WillScot Holdings Corporation

Welcome to the third quarter 2022 Will Scott Mobile Mini Earnings Conference Call. My name is Michelle and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct the question and answer session. Please note that this conference is being recorded. I will now turn the call over to Nick Girardi, Senior Director of Treasurer, and investor relations. Nick, you may begin.

Good morning, and welcome to the Will Scott Mobile Mini third quarter 2022 earnings call. Participants on today's call include Brad Soltz, Chief Executive Officer, and Tim Boswell, President and 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. Good morning, everyone. Thank you for joining us today. I'm Brad Soltz, CEO of Will Scott Mobile Mini. First, I'd like to take a second to thank our colleagues that supported the successful divestiture of the tank and pump segment during this quarter. Following the divestiture, we're a unique pure play modular and storage solutions provider of unparalleled scale with a higher quality revenue mix. The consistent compounding growth of our core segments and the successful divestiture of the tank and pump segment during the quarter together reduce leverage from 3.7x in Q2 to 3.4x in Q3 and comfortably within our target leverage range of 3 to 3.5 times net debt to EBITDA. The capital from the divestiture is already being redeployed consistent with our capital allocation framework, including reinvestment to modular and storage segments, continued M&A, and returns to shareholders. Shifting to our third quarter 2022 performance, which was again stellar and demonstrates our team's commitment to delivering value to our customers and our shareholders. Our strong commercial performance continued as volumes, pricing, and value-added products or VAPs were all up year over year. To that end, value-added products average monthly rate in our North American modular segment increased 24%. Modular units on rent in the North American modular segment increased 4%, and prices were up 19%, inclusive of apps. And storage units on rent in the North America segment increased 28%, and prices were up 27%. We offer a differentiated value proposition, which has continued to drive our rate performance and capture volume in 2022, and will continue to do so going forward. Given the resulting 31% in year-over-year revenue growth and the sequential stabilization in SG&A, we generated 251 million of adjusted EBITDA from continuing operations in Q3. Adjusted EBITDA margin was 41.6%, which expanded 270 basis points year over year and 140 BIPs sequentially. As such, we're tracking towards about 200 basis points of margin expansion for the full year 2022 relative to the prior year. We remain convicted as ever in our ability to continue to compound growth and deliver outsized returns. Switching gears to demand, which continues to be broad-based and robust across our end markets, other than some softening in Canada, as well as U.S. residential builders and developers, both of which were discussed during our Q2 call. Other aspects of the diverse portfolio are effectively mitigating these two more minor contributors. The Architectural Billing Index has remained positive since February of 21. which combined with our customer sentiment supports our confidence and continued robust non-residential demand well into 2023. We are already actively servicing major reshoring and onshoring megaprojects. These are large, complex, long-duration projects which require a correspondingly complex modular and storage solutions. With our scale and sophistication, we're uniquely positioned to compete for these projects, which began even before the chips where inflation reduction acts were passed. Infrastructure spending will also continue to be a tailwind. We're just now beginning to see project activity that we can trace back to the federal investment. For example, we're supporting offshore wind projects along the Atlantic coast, partnering with our customers to provide office, break room storage, and operational space as they develop wind turbines. We're uniquely positioned to support these projects which typically have a broader geographical requirement for ready-to-work modular and storage solutions. And internally, we'll be focused on improving our cross-selling capabilities to drive volumes into 2023. Our CRM harmonization, which upgrades our two existing instances of Salesforce.com into a single instance and is on track to be completed in Q1 of 2023. This project will enable automated lead sharing, enhanced digital marketing and customer targeting, and improve sales rep productivity, taking our industry-leading data and technology advantage one step further and giving us yet another lever with which to drive volumes irrespective of in-market conditions. We continued to progress the deployment of value-added products across our mobile mini branded fleet. Our commercial and product management team is actively transforming how we go to market in the storage business, transitioning our mindset from just delivering a box to supplying portable, secure workspace and warehouse solutions. As a point of reference, our current North America storage average rental rates equal less than $1 per square foot per month for a portable, secure workspace or warehouse that's dropped where you want, when you need it, with our best-in-class logistics capabilities. Our ground-level office in the third quarter were already delivered with over $100 of average VAPS value per month, with customer adoption increasing towards that which we see in comparably sized units in the modular segment. And early feedback with respect to our VAPS initiative for portable storage units is extremely encouraging, with locks, lighting, and basic shelving all beginning to increase in penetration. Given our scale, every $1 of VAPS value per month on portable storage units represents approximately $2 million of incremental annual revenue. Based upon this unique storage value proposition, which is further enhanced as we extend and expand VAPS penetration, we're confident in continued storage rate growth for years to come, as we've been experiencing in our modular business. So all in, we're confident in the trajectory upon which we enter 2023, and we continue to invest aggressively, given first we see objective sources of strength in our end markets, as evidenced by the ABI customer sentiment, on showing and restoring of industrial manufacturing and tailwinds from infrastructure spending. Second, we have the strongest leasing run rate in our history, with rapidly accelerating free cash flow. Third, we're demonstrating undeniable progress, executing across our one billion of idiosyncratic growth levers. And finally, we are methodically executing our programming tuck-in acquisition strategy to further compound growth. Now, while our current outlook demand remains robust, As Tim discussed during the Q&A during a Q2 call, we have an established playbook to grow our resilient portfolio through any macroeconomic environment. We effectively execute that playbook every 90 days across all geographies and major products as per our zero-based CapEx and operations planning process. Finally, I'll touch on guidance before Tim takes over. The midpoint of our prior adjusted EBITDA full-year guidance range was $920 million, including the expected contributions from the recently divested tank and pump division. The midpoint of our revised full year guidance for adjusted EBITDA from continuing operation is still 920 million. In other words, two quarters of outperformance in our modular and storage segments is offsetting the full year of earnings from our former tank and pump division. As such, implied Q4 adjusted EBITDA from continuing operations is $257 to $277 million, which along with the $251 million of adjusted EBITDA from continuing operations in Q3 indicates that we're already at the $1 billion adjusted EBITDA run rate that we set in our November 2022 Investor Day with a superior revenue mix and a laser-like focus by our team on the modular and storage operations. With that, I'll turn the call over to Tim.