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"), 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 I, Item 1 of this report. The
discussion of results of operations in this MD&A is presented on a historical
basis, as of or for the three months ended March 31, 2022 or prior periods.
The consolidated financial statements were prepared in conformity with
accounting principles generally accepted in the US ("GAAP"). We use certain
non-GAAP financial metrics to supplement the GAAP reported results in order to
highlight key operational metrics that are used by management to evaluate
Company performance. Reconciliations of GAAP financial information to the
disclosed non-GAAP measures are provided in the Reconciliation of Non-GAAP
Financial Measures section.
Executive Summary and Outlook
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 approximately 13,200 tank and pump units in
our fleet. As of March 31, 2022, our branch network included approximately 280
branch locations and additional drop lots to service over 85,000 customers. We
offer our customers an extensive selection of "Ready to Work" modular space and
portable storage solutions with over 162,000 modular space units and over
214,000 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. Furthermore, 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 modular
space and portable storage lease portfolio, excluding seasonal portable storage
units, is nearly 31 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.
Our customers operate in a diversified set of end markets, including
construction, commercial and industrial, retail and wholesale trade, energy and
natural resources, education, government and institutions, and healthcare. Core
to our operating model is the ability to redeploy standardized assets across end
markets, as we did in 2020 and 2021 to service emerging demand in the healthcare
and government sectors related to COVID-19, as well as expanded space
requirements related to social distancing. We track several market leading
indicators in order to predict demand, including those related to our two
largest end markets, the commercial and industrial segment and the construction
segment, which collectively accounted for approximately 46% and 41% of our
revenues, respectively, for the three months ended March 31, 2022.
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.
Significant Developments
Asset Acquisitions
During the first quarter of 2022, we acquired certain assets and liabilities,
which consisted primarily of approximately 400 blast resistant modular units.
When combined with other recent acquisitions over the past three quarters, we
have acquired assets and liabilities from eight regional and local storage and
modular companies, consisting primarily of 15,700 storage units and 6,200
modular units.
Share and Warrant Repurchases
During the three months ended March 31, 2022, we repurchased and cancelled
11,032 of the 2018 Warrants for $0.2 million. In addition, during the three
months ended March 31, 2022, 929,379 of the 2018 Warrants were exercised on a
cashless basis, resulting in the issuance of 573,483 shares of common stock. At
March 31, 2022, 3,137,762 of the 2018 Warrants were outstanding.
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During the three months ended March 31, 2022, we repurchased a total of
2,070,054 shares of Common Stock and stock equivalents for $77.4 million,
including the repurchased warrants. As of March 31, 2022, we had $879.3 million
remaining of a $1 billion share repurchase authorization under our stock
repurchase program. Given the predictability of our free cash flow, we believe
that repurchases will be a reoccurring capital allocation priority.
First Quarter Highlights
For the three months ended March 31, 2022, as compared to the three months ended
March 31, 2021 unless otherwise noted, key drivers of our financial performance
included:
•Total revenues increased by $83.6 million, or 19.7%, attributable to organic
revenue growth levers in the business and due to the impact of acquisitions.
Leasing revenue increased $77.5 million, or 24.5%, and delivery and installation
revenue increased $16.8 million, or 20.1%. These increases were offset by
decreased sales; rental unit sales decreased $6.4 million, or 42.1%, and new
unit sales revenue decreased $4.4 million, or 40.0%. We estimate that recent
acquisitions contributed approximately $12.0 million to total revenues for three
months ended March 31, 2022.
Key leasing revenue drivers include:
-Average portable storage units on rent increased 34,877 units, or 24.0%, and
average modular space units on rent increased 1,670 units, or 1.5%.
Approximately 50% of the increase in total average units on rent was driven by
increases in organic delivery activity and lower return activity during 2021 and
into the first quarter of 2022 as economic activity rebounded versus 2020 and
the other 50% was driven by units on rent acquired as a result of recent
acquisitions.
-Average modular space monthly rental rate increased $123, or 18.1%, to $802
driven by strong pricing performance across all relevant segments. Average
modular space monthly rental rates increased by $147, or 19.9%, in the NA
Modular segment, by $59, or 11.0%, in the NA Storage segment, and by $24, or
5.9% in the UK Storage segment.
-Average portable storage monthly rental rate increased $20, or 14.8%, to $155
driven by increased pricing as a result of our price management tools and
processes, further supported by tight supply on portable storage containers in
the markets in which we operate.
-Average utilization for portable storage units increased to 84.0% from 74.4%
for the same period in 2021 driven by increased demand in 2022 as compared to
the same period in 2021. Average utilization for modular space units decreased
140 basis points ("bps") to 68.9%.
•NA Modular segment revenue, which represents 58.9% of consolidated revenue for
the three months ended March 31, 2022, increased $33.5 million, or 12.6%, to
$299.7 million. The increase was driven by our core leasing revenue, which grew
$33.4 million, or 16.7%, due to continued growth of pricing and value added
products. Delivery and installation revenues increased $6.9 million, or 14.2%,
driven by increased pricing on new deliveries and returns as compared to 2021.
The increases to leasing revenue and delivery and installation revenues were
partially offset by declines in revenues for portable storage units as the
result of transitioning the majority of the portable storage product business
within the NA Modular segment to the NA Storage segment. Rental unit sales
decreased $4.2 million, or 40.4%, and new unit sales decreased $2.7 million, or
36.0%. NA Modular revenue drivers for the three months ended March 31, 2022
included:
-Modular space average monthly rental rate of $884, increased 19.9% year over
year representing a continuation of the long-term price optimization and VAPS
penetration opportunities across our portfolio.
-Average modular space units on rent increased 212, or 0.3%, year over year
driven primarily by units on rent acquired as a result of recent acquisitions.
Sequentially from December 31, 2021, modular space units on rent increased by
approximately 1,800 units, or 2.1%. Excluding units acquired from acquisitions
during the quarter, sequential modular space units on rent from December 31,
2021 increased by approximately 1,400 units, or 1.7%.
-Average modular space monthly utilization decreased 60 bps to 67.0% for the
three months ended March 31, 2022, as compared to the three months ended March
31, 2021. Sequentially from the fourth quarter 2021, average modular utilization
decreased 50 bps, however end of period utilization increased over 100 bps from
December 31, 2021 to March 31, 2022.
•NA Storage segment revenue, which represents 29.8% of consolidated revenue for
the three months ended March 31, 2022, increased $43.7 million, or 40.5%, to
$151.5 million. The increase was driven by our core leasing revenue, which grew
$38.2 million, or 47.5%, due to increased units on rent driven by significant
increases in delivery activity during 2021 and into the first quarter of 2022 as
economic activity rebounded versus 2020, recent acquisition activity, and
increased pricing. Delivery and installation revenues increased $8.5 million, or
39.7%, driven by increased demand for new project deliveries, and by increased
pricing on new deliveries and returns as compared to 2021. The increases to
leasing revenue and delivery and installation revenues in the NA Storage segment
were also impacted
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as the result of transitioning the majority of the portable storage product
business within the NA Modular segment to the NA Storage segment. Rental unit
sales decreased $1.7 million, or 44.7%, and new unit sales decreased $1.3
million, or 59.1%.
NA Storage revenue drivers for the three months ended March 31, 2022 included:
•Portable storage average monthly rental rate of $166, increased 12.2% year over
year as a result of our price management tools and processes, further supported
by tight supply on portable storage containers in the markets in which we
operate. Modular space average monthly rental rate of $594, increased 11.0% year
over year as a result of price optimization and early benefits from increased
VAPS penetration opportunities.
•Average portable storage units on rent increased 46,516, or 44.0%, year over
year. Increases in organic activity in 2021 and the first quarter of 2022 drove
an increase to average portable storage units on rent of approximately 18% or
19,000 units on rent. Of the remaining increase, approximately 15,500 units on
rent was driven by units acquired from recent acquisitions, and approximately
12,000 units on rent was driven by transitioning the portable storage product
business within the NA Modular segment to the NA Storage segment, which occurred
in the third quarter of 2021. Combined, average portable storage units on rent
for the NA Storage and NA Modular segments increased approximately 32,076 units,
or 26.6%. Average modular space units on rent increased 2,120, or 12.9% year
over year driven by increases in organic delivery activity as well as due to
units on rent acquired.
•Average portable storage monthly utilization increased 930 bps to 83.2% for the
three months ended March 31, 2022, as compared to the three months ended March
31, 2021. Average modular space monthly utilization decreased 310 bps to 76.3%
for three months ended March 31, 2022, as compared to the three months ended
March 31, 2021.
•Generated consolidated net income of $51.2 million for the three months ended
March 31, 2022 representing an increase of $46.7 million versus the three months
ended March 31, 2021, and included $4.4 million of discrete costs expensed in
the period related to integration activities. Discrete costs in the period
included $4.1 million of integration costs and $0.3 million of restructuring
costs, lease impairment expense and other related charges. Net Income Excluding
Gain/Loss from Warrants of $51.2 million three months ended March 31, 2022
represented an increase of $19.5 million, or 61.5% as compared to the three
months ended March 31, 2021.
•Generated Adjusted EBITDA of $191.8 million for the three months ended March
31, 2022, representing an increase of $28.2 million, or 17.2%, as compared to
the same period in 2021. This increase was driven primarily by increased leasing
gross profit.
?Consolidated Adjusted EBITDA Margin was 37.7% in the first quarter of 2022 and
decreased 80 bps versus prior year driven by increased variable costs as a
result of higher activity levels in the current quarter and inflationary
pressures across many of our cost categories.
•Generated Free Cash Flow of $54.6 million for the three months ended March 31,
2022 representing a decrease of $36.6 million as compared to the same period in
2021. Net cash provided by operating activities increased $23.4 million to
$145.5 million. Net cash used in investing activities increased by $117.5
million to $148.4 million to support increases in delivery activity during 2022
as economic activity rebounded versus 2021, to support unit on rent growth and
to support a 2022 acquisition.
•Returned $77.4 million to shareholders through stock and warrant repurchases
and closed one acquisition totaling approximately 400 modular units for $57.5
million in cash during the three months ended March 31, 2022. The predictability
of our free cash flow allows us to pursue multiple capital allocation priorities
opportunistically, including investing in organic opportunities we see in the
market, continuing our deleveraging trajectory, opportunistically executing
accretive acquisitions, and returning capital to shareholders.
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WILLSCOT MOBILE MINI HOLDINGS CORP. 
