WillScot Holdings Corporation

Welcome to the third quarter 2021 Will Scott Mobile Mini Earnings Conference call. My name is Sarah, and I'll 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. And please know that this conference is being recorded. I will now turn the call over to Nick Girarda, Director of Treasury and Investor Relations. Nick, you may begin.

Good morning, and welcome to the Will Scott Mobile Mini third quarter earnings call. Participants on today's call include Brad Saltz, 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 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. Good morning, everyone, and thank you for joining us today. Before I get into this quarter's results, I'd like to remind everyone that we'll be hosting an Investor Day next Monday, November 8th at NASDAQ in Times Square. We're delighted with the number of attendees and look forward to seeing so many of you there. Now turning to slide five, our third quarter results demonstrate continued acceleration across our diversified portfolio with corresponding exceptional outcomes. While delivering this solid operational and financial performance, we also acquired and fully integrated three companies late in the third quarter, all together adding approximately 11,000 storage assets and several new team members. As expected, following our successful SAP harmonization in the second quarter, we're even more able to seamlessly integrate these acquisitions. We've closed a fourth acquisition already in the fourth quarter, and going forward, we're uniquely positioned to continue our strategy to compound robust organic growth with highly accretive M&A. Operationally, our delivery volumes and rates improved across all of our segments, underpinned by increased demand across all of our major end markets. A special note, VAPS penetration in North American modular segment achieved a rate of 384 VAPS value per unit per month on all new units delivered in the last 12 months. Now, you may recall that when we took the company public in late 2017, we set several ambitious goals, one of which was achieving 80% furniture penetration, which correlated to $400 of VAPS value per month. Needless to say, The 400 milestone is one of many that we'll be resetting and raising as we see significant further upside potential as we continue to expand our offering, increase penetration, and further optimize rates. In turn, we're pleased to raise guidance again this quarter. Strong free cash flow margins of 19% over the last 12 months supports continued execution of our capital deployment strategy. In addition to funding all organic growth, one-time merger-related integration costs, and three acquisitions, we've repurchased 350 million of our shares and warrants over the last 12 months. Given our track record of smart and balanced capital deployment, our Board of Directors has increased our share repurchase authorization to $1 billion. I want to extend my gratitude to our entire team for the strong performance in yet another quarter and extend a warm welcome to many of our new colleagues. I also want to thank our customers for their continued support, so we appreciate and value your business and take pride in delivering on our commitments to you. Turning to slide 10, the VAPS penetration mentioned before achieved by our North American modular segment on new units delivered in the last 12 months is up 34 percent on a year-over-year basis and represents approximately $150 million of very predictable revenue growth over the next three years. This embedded growth potential simply and conservatively assumes we hold VAPS penetration levels flat at the levels we've already achieved. We'll continue to do better than this. We've also continued to roll out the same VAPS strategy across the mobile mini branches to further enhance our ready-to-work ground-level office solution set. Once fully deployed, this represents an incremental $50 million of potential revenue growth over the next five years. This growth driver was identified at the time of the merger with MobileMini and simply assumes we can achieve the same level of penetration we've already achieved on like-sized units in our North American modular segment. Turning to slide 12, our ESG journey will further differentiate Will Scott with our customers and employees and will certainly serve as an accelerant to grow our human capital commensurate with our growth trajectory. From our 275 branches up to the board level, we've begun to launch ESG initiatives, building upon our inherently sustainable circular economy model with an emphasis on human capital inclusion, diversity, and development. This ESG roadmap will build upon our core values, and we're committed to continue to enhance governance and ESG disclosure, including continued shareholder outreach, the launch of our ESG microsite, and issuing our first sustainability report by the end of 2023. Turning back to slide 15, operationally, the demands mentioned before continues to remain robust across all of our segments. Modular space unit deliveries in our North American modular segment increased in a quarter at a rate of 8%, generally in line with our expectations given robust in-market demand. The only minor mixed change is associated with the continued return of short-term events, mitigating declines in COVID unique demand. Deliveries in our North America storage segment increased 13% year-over-year This is driven by both strong demand across all of our end markets, as well as the effect of North America storage now handling logistics services for both legacy mobile mini portable storage, as it previously had, as well as now the legacy Will Scott portable storage in most of our geographical markets. In our North American modular segment, the increased deliveries resulted in an increase on unit-owned rent of 700 units over the course of the third quarter. On average, across the third quarter, units on rent were down 2.5% year-over-year. Given the long lease durations, unit-owned rent growth will continue to lag as volumes increase. Average portable storage units on rent in our North America storage segment increased 30% year-over-year and 21% sequentially from the second quarter. While the increases include approximately 12,000 units on rent that were transferred from our North American modular segment, the combined North American fleet of storage units on rent was still up 14% year-over-year, reflecting strong demand across all end markets, in particular the retail store remodels. Our UK segment utilization is 88%, and our tank and pump segment OEC utilization is up in the mid-70s, which is now above 19 levels. We've been allocating growth capital to both segments to maintain a healthy but tight supply and demand balance. And both segments are driving significant revenue and EBITDA growth on a year-over-year basis. Shifting gears to pricing on slide 17, North American modular average monthly rental rates increased 20% year-over-year. 40% of the 141 year-over-year increase was driven by continued VAPS penetration. The remainder of the increase came from core pricing. And while there continues to be a favorable mix effect from the return of shorter duration events, as we saw in Q2, the overall price environment remains extremely robust. Looking further back, the North American modular segment has now achieved an impressive rate expansion of 11.4 percent CAGR since 2017. North American storage segment rates were also up, up 7 percent year-over-year in the third quarter. Our team is very focused on optimizing rates for new storage activations, and the focus is evident in the results. At our investor day, we'll also start to quantify some of the benefits we expect associated with the deployment of VAPs across the North America storage portfolio, as well as benefits associated with enhanced product positioning, technology expansion, et cetera. With that, I'll pass the call over to Tim.