Willscot Holdings Corporation · NASDAQ:WSC
Willscot — Q2 2024 Earnings Presentation
58 slides from Willscot's earnings presentation, Aug 1, 2024
Slide 1: Quarterly Investor Presentation Second Quarter 2024
QUARTERLY INVESTOR PRESENTATION SECOND QUARTER 2024 08/01/2024
Slide 2: Safe Harbor
SAFE HARBOR Forward Looking Statements Non-GAAP Financial Measures This presentation contains forward-looking statements (including the guidance/outlook This press release includes non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA Margin from continuing operations, Adjusted con
Slide 3: Safe Harbor
SAFE HARBOR Recent Developments Important Information About the Proposed Transaction Entry into an Agreement to Acquire McGrath RentCorp In connection with the Proposed Transaction, the Company filed a registration statement on Form S-4 (No. 333- 278544), which includes a preliminary prospectus of t
Slide 4: Table of Contents
05 19 24 WillScot Business Q2 2024 Q2 2024 Overview Operating Results Financial Review TABLE OF CONTENTS 31 35 44 Value Drivers WillScot to Acquire Appendix McGrath 4
Slide 5: The Continuous Evolution of Turnkey Spaces
THE CONTINUOUS EVOLUTION OF TURNKEY SPACES Leading Onsite Climate-Controlled Storage Clearspan Structures Comfort & Facilities Seamlessly manage temperature sensitive Expansive, durable, and highly configurable From restrooms to efficient climate- goods and materials across diverse structures that c
Slide 6: WSC Has an Established Formula to Drive Sustainable Growth and Returns
WSC HAS AN ESTABLISHED FORMULA TO DRIVE SUSTAINABLE GROWTH AND RETURNS 1 Clear Market Leadership #1 In ~$20B North American market for flexible space solutions >25% Unlevered IRRs on portable storage and turnkey modular space fleet investments 2 Compelling Unit Economics And Return on Invested Capit
Slide 7: We Offer the Most Flexible and Cost-Effective Temporary Space Solutions
WE OFFER THE MOST FLEXIBLE AND COST-EFFECTIVE TEMPORARY SPACE SOLUTIONS Value-Added Products provide a turnkey space solution in our modular units WillScot successfully installs first solar unit at Crypto.com Arena A conference room package inside a modular unit. VAPS inside a storage container enab
Slide 8: Our Scale Is a Key Competitive Advantage and Value Driver
OUR SCALE IS A KEY COMPETITIVE ADVANTAGE AND VALUE DRIVER FOR OUR CUSTOMERS ▪ We leverage our scale to win locally ▪ ~130M square feet of turnkey space relocatable anywhere in North America ▪ Sophisticated commercial and operational technology platform ▪ ~5,000 experts safely work ~10M hours annuall
Slide 9: Pioneer Within the Industrial Circular Economy
WE ARE A PIONEER WITHIN THE INDUSTRIAL CIRCULAR ECONOMY AND OUR BUSINESS IS INHERENTLY SUSTAINABLE Alternatives Our circular economy solutions Ready to Work solution Permanent new construction Incorporates VAPS to drive reuse ▪ We have implemented of more products and equipment, Requires extensive m
Slide 10: Our Lease Revenues Compound Predictably Through Cycle
OUR LEASE REVENUES COMPOUND PREDICTABLY, IRRESPECTIVE OF MARKET CONDITIONS WITH STABILITY THROUGH CYCLE $1.9B Leasing Revenue LTM GDP¹ Non-residential construction square foot starts¹ Lease Revenue2 Increase of ~86% $1.0B Lease Revenue2 2019 2020 2021 2022 2023 / 2024 “Normal” Demand COVID Shock Pos
Slide 11: We Continue to Invest to Optimize Our Platform
WE CONTINUE TO INVEST TO OPTIMZE OUR PLATFORM Investments in the Business Investments in Core Solutions Investments in Our Team Investments in New Offerings 2020 2021 2022 2023 2024 2025 + CRM Harmonization Digital Logistics Optimization ▪ Branding ▪ Project One ▪ Website ▪ VAPS quoting ▪ Customer P
Slide 12: We Serve Diverse Customer Segments and Can Reposition Within Them
WE SERVE DIVERSE CUSTOMER SEGMENTS AND CAN REPOSITION WITHIN THEM Revenue By Customer Segment1 Customer Segment Outlook Engineering & Architecture – 2% Highway & Heavy Construction – 5% Construction & ▪ Continued multi-year demand from Infrastructure Home Builders & Developers – 12% strategic onshor
Slide 13: We Have Compelling Unit Economics
WE HAVE COMPELLING UNIT ECONOMICS Illustrative unit level cumulative cash flow 1 Maintenance Proceeds Capital investment Rapid Low annual Realized residual Average acquisition payback of ▪ IRR ~30% over Portable Storage maintenance values average >50% cost of ~$5K ~35 months costs of original factor
Slide 14: Our Growth Algorithm Is Simple with Multiple Paths
OUR GROWTH ALGORITHM IS SIMPLE AND WE HAVE MULTIPLE PATHS TO DRIVE PREDICTABLE COMPOUND RETURNS TO SHAREHOLDERS OVER TIME ▪ Moves directionally with GDP overweight to non-residential construction ▪ Governed by 3-year lease duration Value Added Predictable Adj. Volume Rate Double Digit Lease Margin P
Slide 15: Robust and Growing Free Cash Flow Profile
WE HAVE A ROBUST AND GROWING FREE CASH FLOW PROFILE Carve-Out and Minimal North American Investment under Transforming Accelerating Growth Global Ownership Structure for Growth ▪ Capex is discretionary due to Avg. EBITDA long-lived assets and can be adapted 275 173 830 to market cycles less Net Cape
Slide 16: Executing Initiatives Representing Over $1B of Growth Opportunity
WE ARE EXECUTING INITIATIVES REPRESENTING OVER $1B OF GROWTH OPPORTUNITY POTENTIAL ($M) Value Added Products ~$500 and Services (VAPS) Lease Rate ~$200 Optimization Market ~$200 Penetration Logistics ~$50 Recent M&A and ~$100 Scale Efficiencies Modular Storage 16
Slide 17: Eclipsing 3-5 Year Milestones Established at 2021 Investor Day
ECLIPSING 3 – 5 YEAR MILESTONES ESTABLISHED AT 2021 INVESTOR DAY THROUGH GROWTH MINDSET AND CONSISTENT EXECUTION Performance 3 – 5 Year Updated Operating Range Q2 2024 LTM 2024E – 2026E ▪ Portfolio of growth initiatives gives us Metric1 (‘21 Investor Day) Operating Ranges optionality and multiple or
Slide 18: Table of Contents
05 19 24 WillScot Business Q2 2024 Q2 2024 Overview Operating Results Financial Review TABLE OF CONTENTS 31 35 44 Value Drivers WillScot to Acquire Appendix McGrath 18
Slide 19: Long History of Compounding Unit Returns with Value-Added Products
WE HAVE A LONG AND CONSISTENT HISTORY OF COMPOUNDING UNIT RETURNS WITH VALUE-ADDED PRODUCTS Historical Progression of Modular Space VAPS1 ▪ ~15% per unit per month rent CAGR over 10 years Average Monthly Rate2,3 ▪ Units on Rent up >2x $/unit ▪ Quarterly VAPS revenue up ~10x 2019-2024 Average UOR: ~1
Slide 20: VAPS Are Our Largest Opportunity
VAPS ARE OUR LARGEST OPPORTUNITY AND AN EXAMPLE OF INNOVATION DRIVING PREDICTABLE MULTI-YEAR GROWTH Modular Units VAPS Future Revenue Potential1,2 95.7k Units1,2 x $89 + $207 x 12 mo. = $340M $/unit VAPS Average 207 Monthly Rate / UOR ▪ ~$340M revenue growth opportunity in modular units +3% Y/Y Lift
Slide 21: Consistent Rental Rate Performance Reflects Differentiated Value Proposition
OUR CONSISTENT RENTAL RATE PERFORMANCE REFLECTS OUR DIFFERENTIATED VALUE PROPOSITION Modular Space Unit Average Monthly Rental Rate1 $/unit per month ▪ Modular space unit average monthly rental rate increased 1,149 8% Y/Y to $1,176 in Q2 2024 1,130 1,010 1,145 1,031 1,091 1,176 977 914 ▪ ~15% Modula
Slide 22: Stable Portfolio of Units on Rent Underpinned by 3-Year Lease Duration
OUR STABLE PORTFOLIO OF UNITS ON RENT IS UNDERPINNED BY 3-YEAR LEASE DURATION Average Modular Space Units on Rent1 in thousands 102.9 98.2 103.1 97.7 100.7 99.8 95.8 102.0 98.9 95.7 ▪ 3% decline in average modular units on rent, with strength in industrial and manufacturing and the southern U.S. 68.
Slide 23: Table of Contents
05 19 24 WillScot Business Q2 2024 Q2 2024 Overview Operating Results Financial Review TABLE OF CONTENTS 31 35 44 Value Drivers WillScot to Acquire Appendix McGrath 23
Slide 24: On Track for Record Year in 2024
ON TRACK FOR RECORD YEAR IN 2024 Metric Commentary Results driven by Value-Added Products penetration, product differentiation, and our price Y/Y Change in Leasing Revenue +2% management tools and processes Solid execution and cost control as modular activations increased Y/Y and storage activations
Slide 25: Delivered Revenue Growth of 4% in Q2 2024
DELIVERED REVENUE GROWTH OF 4% IN Q2 2024 Revenue Adjusted EBITDA1 ▪ Leasing revenue increased 2% Y/Y $M $M ▪ Supported by VAPS penetration and increased pricing as a result of our price management tools and processes, and contributions from climate- controlled storage 700 ▪ Offset by volume decline
Slide 26: Free Cash Flow Is Accelerating
FREE CASH FLOW IS ACCELERATING DUE TO PREDICTABLE, RECURRING LEASE REVENUES AND CAPITAL MANAGEMENT Net Cash Provided By Operating Activities1 $M ▪ Continued strong operating cash flow from predictable, recurring 219 209 lease revenues 210 191 200 188 202 176 146 149 ▪ $12M Y/Y Net Capex increase dri
Slide 27: We Maintain Appropriate Leverage and Flexible Long-Term Debt Structure
WE MAINTAIN APPROPRIATE LEVERAGE AND A FLEXIBLE LONG-TERM DEBT STRUCTURE Liquidity and Debt Maturity Profile1 $M ▪ Leverage at 3.3x last-twelve-months Adj. EBITDA of $1.06B ▪ ~$1.8B available liquidity in our revolving credit facility $1,829 $1,368 ▪ In June, we issued 5-year secured notes due 2029
Slide 28: LTM Capital Allocation Consistent with Long-Term Framework
OUR LTM CAPITAL ALLOCATION IS CONSISTENT WITH OUR LONG-TERM FRAMEWORK Capital Allocation Framework $1,158 LTM Capital Generated $1,158 LTM Capital Generated $5 – $6B Over 5 Years $M | % $M | % % 26 2% 216 25% 18% 337 29% 459 40% 50% 795 69% 25% 483 42% Cash From Increased Net Capex Net Capex Operati
Slide 29: Revised Outlook Reflects Solid Growth and Margin Expansion
REVISED OUTLOOK REFLECTS SOLID GROWTH AND MARGIN EXPANSION WITH A SOFTER MACRO BACKDROP 2023 Results 2024 Outlook $M From Continuing Operations (excludes McGrath) Revenue $2,365 $2,400 - $2,500 Adjusted EBITDA1 $1,061 $1,085 - $1,125 Net CAPEX $185 $260 - $290 ▪ 1% - 6% expected revenue growth relat
Slide 30: Table of Contents
05 19 24 WillScot Business Q2 2024 Q2 2024 Overview Operating Results Financial Review TABLE OF CONTENTS 31 35 44 Value Drivers WillScot to Acquire Appendix McGrath 30
Slide 31: Executing Initiatives Representing Over $1B of Growth Opportunity
WE ARE EXECUTING INITIATIVES REPRESENTING OVER $1B OF GROWTH OPPORTUNITY POTENTIAL ($M) Value Added Products ~$500 and Services (VAPS) Lease Rate ~$200 Optimization Market ~$200 Penetration Logistics ~$50 Recent M&A and ~$100 Scale Efficiencies Modular Storage 31
Slide 32: Growth, Cash Generation, and Capital Allocation Drive Shareholder Returns
▪ Strong confidence in sustained growth given our forward visibility & availability of $1B organic growth levers. Our growth, ▪ Clear line of sight to $700M annual free cash flow as the portfolio rolls forward predictably. cash generation, ▪ Maintain 3.0x – 3.5x leverage while and capital allocation
Slide 33: Our Company Values
OUR COMPANY VALUES WE ARE Dedicated To Committed To Driven To Health & Safety Inclusion & Diversity Excellence We take responsibility for our own We are stronger together when we We measure success through our well-being and for those around us. celebrate our differences and strive results and the a
Slide 34: Table of Contents
05 19 24 WillScot Business Q2 2024 Q2 2024 Overview Operating Results Financial Review TABLE OF CONTENTS 31 35 44 Value Drivers WillScot to Acquire Appendix McGrath 34
Slide 35: A Highly Synergistic Combination
A HIGHLY SYNERGISTIC COMBINATION KEY PRO FORMA METRICS KEY BENEFITS ▪ Extends position in North America in turnkey space solutions with enhanced geographic coverage and a more diversified platform $3.2B ~$1.4B (~45%) ~$700M ▪ Strengthens service offering, customer diversity and expands Value-Added P
Slide 36: Transaction Summary
TRANSACTION SUMMARY Transaction Structure Expected Synergies Capital Structure / Allocation Approvals / Closing ▪ WillScot to acquire McGrath (“McGrath”) for an ▪ Expected $50M run-rate ▪ Committed financing in place ▪ Transaction unanimously enterprise value of $3.8B operating synergies, for 100% o
Slide 37: Compelling Strategic and Financial Rationale
COMPELLING STRATEGIC AND FINANCIAL RATIONALE Strategic Financial ▪ Combination of two highly complementary companies with leadership positions in turnkey space solutions ▪ Enhanced ability to serve a more diverse set of customers $3.2B ~$1.4B ▪ Broad rental fleet with long rental duration and useful
Slide 38: Combination Enhances Customer Value Proposition
COMBINATION ENHANCES CUSTOMER VALUE PROPOSITION ▪ Increased capabilities to service customers consistently FLEX ▪ Increased customer access to innovative products and services, including Value-Added Products, PRORACKTM, Climate-Controlled Storage, and ClearSpan structures ▪ Greater available fleet o
Slide 39: Complementary Customer Segments with Benefits from Diversification
COMPLEMENTARY CUSTOMER SEGMENTS WITH BENEFITS FROM DIVERSIFICATION Diverse Customer Segments1… …Driving Demand $2.4B $0.8B $3.2B Broad-Based Exposure to GDP with Education Overweight to Non-Residential Construction 5% Education Government / 12% Healthcare Continued multi-year demand from Government
Slide 40: Track Record of Delivering Operating Synergies
TRACK RECORD OF DELIVERING OPERATING SYNERGIES Expected Run-Rate Operating Synergies of $50M Adj. EBITDA Expansion via Organic & Inorganic Growth $50M $322M $50M $1,433M Logistics & ▪ Insourcing and optimization of trucking Third-Party Services: ~$10M and fleet maintenance spend $347M $1,061M ▪ Oper
Slide 41: Compelling Sources of Stakeholder Value Creation
COMPELLING SOURCES OF STAKEHOLDER VALUE CREATION Revenue Margins ROIC 1 Cross-sell VAPS 2 Cross-sell Flex, Clearspan, and Climate-Controlled solutions within MGRC 3 Cross-sell Kitchens-To-Go, Enviroplex, and custom modular sales capabilities within WSC 4 Diversify into new customer segments 5 Drive
Slide 42: Acquisition Benefits All Stakeholders
ACQUISITION BENEFITS ALL STAKEHOLDERS FLEX ClearSpan Enhances value proposition of turnkey space solutions across key customer segments VAPS Significant, high certainty synergies achievable based on WillScot’s track record of substantial value creation through M&A Powerful cash flow characteristics
Slide 43: Table of Contents
05 19 24 WillScot Business Q2 2024 Q2 2024 Overview Operating Results Financial Review TABLE OF CONTENTS 31 35 44 Value Drivers WillScot to Acquire Appendix McGrath 43
Slide 44: Appendix
APPENDIX WILLSCOT RIGHT FROM THESTART = «a
Slide 45: Strategy and Execution Driving Sustainable Growth and Returns
STRATEGY AND EXECUTION DRIVING SUSTAINABLE GROWTH AND RETURNS Return on Invested Capital1 $M 17.7% 16.9% 3,500 15.4% 15.0% 3,000 11.7% 9.6% 10.0% 2,500 5.0% 2,000 0.0% 1,500 1,000 -5.0% 500 -10.0% - -15.0% 2020 2021 2022 2023 Q2 2024 LTM Average Invested Capital Adjusted Earnings Before Interest and
Slide 46: Summary P&L, Balance Sheet and Cash Flow Items
SUMMARY P&L, BALANCE SHEET AND CASH FLOW ITEMS Key Profit & Loss Items Three Months Ended June 30 Six Months Ended June 30 (in thousands) 2024 2023 2024 2023 Leasing and Services Leasing $458,592 $449,320 $919,193 $889,271 Delivery and Installation 108,147 112,754 208,509 219,384 Sales New Units 21,
Slide 47: Consolidated Quarterly Performance
CONSOLIDATED QUARTERLY PERFORMANCE Modular Space Unit Average Monthly Rental Rate1 Portable Storage Unit Average Monthly Rental Rate1 $/unit per month $/unit per month 262 262 263 242 1,130 1,145 1,149 1,176 218 223 1,031 1,091 214 977 1,010 195 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Q3 22
Slide 48: Consolidated Quarterly Performance
CONSOLIDATED QUARTERLY PERFORMANCE1,2 Quarterly Results for the three months ended June 30, 2024: (in thousands, except for units on rent Q1 Q2 Q3 Q4 TOTAL and monthly rental rate) Revenue $587,181 $604,590 $1,191,771 Gross profit $316,888 $327,118 $554,006 Adjusted EBITDA $248,009 $263,576 $511,585
Slide 49: Reconciliation of Non-GAAP Measures – Adjusted EBITDA
RECONCILIATION OF NON-GAAP MEASURES – ADJUSTED EBITDA Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before income tax expense (benefit), net interest (income) expense, depreciation and amortization adjusted for certain items considered non-core to our business operations includi
Slide 50: Reconciliation of Non-GAAP Measures – Adjusted EBITDA Margin %
RECONCILIATION OF NON-GAAP MEASURES – ADJUSTED EBITDA MARGIN % We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. Management believes that the presentation of Adjusted EBITDA Margin provides useful information to investors regarding the performance of our business. The following
Slide 51: Reconciliation of Non-GAAP Measures – Net Debt to Adjusted EBITDA Ratio
RECONCILIATION OF NON-GAAP MEASURES – NET DEBT TO ADJUSTED EBITDA RATIO Net Debt to Adjusted EBITDA ratio is defined as Net Debt divided by Adjusted EBITDA from continuing operations from the last twelve months. We define Net Debt as total debt from continuing operations net of total cash and cash e
Slide 52: Reconciliation of Non-GAAP Measures – Net CAPEX
RECONCILIATION OF NON-GAAP MEASURES – NET CAPEX We define Net CAPEX as purchases of rental equipment and refurbishments and purchases of property, plant and equipment (collectively, "Total Capital Expenditures"), less proceeds from the sale of rental equipment and proceeds from the sale of property,
Slide 53: Reconciliation of Non-GAAP Measures – Adjusted Income from Continuing Operations
RECONCILIATION OF NON-GAAP MEASURES – ADJUSTED INCOME FROM CONTINUING OPERATIONS We define adjusted income from continuing operations as income (loss) from continuing operations, plus certain non-cash items and the effect of what we consider transactions or events not related to our core business op
Slide 54: Reconciliation of Non-GAAP Measures – Adjusted Diluted Earnings Per Share
RECONCILIATION OF NON-GAAP MEASURES – ADJUSTED DILUTED EARNINGS PER SHARE We define adjusted diluted earnings per share from continuing operations as adjusted income from continuing operations divided by adjusted diluted weighted average common shares outstanding. Management believes that the presen
Slide 55: Reconciliation of Non-GAAP Measures – Free Cash Flow and Free Cash Flow Margin
RECONCILIATION OF NON-GAAP MEASURES – FREE CASH FLOW AND FREE CASH FLOW MARGIN Free Cash Flow is a non-GAAP measure. We define Free Cash Flow as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included
Slide 56: Reconciliation of Non-GAAP Measures – Return on Invested Capital
RECONCILIATION OF NON-GAAP MEASURES – RETURN ON INVESTED CAPITAL Return on Invested Capital is defined as Adjusted earnings before interest and amortization divided by Average Invested Capital. Management believes that the presentation of Return on Invested Capital provides useful information regard
Slide 57: Reconciliation of Non-GAAP Measures – Return on Invested Capital
RECONCILIATION OF NON-GAAP MEASURES – RETURN ON INVESTED CAPITAL Return on Invested Capital is defined as Adjusted earnings before interest and amortization divided by Average Invested Capital. Management believes that the presentation of Return on Invested Capital provides useful information regard
Slide 58: WillScot
WILLSCOT RIGHT FROM THESTART ss