a result of recent acquisitions as well as increased margins due to favorable
average monthly rental rates on modular space units and increased delivery and
installation margins driven primarily by higher pricing per transaction. These
increases were partially offset by increased depreciation of $53.3 million as a
result of additional rental equipment acquired as part of the ModSpace
acquisition, as well as continued capital investment in our existing rental
equipment.
Adjusted EBITDA: Adjusted EBITDA increased $141.0 million, or 65.4%, to $356.5
million for the year ended December 31, 2019 from $215.5 million for the year
ended December 31, 2018. The increase was driven by higher revenues and gross
profits discussed above excluding depreciation, partially offset by increases in
SG&A expense, excluding discrete items, of $33.8 million primarily related to
the acquisitions of Acton and ModSpace during the year. Discrete items included
in SG&A expense decreased for the year ended December 31, 2019, compared to the
year ended December 31, 2018, by $17.7 million as decreases in transaction and
integration costs related to the ModSpace and Acton acquisitions and subsequent
integrations of $20.1 million and $4.0 million, respectively, were partially
offset by increases in stock compensation expense and other acquisition-related
activities of $3.3 million and $3.1 million, respectively. The remaining
increases of $4.0 million are primarily related to increased professional fees,
insurance, computer, travel, office and other expenses related to operating a
larger business as a result of our recent acquisitions and our expanded employee
base and branch network.
Capex for rental equipment: Capex for rental equipment increased $44.2 million,
or 27.5%, to $205.1 million for the year ended December 31, 2019 from $160.9
million for the year ended December 31, 2018. The increase was driven by
increased spend for new units, VAPS, and refurbishments as a result of the
increased fleet size due to the Acton, Tyson and ModSpace acquisitions. During
the year, our average modular space unit fleet grew over 30% in 2019 as compared
to 2018.

Supplemental Pro Forma Information
The following pro forma financial information has been prepared for WillScot
Mobile Mini, for the years ended December 31, 2020 and 2019. These pro forma
statements of operations present the historical consolidated statements of
operations of WillScot Mobile Mini, giving effect to the following items as if
they had occurred on January 1, 2019:
(i)   the Merger with Mobile Mini;
(ii)  borrowings under the Company's 2025 Secured Notes and the 2020 ABL
Facility;
(iii)  extinguishment of the Mobile Mini line of credit and senior notes assumed
in the Merger and subsequently repaid;
(iv)  repayment of the 2017 ABL Facility and the 2022 Secured Notes repaid
contemporaneously with the Merger;
(v)  the transaction costs incurred in connection with the Merger; and
(vi)  elimination of non-controlling interest in connection with the Sapphire
Exchange as contemplated by the Merger.
The adjustments presented on the pro forma financial statements have been
identified and presented to provide relevant information necessary for an
accurate understanding of the combined company following the transactions and
events described above. The pro forma financial information set forth below is
based upon available information and assumptions that we believe are reasonable
and is for illustrative purposes only. The financial results may have been
different if the transactions described above had been completed sooner. You
should not rely on the pro forma financial information as being indicative of
the historical results that would have been achieved if these transactions and
events had been completed as of January 1, 2019. The pro forma combined
financial information below should be read in conjunction with the consolidated
financial statements and related notes of the Company included elsewhere in this
Form 10-K. All pro forma adjustments and their underlying assumptions are
described more fully in the notes below.
Accounting Policies
During the preparation of these pro forma combined financial statements, we
assessed whether there were any material differences between the Company's
accounting policies and Mobile Mini's accounting policies. The assessment
performed did not identify any material differences and, as such, these pro
forma combined financial statements do not adjust for or assume any differences
in accounting policies between WillScot and Mobile Mini.
Pro forma Presentation
The following pro forma combined financial information and associated notes are
based on the historical financial statements of WillScot and Mobile Mini as
described below. In preparing the pro forma combined statements of operations
for the years ended December 31, 2020 and 2019, certain historical financial
information for Mobile Mini was reclassified to align to the reporting
classifications of WillScot.
The pro forma combined statements of operations for the years ended December 31,
2020 and 2019 are based on, derived from, and should be read in conjunction
with, WillScot's historical financial statements. The aforementioned pro forma
financial statements are also based on, derived from, and should be read in
conjunction with Mobile Mini's historical financial statements.
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                                                                       Year Ended December 31, 2020
                                           WillScot Mobile Mini   Historical Mobile
                                              Holdings Corp.             Mini                 Pro Forma              Pro Forma
(in thousands)                                 (as restated)      (as reclassified)          Adjustments             Combined
Revenues:
Leasing and services revenue:
Leasing                                   $    1,001,447          $       208,374          $           -          $  1,209,821
Delivery and installation                        274,156                   59,999                      -               334,155
Sales revenue:
New units                                         53,093                    8,402                      -                61,495
Rental units                                      38,949                    7,465                      -                46,414
Total revenues                                 1,367,645                  284,240                      -             1,651,885
Costs:
Costs of leasing and services:
Leasing                                          227,376                   28,584                      -               255,960
Delivery and installation                        220,102                   42,476                      -               262,578
Costs of sales:
New units                                         34,841                    5,457                      -                40,298
Rental units                                      24,772                    4,625                      -                29,397
Depreciation of rental equipment (b)             200,581                   15,360                  2,334               218,275
Gross profit                                     659,973                  187,738                 (2,334)              845,377

Expenses:

Selling, general and administrative              360,626                   96,170                      -               456,796
Transaction costs (a)                             64,053                   16,799                (80,852)                    -
Other depreciation and amortization (c)           43,249                   19,695                 11,397                74,341

Lease impairment expense and other
related charges                                    4,876                        -                      -                 4,876
Restructuring costs                                6,527                        -                      -                 6,527
Currency losses, net                                (355)                      39                      -                  (316)
Other income, net                                 (1,718)                     186                      -                (1,532)
Operating income                                 182,715                   54,849                 67,121               304,685
Interest expense (d)                             119,886                   16,974                 (9,808)              127,052
Fair value gain on common stock warrant                                     

-

liabilities                                       (3,461)                                              -                (3,461)
Loss on extinguishment of debt (e)                42,401                        -                (19,682)               22,719
Income before income tax                          23,889                   37,875                 96,611               158,375
Income tax (benefit) expense (f)                 (51,451)                  12,330                 73,670                34,549
Net income                                        75,340                   25,545                 22,941               123,826
Net income attributable to
non-controlling interest, net of tax (g)           1,213                        -                 (1,213)                    -
Net income attributable to WillScot
Mobile Mini                               $       74,127          $        25,545          $      24,154          $    123,826



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                                                                       Year Ended December 31, 2019
                                             Historical         Historical Mobile
                                              WillScot                 Mini                 Pro Forma              Pro Forma
(in thousands)                             (as restated)        (as reclassified)          Adjustments             Combined

Revenues:

Leasing and services revenue:
Leasing                                    $   744,185          $       447,636          $           -          $  1,191,821
Delivery and installation                      220,057                  141,988                      -               362,045
Sales revenue:
New units                                       59,085                   16,681                      -                75,766
Rental units                                    40,338                   13,713                      -                54,051
Total revenues                               1,063,665                  620,018                      -             1,683,683
Costs:
Costs of leasing and services:
Leasing                                        213,151                   67,396                      -               280,547
Delivery and installation                      194,107                   99,634                      -               293,741
Costs of sales:
New units                                       42,160                   10,885                      -                53,045
Rental units                                    26,255                    9,480                      -                35,735
Depreciation of rental equipment (b)           174,679                   31,802                  4,667               211,148
Gross profit                                   413,313                  400,821                 (4,667)              809,467

Expenses:

Selling, general and administrative            271,004                  208,461                      -               479,465
Other depreciation and amortization (c)         12,395                   38,781                 22,399                73,575

Impairment losses on long-lived assets           2,848                        -                      -                 2,848
Lease impairment expense and other related
charges                                          8,674                        -                      -                 8,674
Restructuring costs                              3,755                        -                      -                 3,755
Currency (gains) losses, net                      (688)                     274                      -                  (414)
Other (income) expense, net                     (2,200)                      99                      -                (2,101)
Operating income                               117,525                  153,206                (27,066)              243,665
Interest expense (d)                           122,504                   41,378                (37,756)              126,126
Fair value loss on common stock warrant
liabilities                                    109,622                        -                      -               109,622
Loss on extinguishment of debt (e)               8,755                      123                 (1,512)                7,366
(Loss) income before income tax               (123,356)                 111,705                 12,202                   551
Income tax (benefit) expense (f)                (2,191)                  27,971                  3,112                28,892
Net (loss) income                             (121,165)                  83,734                  9,090               (28,341)
Net loss attributable to non-controlling
interest, net of tax (g)                          (421)                       -                    421                     -
Net (loss) income attributable to WillScot
Mobile Mini                                $  (120,744)         $        83,734          $       8,669          $    (28,341)


Notes to Pro Forma Statements (a) Represents the elimination of discrete transaction costs expensed by WillScot Mobile

Mini as part of the Merger. (b) Represents the adjustment for depreciation of rental fleet relating to the estimated

increase in fair value purchase accounting adjustments as a result of the Merger. (c) Represents the differential in other depreciation and amortization expense related

to the estimated fair value purchase accounting adjustments as a result of the

       Merger.


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(d) Reflects the incremental interest expense related to our debt structure after the

Merger as though the following had occurred on January 1, 2019 (i) borrowings under

the 2020 ABL Facility, (ii) borrowings under the 2025 Secured Notes, (iii) repayment

of the 2017 ABL Facility, (iv) repayment of the 2022 Secured Notes and repayment of

the Mobile Mini credit facility and secured notes (the "Mobile Mini debt"). (e) Represents the elimination of the loss on extinguishment of debt in connection with

the repayment of the 2022 Secured Notes and the 2017 ABL Facility in 2020 and partial

redemption of the 2022 Secured Notes in 2019. (f) Reflects the adjustment to recognize the income tax impacts of the unaudited pro forma

adjustments for which a tax expense is recognized using a US federal and state

statutory tax rate of 25.5%. This rate may vary from the effective tax rates of the

historical and combined businesses. In addition, the year ended December 31, 2020

included an adjustment of $56.8 million to eliminate the reversal of valuation

allowance as a result of reassessment of the realizability of deferred tax assets as a

result of the Merger. (g) Reflects the pro forma adjustment for the extinguishment of non-controlling interest

as a result of the Sapphire Exchange on June 30, 2020.

The pro forma adjustment to interest expense consists of the following:

                                             Year Ended December 31,
(in thousands)                                 2020               2019
ABL Facility interest                  $     (2,561)           $ (16,422)
2022 Secured Notes interest                 (10,631)             (23,507)
2025 Secured Notes interest                  18,247               39,813
Mobile Mini debt interest                   (15,921)             (39,672)
Deferred financing fee amortization           1,058                2,032
Net pro forma adjustment               $     (9,808)           $ (37,756)



Reconciliation of Pro Forma Adjusted EBITDA
The following unaudited table provides a reconciliation of Net income to pro
forma unaudited adjusted EBITDA:
                                                                   Year Ended December 31,
(in thousands)                                                2020                          2019
                                                          (as restated)                 (as restated)
Net income (loss)                                   $          123,826              $          (28,341)
Loss on extinguishment of debt                                  22,719                           7,366
Income tax expense                                              34,549                          28,892
Interest expense                                               127,052                         126,126
Depreciation and amortization                                  292,616                         284,723
Fair value (gain) loss on common stock warrant
liabilities                                                     (3,461)                        109,622
Currency gains, net                                               (316)                           (414)
Goodwill and other impairment charges                                -                           2,848
Restructuring costs, lease impairment expense,
other related charges                                           11,403                          12,429
Transaction fees                                                     -                           3,129
Integration costs                                               18,338                          26,607
Stock compensation expense                                      15,280                          21,807
Other                                                            4,459                           4,647
Adjusted EBITDA                                     $          646,465              $          599,441



Summary Business Segment Supplemental Pro Forma Financial Information
As a result of the Merger and the significant related financing transactions, we
believe presenting supplemental pro forma financial information is beneficial to
the readers of the financial statements. The following table sets forth key
metrics used by management to run the business on a pro forma basis as if the
Merger and related financing transactions had occurred on January 1, 2019. Refer
to the Supplemental Pro Forma Financial Information section below for the full
reconciliation of the statements of operations.
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Following the Merger, we modified our management structure and expanded from two
reporting segments to four segments: NA Modular, NA Storage, UK Storage and Tank
and Pump. Prior to the Merger, WillScot had two reportable segments, US Modular
and Other North America Modular. These two segments were combined to create the
new NA Modular segment, which represents the legacy WillScot operations. The
other new segments, NA Storage, UK Storage, and Tank and Pump align to the
legacy operations and segments reported by Mobile Mini. The new reporting
segments are aligned with how we operate and analyze our business results.
Pro Forma Comparison of Years ended December 31, 2020 and 2019
                                     Pro Forma Combined Year Ended December
                                                       30,                                        2020 vs. 2019
(in thousands)                            2020                   2019                  $ Change                 % Change
                                      (as restated)          (as restated)
Revenue                              $  1,651,885          $    1,683,683          $     (31,798)                      (1.9) %

Selling, general and administrative $ 456,796 $ 479,465

       $     (22,669)                      (5.0) %
expenses
Net income                           $    123,826          $      (28,341)         $     152,167                      122.9  %
Adjusted EBITDA                      $    646,465          $      599,441          $      47,024                        7.3  %

Other Financial Data:
Adjusted EBITDA - NA Modular         $    394,805          $      356,548          $      38,257                        9.7  %
Adjusted EBITDA - NA Storage                 184,601              169,697                 14,904                        8.1  %
Adjusted EBITDA - UK Storage                  31,080               25,758                  5,322                       17.1  %
Adjusted EBITDA - Tank and Pump               35,979               47,438                (11,459)                     (31.8) %
Combined Adjusted EBITDA             $    646,465          $      599,441          $      47,024                        7.3  %



NA Modular - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2020:
(in thousands, except for units on
rent and
monthly rental rate)                      Q1                 Q2                 Q3                 Q4                Total
Revenue                              $ 255,821          $ 256,862          $ 267,867          $ 270,612          $ 1,051,162
Gross profit                         $ 106,190          $ 109,964          $ 112,079          $ 123,409          $   451,642
Adjusted EBITDA                      $  89,544          $  97,520          $ 100,281          $ 107,460          $   394,805
Capex for rental equipment           $  39,648          $  40,034          $  34,249          $  39,396          $   153,327
Average modular space units on rent     87,988             87,096             86,400             86,011               86,874
Average modular space utilization
rate                                      69.2  %            68.5  %            68.3  %            68.2  %              68.9  %
Average modular space monthly rental
rate                                 $     653          $     669          $     693          $     724          $       685
Average portable storage units on
rent                                    16,346             15,869             15,473             15,603               15,823
Average portable storage utilization
rate                                      64.1  %            62.5  %            61.3  %            62.6  %              63.5  %
Average portable storage monthly
rental rate                          $     119          $     120          $     124          $     124          $       122



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Pro Forma Quarterly Results for the year ended December 31, 2019:
(in thousands, except for units on
rent and
monthly rental rate)                      Q1                 Q2                 Q3                 Q4                Total
Revenue                              $ 253,685          $ 263,713          $ 268,222          $ 278,045          $ 1,063,665
Gross profit                         $ 103,331          $ 101,484          $  99,308          $ 109,190          $   413,313
Adjusted EBITDA                      $  83,354          $  87,554          $  87,424          $  98,216          $   356,548
Capex for rental equipment           $  51,873          $  61,215          $  47,789          $  44,229          $   205,106
Average modular space units on rent     93,309             92,300             91,233             90,013               91,682
Average modular space utilization
rate                                      72.4  %            71.9  %            71.2  %            70.7  %              72.0  %
Average modular space monthly rental
rate                                 $     575          $     611          $     630          $     641          $       614
Average portable storage units on
rent                                    17,419             16,544             16,416             16,944               16,878
Average portable storage utilization
rate                                      66.1  %            63.3  %            63.0  %            66.1  %              65.8  %
Average portable storage monthly
rental rate                          $     119          $     121          $     123          $     118          $       120



The NA Modular segment represents the activities of WillScot prior to the
Merger. As a result, there are no differences between pro forma results and
actual results on a reported basis. Please see comparison of results for the
years ended December 31, 2020 and 2019 within "Business Segment Results" above.
NA Storage - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2020:
(in thousands, except for units on
rent and
monthly rental rate)                      Q1                Q2                 Q3                 Q4               Total
Revenue                              $ 103,495          $ 92,826          $ 104,493          $ 117,336          $ 418,150
Gross profit                         $  71,400          $ 66,639          $  73,384          $  83,401          $ 294,824
Adjusted EBITDA                      $  43,994          $ 40,770          $  46,465          $  53,372          $ 184,601
Capex for rental equipment           $   5,200          $  7,272          $   7,234          $   7,735          $  27,441
Average modular space units on rent     15,509            15,757             16,383             16,948             16,152
Average modular space utilization
rate                                      77.8  %           78.6  %            80.4  %            80.9  %            79.4  %
Average modular space monthly rental
rate                                 $     497          $    463          $     505          $     547          $     504
Average portable storage units on
rent                                   105,441           101,463            105,221            120,439            108,167
Average portable storage utilization
rate                                      73.1  %           70.6  %            73.4  %            83.0  %            75.1  %
Average portable storage monthly
rental rate                          $     146          $    143          $     145          $     150          $     146



Pro Forma Quarterly Results for the year ended December 31, 2019:
(in thousands, except for units on
rent and
monthly rental rate)                     Q1                Q2                 Q3                 Q4               Total
Revenue                              $ 99,565          $ 98,045          $ 104,641          $ 113,262          $ 415,513
Gross profit                         $ 68,357          $ 66,523          $  73,302          $  80,740          $ 288,922
Adjusted EBITDA                      $ 37,957          $ 37,474          $  43,084          $  51,182          $ 169,697
Capex for rental equipment           $ 11,841          $ 16,166          $  11,107          $   7,200          $  46,314
Average modular space units on rent    15,974            15,522             15,835             16,192             15,881
Average modular space utilization
rate                                     80.5  %           80.5  %            80.9  %            80.4  %            80.6  %
Average modular space monthly rental
rate                                 $    413          $    449          $     470          $     502          $     458
Average portable storage units on
rent                                  107,658           105,770            109,723            119,642            110,728
Average portable storage utilization
rate                                     76.1  %           74.5  %            76.8  %            82.5  %            77.5  %
Average portable storage monthly
rental rate                          $    144          $    143          $     145          $     151          $     146



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Pro Forma Comparison of Years ended December 31, 2020 and 2019
NA Storage
Revenue: Total revenue increased $2.7 million, or 0.6%, to $418.2 million for
the year ended December 31, 2020 from $415.5 million for the year ended December
31, 2019. Leasing revenues for the year ended December 31, 2020 increased
year-over-year by $4.8 million, or 1.6%, resulting from the combination of
increased revenues in the first quarter, decreased year-over-year revenue in the
second quarter due to the impact of COVID-19, flat year-over-year revenue in the
third quarter and increased revenues in the fourth quarter, when compared to the
prior-year periods. Modular space average units on rent increased 1.7% compared
to 2019 and average modular space monthly rental rates increased 10.0%
year-over-year but were offset by a 2.3% decrease in average portable storage
units on rent. Delivery and installation revenues decreased $7.3 million
year-over year. Beginning late in the first quarter, the COVID-19 pandemic
resulted in fewer new units placed on rent as well as a decrease in returned
units leading to a year-over-year decrease in our delivery and installation
revenues. Sales revenues increased $5.1 million compared to the prior year.
Gross Profit: Gross profit increased $5.9 million, or 2.0%, for the year ended
December 31, 2020 to $294.8 million from $288.9 million for the year ended
December 31, 2019. This gross profit increase was driven primarily by a $6.8
million, or 2.5%, year-over-year increase within leasing and a $1.3 million
increase related to sales, offset by decreased delivery and installation gross
profit of $1.5 million. Within leasing activity, reduced expenses of $2.0
million from strong cost management in response to the COVID-19 pandemic
combined with the $4.8 million revenue increase resulted in a $6.8 million
year-over-year increase in leasing gross profit. Reduced expenses in this area
include lower maintenance costs of $2.0 million and reductions in personnel
costs. For delivery and installation, gross profit decreased $1.5 million as the
effect of reduced revenue was largely mitigated by proactive cost management
resulting in a $3.0 million reduction in outside hauling expense combined with
reduced salaries for drivers and lower fuel costs. Sales gross profit increased
$1.3 million on larger sales volume.
Adjusted EBITDA: Adjusted EBITDA increased $14.9 million, or 8.8%, to $184.6
million for the year ended December 31, 2020 from $169.7 million for the year
ended December 31, 2019 and the margin expanded to 44.1% from 40.8%. The
increase in Adjusted EBITDA was driven by a reduction in SG&A expense and the
higher gross profit discussed above. Excluding integration and stock-based
compensation, SG&A expense decreased due to reduced costs for personnel of
approximately $8.0 million and $2.3 million due to curtailed travel, partially
offset by increased occupancy and other costs.
Capex for Rental Equipment: Purchases of rental equipment and refurbishments of
$27.4 million for the year ended December 31, 2020 were $18.9 million lower than
for the year ended December 31, 2019. Rental fleet expenditures were reduced
significantly during the year ended December 31, 2020 in response to COVID-19,
especially after the first quarter of 2020, and were primarily to meet demand
for specific products, largely ground level offices.
UK Storage - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2020:
(in thousands, except for units on
rent and
monthly rental rate)                     Q1                Q2                Q3                Q4               Total
Revenue                              $ 20,197          $ 17,154          $ 21,653          $ 24,708          $ 83,712
Gross profit                         $ 11,372          $ 10,991          $ 12,671          $ 14,971          $ 50,005
Adjusted EBITDA                      $  6,405          $  6,853          $  8,306          $  9,516          $ 31,080
Capex for rental equipment           $    337          $    522          $    677          $  1,016          $  2,552
Average modular space units on rent     7,850             7,912             8,444             8,834             8,262
Average modular space utilization
rate                                     74.2  %           74.6  %           79.1  %           82.4  %           77.6  %
Average modular space monthly rental
rate                                 $    326          $    313          $    356          $    377          $    344
Average portable storage units on
rent                                   23,328            22,870            23,146            24,496            23,462
Average portable storage utilization
rate                                     83.7  %           82.2  %           83.2  %           88.6  %           84.4  %
Average portable storage monthly
rental rate                          $     73          $     70          $     75          $     78          $     74



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Pro Forma Quarterly Results for the year ended December 31, 2019:
(in thousands, except for units on
rent and
monthly rental rate)                     Q1                Q2                Q3                Q4               Total
Revenue                              $ 20,959          $ 20,920          $ 20,499          $ 20,179          $ 82,557
Gross profit                         $ 11,129          $ 11,367          $ 11,106          $ 11,329          $ 44,931
Adjusted EBITDA                      $  6,070          $  6,396          $  6,704          $  6,588          $ 25,758
Capex for rental equipment           $    921          $  1,190          $  1,546          $    561          $  4,218
Average modular space units on rent     8,440             8,460             8,360             8,008             8,316
Average modular space utilization
rate                                     79.0  %           79.0  %           78.0  %           75.4  %           77.8  %
Average modular space monthly rental
rate                                 $    319          $    327          $    320          $    336          $    326
Average portable storage units on
rent                                   23,910            23,594            23,927            24,910            24,087
Average portable storage utilization
rate                                     85.9  %           85.0  %           85.9  %           88.9  %           86.4  %
Average portable storage monthly
rental rate                          $     70          $     70          $     69          $     72          $     70



Pro Forma Comparison of Years ended December 31, 2020 and 2019
UK Storage
Revenue: Total revenue increased $1.1 million, or 1.3%, to $83.7 million for the
year ended December 31, 2020 from $82.6 million for the year ended December 31,
2019. Currency fluctuations were immaterial for the current period. Leasing
revenues increased 4.0% and delivery and installation revenues decreased 9.8%.
Within leasing activity, average monthly rental rates for modular space units
and portable storage units increased 5.5% and 5.7% year-over-year, respectively.
These increases were partially offset by a 0.6% decline in modular space average
units on rent and a 2.6% decrease in average portable storage units on rent. The
decrease in delivery and installation revenues is due to an overall decrease in
newly placed and returned units primarily resulting from a slower economy during
the current-year period as a result of COVID-19. Sales revenues increased $0.6
million compared to the prior year.
Gross Profit: Gross profit increased $5.1 million, or 11.4%, to $50.0 million
for the year ended December 31, 2020 from $44.9 million for the year ended
December 31, 2019. Proactive cost management fully mitigated the lower delivery
and installation revenues and included reduced delivery and installation cost of
$2.3 million. Gross profit on leasing increased 6.9% year-over-year. Gross
profit on sales increased $1.3 million. Depreciation on rental equipment also
decreased by $0.2 million.
Adjusted EBITDA: Adjusted EBITDA increased $5.3 million, or 20.5%, to $31.1
million for the year ended December 31, 2020 from $25.8 million for the year
ended December 31, 2019 and the margin expanded to 37.1% from 31.2%. The
increase resulted primarily from the favorable gross profit discussed above and
decreased SG&A expense related largely to lower travel costs.
Capex for Rental Equipment: Purchases of rental equipment and refurbishments of
$2.6 million for the year ended December 31, 2020 were $1.6 million lower than
for the year ended December 31, 2019. Rental fleet expenditures were reduced in
2020 in response to COVID-19.
Tank and Pump - Quarterly Results
Pro Forma Quarterly Results for the year ended December 31, 2020:
(in thousands, except for units on rent
and
monthly rental rate)                         Q1                Q2                Q3                Q4               Total
Revenue                                  $ 26,884          $ 23,684          $ 23,302          $ 24,991          $ 98,861
Gross profit                             $ 13,279          $ 11,723          $ 11,430          $ 12,474          $ 48,906
Adjusted EBITDA                          $  9,477          $  8,659          $  8,507          $  9,336          $ 35,979
Capex for rental equipment               $  4,514          $    941          $    431          $  1,963          $  7,849
Average tank and pump solutions rental
fleet utilization based on original
equipment cost                               66.4  %           60.5  %           58.2  %           65.2  %           62.6  %



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Pro Forma Quarterly Results for the year ended December 31, 2019:
(in thousands, except for units on rent
and
monthly rental rate)                         Q1                Q2                Q3                Q4               Total
Revenue                                  $ 30,934          $ 32,961          $ 30,185          $ 27,867          $ 121,947
Gross profit                             $ 16,210          $ 16,643          $ 15,573          $ 13,875          $  62,301
Adjusted EBITDA                          $ 12,203          $ 13,037          $ 11,885          $ 10,313          $  47,438
Capex for rental equipment               $ 10,254          $  6,025          $  2,197          $  1,843          $  20,319
Average tank and pump solutions rental
fleet utilization based on original
equipment cost                               74.1  %           73.5  %           68.3  %           68.6  %            71.1  %



Pro Forma Comparison of Years ended December 31, 2020 and 2019
Tank and Pump
Revenue: Total revenue decreased $23.0 million, or 18.9%, to $98.9 million for
the year ended December 31, 2020 from $121.9 million for the year ended December
31, 2019. Industrial softening, which began in the second half of 2019, was
exacerbated in 2020 by an oversupply of oil leading to lower oil prices.
Further, the effects of COVID-19 have resulted in decreased demand for oil. The
business environment during 2020 resulted in reduced demand for our products as
utilization based on OEC reduced from 71.1% for the year ended December 31, 2019
to 62.6% for year ended December 31, 2020 and experienced a decrease in average
rental rates compared to the prior-year period. However, utilization levels
stabilized sequentially during the third quarter of 2020 and increased 700 bps
to 65.2% in the fourth quarter as compared to the third quarter. Year-over-year
leasing revenue decreased $15.2 million, or 18.7%, while delivery and
installation revenue decreased $6.8 million, or 19.3%. Sales revenues decreased
$1.0 million compared to the prior-year period.
Gross Profit: Gross profit decreased $13.4 million, or 21.5%, for the year ended
December 31, 2020 to $48.9 million from $62.3 million for the year ended
December 31, 2019. Gross profit for leasing activity decreased $12.2 million
driven by the decreased revenue as discussed above offset by reduced costs of
$3.1 million, including decreased repairs and maintenance of $1.2 million and
lower re-rent expense due to the lower activity. Gross profit for delivery and
installation activity decreased $2.1 million reflecting the lower revenues
offset by a $4.7 million decrease in expense, including $1.9 million less
expense for outside hauling and a reduction in employee costs for delivery
drivers. Depreciation of rental equipment decreased $1.4 million.
Adjusted EBITDA: Adjusted EBITDA decreased $11.4 million, or 24.1%, to $36.0
million for the year ended December 31, 2020 from $47.4 million for the year
ended December 31, 2019 and the margin contracted to 36.4% from 38.9%. The
decrease in Adjusted EBITDA was driven by the lower gross profit discussed
above, offset by a $3.4 million reduction SG&A expense including $2.0 million in
decreased employee costs.
Capex for rental equipment: Purchases of rental equipment and refurbishments
were reduced significantly during 2020 due to the unfavorable environment for
this segment. For the year ended December 31, 2020, expenditures of $7.8 million
were $12.5 million lower than for the year ended December 31, 2019.

Liquidity and Capital Resources
Overview
WillScot Mobile Mini is a holding company that derives all of its operating cash
flow from its operating subsidiaries. Our principal sources of liquidity include
cash generated by operating activities from our subsidiaries, borrowings under
the 2020 ABL Facility, and sales of equity and debt securities. We believe that
our liquidity sources and operating cash flows are sufficient to address our
operating, debt service and capital requirements over the next twelve months.
We have been consistently engaged in the debt and equity capital markets both
opportunistically and as necessary to support the growth of our business,
desired leverage levels, and other capital allocation priorities. Subsequent to
the Merger, we believe we have ample liquidity in the 2020 ABL Facility to
support both organic operations and other capital allocation priorities as they
arise.
We continue to review available acquisition opportunities with the awareness
that any such acquisition may require us to incur additional debt to finance the
acquisition and/or to issue shares of our Common Stock or other equity
securities as acquisition consideration or as part of an overall financing plan.
In addition, we will continue to evaluate options to improve our liquidity, such
as the issuance of additional unsecured and secured debt, equity securities
and/or equity-linked securities. There can be no assurance as to the timing of
any such issuance. If we obtain additional capital by issuing equity, the
interests of our existing stockholders will be diluted. If we incur additional
indebtedness, that indebtedness may contain significant financial and other
covenants that may significantly restrict our operations. We cannot assure you
that we could obtain refinancing or additional financing on favorable terms or
at all. From time to time, we may also seek to streamline our capital structure
and improve our financial position through refinancing or restructuring our
existing debt or retiring certain of our securities for cash or other
consideration.
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In anticipation of the Merger, on June 15, 2020, we completed a private offering
of $650.0 million in aggregate principal amount of the 2025 Secured Notes. The
proceeds from the 2025 Secured Notes of $650.0 million were used to consummate
the Merger and the related financing transactions, which included repayment of
the 2022 Secured Notes, repayment of the Mobile Mini senior notes, and payment
of certain fees and expenses related to the Merger and the related financing
transactions. The 2025 Secured Notes mature on June 15, 2025 and bear interest
at a rate of 6.125% per annum. Interest is payable semi-annually on June 15 and
December 15 of each year, beginning December 15, 2020.
On July 1, 2020, in connection with the completion of the Merger, Holdings,
WSII, and certain of its subsidiaries, entered into the 2020 ABL Facility, which
provides for revolving credit facilities in the aggregate principal amount of up
to $2.4 billion, consisting of: (i) a senior secured asset-based US dollar
revolving credit facility in the aggregate principal amount of $2.0 billion (the
"US Facility"), available to WSII and certain of its subsidiaries (collectively,
the "US Borrowers"), and (ii) a $400 million senior secured asset-based
multicurrency revolving credit facility (the "Multicurrency Facility") together
with the US Facility (collectively, the "2020 ABL Facility"), available to be
drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros by the
US Borrowers, and certain of WSII's wholly-owned subsidiaries organized in
Canada and in the UK. Borrowing availability under the 2020 ABL Facility is
equal to the lesser of $2.4 billion and the applicable borrowing bases. The
borrowing bases are a function of, among other things, the value of the assets
in the relevant collateral pool of which our rental equipment represents the
largest component. On July 1, 2020, in connection with the completion of the
Merger, approximately $1.47 billion of proceeds from the 2020 ABL Facility were
used to repay the 2017 ABL Facility, repay Mobile Mini's asset-backed lending
facility, and pay fees and expenses related to the Merger and the related
financing transactions. On August 11, 2020, we redeemed $49.0 million of our
2023 Secured Notes at a redemption price of 103.0% plus accrued and unpaid
interest using proceeds from the 2020 ABL Facility. At December 31, 2020, we had
$1.1 billion of available borrowing capacity under the 2020 ABL Facility.
On August 25, 2020, we completed a private offering of $500.0 million in
aggregate principal amount of the 2028 Secured Notes. Proceeds from the 2028
Secured notes were used to repay the $441.0 million remaining outstanding
principal of the 2023 Secured Notes at a redemption price of 103.438% plus
accrued and unpaid interest. The 2028 Secured Notes mature on August 15, 2028
and bear interest at a rate of 4.625% per annum. Interest is payable
semi-annually on August 15 and February 15 of each year, beginning February 25,
2021.
COVID-19 Impact on Liquidity
Although there is uncertainty related to the continued impact of the COVID-19
pandemic on future results, we believe our predictable lease revenue streams
underpinned by long lease durations, combined with steps we have taken to reduce
cost and capital spending, increased our internally generated free cash flow in
2020, and we expect our free cash flow generation to continue to increase.
Further, the approximately $1.1 billion of availability under our 2020 ABL
Facility as of December 31, 2020, provides additional liquidity in excess of our
free cash flow generation. We continue to manage all aspects of our business
including, but not limited to, monitoring the financial health of our customers,
suppliers and other third-party relationships, actively managing our cost
structure, reducing or delaying capital spending and developing new
opportunities for growth. We believe that the actions we have taken in recent
years to increase our scale and competitive position and strengthen our balance
sheet have positioned us well to manage through periods of economic disruption.
Cash Flows
Significant factors driving our liquidity include cash flows generated from
operating activities and capex. Our ability to fund our capital needs will be
affected by our ongoing ability to generate cash from operations and access to
capital markets.
The following summarizes our change in cash and cash equivalents for the periods
presented:
                                                                       Year Ended December 31,
(in thousands)                                              2020               2019                2018
Net cash from operating activities                      $ 304,812          $ 172,566          $     37,149
Net cash from investing activities                       (125,360)          (152,582)           (1,217,202)
Net cash from financing activities                       (158,958)           (26,063)            1,180,037
Effect of exchange rate changes on cash and cash            1,398                166                  (211)

equivalents

Net change in cash and cash equivalents                 $  21,892          

$ (5,913) $ (227)

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Comparison of the Years Ended December 31, 2020 and 2019 and December 31, 2019
and 2018
Cash Flows from operating activities
Cash provided by operating activities for the year ended December 31, 2020 was
$304.8 million as compared to $172.6 million for the year ended December 31,
2019, an increase of $132.2 million. The increase in cash provided by operating
activities was driven by an increase of $136.7 million of net income, adjusted
for non-cash items, primarily due to the impact of the Merger on revenues and
gross profit. This was partially offset by a decrease of $4.4 million in the net
movements of the operating assets and liabilities which was primarily
attributable to a decrease in accounts payable and other accrued liabilities of
$20.9 million, an increase in prepaid and other assets of $12.7 million, and a
decrease in accrued interest of $7.7 million, compared to the same period in
2019. This was partially offset by a decrease in cash used from accounts
receivable of $36.9 million compared to the same period in 2019.
Cash provided by operating activities for the year ended December 31, 2019 was
$172.6 million as compared to $37.1 million for the year ended December 31,
2018, an increase of $135.5 million. This increase was primarily due to an
increase in net income of $159.1, million, adjusted for non-cash items, in 2019
as compared to 2018, as a result of the impact of the ModSpace acquisition on
operations, which is reflected in our results for all of 2019, but is only
included for four and a half months in 2018. This increase in net income,
adjusted for non-cash items, was partially offset by a decrease of $23.7 million
in the net movements of the operating assets and liabilities. The decrease in
operating assets and liabilities was attributable to an increase in trade
receivables and an increase in cash interest payments during the year ended
December 31, 2019, partially offset by an increase in accounts payable and
accrued liabilities.
Cash flows from investing activities
Cash used in investing activities for the year ended December 31, 2020 was
$125.4 million as compared to $152.6 million for the year ended December 31,
2019, a decrease of $27.2 million. The decrease in cash used in investing
activities was driven by a $32.7 million decrease in cash used for purchase of
rental equipment and refurbishments. Cash used for purchase of rental equipment
and refurbishments decreased compared to 2019 as fleet was less constrained due
to reduced utilization and reduced demand for new project deliveries as a result
of the COVID-19 pandemic and the current period impact of prior year spend.
Additionally, $17.2 million of cash was acquired as part of the Merger. This
increase was partially offset by an $11.4 million decrease in proceeds from sale
of property, plant and equipment, an increase of $8.2 million on purchases of
property, plant and equipment and a $3.2 million decrease in proceeds from the
sale of rental equipment. Proceeds from sale of rental equipment decreased
compared to the prior year due to lower sales demand.
Cash used in investing activities for the year ended December 31, 2019 was
$152.6 million as compared to $1,217.2 million for the year ended December 31,
2018, a decrease of $1,064.6 million. The decrease in cash used in investing
activities was driven by a $1,083.1 million decrease in cash used for business
acquisitions, an $11.3 million increase in proceeds from the sale of rental
equipment, and an $18.1 million increase in proceeds from the sale of property,
plant, and equipment. The decrease in cash used in business acquisitions was due
to the acquisition of ModSpace during the year ended December 31, 2018, with no
business acquisitions during the year ended December 31, 2019. Proceeds from the
sale of rental equipment increased due to increased sales volume as a result of
the acquisition of ModSpace. Proceeds from the sale of property, plant and
equipment increased primarily as a result of the sale of non-operating branch
locations during the year ended December 31, 2019, as part of the ongoing
integration and consolidation process following the acquisition of ModSpace. The
overall decrease in cash used in investing activities for the year ended
December 31, 2019 was partially offset by an increase in capex of $44.2 million
in 2019, which was primarily driven by increased refurbishments of existing
fleet, following our recent acquisitions, and purchases of VAPS to drive revenue
growth.
Cash flows from financing activities
Cash used in financing activities for the year ended December 31, 2020 was
$159.0 million as compared to $26.1 million cash provided by financing
activities for the year ended December 31, 2019, an increase of $132.9 million
cash used. The increase in cash used in financing activities was driven by an
increase of $62.9 million for payment of financing costs, an increase of $27.4
million for payment of debt extinguishment costs, payment of $21.8 million for
the repurchase and cancellation of warrants, payment of $4.2 million for Common
Stock issuance costs, an increase of $12.8 million of taxes paid on employee
stock awards, and an increase of $8.4 million of principal payments on finance
lease obligations. Additionally, there was a net increase of $5.1 million of
payments on borrowings, comprised of an increase in repayments of borrowings of
$2,239.7 million that was partially offset by an increase receipts from
borrowings of $2,234.6 million. The cash used in financing activities was
partially offset by an increase in receipts from the issuance of Common Stock
from the exercise of options and warrants of $9.7 million.
Cash used in financing activities for the year ended December 31, 2019 was $26.1
million as compared to $1,180.0 million cash provided by financing activities
for the year ended December 31, 2018, an increase of $1,206.1 million cash used.
The increase in cash used by financing activities is primarily due to a
reduction in borrowings, net of repayments of $1,086.0 million, a decrease in
receipts from the issuance of Common Stock of $146.3 million primarily related
to the financing of the ModSpace acquisition and an increase in debt
extinguishment costs of $7.1 million. In connection with the ModSpace
acquisition, in 2018 we borrowed an aggregate of $1,097.1 million related to the
issuance of the 2023 Secured Notes and the Unsecured Notes, and through the
up-sized 2017 ABL Facility. The 2018 stock issuance was used to finance the
acquisition of ModSpace. We paid redemption premium costs of $7.1 million in
2019 as a result of the redemption of the Unsecured Notes and the $30.0 million
prepayment on the 2022 Secured Notes. The decrease in cash provided by financing
activities was
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partially offset by a decrease in financing fees payments of $34.0 million due
to the significant fees incurred in 2018 as part of the financing activities
noted above in connected with the acquisition of ModSpace.

Contractual Obligations
The following table presents information relating to our contractual obligations
and commercial commitments as of December 31, 2020:
                                                           Less than 1      

Between 1 to 3 Between 3 to 5 More than 5 (in thousands)

                           Total                year                years                 years                years
Long-term indebtedness, including
current portion and interest (a)(b)  $ 2,915,812          $   87,613          $   262,839          $  1,999,918          $  565,442
Payroll tax withholding (c)               10,350               5,175                5,175                     -     -             -
Operating lease liabilities              279,677              60,120               92,258                59,878              67,421
Total                                $ 3,205,839          $  152,908          $   360,272          $  2,059,796          $  632,863


(a) Long-term indebtedness includes borrowings and interest under the 2020 ABL Facility,

the 2025 Secured Notes, the 2028 Secured Notes, and finance leases. (b) Includes the obligations under our interest rate swap agreement that effectively

convert $400 million in aggregate notional amount of variable-rate debt under the

Company's 2020 ABL Facility into fixed-rate debt. The future obligations under the

interest rate swaps were calculated using the 1-month LIBOR rate as of December 31,

2020.

(c) Amounts relate to the delay in payment of employer payroll taxes in accordance with

the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the ''CARES Act'').



At December 31, 2020, in addition to the above contractual obligations, we had
$14.5 million of potential long-term tax liabilities, including interest and
penalties, related to uncertain tax positions. Because of the high degree of
uncertainty regarding the future cash flows associated with these potential
long-term tax liabilities, we are unable to estimate the years in which
settlement will occur with the respective taxing authorities.

Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future material effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capex or capital resources.

Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition, results of operations,
liquidity and capital resources is based on our consolidated financial
statements, which have been prepared in accordance with GAAP. GAAP requires that
we make estimates and judgments that affect the reported amount of assets,
liabilities, revenue, expenses and the related disclosure of contingent assets
and liabilities. We base these estimates on historical experience and on various
other assumptions that we consider reasonable under the circumstances and
reevaluate our estimates and judgments as appropriate. The actual results
experienced by us may differ materially and adversely from our estimates. We
believe that the following critical accounting policies involve a higher degree
of judgment or complexity in the preparation of financial statements:
Revenue Recognition
A performance obligation is a promise in a contract to transfer a distinct good
or service to the customer. A contract's transaction price is allocated to each
distinct performance obligation and recognized as revenue when, or as, the
performance obligation is satisfied.
Leasing and Services Revenue
The majority of revenue is generated by rental income subject to the guidance of
ASC 840, Leases ("ASC 840") in 2018 and ASC 842 in 2019 and 2020. The remaining
revenue is generated by performance obligations in contracts with customers for
services or sale of units subject to the guidance in ASC 605, Revenue ("ASC
605"), in 2018 and ASU 2014-09, Revenue from Contracts with Customers (Topic
606) ("ASC 606") in 2019 and 2020.
Leasing Revenue
Income from operating leases is recognized on a straight-line basis over the
lease term. The Company's lease arrangements can include multiple lease and
non-lease components. Examples of lease components include, but are not limited
to, the lease of modular space, portable storage units and VAPS. Examples of
non-lease components include, but are not limited to, the delivery,
installation, maintenance, and removal services commonly provided in a bundled
transaction with the lease components. Arrangement consideration is allocated
between lease deliverables and non-lease components based on the relative
estimated selling (leasing) price of each deliverable. Estimated selling
(leasing) price of the lease deliverables is based upon the estimated
stand-alone selling price of the related performance obligations using an
adjusted market approach.
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When leases and services are billed in advance, recognition of revenue is
deferred until services are rendered. If equipment is returned prior to the
contractually obligated period, the excess, if any, between the amount the
customer is contractually required to pay over the cumulative amount of revenue
recognized to date is recognized as incremental revenue upon return.
Rental equipment is leased primarily under operating leases and, from time to
time, under sales-type lease arrangements. Operating lease minimum contractual
terms within the NA Modular segment generally range from 1 month to 60 months
and averaged approximately 9 months across this segment's rental fleet for the
year ended December 31, 2020.Rental contracts with customers within the NA
Storage and UK Storage segments are generally based on a 28-day rate and billing
cycle. The rental continues until cancelled by the Company or the customer.
There were no material sales-type lease arrangements as of December 31, 2020 or
2019.
The Company may use third parties to satisfy its performance obligations,
including both the provision of rental units and other services. To determine
whether it is the principal or agent in the arrangement, the Company reviews
each third-party relationship on a contract-by-contract basis. The Company is
considered an agent when its role is to arrange for another entity to provide
the rental units and other services to the customer. In these instances, the
Company does not control the rental unit or service before it is provided. The
Company is considered the principal when it controls the rental unit or service
prior to transferring control to the customer. WillScot Mobile Mini may be a
principal in the fulfillment of some rental units and services and an agent for
other rental units and services within the same contract. Revenue is recognized
on a gross basis when the Company is the principal in the arrangement and on a
net basis when it is the agent.
The adoption of ASC 842 at January 1, 2019, did not have a significant impact on
the recognition of leasing revenue. Based on the requirements of ASC 842, the
Company records changes in estimated collectability, directly against leasing
revenue.
Services Revenue
The Company generally has three non-lease service-related performance
obligations in its contracts with customers:
•Delivery and installation of the modular or portable storage unit;
•Maintenance and other ad hoc services performed during the lease term; and
•Removal services that occur at the end of the lease term.
Consideration is allocated to each of these performance obligations within the
contract based upon their estimated relative standalone selling prices using the
estimated cost plus a margin approach. Revenue from these activities is
recognized as the services are performed.
Sales Revenue
Sales revenue is generated by the sale of new and rental units. Revenue from the
sale of new and rental units is generally recognized at a point in time upon the
transfer of control to the customer, which occurs when the unit is delivered and
installed in accordance with the contract. Sales transactions constitute a
single performance obligation.
Other Matters
The Company's non-lease revenues do not include material amounts of variable
consideration, other than the variability noted for services arrangements
expected to be performed beyond a twelve-month period.
The Company's payment terms vary by the type and location of its customer and
the product or services offered. The time between invoicing and when payment is
due is not significant. While the Company may bill certain customers in advance,
its contracts do not contain a significant financing component based on the
short length of time between upfront billings and the performance of contracted
services. For certain products, services, or customer types, the Company
requires payment before the products or services are delivered to the customer.
Revenue is recognized net of taxes collected from customers, which are
subsequently remitted to governmental authorities.
Goodwill and Goodwill Impairment
For acquired businesses, the Company records assets acquired and liabilities
assumed at their estimated fair values on the respective acquisition dates.
Based on these values, the excess purchase price over the fair value of the net
assets acquired is recorded as goodwill. Generally, reporting units are at the
operating segment level or one level below the operating segment (the component
level), if discrete financial information is prepared and regularly reviewed by
segment management. Goodwill acquired in a business combination is assigned to
each of the Company's reporting units that are expected to benefit from the
combination.
The Company performs its annual impairment test of goodwill as of October 1 at
the reporting unit level, as well as during any reporting period in which events
or changes in circumstances occur that, in management's judgment, may constitute
triggering events under ASC 350-20, Intangibles - Goodwill and Other, Testing
Goodwill for Impairment. The Company performs its assessment of goodwill
utilizing either a qualitative or quantitative impairment test. The qualitative
impairment test assesses company-specific, industry, market and general economic
factors to determine whether it is more likely than not that the fair value of
the reporting unit is less than its carrying amount. If the Company concludes
that it is more likely than not that the fair value of the reporting unit is
less than its carrying amount, or elects not to use the qualitative
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impairment test, a quantitative impairment test is performed. The quantitative
impairment test involves a comparison of the estimated fair value of a reporting
unit to its carrying amount. The Company uses an independent valuation
specialist for its annual impairment tests to assist in the valuation.
The Company has historically used the quantitative impairment test to evaluate
goodwill for impairment. The Company used the qualitative approach for the
reporting units acquired in the Merger due to the proximity of the July 1, 2020
acquisition date to the October 1, 2020 measurement date.
Determining the fair value of a reporting unit is judgmental in nature and
involves the use of significant estimates and assumptions. These estimates and
assumptions include revenue growth rates and operating margins used to calculate
projected future cash flows, risk-adjusted discount rates, value of net
operating losses, future economic and market conditions and determination of
appropriate market comparables. Management bases fair value estimates on
assumptions it believes to be reasonable but that are unpredictable and
inherently uncertain. Actual future results may differ from these estimates.
If the carrying amount of the reporting unit exceeds the calculated fair value
of the reporting unit, an impairment charge would be recognized for the excess,
not to exceed the amount of goodwill allocated to that reporting unit.
Intangible Assets Other than Goodwill
Intangible assets that are acquired by the Company and determined to have an
indefinite useful life are not amortized but are tested for impairment at least
annually. The Company's indefinite-lived intangible assets consist of the
Williams Scotsman trade name and the Mobile Mini trade name. The Company
performs its assessment of indefinite-lived intangible assets utilizing either a
qualitative or quantitative impairment test. When utilizing a quantitative
impairment test, the Company calculates fair value using a relief-from-royalty
method. This method is used to estimate the cost savings that accrue to the
owner of an intangible asset who would otherwise have to pay royalties or
license fees on revenues earned through the use of the asset. If the carrying
amount of the indefinite-lived intangible asset exceeds its fair value, an
impairment charge would be recorded to the extent the recorded indefinite-lived
intangible asset exceeds the fair value.
Other intangible assets that have finite useful lives are measured at cost less
accumulated amortization and impairment losses, if any. Amortization is
recognized in profit or loss over the estimated useful lives of the intangible
asset.
Purchase Accounting
The Company accounts for acquisitions of businesses under the acquisition
method. Under the acquisition method of accounting, the Company records assets
acquired and liabilities assumed at their estimated fair value on the date of
acquisition. Goodwill is measured as the excess of the fair value of the
consideration transferred over the fair value of the identifiable net assets.
Estimated fair values of acquired assets and liabilities are provisional and
could change as additional information is received. When appropriate, our
estimates of the fair values of assets and liabilities acquired include
assistance from independent third-party valuation firms. Valuations are
finalized as soon as practicable, but not later than one year from the
acquisition date. Any subsequent changes to purchase price allocations result in
a corresponding adjustment to goodwill.
Long-lived assets (principally rental equipment), goodwill and other intangible
assets generally represent the largest components of our acquisitions. Rental
equipment is valued utilizing a replacement cost approach. Intangible assets are
recognized at their estimated fair values as of the date of acquisition and
generally consist of customer relationships and trade names. Determination of
the estimated fair value of intangible assets requires judgment. The estimated
fair value of customer relationships is determined based on estimates and
judgments regarding discounted future after-tax earnings and cash flows arising
from lease renewals and new lease arrangements expected from customer
relationships. The fair value of trade name intangible assets is determined
utilizing the relief from royalty method. Under this form of the income
approach, a royalty rate based on observed market royalties is applied to
projected revenue supporting the trade name and discounted to present value.
Rental Equipment
Rental equipment is comprised of modular space and portable storage units held
for rent or on rent to customers, tank and pump solutions products, which
consist primarily of liquid and solid containment units, pumps and filtration
equipment, and VAPS which are in use or available to be used by customers.
Rental equipment is measured at cost less accumulated depreciation and
impairment losses. Cost includes expenditures that are directly attributable to
the acquisition of the asset. Costs of improvements and betterments to rental
equipment are capitalized when such costs extend the useful life of the
equipment or increase the rental value of the unit. Costs incurred for equipment
to meet a particular customer specification are capitalized and depreciated over
the lease term taking in consideration the residual value of the asset.
Maintenance and repair costs are expensed as incurred.
Depreciation is generally computed using the straight-line method over estimated
useful lives, as follows:
                                             Estimated Useful Life      Residual Value
Modular space units                              10 - 20 years             20 - 50%
Portable storage units                             30 years                   55%
Tank and pump                                    7 - 25 years                 -%
VAPS and other related rental equipment           1 - 8 years               

-%

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Trade Receivables and Allowance for Credit Losses
The Company is exposed to credit losses from trade receivables generated through
its leasing and sales business. The Company assesses each customer's ability to
pay for the products it leases or sells by conducting a credit review. The
credit review considers expected billing exposure and timing for payment and the
customer's established credit rating. The Company performs its credit review of
new customers at inception of the customer relationship and for existing
customers when the customer transacts new leases after a defined period of
dormancy. The Company also considers contract terms and conditions, country risk
and business strategy in the evaluation.
The Company monitors ongoing credit exposure through an active review of
customer balances against contract terms and due dates. The Company may employ
collection agencies and legal counsel to pursue recovery of defaulted
receivables. The allowances for credit losses reflect the estimate of the amount
of receivables that the Company will be unable to collect based on historical
write-off experience and, as applicable, current conditions and reasonable and
supportable forecasts that affect collectability. This estimate could require
change based on changing circumstances, including changes in the economy or in
the particular circumstances of individual customers. Accordingly, the Company
may be required to increase or decrease our allowances.
In accordance with the adoption of Accounting Standards Update ("ASU") 2016-2,
Leases (Topic 842) ("ASC 842"), effective January 1, 2019, and the adoption of
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASC 326"),
effective January 1, 2020, specifically identifiable lease revenue receivables
and sales receivables not deemed probable of collection are recorded as a
reduction of revenue. The remaining provision for credit losses is recorded as
selling, general and administrative expense. For the year ended December 31,
2018, the entire provision for credit losses was recorded as a selling, general
and administrative expense. The Company reviews the adequacy of the allowance on
a quarterly basis.
Stock-Based Compensation
Prior to the Merger, stock awards were granted under the WillScot Corporation
2017 Incentive Award Plan (the "2017 Incentive Plan"), which included Restricted
Stock Awards ("RSAs") and Restricted Stock Units ("RSUs"). On June 24, 2020,
WillScot's stockholders approved the WillScot Mobile Mini 2020 Incentive Award
Plan ("2020 Incentive Plan") to take effect pending completion of the Merger.
The plan amended and restated in its entirety the 2017 Incentive Plan. As a
result, all historical and future incentive awards to the Company's Board of
Directors, executive officers and employees, as determined by the Company's
Compensation Committee ("the Comp Committee"), are granted under the 2020
Incentive Plan. The 2020 Incentive Plan is administered by the Comp Committee.
Under the 2020 Incentive Plan, the Comp Committee may grant an aggregate of
6,488,988 shares of Common Stock in the form of non-qualified stock options,
incentive stock options, stock appreciation rights, RSAs, RSUs, performance
compensation awards and stock bonus awards. Stock-based payments, including the
grant of stock options, RSAs and RSUs, are subject to service-based vesting
requirements, and expense is recognized on a straight-line basis over the
vesting period. Forfeitures are accounted for as they occur.
Stock-based compensation expense includes grants of stock options, time-based
RSUs ("Time-Based RSUs") and performance-based RSUs ("Performance-Based RSUs",
together with Time-Based RSUs, the "RSUs"). The 2020 Incentive Plan continues
the former Market-Based RSUs renamed as "Performance-Based RSUs." RSUs are
recognized in the financial statements based on their fair value. In addition,
stock-based payments to non-executive directors include grants of RSAs.
Time-Based RSUs and RSAs are valued based on the intrinsic value of the
difference between the exercise price, if any, of the award and the fair market
value of WillScot Mobile Mini's Common Stock on the grant date.
Performance-Based RSUs are valued based on a Monte Carlo simulation model to
reflect the impact of the Performance-Based RSUs market condition. The
probability of satisfying a market condition is considered in the estimation of
the grant-date fair value for Performance-Based RSUs and the compensation cost
is not reversed if the market condition is not achieved, provided the requisite
service has been provided.
RSAs cliff vest in a one year period. Time-Based RSUs vest ratably over a period
of four years. Performance-Based RSUs cliff vest based on achievement of the
relative total stockholder return ("TSR") of the Company's Common Stock as
compared to the TSR of the constituents of the Russell 3000 Index at the grant
date over the performance period of three years. The target number of RSUs may
be adjusted from 0% to 150% based on the TSR attainment levels defined by the
Comp Committee. The 100% target payout is tied to performance at the 50%
percentile, with a payout curve ranging from 0% (for performance less than the
25% percentile) to 150% (for performance at or above the 75% percentile).
Vesting is also subject to continued service requirements through the vesting
date.
Stock options vest in tranches over a period of four years and expire ten years
from the grant date. The fair value of each stock option award on the grant date
is estimated using the Black-Scholes option-pricing model with the following
assumptions: expected dividend yield, expected stock price volatility,
weighted-average risk-free interest rate and weighted-average expected term of
the options. The volatility assumption used in the Black-Scholes option-pricing
model was based on a blend of peer group volatility and Company trading history
as the Company did not have a sufficient trading history as a stand-alone public
company. Future calculations will use the Company trading history. Additionally,
due to an insufficient history with respect to stock option activity and
post-vesting cancellations, the expected term assumption is based on the
simplified method under GAAP, which is based on the vesting period and
contractual term for each tranche of awards. The mid-point between the
weighted-average vesting term and the expiration date is used as the expected
term under this method. The risk-free interest rate used in the Black-Scholes
option-pricing model is based on the implied US Treasury bill yield curve
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at the date of grant with a remaining term equal to the Company's expected term
assumption. WillScot Mobile Mini has never declared or paid a cash dividend on
common shares.
Warrants
The Company accounts for warrants in accordance with applicable accounting
guidance provided in ASC 815-40, as either derivative liabilities or as equity
instruments depending on the specific terms of the warrant agreements. In
periods subsequent to issuance, warrants classified as liabilities are subject
to remeasurement at each balance sheet date and transaction date with changes in
the estimated fair values of the common stock warrant liabilities and gains and
losses on extinguishment of common stock warrant liabilities reported in the
consolidated statements of operations.
The Company accounts for its warrants in the following ways: (i) the 2015
Private Warrants as liabilities for all periods presented, (ii) the 2015 Public
Warrants as liabilities through their final redemption in February 2020 and
(iii) the 2018 Warrants as liabilities until June 30, 2020, the date all issued
and outstanding shares of the Company's Class B Common Stock were cancelled.
Prior to their redemption, the Company's 2015 Public Warrants traded in active
markets. When classified as liabilities, warrants traded in active markets with
sufficient trading volume represent Level 1 financial instruments as they were
publicly traded in active markets and thus had observable market prices which
were used to estimate the fair value adjustments for the related common stock
warrant liabilities. When classified as liabilities, warrants not traded in
active markets, or traded with insufficient volume, represent Level 3 financial
instruments that are valued using a Black-Scholes option-pricing model to
estimate the fair value adjustments for the related common stock warrant
liabilities.
Income Taxes
The Company accounts for income taxes under the asset and liability method,
which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date.
The Company records deferred tax assets to the extent it believes that it is
more likely than not that these assets will be realized. In making such
determination, the Company considers all available positive and negative
evidence, including scheduled reversals of deferred tax liabilities, projected
future taxable income, tax planning strategies and recent results of operations.
Valuation allowances are recorded to reduce the deferred tax assets to an amount
that will more likely than not be realized.
The Company assesses the likelihood that each of the deferred tax assets will be
realized. To the extent management believes realization of any deferred tax
assets is not likely, the Company establishes a valuation allowance. When a
valuation allowance is established or there is an increase in an allowance in a
reporting period, tax expense is generally recorded in the Company's
consolidated statement of operations. Conversely, to the extent circumstances
indicate that a valuation allowance is no longer necessary, that portion of the
valuation allowance is reversed, which generally reduces the Company's income
tax expense.
Deferred tax liabilities are recognized for the income taxes on the
undistributed earnings of wholly-owned foreign subsidiaries unless such earnings
are indefinitely reinvested, or will only be repatriated when possible to do so
at minimal additional tax cost. Current income tax relating to items recognized
directly in equity is recognized in equity and not in profit (loss) for the
year.
In accordance with applicable authoritative guidance, the Company accounts for
uncertain income tax positions using a benefit recognition model with a two-step
approach; a more-likely-than-not recognition criterion; and a measurement
approach that measures the position as the largest amount of tax benefit that is
greater than 50% likely of being realized upon ultimate settlement. If it is not
more-likely-than-not that the benefit of the tax position will be sustained on
its technical merits, no benefit is recorded. Uncertain tax positions that
relate only to timing of when an item is included on a tax return are considered
to have met the recognition threshold. The Company classifies interest on tax
deficiencies and income tax penalties within income tax expense.

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