WillScot Holdings Corporation

Welcome to the fourth 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 afternoon and good evening, and welcome to the Will Scott Mobile Mini fourth quarter 2023 earnings call. Participants on today's call include Brad Sulz, 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. Slides two and three contain 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 statements in our presentation and our filings with the SEC. With that, I'll turn the call over to Brad Saltz.

Thanks, Nick. Good afternoon, everyone, and thank you for joining us today. I'm Brad Soltz, CEO of Will Scott Mobile Mini. Starting on slide six, 2023 was a record year for our company. We built a platform to deliver consistent, predictable compounding returns, irrespective of market conditions, and the strength of that platform was abundantly clear. We are ahead of expectations financially, eclipsing $1 billion of adjusted EBITDA faster than we expected. We delivered $577 million of free cash flow, which is $3 million free cash flow per share, return on invested capital of 18%, and we grew earnings per share from continuing ops by 35% to $1.69. All of these metrics are company records. These compounding returns, along with our clear line of sight to continued growth, sets us up for years of long-term value creation. In 2023, we continue to invest in our portfolio for the long-term benefit of our customers, team, and shareholders. We upgraded and harmonized our CRM system, which provides a world-class IT platform upon which we can easily scale our offering and integrate acquired businesses. We continued our history of innovation, expanding our VAPS offering and establishing market leadership positions in climate-controlled storage and clear span structures. We now offer our customers over 129 million square foot of comprehensive temporary space solutions. And as the only pure play provider, we're excited to continue to expand and reinvent this space for years to come. As we begin 2024, our strategy is unchanged. We safely and frugally grow leasing and service revenues by driving VAPs, rate, and volumes, underpinned by investments in best-in-class technology and our team to consistently improve the customer experience. We see immediate and significant tailwinds from VAPs, rate, and margins, continuing into 2024. We also see continued opportunities to expand our solutions offering through programmatic tuck-in M&A, in addition to our previously announced definitive agreement to acquire McGrath. And we will continue to invest in capabilities to differentiate our portfolio of space solutions. Just a few highlights. First, we're making new investments in both human capital and digital tools. I'm particularly excited about our plans to improve our digital customer experience with enhanced field service and dispatch tools, while upgrading our web presence with state-of-the-art customer portal and introducing more sophisticated demand generation tools. Second, we'll continue investing in innovation, especially in the value-added products, and continue to scale our existing offering. Our proprietary ProRack system is rolling out across 30 markets as we enter 2024. And some of you may have seen our solar prototype at the World of Concrete Convention, which we are now testing with customers and expect to place in the market in 2024. And we're introducing our proprietary ramp system for storage containers beginning in Q1, all of which give us opportunities to build upon our lease revenues by providing a more comprehensive solution to our customers. And third, the build outs of our climate controlled storage and clear span structures platforms are well underway. Each of these businesses have exciting multi-year growth prospects. In order to further accelerate our growth initiatives and improve customer service, we've recently unified our go-to-market approach, consolidating our legacy Will Scott and Mobile Mini branches and sales teams into a single field leadership structure that is responsible for maximizing local market penetration of all of our space solutions. This new structure gives us a single team that's accountable to our customers in each geographical market, allows us to present our whole full suite of solutions to our customers all of the time, and allows us to leverage operational resources such as drivers, technicians, and real estate to support all of our solutions in that given market, all while providing increased career development and growth opportunities for our team. Turning to page 11, as we complete 2023, It's important to reflect on the growth of our portfolio. Investors sometimes ask me if I'm concerned about cyclicality in the economy and the potential impact on our business. The reality is we've operated like a duck on water through highly volatile market conditions over the last five years. 2019 was the last time there wasn't a major macro event occurring, and even then we were busy integrating the mod space acquisitions. And while non-residential starts on both a dollar and per square foot basis slowed significantly in 2023, the modular quoting growth that we discussed in Q3 began converting into net orders and activations over the last three months and are now at levels above the same period the prior year. And this has given us confidence in our outlook, which Tim will discuss later. In this graphic, we've indexed our lease revenue, GDP, and non-residential square foot starts to Q1 of 2019. At that time, we were generating approximately $1 billion of lease revenue over the prior 12 months on a pro forma basis. Over the next five years, leasing revenue grew 80% to $1.8 billion, all while improving ROIC 1,000 bps to 18%. Despite macro movements that are outside of our control, our leasing and service revenue is recurring, predictable, and growing and shows zero volatility. That's because of strategy and the $1 billion of idiosyncratic growth levers at our disposal, along with the value of the average three-year lease duration. Now, turning to page 18, our strategy drives accelerated growth, differentiated positioning, and undisputed category leadership with demonstrated world-class execution and capital allocation. We're excited about how the recently announced definitive agreement to acquire McGrath Rent Corp will further accelerate our growth, and extend our value proposition to new customers, all complementary to the extraordinary opportunity already within our existing platform. As a reminder to how a size of this transaction can further accelerate our growth, let's look back to our performance following the Will Scott and Mobile Mini merger. At the time of the transaction closing, we were doing around 620 million of LTM EBITDA. Since then, we've divested more EBITDA than we've acquired, and we just delivered over a billion dollars of EBITDA, up approximately 70 percent since 2023. Given our performance in 2023, we increased our near-term 2024 and 2026 operating ranges on a few of our key metrics. Notably, we believe we can achieve adjusted EBITDA margin between 45 and 50 percent, and return on invested capital between 15 to 20. We also believe we can achieve over 700 million in free cash flow within this three-year horizon. These milestones are achievable irrespective of the announcement graph acquisition, which itself would be accretive to cash earnings in year one. Our investor value proposition is simple. Our financial performance is predictable and growing due to our $1 billion of idiosyncratic growth levers, all governed by three-year lease durations. We can enter new markets from a position of strength and with clear market leadership, which creates more value for our customers and increases our total addressable market. And most importantly, we generate a lot of cash, which we invest to maximize sustainable returns in our business and drive value for our shareholders. With that, I'll hand it over to Tim.