WillScot Holdings Corporation

Welcome to the first quarter, 2021, Will Scott Mobile Mini-Earnings Conference Call. My name is Christy, and I will be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Nick Girardi, Director of Treasury and Investor Relations. Nick, you may begin.

Good morning, and welcome to the Will Scott Mobile Mini first quarter earnings call. Participants on today's call include Brad Soltz, Chief Executive Officer, and Tim Boswell, Chief Financial Officer. Today's presentation material may be found on the investor relations section of the Will Scott Mobile Mini website. Slide two contains our safe harbor statement. We will be making forward-looking statements during the presentation and our Q&A session. Our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control. As a result, our actual results may differ materially from today's comments. For a more complete description of the factors that could cause actual results to differ and other possible risks, please refer to the Safe Harbor Statement in our presentation and our filings with the SEC. With that, I'll turn the call over to Brad Saltz.

Thanks, Nick. Thanks, Nick. Greetings, everyone, and thank you for joining us today. I'm Brad Soltz, CEO of Will Scott Mobile Mini. First of all, I'd like to thank the entire Will Scott Mobile Mini team for yet again delivering another outstanding quarter, while at the same time making significant progress towards the key integration milestones that will unlock the full potential of the merger, driving shareholder value for years to come. Due to our strong performance in the first quarter, and strengthening commercial KPIs, we're raising our full-year 2021 guidance midpoints for revenue, adjusted EBITDA, and net capex. While Tim and I will go into further detail during our call, suffice it to say that we're extremely excited about the future as demand is increasing across our diversified end markets, and our team continues to rise to the challenge to deliver ever-increasing and exceptional value to our customers. Turning to page five of our presentation, I would like to highlight the eight unique characteristics inherent in our platform and the associated exemplification apparent in our Q1 performance. First, as a reminder, we are a fast-growing, leading business services provider specializing in innovative, flexible workspace and portable storage solutions. We are the number one provider within this sector and are 5X our next largest competitor. Our position is underpinned by a vast fleet position across 275 branches in North America and UK, which yields compelling unit economics of greater than 25% on levered IRR. Q1 leasing revenues in our North American modular and storage segments were up 6% compared to this time last year on a pro forma basis, which provides great forward visibility based upon this foundation of steady and predictable reoccurring lease revenues given average lease durations of nearly three years. Our demand is robust and accelerating, with North American unit-owned rent and deliveries accelerating in March headed into the second quarter, where we serve 15 sectors across a diverse group of end markets and geography. Our team continues to deliver unique and expanding value to our customers. As we expand best practices across our portfolio, we benefit from tailwinds associated with powerful, idiosyncratic organic revenue growth levers, three of which are worth taking a moment to highlight, both given their magnitude and our Q1 progress. First, rental rates. Average monthly rental rates in our North American modular segment were up 13% year over year, marking our 14th consecutive quarter of double-digit growth. We also realized notable pricing traction in North America's storage in the U.K., with average monthly rates of 5% and 26% year-over-year, respectively. North America's storage's 5% increase marks the 33rd consecutive quarter of year-over-year rental rate increases for this segment and is the highest increase in the last 13 quarters. We expect our unique value proposition, contract harmonization, and migration to technology-enabled pricing more broadly across the portfolio will support these trajectories for years to come. The second is VAPS. North America modular VAPS penetration continued to accelerate, driving nearly half of the aforementioned 13% average monthly rental rate growth. The team achieved an average monthly rental rate of $337 on units delivered over the last 12 months, which is a 22% year-over-year increase and an 8% sequential increase. Simply holding this LTM penetration level for the next three years represents a $145 million tail lamp. As we continue our trajectory towards achieving and eclipsing our long-term goal of $400, this tailwind expands and extends. I'm also pleased to confirm that we began extending the VAPS offering to our mobile mini ground-level office customers, which once fully deployed represents an incremental 50 million opportunity. We believe there is a third meaningful VAPS opportunity associated with the storage containers which we are just beginning to size utilizing our proven playbook. And third is cross-sell. Albeit a bit manual in process until our systems are fully integrated, our teams have begun to cross-sell storage along with modular leads and vice versa. While 80% of our customers require both storage and office, we currently have only a 40% customer overlap. We delivered 65 million of cost synergies from 10 acquisitions over the last 10 years. Based upon this track record, we are extremely confident in delivering an incremental $55 million that has been identified and staged for execution. Our unique scale and technology in tandem continues to drive efficiencies. Our first quarter 2021 adjusted EBITDA was $164 million, which represents a 350 basis points expansion relative to the first quarter of 2020. Core pricing, VAPS penetration, and synergy execution continue to drive our profitability and growth. Beyond the identified cost synergies, we have a growing list of operational improvement opportunities, which will contribute to continued margin expansion in years to come. And finally, we are thoughtful and deliberate as we consider our capital allocation and will continue to prioritize growth, deleveraging, and share repurchases. We generated $91 million of free cash flow at a 21% free cash flow margin in the quarterly by fully funding all organic growth, one-time integration costs, and repurchasing 82 million of securities. We reduced leverage to 3.7 turns, well on our way towards achieving our long-term target of three to three and a half turns by the end of 2021. This trajectory is expected to yield 500 million annual free cash flow run rate by the second half of 2022. Turning to page eight, We profile our 15 discrete end markets, which we bucket into construction, commercial, industrial, energy, natural resources, and government and institutions. While there have not been any material shifts in our end markets profile, we would note that Architectural Billing Index, or ABI, was released at 55 in March, which is the second straight month with a measurement above 50, which, if continued, could be expected to support growth in 2022 and beyond. We're also monitoring the composition of the infrastructure legislation that could further underpin and extend this momentum. Page 11 reflects our multi-year portfolio of growth opportunities. While I've touched on the majority of these previously, I would like to expand upon the cross-selling opportunity as well as highlight our progress with system integration as an enabler for acceleration of value creation more broadly. As mentioned before, our teams have begun to cross-sell modular to storage and vice versa. For context, at announcement of the merger between Will Scott and Mobile Mini, we believe that we had a 45% market share in modular and a 25% market share in storage, while we believe 80% of our customers actually require both. All in, almost 3,000 units have gone on rent as a result of our cross-selling efforts. This started with our merger in Q3 of 2020. And while that's not a large number when compared to the 220,000 units on rent in North America, it's easy to see how we'll continue to get some volume uplift over time as we further automate and hone these tactics. Our cross-selling efforts, among other growth levers, will be accelerated by our ERP migration, which is on track to occur in the second quarter of 2021. We've completed all testing or in the final stages of data preparation before moving our North American modular segment onto the legacy mobile minis best-in-class SAP. While no ERP integration is easy, I'm incredibly proud and grateful for the team for their great efforts and long hours to support this critical value enabler. Once the migration is complete, we'll begin to accelerate the execution of the $50 million of cost synergies premised in the merger between Will Scott and MobileMini. Moving to slide 14, which depicts examples of the varied uses of our standardized fleet across our diverse end markets. As I discussed earlier, demand is improving across our end markets. In North American Modular, our deliveries increased 0.4% year-over-year in the first quarter. It's important to note that March 2021 deliveries increased 8% relative to March 2020 and 4% relative to March 2019. Although average units on rent decreased slightly sequentially as expected, period end units in March increased modestly relative to December which contributed positively to our lease run rate. In the North America storage segment, we saw a small decrease of 1% year-over-year deliveries. The same timing dynamic realized in modular, however, existed in storage. March 2021 was our strongest core delivery month since June of 2019. Although average units on rent came down relative to their seasonal peak in Q4 as expected, they're up 1% year-over-year. These positive trending commercial KPIs in both of our major segments are a bit earlier than we expected and is one of the fundamental drivers for the increase in our 2021 guidance. With that, I'll hand it over to Tim.