WillScot Holdings Corporation

Welcome to the second 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 will now turn the call over to Nick Girardi, Senior Director of Treasury and Investor Relations. Nick, you may begin.

Good morning and welcome to the Will Scott Mobile Mini second quarter 2023 earnings call. Participants on today's call include Brad Saltz, 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 today 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. Thank you for joining us today. I'm Brad Soltz, CEO of Will Scott Mobile Mini. Let's start on slide 16 of our 2Q investor deck. 2Q 2023 was another terrific quarter for our company and showcases the predictable compounding returns and cash generation that are clearly accelerating as we scale the business. As shown on this page, we are already exceeding or on track to outpace all of the performance metrics that we laid out in our investor day in November of 2021. Revenue increased 11% year over year due to the compounding effect of rate optimization and VAPS penetration. Adjusted EBITDA increased 25% to $261 million, and adjusted EBITDA margin expanded 500 basis points, a function of both the high flow through of rate and VAPS, as well as the margin enhancement initiatives on which we've been focused since we began operating on the SAP platform about two years ago. At 45% adjusted EBITDA margin, we're at the top end of the milestone range that we laid out in our investor day. Cash generation in our business is just outstanding. We achieved a company record of $160 million of free cash flow and 27% free cash flow margin during the quarter. Year-to-date, we've delivered $263 million of free cash flow and expect to generate well in excess of $500 million of free cash flow in 2023. Clearly, we're well on our way towards our next free cash flow milestone of $650 million. And with leverage at three turns, net debt, the adjusted EBITDA, and at the bottom end of our target range of three to three and a half turns, Our approach to capital allocation remains unchanged and unconstrained. During the quarter, we allocated $43 million to net capex, we invested $70 million in M&A, and we repurchased 5.4 million shares of our common stock for $239 million. Over the last 12 months, we've now returned $891 million to shareholders and reduced economic share count by 9.1%. All in, our financial performance was outstanding. and our results this quarter demonstrate the powerful and predictable compounding of our portfolio. Commercially, I'm excited to announce that our team successfully launched our premium storage VAPS offering, or ProRack, which you can see a picture of on the cover of this investor deck on our website. ProRack is a proprietary space management solution that fits inside storage containers. It's safe, durable, easy to install, easy to use, and solves customer problems with flexible configurations to function as desk, material storage, pipe rack, tool crib, shelves, or any of the above. ProRack is modular in nature in that we can connect up to four ProRack modules on each side of a 40-foot container, building flexible configurations for our customers. ProRack is a perfect example of the type of innovation that differentiates us on the market and helps our customers operate more safely, comfortably, and efficiently during their projects. I'm incredibly proud of the product development, commercial and operational teams, and the collaboration that drove this innovation, as well as many others in the pipeline. As a reminder, VAPs across the portfolio represent 500 million of our 1 billion of idiosyncratic growth levers. Modular, including the ground-level offices, represents 370 million of the 500 million based on the portfolio currently in place. In order to realize the balance of the 130 million from storage, we simply need to achieve storage VAPS delivered rates of $70 per unit. We're extremely confident in reaching and likely eclipsing this milestone in the next three to five years. As a point of reference, our last 12-month delivered rate in storage is already over $20 per unit, and that's with only one year since the rollout of our basic offering and before any contribution from PRO-RAC. Flipping back to slide 10, in short, not much has changed from our Q1 2023 earnings call with respect to end market demand. We're continuing to experience robust demand across commercial, industrial, and markets, particularly in manufacturing and professional services. As expected, retail demand was down in the quarter, driven by deferral of storage remodels at major non-mall-based retailers, which is impacting storage volumes in Q2 and Q3. That said, we've now started to receive orders for seasonal storage needs, and while we're early in both the timing and quantity of these are consistent with our expectations. Also, as noted and expected, non-residential construction starts, both on a dollar and square foot basis, has been below the record levels in 2022. The Architectural Billing Index, which has been a good forward indicator of non-residential construction starts in 9 to 12 months, has now stabilized in neutral to positive ranges in the second quarter, following modest contracting levels throughout the prior two quarters. And like our customers' project backlogs, The AIA, the Inquiry Index leading the ABI, has remained robust throughout. Further of note, our second quarter quoting activity in the NA modular segment was up modestly in the second quarter, again against extremely robust levels realized in 2022. Geographically, strength in the U.S. Southeast from Carolinas down to Florida, the Midwest, and the desert states have been countering relatively weaker demand in the U.S. Northeast, U.S. West Coast states, and Canada. While we continue to maintain a prudent outlook with respect to in-market demand through the balance of 2023, we're extremely excited about the potential tailwinds associated with onshoring and reshoring and infrastructure projects that we expected further accelerate in 2024 and persist for years to come. Large-scale reshoring projects have already been breaking ground in the North America, which represent material and long-duration opportunities to deploy our services. We're actively participating, bidding, and winning multiple billion-dollar projects in sectors such as chemicals, power gen, renewables, electric vehicles, semiconductors, et cetera. And with our recently combined CRM, our storage and modular field sales teams now have uniform visibility into all projects, and we are even further disproportionately well-positioned to provide complex value-added total space solutions to our customers with our unrivaled scale, product offering capabilities, and particularly as the product size and complexity increase. And quickly on slide 18, our rates continued to compound powerfully and predictably across the portfolio. In our storage segment, portable storage average monthly rates increased 27% as we continue to execute our price management roadmap, leverage our best-in-class tools and technology investments, and the new product positioning. Storage VAPs, while still in the very early innings, will begin to contribute more meaningfully in 2024 and provide a recipe for years of sustained double-digit rate growth as we've experienced over the last five years in the modular segment. In our modular segment, rental rates increased 19% versus prior year and were above 6% sequentially, driven by both increased rate and VAPS penetration. Spreads between modular delivered spot rates in the last 12 months have averaged – over the last 12 months, and the average of the portfolio continued to remain above 30%. Now, before I hand the call over to Tim, I'd like to take a moment to thank our team for safely and frugally delivering yet another outstanding quarter and progressing each of our $1 billion idiosyncratic growth levers. Along the way, the team has exceeded or is on track to eclipse all seven of the ambitious multi-year growth and return metrics we committed to at our investor day in late 2021. With that, I'll hand the call over to Tim for additional context.