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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023 |
OR |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________ |
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Commission File Number: | 001-37552 |
WILLSCOT MOBILE MINI HOLDINGS CORP.
(Exact name of registrant as specified in its charter) | | | | | | | | |
Delaware | | 82-3430194 |
(State or other jurisdiction of incorporation) | | (I.R.S. Employer Identification No.) |
4646 E Van Buren St., Suite 400
Phoenix, Arizona 85008
(Address, including zip code, of principal executive offices)
(480) 894-6311
(Registrant’s telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | WSC | The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Shares of Common Stock, par value $0.0001 per share, outstanding: 197,304,704 shares at July 28, 2023.
WILLSCOT MOBILE MINI HOLDINGS CORP.
Quarterly Report on Form 10-Q
Table of Contents
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| | | Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022 |
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ITEM 1. Financial Statements
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Balance Sheets | | | | | | | | | | | |
(in thousands, except share data) | June 30, 2023 (unaudited) | | December 31, 2022 |
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Assets | | | |
Cash and cash equivalents | $ | 7,660 | | | $ | 7,390 | |
Trade receivables, net of allowances for credit losses at June 30, 2023 and December 31, 2022 of $68,096 and $57,048, respectively | 441,643 | | | 409,766 | |
Inventories | 44,360 | | | 41,030 | |
Prepaid expenses and other current assets | 42,868 | | | 31,635 | |
Assets held for sale - current | 8,924 | | | 31,220 | |
Total current assets | 545,455 | | | 521,041 | |
Rental equipment, net | 3,196,518 | | | 3,077,287 | |
Property, plant and equipment, net | 315,444 | | | 304,659 | |
Operating lease assets | 234,468 | | | 219,405 | |
Goodwill | 1,012,135 | | | 1,011,429 | |
Intangible assets, net | 407,250 | | | 419,125 | |
Other non-current assets | 7,230 | | | 6,683 | |
Assets held for sale - non-current | — | | | 268,022 | |
Total long-term assets | 5,173,045 | | | 5,306,610 | |
Total assets | $ | 5,718,500 | | | $ | 5,827,651 | |
Liabilities and equity | | | |
Accounts payable | $ | 91,783 | | | $ | 109,349 | |
Accrued expenses | 120,301 | | | 109,542 | |
Accrued employee benefits | 43,647 | | | 56,340 | |
Deferred revenue and customer deposits | 209,726 | | | 203,793 | |
Operating lease liabilities - current | 54,110 | | | 50,499 | |
Current portion of long-term debt | 13,952 | | | 13,324 | |
Liabilities held for sale - current | — | | | 19,095 | |
Total current liabilities | 533,519 | | | 561,942 | |
Long-term debt | 3,035,521 | | | 3,063,042 | |
Deferred tax liabilities | 506,425 | | | 401,453 | |
Operating lease liabilities - non-current | 181,319 | | | 169,618 | |
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Other non-current liabilities | 23,171 | | | 18,537 | |
Liabilities held for sale - non-current | — | | | 47,759 | |
Long-term liabilities | 3,746,436 | | | 3,700,409 | |
Total liabilities | 4,279,955 | | | 4,262,351 | |
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Preferred Stock: $0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at June 30, 2023 and December 31, 2022 | — | | | — | |
Common Stock: $0.0001 par, 500,000,000 shares authorized and 198,375,893 and 207,951,682 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 20 | | | 21 | |
Additional paid-in-capital | 2,435,571 | | | 2,886,951 | |
Accumulated other comprehensive loss | (44,109) | | | (70,122) | |
Accumulated deficit | (952,937) | | | (1,251,550) | |
Total shareholders' equity | 1,438,545 | | | 1,565,300 | |
Total liabilities and shareholders' equity | $ | 5,718,500 | | | $ | 5,827,651 | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Operations
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands, except share and per share data) | 2023 | | 2022 | | 2023 | | 2022 |
Revenues: | | | | | | | |
Leasing and services revenue: | | | | | | | |
Leasing | $ | 449,320 | | | $ | 386,386 | | | $ | 889,271 | | | $ | 737,945 | |
Delivery and installation | 112,754 | | | 110,841 | | | 219,384 | | | 196,380 | |
Sales revenue: | | | | | | | |
New units | 9,004 | | | 9,927 | | | 19,661 | | | 15,714 | |
Rental units | 11,011 | | | 15,736 | | | 19,241 | | | 24,022 | |
Total revenues | 582,089 | | | 522,890 | | | 1,147,557 | | | 974,061 | |
Costs: | | | | | | | |
Costs of leasing and services: | | | | | | | |
Leasing | 98,556 | | | 88,111 | | | 196,071 | | | 168,445 | |
Delivery and installation | 81,349 | | | 82,537 | | | 156,356 | | | 153,117 | |
Costs of sales: | | | | | | | |
New units | 4,795 | | | 5,321 | | | 11,003 | | | 9,077 | |
Rental units | 5,067 | | | 8,478 | | | 9,521 | | | 13,370 | |
Depreciation of rental equipment | 64,450 | | | 63,230 | | | 123,606 | | | 120,778 | |
Gross profit | 327,872 | | | 275,213 | | | 651,000 | | | 509,274 | |
Expenses: | | | | | | | |
Selling, general and administrative | 146,810 | | | 150,129 | | | 297,702 | | | 288,273 | |
| | | | | | | |
Other depreciation and amortization | 17,346 | | | 14,951 | | | 34,519 | | | 30,313 | |
| | | | | | | |
| | | | | | | |
Currency losses (gains), net | 14 | | | (173) | | | 6,789 | | | (36) | |
Other income, net | (2,838) | | | (3,794) | | | (6,197) | | | (5,077) | |
Operating income | 166,540 | | | 114,100 | | | 318,187 | | | 195,801 | |
Interest expense | 47,246 | | | 33,153 | | | 92,112 | | | 63,723 | |
Income from continuing operations before income tax | 119,294 | | | 80,947 | | | 226,075 | | | 132,078 | |
Income tax expense from continuing operations | 31,565 | | | 20,848 | | | 62,075 | | | 32,931 | |
Income from continuing operations | 87,729 | | | 60,099 | | | 164,000 | | | 99,147 | |
| | | | | | | |
Discontinued operations: | | | | | | | |
Income from discontinued operations before income tax | — | | | 17,140 | | | 4,003 | | | 32,927 | |
Gain on sale of discontinued operations | — | | | — | | | 176,078 | | | — | |
Income tax expense from discontinued operations | — | | | 3,863 | | | 45,468 | | | 7,527 | |
Income from discontinued operations | — | | | 13,277 | | | 134,613 | | | 25,400 | |
| | | | | | | |
Net income | $ | 87,729 | | | $ | 73,376 | | | $ | 298,613 | | | $ | 124,547 | |
| | | | | | | |
Earnings per share from continuing operations attributable to WillScot Mobile Mini common shareholders: | | |
Basic | $ | 0.44 | | | $ | 0.27 | | | $ | 0.80 | | | $ | 0.45 | |
Diluted | $ | 0.43 | | | $ | 0.26 | | | $ | 0.78 | | | $ | 0.44 | |
Earnings per share from discontinued operations attributable to WillScot Mobile Mini common shareholders: | | |
Basic | $ | — | | | $ | 0.06 | | | $ | 0.66 | | | $ | 0.11 | |
Diluted | $ | — | | | $ | 0.06 | | | $ | 0.65 | | | $ | 0.11 | |
Earnings per share attributable to WillScot Mobile Mini common shareholders: | | | | |
Basic | $ | 0.44 | | | $ | 0.33 | | | $ | 1.46 | | | $ | 0.56 | |
Diluted | $ | 0.43 | | | $ | 0.32 | | | $ | 1.43 | | | $ | 0.55 | |
Weighted average shares: | | | | | | | |
Basic | 200,946,619 | | | 223,376,276 | | | 204,635,764 | | | 222,196,986 | |
Diluted | 204,326,162 | | | 227,484,012 | | | 208,233,141 | | | 226,983,150 | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
Net income | $ | 87,729 | | | $ | 73,376 | | | $ | 298,613 | | | $ | 124,547 | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment, net of income tax expense of $0 for both the three and six months ended June 30, 2023 and 2022 | 5,915 | | | (25,628) | | | 13,849 | | | (29,702) | |
Net gain on derivatives, net of income tax expense of $4,268 and $394 for the three months ended June 30, 2023 and 2022, respectively, and $4,046 and $1,171 for the six months ended June 30, 2023 and 2022, respectively. | 12,831 | | | 1,176 | | | 12,164 | | | 3,497 | |
Total other comprehensive income (loss) | 18,746 | | | (24,452) | | | 26,013 | | | (26,205) | |
Total comprehensive income | $ | 106,475 | | | $ | 48,924 | | | $ | 324,626 | | | $ | 98,342 | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Changes in Equity
(Unaudited) | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2023 |
| Common Stock | Additional Paid-in-Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Equity |
(in thousands) | Shares | Amount |
Balance at December 31, 2022 | 207,952 | | $ | 21 | | $ | 2,886,951 | | $ | (70,122) | | $ | (1,251,550) | | $ | 1,565,300 | |
Net income | — | | — | | — | | — | | 210,884 | | 210,884 | |
Other comprehensive income | — | | — | | — | | 7,267 | | — | | 7,267 | |
Withholding taxes on net share settlement of stock-based compensation | — | | — | | (10,058) | | — | | — | | (10,058) | |
Stock-based compensation and issuance of Common Stock from vesting | 355 | | — | | 8,150 | | — | | — | | 8,150 | |
Repurchase and cancellation of Common Stock | (4,589) | | — | | (217,687) | | — | | — | | (217,687) | |
Issuance of Common Stock from the exercise of options | 6 | | — | | 68 | | — | | — | | 68 | |
Balance at March 31, 2023 | 203,723 | | 21 | | 2,667,424 | | (62,855) | | (1,040,666) | | 1,563,924 | |
Net income | — | | — | | — | | — | | 87,729 | | 87,729 | |
Other comprehensive income | — | | — | | — | | 18,746 | | — | | 18,746 | |
| | | | | | |
Stock-based compensation and issuance of Common Stock from vesting | 35 | | — | | 9,348 | | — | | — | | 9,348 | |
Repurchase and cancellation of Common Stock | (5,406) | | (1) | | (241,545) | | — | | — | | (241,546) | |
Issuance of Common Stock from the exercise of options | 24 | | — | | 344 | | — | | — | | 344 | |
Balance at June 30, 2023 | 198,376 | | $ | 20 | | $ | 2,435,571 | | $ | (44,109) | | $ | (952,937) | | $ | 1,438,545 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2022 |
| Common Stock | Additional Paid-in-Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Equity |
(in thousands) | Shares | Amount |
Balance at December 31, 2021 | 223,940 | | $ | 22 | | $ | 3,616,902 | | $ | (29,071) | | $ | (1,591,090) | | $ | 1,996,763 | |
Net income | — | | — | | — | | — | | 51,171 | | 51,171 | |
Other comprehensive loss | — | | — | | — | | (1,753) | | — | | (1,753) | |
Withholding taxes on net share settlement of stock-based compensation | — | | — | | (12,295) | | — | | — | | (12,295) | |
Stock-based compensation and issuance of Common Stock from vesting | 498 | | — | | 6,395 | | — | | — | | 6,395 | |
Repurchase and cancellation of Common Stock and warrants | (2,064) | | — | | (77,409) | | — | | — | | (77,409) | |
Issuance of Common Stock from the exercise of options and warrants | 800 | | — | | 3,313 | | — | | — | | 3,313 | |
Balance at March 31, 2022 | 223,174 | | 22 | | 3,536,906 | | (30,824) | | (1,539,919) | | 1,966,185 | |
Net income | — | | — | | — | | — | | 73,376 | | 73,376 | |
Other comprehensive loss | — | | — | | — | | (24,452) | | — | | (24,452) | |
Withholding taxes on net share settlement of stock-based compensation | — | | — | | (1,075) | | — | | — | | (1,075) | |
Stock-based compensation and issuance of Common Stock from vesting | 70 | | — | | 9,292 | | — | | — | | 9,292 | |
Repurchase and cancellation of Common Stock and warrants | (7,222) | | — | | (249,515) | | — | | — | | (249,515) | |
Issuance of Common Stock from the exercise of options and warrants | 69 | | — | | 139 | | — | | — | | 139 | |
Balance at June 30, 2022 | 216,091 | | $ | 22 | | $ | 3,295,747 | | $ | (55,276) | | $ | (1,466,543) | | $ | 1,773,950 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited) | | | | | | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 |
Operating activities: | | | |
Net income | $ | 298,613 | | | $ | 124,547 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 158,125 | | | 168,050 | |
Provision for credit losses | 22,193 | | | 18,865 | |
Gain on sale of discontinued operations | (176,078) | | | — | |
| | | |
Gain on sale of rental equipment and other property, plant and equipment | (11,691) | | | (14,195) | |
Amortization of debt discounts and debt issuance costs | 5,501 | | | 6,975 | |
| | | |
| | | |
Stock-based compensation expense | 17,498 | | | 15,687 | |
Deferred income tax expense | 90,675 | | | 31,072 | |
Loss on foreign currency forward contract | 7,715 | | | — | |
Unrealized currency losses, net | (1,030) | | | (71) | |
Other | 2,176 | | | 1,916 | |
Changes in operating assets and liabilities: | | | |
Trade receivables | (48,641) | | | (60,737) | |
Inventories | (2,273) | | | (9,293) | |
Prepaid expenses and other assets | (2,211) | | | (13,907) | |
Operating lease assets and liabilities | 37 | | | 936 | |
| | | |
Accounts payable and other accrued expenses | (19,705) | | | 34,756 | |
Deferred revenue and customer deposits | 10,016 | | | 29,252 | |
Net cash provided by operating activities | 350,920 | | | 333,853 | |
Investing activities: | | | |
Proceeds from sale of discontinued operations | 403,992 | | | — | |
Acquisitions, net of cash acquired | (149,421) | | | (103,927) | |
Proceeds from sale of rental equipment | 25,254 | | | 35,080 | |
Purchase of rental equipment and refurbishments | (102,709) | | | (225,389) | |
Payment for settlement of foreign currency forward contract | (7,715) | | | — | |
Proceeds from the sale of property, plant and equipment | 265 | | | 751 | |
Purchase of property, plant and equipment | (11,189) | | | (20,253) | |
Net cash provided by (used in) investing activities | 158,477 | | | (313,738) | |
Financing activities: | | | |
Receipts from issuance of Common Stock from the exercise of options | 412 | | | 3,452 | |
Repurchase and cancellation of Common Stock and warrants | (456,297) | | | (319,225) | |
| | | |
Receipts from borrowings | 628,538 | | | 454,322 | |
Payment of financing costs | — | | | (8,021) | |
Repayment of borrowings | (674,719) | | | (127,607) | |
| | | |
Principal payments on finance lease obligations | (8,133) | | | (10,353) | |
Taxes paid on employee stock awards | (10,058) | | | (13,370) | |
| | | |
Net cash used in financing activities | (520,257) | | | (20,802) | |
Effect of exchange rate changes on cash and cash equivalents | 746 | | | (306) | |
Net change in cash and cash equivalents | (10,114) | | | (993) | |
Cash and cash equivalents at the beginning of the period | 17,774 | | | 12,699 | |
Cash and cash equivalents at the end of the period | $ | 7,660 | | | $ | 11,706 | |
| | | |
Supplemental cash flow information: | | | |
Interest paid, net | $ | 86,123 | | | $ | 59,980 | |
Income taxes paid, net | $ | 15,055 | | | $ | 10,608 | |
Assets acquired under capital leases | $ | 24,379 | | | $ | 17,065 | |
Capital expenditures accrued or payable | $ | 18,740 | | | $ | 39,949 | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
WillScot Mobile Mini Holdings Corp. (“WillScot Mobile Mini” and, together with its subsidiaries, the “Company”) is a leading business services provider specializing in innovative flexible work space and portable storage solutions in the United States (“US”), Canada, and Mexico. The Company leases, sells, delivers and installs modular space solutions and portable storage products through an integrated network of branch locations that spans North America.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by US Generally Accepted Accounting Principles ("GAAP") for complete financial statements. The accompanying unaudited condensed consolidated financial statements comprise the financial statements of WillScot Mobile Mini and its subsidiaries that it controls due to ownership of a majority voting interest and contain all adjustments, which are of a normal and recurring nature, considered necessary by management to present fairly the financial position, results of operations and cash flows for the interim periods presented.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated.
The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Reclassifications
Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.
Recently Issued and Adopted Accounting Standards
In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with FASB Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). The Company adopted ASU 2021-08 on January 1, 2023 on a prospective basis. The adoption of this ASU did not have a material impact on the Company's financial statements or related disclosures.
NOTE 2 - Acquisitions
WillScot Mobile Mini is the holding company for the Williams Scotsman and Mobile Mini family of companies, which resulted from the combination of WillScot Corporation (“WillScot”) and Mobile Mini, Inc. (“Mobile Mini”) through a merger that occurred on July 1, 2020 (the "Merger").
Asset Acquisitions
During the six months ended June 30, 2023, the Company acquired certain assets and liabilities of five regional and local storage and modular companies, which consisted primarily of approximately 1,800 storage units and 700 modular units, for $149.4 million in cash, net of cash acquired. The accompanying consolidated financial statements include $147.9 million of rental equipment and $4.5 million of land held for sale as of June 30, 2023 as a result of these acquisitions. A sale of the acquired land is expected to close before the end of the year.
Integration Costs
The Company recorded $2.2 million and $5.2 million in integration costs related to asset acquisitions and the Merger within selling, general and administrative expense ("SG&A") during the three months ended June 30, 2023 and 2022, respectively, and $6.1 million and $9.3 million in integration costs related to acquisitions and the Merger during the six months ended June 30, 2023 and 2022, respectively.
NOTE 3 - Discontinued Operations
Tank and Pump Divestiture
On September 30, 2022, the Company sold its former Tank and Pump segment for $321.9 million. Exiting the former Tank and Pump segment represented the Company’s strategic shift to concentrate its operations on its core modular and storage businesses. The criteria for discontinued operations presentation were met during the third quarter of 2022 and results for the former Tank and Pump segment are reported in income from discontinued operations within the consolidated statements of operations for periods presented prior to September 30, 2022.
UK Storage Solutions Divestiture
On December 12, 2022, the Company entered into a stock purchase agreement to sell its former UK Storage Solutions segment. The sale transaction was completed on January 31, 2023. Total cash consideration for the transaction was $418.1 million. Exiting the former UK Storage Solutions segment represented the Company’s strategic shift to concentrate its operations on its core modular and storage businesses in North America. The criteria for discontinued operations presentation were met during the fourth quarter of 2022 and results for the former UK Storage Solutions segment are reported in income from discontinued operations within the consolidated statements of operations for all periods presented. The carrying value of the former UK Storage Solutions segment's assets and liabilities are presented within assets and liabilities held for sale on the consolidated balance sheet as of December 31, 2022.
The following tables present the results of the former Tank and Pump segment and the former UK Storage Solutions segment as reported in income from discontinued operations within the consolidated statements of operations, and the carrying value of the former UK Storage Solutions segment's assets and liabilities as presented within assets and liabilities held for sale on the consolidated balance sheet.
| | | | | |
| Six Months Ended June 30, 2023 |
(in thousands) | UK Storage Solutions |
Revenues: | |
Leasing and services revenue: | |
Leasing | $ | 6,389 | |
Delivery and installation | 1,802 | |
Sales revenue: | |
New units | 54 | |
Rental units | 449 | |
Total revenues | 8,694 | |
Costs: | |
Costs of leasing and services: | |
Leasing | 1,407 | |
Delivery and installation | 1,213 | |
Costs of sales: | |
New units | 38 | |
Rental units | 492 | |
| |
Gross profit | 5,544 | |
Expenses: | |
Selling, general and administrative | 1,486 | |
| |
| |
| |
Other income, net | (1) | |
Operating income | 4,059 | |
Interest expense | 56 | |
Income from discontinued operations before income tax | 4,003 | |
Gain on sale of discontinued operations | 175,708 | |
Income tax expense from discontinued operations | 45,468 | |
Income from discontinued operations | $ | 134,243 | |
Other selected data: | |
Adjusted EBITDA from discontinued operations | $ | 4,124 | |
In January 2023, a $0.4 million adjustment was made to the gain on sale of the former Tank and Pump segment due to the final contractual working capital adjustment. Including this adjustment, the total gain on sale of discontinued operations was $176.1 million for the six months ended June 30, 2023.
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 |
(in thousands) | Tank and Pump | | UK Storage Solutions | | Total |
Revenues: | | | | | |
Leasing and services revenue: | | | | | |
Leasing | $ | 22,078 | | | $ | 20,156 | | | $ | 42,234 | |
Delivery and installation | 9,219 | | | 5,342 | | | 14,561 | |
Sales revenue: | | | | | |
New units | 678 | | | 489 | | | 1,167 | |
Rental units | 110 | | | 679 | | | 789 | |
Total revenues | 32,085 | | | 26,666 | | | 58,751 | |
Costs: | | | | | |
Costs of leasing and services: | | | | | |
Leasing | 4,608 | | | 4,193 | | | 8,801 | |
Delivery and installation | 7,640 | | | 3,410 | | | 11,050 | |
Costs of sales: | | | | | |
New units | 496 | | | 322 | | | 818 | |
Rental units | (23) | | | 500 | | | 477 | |
Depreciation of rental equipment | 2,793 | | | 1,154 | | | 3,947 | |
Gross profit | 16,571 | | | 17,087 | | | 33,658 | |
Expenses: | | | | | |
Selling, general and administrative | 6,289 | | | 5,652 | | | 11,941 | |
Other depreciation and amortization | 2,413 | | | 1,690 | | | 4,103 | |
| | | | | |
Currency losses, net | — | | | 46 | | | 46 | |
Other expense, net | 1 | | | 5 | | | 6 | |
Operating income | 7,868 | | | 9,694 | | | 17,562 | |
Interest expense | 190 | | | 232 | | | 422 | |
Income from discontinued operations before income tax | 7,678 | | | 9,462 | | | 17,140 | |
Income tax expense from discontinued operations | 1,997 | | | 1,866 | | | 3,863 | |
Income from discontinued operations | $ | 5,681 | | | $ | 7,596 | | | $ | 13,277 | |
Other selected data: | | | | | |
Adjusted EBITDA from discontinued operations | $ | 12,462 | | | $ | 12,230 | | | $ | 24,692 | |
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
(in thousands) | Tank and Pump | | UK Storage Solutions | | Total |
Revenues: | | | | | |
Leasing and services revenue: | | | | | |
Leasing | $ | 43,140 | | | $ | 40,727 | | | $ | 83,867 | |
Delivery and installation | 17,544 | | | 11,809 | | | 29,353 | |
Sales revenue: | | | | | — | |
New units | 1,360 | | | 617 | | | 1,977 | |
Rental units | 324 | | | 953 | | | 1,277 | |
Total revenues | 62,368 | | | 54,106 | | | 116,474 | |
Costs: | | | | | |
Costs of leasing and services: | | | | | |
Leasing | 8,915 | | | 8,430 | | | 17,345 | |
Delivery and installation | 14,651 | | | 7,334 | | | 21,985 | |
Costs of sales: | | | | | |
New units | 1,003 | | | 385 | | | 1,388 | |
Rental units | 72 | | | 657 | | | 729 | |
Depreciation of rental equipment | 6,323 | | | 2,292 | | | 8,615 | |
Gross profit | 31,404 | | | 35,008 | | | 66,412 | |
Expenses: | | | | | |
Selling, general and administrative | 12,501 | | | 11,769 | | | 24,270 | |
Other depreciation and amortization | 4,829 | | | 3,515 | | | 8,344 | |
| | | | | |
Currency losses, net | — | | | 47 | | | 47 | |
Other expense (income), net | 20 | | | (40) | | | (20) | |
Operating income | 14,054 | | | 19,717 | | | 33,771 | |
Interest expense | 368 | | | 476 | | | 844 | |
Income from discontinued operations before income tax | 13,686 | | | 19,241 | | | 32,927 | |
Income tax expense from discontinued operations | 3,510 | | | 4,017 | | | 7,527 | |
Income from discontinued operations | $ | 10,176 | | | $ | 15,224 | | | $ | 25,400 | |
Other selected data: | | | | | |
Adjusted EBITDA from discontinued operations | $ | 23,968 | | | $ | 24,774 | | | $ | 48,742 | |
| | | | | | | | |
| | December 31, 2022 |
(in thousands) | | UK Storage Solutions |
Assets | | |
Cash and cash equivalents | | $ | 10,384 | |
Trade receivables, net of allowances for doubtful accounts of $300 | | 15,991 | |
Inventories | | 3,058 | |
Prepaid expenses and other current assets | | 1,787 | |
Rental equipment, net | | 165,853 | |
Property, plant and equipment, net | | 20,645 | |
Operating lease assets | | 15,134 | |
Goodwill | | 58,144 | |
Intangible assets, net | | 6,414 | |
Other non-current assets | | 1,832 | |
Total assets held for sale | | $ | 299,242 | |
Liabilities | | |
Accounts payable | | $ | 4,515 | |
Accrued expenses | | 3,273 | |
Accrued employee benefits | | 1,009 | |
Deferred revenue and customer deposits | | 6,850 | |
Deferred tax liabilities | | 29,737 | |
Operating lease liabilities | | 15,192 | |
Other non-current liabilities | | 6,278 | |
Total liabilities held for sale | | $ | 66,854 | |
For the six months ended June 30, 2022, significant operating and investing items related to the former Tank and Pump segment were as follows:
| | | | | |
(in thousands) | Six Months Ended June 30, 2022 |
Operating activities of discontinued operations: | |
Depreciation and amortization | $ | 11,152 | |
Investing activities of discontinued operations: | |
Proceeds from sale of rental equipment | $ | 325 | |
Purchases of rental equipment and refurbishments | $ | (13,658) | |
| |
Purchases of property, plant and equipment | $ | (170) | |
The following table presents a reconciliation of Income from discontinued operations before income tax to Adjusted EBITDA from discontinued operations for the former Tank and Pump segment for the three and six months ended June 30, 2022. See Note 16 for further information regarding Adjusted EBITDA.
| | | | | | | | | | | |
(in thousands) | Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
Income from discontinued operations | $ | 5,681 | | | $ | 10,176 | |
| | | |
Income tax expense from discontinued operations | 1,997 | | | 3,510 | |
Income from discontinued operations before income tax | 7,678 | | | 13,686 | |
Interest expense | 190 | | | 368 | |
Depreciation and amortization | 5,206 | | | 11,152 | |
| | | |
| | | |
| | | |
| | | |
Stock compensation expense | 135 | | | 239 | |
Other | (747) | | | (1,477) | |
Adjusted EBITDA from discontinued operations | $ | 12,462 | | | $ | 23,968 | |
For the six months ended June 30, 2023 and 2022, significant operating and investing items related to the former UK Storage Solutions segment were as follows:
| | | | | | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 |
Operating activities of discontinued operations: | | | |
Depreciation and amortization | $ | — | | | $ | 5,807 | |
Investing activities of discontinued operations: | | | |
Proceeds from sale of rental equipment | $ | 514 | | | $ | 953 | |
Purchases of rental equipment and refurbishments | $ | (371) | | | $ | (17,219) | |
Proceeds from sale of property, plant and equipment | $ | 8 | | | $ | 502 | |
Purchases of property, plant and equipment | $ | (64) | | | $ | (3,188) | |
The following table presents reconciliations of Income from discontinued operations before income tax to Adjusted EBITDA from discontinued operations for the former UK Storage Solutions segment for the three and six months ended June 30, 2023 and 2022, respectively. See Note 16 for further information regarding Adjusted EBITDA.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
Income from discontinued operations | $ | — | | | $ | 7,596 | | | $ | 134,243 | | | $ | 15,224 | |
Gain on sale of discontinued operations | — | | | — | | | 175,708 | | | — | |
Income tax expense from discontinued operations | — | | | 1,866 | | | 45,468 | | | 4,017 | |
Income from discontinued operations before income tax and gain on sale | — | | | 9,462 | | | 4,003 | | | 19,241 | |
Interest expense | — | | | 232 | | | 56 | | | 476 | |
Depreciation and amortization | — | | | 2,844 | | | — | | | 5,807 | |
Currency losses, net | — | | | 46 | | | — | | | 47 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Stock compensation expense | | | 29 | | | (196) | | | 47 | |
Other | | | (383) | | | 261 | | | (844) | |
Adjusted EBITDA from discontinued operations | $ | — | | | $ | 12,230 | | | $ | 4,124 | | | $ | 24,774 | |
NOTE 4 - Revenue
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the following geographic areas for the three and six months ended June 30, 2023 and 2022 as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
US | $ | 545,333 | | | $ | 485,286 | | | $ | 1,078,507 | | | $ | 906,970 | |
Canada | 30,839 | | | 32,901 | | | 57,780 | | | 58,174 | |
Mexico | 5,917 | | | 4,703 | | | 11,270 | | | 8,917 | |
Total revenues | $ | 582,089 | | | $ | 522,890 | | | $ | 1,147,557 | | | $ | 974,061 | |
Major Product and Service Lines
Equipment leasing is the Company's core business and the primary driver of the Company's revenue and cash flows. This includes modular space and portable storage units along with value-added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, integral tool racking, heavy duty capacity shelving, workstations, electrical and lighting products and other items used by customers in connection with the Company's products. The Company also offers its lease customers a damage waiver program that protects them in case the leased unit is damaged. Leasing is complemented by new unit sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services and removal services at the end of lease transactions.
The Company’s revenue by major product and service line for the three and six months ended June 30, 2023 and 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
Modular space leasing revenue | $ | 236,625 | | | $ | 204,667 | | | $ | 461,095 | | | $ | 395,056 | |
Portable storage leasing revenue | 93,462 | | | 81,186 | | | 190,777 | | | 151,890 | |
VAPS and third party leasing revenues(a) | 97,698 | | | 81,855 | | | 191,825 | | | 157,160 | |
Other leasing-related revenue(b) | 21,535 | | | 18,678 | | | 45,574 | | | 33,839 | |
Leasing revenue | 449,320 | | | 386,386 | | | 889,271 | | | 737,945 | |
Delivery and installation revenue | 112,754 | | | 110,841 | | | 219,384 | | | 196,380 | |
Total leasing and services revenue | 562,074 | | | 497,227 | | | 1,108,655 | | | 934,325 | |
New unit sales revenue | 9,004 | | | 9,927 | | | 19,661 | | | 15,714 | |
Rental unit sales revenue | 11,011 | | | 15,736 | | | 19,241 | | | 24,022 | |
Total revenues | $ | 582,089 | | | $ | 522,890 | | | $ | 1,147,557 | | | $ | 974,061 | |
| | | | | |
(a) | Includes $6.1 million and $5.6 million of service revenue for the three months ended June 30, 2023 and 2022, respectively, and $11.7 million and $11.5 million of service revenue for the six months ended June 30, 2023 and 2022, respectively. |
(b) | Includes primarily damage billings, delinquent payment charges, and other processing fees. |
Leasing and Services Revenue
The majority of revenue (76% for both the three and six months ended June 30, 2023, and 73% and 75% for the three and six months ended June 30, 2022, respectively) was generated by rental income subject to the guidance of ASU 2018-11, Leases (Topic 842) ("ASC 842"). The remaining revenue was generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 606.
Receivables and Credit Losses
The Company is exposed to credit losses from trade receivables and manages credit risk at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues. Concentration of credit risk with respect to the Company's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets.
The Company assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review that considers expected billing exposure, timing for payment and the customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for existing customers when the customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation.
The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates and may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowance for credit losses reflects the estimate of the amount of receivables that the Company will be unable to collect based on historical collection experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. The Company's estimate reflects changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance.
Activity in the allowance for credit losses was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
Balance at beginning of period | $ | 61,402 | | | $ | 47,124 | | | $ | 57,048 | | | $ | 45,773 | |
Provision for credit losses, net of recoveries | 13,390 | | | 9,593 | | | 22,193 | | | 17,904 | |
Write-offs | (6,969) | | | (5,385) | | | (11,506) | | | (12,395) | |
Foreign currency translation and other | 273 | | | (48) | | | 361 | | | 2 | |
Balance at end of period | $ | 68,096 | | | $ | 51,284 | | | $ | 68,096 | | | $ | 51,284 | |
Contract Assets and Liabilities
When customers are billed in advance for services, the Company defers recognition of revenue until the related services are performed, which generally occurs at the end of the contract. The balance sheet classification of deferred revenue
is determined based on the contractual lease term. For contracts that continue beyond their initial contractual lease term, revenue continues to be deferred until the services are performed. During the three months ended June 30, 2023, deferred revenue relating to services billed in advance of $26.2 million was recognized as revenue. As of June 30, 2023 and December 31, 2022, the Company had approximately $104.8 million and $102.2 million, respectively, of deferred revenue related to these services.
The Company does not have material contract assets, and the Company's uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future services revenues that are expected to be recognized within twelve months, the Company has elected to utilize the optional disclosure exemption made available regarding transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations. The transaction price for performance obligations that will be completed in greater than twelve months is variable based on the market rate in place at the time those services are provided, and therefore, the Company is applying the optional expedient to omit disclosure of such amounts.
The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one year; therefore, the commissions are expensed as incurred.
NOTE 5 - Leases
As of June 30, 2023, the undiscounted future lease payments for operating and finance lease liabilities were as follows: | | | | | | | | | | | |
(in thousands) | Operating | | Finance |
2023 (remaining) | $ | 33,230 | | | $ | 8,905 | |
2024 | 60,869 | | | 17,994 | |
2025 | 51,326 | | | 17,667 | |
2026 | 39,676 | | | 17,351 | |
2027 | 29,208 | | | 14,099 | |
Thereafter | 62,057 | | | 26,651 | |
Total lease payments | 276,366 | | | 102,667 | |
Less: interest | (40,937) | | | (11,939) | |
Present value of lease liabilities | $ | 235,429 | | | $ | 90,728 | |
Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets.
The Company’s lease activity during the six months ended June 30, 2023 and 2022 was as follows:
| | | | | | | | | | | |
(in thousands) | Six Months Ended June 30, |
Financial Statement Line | 2023 | | 2022 |
Finance Lease Expense | | | |
Amortization of finance lease assets | $ | 7,580 | | | $ | 6,820 | |
Interest on obligations under finance leases | 1,566 | | | 839 | |
Total finance lease expense | $ | 9,146 | | | $ | 7,659 | |
| | | |
Operating Lease Expense | | | |
Fixed lease expense | | | |
Cost of leasing and services | $ | 723 | | | $ | 1,574 | |
Selling, general and administrative | 32,006 | | | 29,709 | |
| | | |
Short-term lease expense | | | |
Cost of leasing and services | 12,404 | | | 16,739 | |
Selling, general and administrative | 905 | | | 986 | |
| | | |
Variable lease expense | | | |
Cost of leasing and services | 1,675 | | | 2,822 | |
Selling, general and administrative | 4,847 | | | 3,419 | |
| | | |
Total operating lease expense | $ | 52,560 | | | $ | 55,249 | |
Supplemental cash flow information related to leases for the six months ended June 30, 2023 and 2022 was as follows:
| | | | | | | | | | | |
(in thousands) | Six Months Ended June 30, |
Supplemental Cash Flow Information | 2023 | | 2022 |
Cash paid for the amounts included in the measurement of lease liabilities: | | | |
Operating cash outflows from operating leases | $ | 33,501 | | | $ | 30,918 | |
Operating cash outflows from finance leases | $ | 1,515 | | | $ | 837 | |
Financing cash outflows from finance leases | $ | 8,087 | | | $ | 7,506 | |
| | | |
Right of use assets obtained in exchange for lease obligations | $ | 36,604 | | | $ | 19,030 | |
Assets obtained in exchange for finance leases | $ | 24,382 | | | $ | 14,576 | |
Weighted average remaining operating lease terms and the weighted average discount rates as of June 30, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
Lease Terms and Discount Rates | June 30, 2023 | | December 31, 2022 |
Weighted average remaining lease term - operating leases | 5.6 years | | 5.8 years |
Weighted average discount rate - operating leases | 5.6 | % | | 5.0 | % |
Weighted average remaining lease term - finance leases | 5.1 years | | 4.9 years |
Weighted average discount rate - finance leases | 4.1 | % | | 3.1 | % |
The Company presents information related to leasing revenues in Note 4.
NOTE 6 - Inventories
Inventories at the respective balance sheet dates consisted of the following:
| | | | | | | | | | | |
(in thousands) | June 30, 2023 | | December 31, 2022 |
Raw materials | $ | 40,971 | | | $ | 38,611 | |
Finished units | 3,389 | | | 2,419 | |
Inventories | $ | 44,360 | | | $ | 41,030 | |
NOTE 7 - Rental Equipment, net
Rental equipment, net at the respective balance sheet dates consisted of the following:
| | | | | | | | | | | |
(in thousands) | June 30, 2023 | | December 31, 2022 |
Modular space units | $ | 3,406,542 | | | $ | 3,197,779 | |
Portable storage units | 851,818 | | | 849,193 | |
Value added products | 204,665 | | | 203,444 | |
Total rental equipment | 4,463,025 | | | 4,250,416 | |
Less: accumulated depreciation | (1,266,507) | | | (1,173,129) | |
Rental equipment, net | $ | 3,196,518 | | | $ | 3,077,287 | |
NOTE 8 - Goodwill and Intangibles
Goodwill
Changes in the carrying amount of goodwill were as follows: | | | | | | | | | | | | | | | | | |
(in thousands) | Modular | | Storage | | Total |
Balance at December 31, 2021 | $ | 521,049 | | | $ | 492,552 | | | $ | 1,013,601 | |
Effects of movements in foreign exchange rates | (2,172) | | | — | | | (2,172) | |
Balance at December 31, 2022 | 518,877 | | | 492,552 | | | 1,011,429 | |
Effects of movements in foreign exchange rates | 706 | | | — | | | 706 | |
Balance at June 30, 2023 | $ | 519,583 | | | $ | 492,552 | | | $ | 1,012,135 | |
The Company had no goodwill impairment during the six months ended June 30, 2023 or the year ended December 31, 2022.
Intangible Assets
Intangible assets other than goodwill at the respective balance sheet dates consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2023 |
(in thousands) | Weighted average remaining life (in years) | | Gross carrying amount | | Accumulated amortization | | Net book value |
Intangible assets subject to amortization: | | | | | | | |
Mobile Mini customer relationships | 5.0 | | $ | 188,000 | | | $ | (70,500) | | | $ | 117,500 | |
Technology | 3.0 | | 1,500 | | | (750) | | | 750 | |
Indefinite-lived intangible assets: | | | | | | | |
Trade name - Mobile Mini | | | 164,000 | | | — | | | 164,000 | |
Trade name - WillScot | | | 125,000 | | | — | | | 125,000 | |
Total intangible assets other than goodwill | | | $ | 478,500 | | | $ | (71,250) | | | $ | 407,250 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
(in thousands) | Weighted average remaining life (in years) | | Gross carrying amount | | Accumulated amortization | | Net book value |
Intangible assets subject to amortization: | | | | | | | |
Mobile Mini customer relationships | 5.5 | | $ | 188,000 | | | $ | (58,750) | | | $ | 129,250 | |
Technology | 3.5 | | 1,500 | | | (625) | | | 875 | |
Indefinite-lived intangible assets: | | | | | | | |
Trade name - Mobile Mini | | | 164,000 | | | — | | | 164,000 | |
Trade name - WillScot | | | 125,000 | | | — | | | 125,000 | |
Total intangible assets other than goodwill | | | $ | 478,500 | | | $ | (59,375) | | |