WillScot Holdings Corporation

Welcome to the first quarter 2023 Will Scott Mobile Mini Earnings Conference Call. My name is Amy 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 would now like to turn the call over to Nick Girardi, Senior Director of Treasury and Investor Relations. Nick, you may begin. Thank you.

Good morning and welcome to the Will Scott Mobile Mini first quarter 2023 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 Soltz.

Thanks, Nick. Good morning, everyone, and thank you for joining us today. I'm Brad Soltz, CEO of Will Scott Mobile Mini. Well, Scott Mobile Mini is a North America leader in innovative and flexible total space solutions. In Q1 of 2023, we continue to execute our idiosyncratic growth levers combined with capital discipline and outstanding operational efficiency, which support our improved 2023 outlook of over $1 billion of adjusted EBITDA. During the quarter, we grew revenue by 25% and adjusted EBITDA by 47%, driven by strong VAPS penetration and rate optimization. And with a company record of 17% return on invested capital over the last 12 months and a free cash flow margin of 18% in the quarter, we pursued our strategy with smart capital discipline, including acquisitions of up to $80 million and $216 million of share repurchases. Turning to slide 16, I'll share a quick growth lever update. Our value-added products initiatives represent over $500 million, over $1 billion of idiosyncratic growth levers, and we made great progress across both segments. Our track record in modular is proven, as well as over the last 10 years, we've delivered over an 18% compound annual growth in our VAPS average monthly rates. We're also beginning to see benefits from VAPS in our storage solution segment. VAPS revenue in this segment in the first quarter was $22 million, up 60% year-over-year, And we believe that this is just the beginning of a differentiated, long in duration, and high growth value driver that is entirely in our control. Tim will unpack this a bit later in his section. Otherwise, the engineer in me could consume the entire call with my exuberance associated with our basic offering of lights, shelving, and pipe racks for portable storage units, as well as many new products under development. Those of you that visited us at ConExpo in March saw our new premium storage offering, which will take this to a whole new level. Based upon robust testing and early customer feedback, we're on track for our plan to launch this premium offering beginning in test markets this summer. We're following an established playbook that we've developed over the last decade in modular with exciting results, and our turnkey value proposition is obviously continuing to resonate with our customers. Now, pricing supported by VAPS continued to contribute meaningfully to our Q1 2023 results. Our modular products continue to drive an approximate 30% spread between the delivered rates on units over the last 12 months and the average of the portfolio. Our storage segment continues to leverage our unique and expansive product offering, our in-house logistics capability, our price management tools and processes, and while still relatively small, a VAPS offering that will drive growth for years to come. Our confidence in delivering double-digit rate growth across both segments is not grounded in hope. Rather, it's largely embedded in the current spreads We enjoy between spot rates of recently delivered units in our portfolio average, and the spot markets continue to trend favorably. We're a very small spin for our customers, and we've transformed our value proposition to provide more value to them. We've been delivering double-digit rate growth in modular for well over five years, and while input and equipment costs have increased meaningful over the last couple years, they're not the driver for this trajectory. Rather, they will provide support for continuation. And as discussed in our 2021 Investor Day, an important milestone in our strategy to improve organic market penetration was the optimization of our two disparate customer relationship management or CRM systems. I'm excited to confirm that we achieved that milestone in early February. Our entire team, including 500 sales reps and many more customer service professionals, now have clear visibility into the activity of our more than 85,000 unique customers. The combined CRM system will serve to further enhance sales productivity and cross-selling with better digital marketing and predictive analytics, which will allow us to accelerate cross-selling and, most importantly, provide a seamless and efficient customer experience. Our team has clearly made demonstrable progress in the first quarter across each of the five aspects of our portfolio of the $1 billion idiosyncratic growth levers, as evident in the continued BAPS price momentum, the successful CRM harmonization, Q1 logistics margins, EBITDA expansion, and continued discipline M&A activity. This team's execution underpinned by long lease durations is the basis for our confidence and our ability to continue to drive growth for years to come, which is certainly not dependent on in-market expansions. Turning back to slide 10, we provide our turnkey solutions across 15 diverse in-markets across all of North America. It is critical to appreciate that units on rent do not move fast in our business, as units on rent are ultimately governed by three-year lease durations, which correspond to product duration. In-market demand for the actual number of new units and storage units we deploy each month is the only aspect of our portfolio which we do not have full control over. We do operate a robust zero-based capital allocation process through which we systematically and routinely adjust fleet and people investments across our diverse end markets and geographies based on actual demand for new activations every 90 days. It's not a new playbook. Rather, it's what we do, and we are very good at it. You recall that we took a more cautious approach to our original 2023 volume outlook, citing uncertainty with respect to tightening finance conditions, our customers' labor constraints, ABI indicators, uncertainty with respect to the number of larger retail store remodels, and continued softness in Canada. In short, not a lot's changed. While our consolidated units on rent in the first quarter were up year over year, and there's certainly no new concerns, we now have better visibility in the demand through the next couple quarters, and it's apparent that our initial caution was both prudent and balanced. We'll stay focused on the top line and bottom line levers that are with our control and which are substantial. I would offer the following update, considering the underlying macroeconomic factors that influence our demand, as well as relative leading indicators, the most important of which is feedback from our customers. First, the ABI index recently turned positive following five months below 50. The ABI, as a reminder, has been a good indication of modular activation nine to 18 months out. Second, our larger general contractors' customer backlogs remain robust, although many are facing labor constraints, which may slightly impact their ability to complete ongoing projects and start new projects according to original timelines. And third, consistent with our concerns earlier in the quarter, many of the retail store remodels have been deferred to 2024, such that we expect an approximate 10,000 portable storage unit owner at headwind across the retail sector in Q2 and Q3 of this year versus prior year, as well as a corresponding tailwind in 2024. So while we continue to maintain our balanced outlook with respect to in-market demand through the balance of 2023, We're excited about the potential tailwinds associated with on-shoring and re-shoring infrastructure projects that we expect could further accelerate heading into 2024 and persist for several years to come. Large-scale re-shoring projects have already been breaking ground across North America, which represent material and long-duration opportunities to deploy our expansive services. We are actively participating in bidding on multiple billion-dollar projects, in sectors such as advanced materials, chemicals, power gen, renewables, electric vehicles, and semiconductors, to name a few. We are uniquely positioned to provide complex value-added total space solutions to our customers with our unrivaled scale, product offering, and capabilities. Now, given this demand outlook, our long lease durations, our differentiated value prop, and the $1 billion of idiosyncratic growth levers that are largely under our control, will easily eclipse our $1 billion adjusted EBITDA milestone in 2023, and we're on track to achieve all of the long-term financial goals that we established just 18 months ago. With that, I'll turn the call over to Tim for more detail on the Q1 results and our updated outlook.