Company Overview
WillScot Holdings Corporation (WSC) is a leading provider of innovative and flexible turnkey temporary space solutions, servicing a diverse range of end markets across the United States, Canada, and Mexico. With a vast network of over 260 branch locations and additional drop lots, the company offers its customers an extensive selection of Ready to Work temporary space solutions, including more than 152,000 modular space units and over 210,000 portable storage and cold storage units.
The company's core business model revolves around leasing, rather than selling, its modular and portable storage units to customers. This approach has resulted in a highly diversified and predictable recurring revenue stream, with over 90% of new lease orders being on the company's standard lease agreement, pre-negotiated master lease, or national account agreements. The initial lease periods vary, and leases are customarily renewable on a month-to-month basis after their initial term, contributing to the stability and durability of WillScot's revenue.
Historical Background
Founded in 1983, WillScot has a rich history of growth and expansion. In its early years, the company primarily focused on serving the construction and industrial sectors, providing portable office and storage units to customers on job sites. Over time, WillScot expanded its product offerings and customer base, moving into the retail, education, and healthcare markets among others. A significant milestone in the company's history was the acquisition of Mobile Mini in 2019, which substantially expanded WillScot's presence in the portable storage space. More recently, in 2024, the company changed its name from WillScot Mobile Mini Holdings Corp. to WillScot Holdings Corporation.
Resilience and Adaptability
Throughout its history, WillScot has demonstrated resilience in the face of challenges. In 2020, the COVID-19 pandemic disrupted operations and led to a temporary decline in demand, particularly in the construction and retail segments. The company successfully navigated this period through cost-saving measures and a focus on supporting its customers. In 2023, WillScot faced another challenge when it terminated a proposed acquisition of McGrath RentCorp, incurring significant one-time costs related to the terminated transaction.
Despite these obstacles, WillScot has maintained a disciplined approach to capital allocation, consistently returning capital to shareholders through share repurchases while also investing in strategic acquisitions and organic growth initiatives. This strategy has helped solidify the company's position as a market leader in the modular space and portable storage industries.
Customer Base and Market Presence
WillScot's customer base spans a diverse set of end markets, including construction, commercial and industrial, retail and wholesale trade, energy and natural resources, education, government and institutions, and healthcare. The company's ability to redeploy standardized assets across these various end markets is a core strength of its operating model, allowing it to leverage scale and achieve purchasing benefits while redeploying capital employed in its lease fleet.
Strategic Initiatives and Operational Efficiency
In recent years, WillScot has made strategic investments to enhance its operational efficiency and customer-focused initiatives, such as integrating its modular and storage divisions under a single leadership team organized by metropolitan statistical area (MSA). This move has enabled the company to consistently deliver its portfolio of solutions to its entire customer base. Additionally, WillScot has made significant progress in unifying its go-to-market structure, consolidating its field sales and operating teams, and implementing a range of digital tools and platforms to improve the customer experience.
Despite the challenges posed by the COVID-19 pandemic and the subsequent contraction in the non-residential construction market, WillScot has demonstrated its resilience and adaptability. The company has consistently executed on its proven playbook, achieving and in many cases, exceeding the ambitious 3-to-5-year margin and return milestones established just three years ago.
Future Outlook and Growth Strategies
Looking ahead, WillScot remains focused on its core priorities of growing leasing revenues, delivering turnkey solutions to its customers with value-added products and services, and continuously improving the overall customer experience. The company is also actively expanding its portfolio of space solutions, including climate-controlled storage, clear-span structures, and sanitation offerings, which are expected to contribute to its growth in the coming years.
Financials and Liquidity
In terms of financial performance, WillScot has maintained a strong balance sheet and liquidity position, with $1.7 billion in available borrowing capacity under its asset-backed lending (ABL) facility as of September 30, 2024. The company's free cash flow generation has been consistently robust, with adjusted free cash flow per share increasing by 13% to $3.12 over the last 12 months, representing an 8% free cash flow yield on the current market capitalization.
For the fiscal year 2023, WillScot reported revenue of $2.36 billion, net income of $476.46 million, operating cash flow of $761.24 million, and free cash flow of $512.03 million. However, the most recent quarter (Q3 2024) showed some headwinds, with revenue decreasing 0.6% year-over-year to $601.43 million. The company reported a net loss of $70.475 million for the quarter, with operating cash flow of -$1.562 million and free cash flow of -$74.278 million.
The revenue decline in Q3 2024 was primarily driven by volume headwinds impacting both storage leasing revenues and delivery and installation revenues, which were down 13% and 1% respectively. These declines were partially offset by increases in modular leasing revenues and value-added products and services (VAPS), which were up 4% and 1% respectively, as well as sales revenue.
WillScot's performance varies across its geographic markets. For the three months ended September 30, 2024, the company generated total revenue of $565.02 million in the United States, $29.66 million in Canada, and $6.75 million in Mexico.
The company's liquidity position remains strong, with $11.05 million in cash and cash equivalents as of September 30, 2024. WillScot's debt-to-equity ratio stands at 3.44, while its current ratio is 0.9044 and quick ratio is 0.8222, indicating a relatively leveraged but stable financial position.
Product Segments
WillScot operates through two main product segments: Modular and Portable Storage.
The Modular segment, which is the company's core business and primary revenue driver, includes the leasing of turnkey temporary modular space units along with value-added products and services (VAPS). For the three months ended September 30, 2024, modular space revenue represented 77.8% of consolidated revenue, increasing 3.8% year-over-year to $467.8 million. This growth was driven by higher delivery and installation revenue, new unit sales revenue, and rental unit sales revenue, partially offset by a slight decrease in core leasing revenue. Modular space average monthly rental rates increased 6.1% year-over-year to $1,200, reflecting continued price optimization and VAPS penetration. However, average modular space units on rent decreased 3.3% as utilization rates declined 180 basis points to 62.1%.
The Portable Storage segment includes the leasing of portable storage and specialty containers, such as climate-controlled and refrigerated units. For the three months ended September 30, 2024, storage product revenue represented 22.2% of consolidated revenue, decreasing 13.4% year-over-year to $133.6 million. This decline was primarily due to a 10.1% decrease in core portable storage leasing revenue resulting from lower container volumes, partially offset by higher rental rates. Portable storage average monthly rental rates increased 9.5% to $265, benefiting from price management and increased VAPS penetration. However, average portable storage units on rent decreased 18.3% as utilization rates declined 1,210 basis points to 58.1%.
Guidance and Future Outlook
WillScot has had to adjust its near-term guidance due to a weaker than expected non-residential construction market. For the full year 2024, the company revised its outlook to a midpoint of $1.60 billion in adjusted EBITDA. This revised guidance reflects the expectation that non-residential construction markets are likely to continue bottoming into the first half of 2025, which is longer and deeper than previously anticipated.
Looking ahead to 2025, WillScot's base case assumes non-residential starts will flatten, in contrast to the double-digit declines seen in 2024. This supports the expectation of moderating volume headwinds and modest organic revenue growth for WillScot in 2025, along with continued margin expansion. The company plans to provide more detailed 2025 guidance and financial targets at their upcoming Investor Day in the first half of 2025.
Conclusion
In conclusion, WillScot Holdings Corporation is a resilient player in the modular and storage space, with a proven track record of execution, a strong financial profile, and a strategic vision to drive sustainable growth and enhance shareholder value. Despite facing short-term headwinds in the non-residential construction market, the company remains well-positioned to capitalize on the eventual recovery in its core markets, leveraging its diversified customer base, value-added product offerings, and ongoing operational improvements. As WillScot navigates the current market environment, its focus on operational excellence, customer-centric innovation, and disciplined capital allocation positions it well for continued success in the years to come.