Executive Summary / Key Takeaways

• WillScot Holdings ($WSC) is executing a strategic transformation, leveraging its scale and integrated technology platform to enhance operational efficiency and customer experience despite a challenging non-residential construction market.
• The company's core leasing business, particularly its modular and portable storage units, provides predictable, recurring revenue, complemented by growing contributions from Value-Added Products (VAPS) and newer adjacent offerings like climate-controlled storage and clearspan structures.
• Recent financial performance in Q1 2025 showed a revenue decline driven by lower volumes, but was partially offset by strong pricing power, VAPS penetration (exceeding 17% of revenue), and increased sales activity, demonstrating the resilience of the business model and effectiveness of internal levers.
• WillScot maintains a robust liquidity position and generates strong Adjusted Free Cash Flow ($144.8 million in Q1 2025), enabling opportunistic capital allocation towards organic investments, debt reduction ($85.8 million in Q1), share repurchases ($32.0 million in Q1), and a newly initiated quarterly dividend ($13.0 million paid in Q1).
• The company reaffirmed its full-year 2025 outlook, anticipating easing volume headwinds and modest top-line growth in the second half, driven by internal initiatives, with a clear path towards long-term financial milestones and increased free cash flow per share.

Setting the Scene: A Transformed Leader in Temporary Space

WillScot Holdings stands as a prominent force in the North American temporary space solutions industry, specializing in modular space and portable storage units. With roots stretching back 80 years, the company's trajectory was fundamentally altered by the July 2020 merger with Mobile Mini. This union initiated a multi-year, complex integration process aimed at combining two distinct organizations into a unified, more efficient entity capable of offering comprehensive turnkey solutions. The core of WillScot's business lies in equipment leasing, a model that generates predictable, recurring revenue streams supported by an average effective lease duration of approximately 41 months for its consolidated portfolio (excluding seasonal storage). This stable foundation is complemented by sales of new and used units, allowing for fleet management and capital redeployment.

The company serves a diverse array of end markets across the US, Canada, and Mexico, including construction and infrastructure, commercial and industrial, energy and natural resources, and government and institutions. While this diversification provides some resilience, the business remains significantly exposed to the cyclical nature of non-residential construction, which, along with the commercial and industrial sectors, accounted for approximately 83% of revenues in Q1 2025. Recent years have seen a challenging market backdrop, with non-residential construction start square footage experiencing a notable contraction, described by management as worse and longer than initially anticipated. For instance, Q1 2025 saw non-residential construction starts down 17% year-over-year, with the Architectural Billings Index (ABI) at 44 in March 2025, indicating continued weakness. This environment has created volume headwinds, particularly impacting smaller-scale projects and portable storage units.

Within this landscape, WillScot competes against a mix of large, diversified equipment rental companies and more specialized modular and storage providers. Key publicly traded rivals include United Rentals (URI), McGrath RentCorp (MGRC), and Herc Holdings (HRI). While URI boasts a larger overall market share in the broader equipment rental space (25-30%), WillScot holds a significant position within its core modular and storage segments (estimated 15-20%). MGRC and HRI also compete directly in these areas, with estimated market shares around 10-15% and 10%, respectively. WillScot's strategic response to this competitive environment and the market downturn has centered on leveraging its scale, driving operational efficiencies through integration, expanding its product portfolio, and enhancing its technological capabilities to differentiate its offering and capture market share, particularly in larger projects and national accounts which have shown greater resilience.

Leveraging Technology and Operational Integration

A cornerstone of WillScot's strategy and a key differentiator in the market is its investment in technology and the operational integration following the Mobile Mini merger. The company has undertaken a significant effort to harmonize its core systems, including SAP and Salesforce, and consolidate its field service and dispatch platforms. These initiatives, largely completed by early 2024, were designed to create a single, streamlined operational backbone. This integration has yielded tangible benefits, including improved efficiency in logistics, better utilization of resources like trucks and drivers across product lines, and enhanced safety and customer communication. The direct impact of these efforts was highlighted by a plan implemented in July 2024 to reduce indirect headcount by 15%, resulting in an estimated $40 million in annualized cost savings, demonstrating the operational leverage gained through technology adoption.

Beyond internal systems, WillScot is also leveraging technology to enhance its customer-facing processes and product offerings. The company has launched an overhauled digital customer experience, including a new website, an enhanced customer portal with self-service capabilities, and new digital marketing initiatives aimed at modernizing the sales funnel. A proprietary sales tool, Project One, integrates third-party and internal data to identify project opportunities, prioritize leads, and recommend tailored bundled solutions to sales representatives, optimizing selling time and conversion rates.

WillScot's technological edge also extends to its physical fleet. While specific quantitative performance metrics for proprietary modular technology like stacking and panelized designs were not detailed, external competitive analysis indicates these designs offer tangible benefits. These include estimated 10-15% faster deployment times compared to alternatives, contributing to a quicker setup on project sites. Furthermore, advanced modular designs are suggested to provide 15-20% greater energy efficiency and 10% lower operating costs per unit over the long term, appealing to customers focused on sustainability and cost management. The durability of WSC's units is also cited as an advantage, with estimates suggesting 25% better performance in harsh environments, relevant for sectors like energy. For investors, these technological advantages are crucial as they contribute to a competitive moat, potentially enabling higher average selling prices (ASPs), lower operating costs, better margins, and a stronger market position, particularly in specialized or time-sensitive applications. The company is also exploring new technological solutions like Solar Power by WillScot, aimed at providing clean, reliable energy to temporary sites, and has added perimeter solutions, signaling a commitment to innovation and expanding its value proposition.

Portfolio Expansion and Value-Added Growth

Complementing its core modular and portable storage offerings, WillScot has strategically expanded its portfolio into adjacent space solutions. This expansion, pursued through a balanced approach of organic investment, new product innovation, and tuck-in acquisitions, includes areas like climate-controlled storage, clearspan structures, and sanitation solutions. These adjacencies are not merely incremental additions; they are intended to extend the company's differentiated value proposition to existing customers while also exposing WillScot to new customer segments and end markets, thereby increasing its total addressable market. The growth in these newer areas has been significant, with the run rate of these adjacencies doubling in 2024 and management expecting them to double again in 2025, representing tangible new levers for growth.

A key component of WillScot's revenue growth and margin expansion strategy is its Value-Added Products and Services (VAPS). These offerings, which include items like furniture, appliances, power solutions, and security products, enhance the functionality and convenience of the leased units. VAPS represented over 17% of total revenue in Q1 2025, a notable achievement given the decline in total units on rent, underscoring the resilience of this revenue stream and reflecting deeper penetration across the core product lines. The company has a long-term goal of generating 20% to 25% of total revenue from VAPS over the next three to five years. The growth in VAPS penetration is supported by ongoing commercial strategies, including the rollout of new pricing and quoting tools designed to facilitate the bundling of these services with core unit rentals. This focus on VAPS not only boosts revenue per unit but also strengthens customer relationships and differentiates WillScot from competitors who may offer more basic rental services.

Financial Performance and Capital Strength

WillScot's financial performance in the first quarter of 2025 reflected the prevailing market conditions, with total revenue decreasing by 4.7% year-over-year to $559.6 million. This decline was primarily driven by a 5.7% decrease in leasing revenue and an 11.7% decrease in delivery and installation revenue, stemming from lower average units on rent (down 11.5% overall) and reduced deliveries/returns. Modular space average units on rent decreased 5.5%, while portable storage units on rent saw a more significant 15.9% decline, largely attributed to lower demand from reduced new construction starts. However, the impact of lower volumes was partially mitigated by strong pricing power and VAPS penetration. Modular average monthly rental rates increased 5.2% year-over-year to $1,209, and portable storage rates increased 1.9% to $267, reflecting the effectiveness of the company's price optimization strategies and VAPS. Sales revenue provided a partial offset, increasing 39.2% in the quarter, driven by a 66.2% surge in new unit sales.

Despite the revenue headwinds, WillScot demonstrated operational flexibility, reducing the cost of leasing and services by 10.2% by flexing variable costs like subcontractor, labor, and materials expenses to match demand. Selling, general, and administrative expenses also decreased by 6.6%, benefiting from lower employee headcount (excluding stock compensation) and reduced discrete expenses, although partially offset by increases in other operating costs. Adjusted EBITDA for Q1 2025 decreased 8.0% year-over-year to $228.8 million, with a margin of 40.9%. While margins contracted slightly year-over-year, the company's ability to manage costs in a declining volume environment underscores the resilience of its operating model.

WillScot maintains a strong liquidity position and robust cash flow generation. Net cash provided by operating activities in Q1 2025 was $206.6 million, a slight decrease from the prior year but still substantial. Net cash used in investing activities decreased significantly by $46.0 million, primarily due to lower cash deployed for acquisitions compared to Q1 2024. Net cash used in financing activities increased, reflecting the company's capital allocation priorities. Adjusted Free Cash Flow remained stable at $144.8 million in Q1 2025. The company actively deployed this cash flow, repurchasing $32.0 million of common stock, paying $13.0 million in its first quarterly dividend, and reducing debt by $85.8 million. As of March 31, 2025, WillScot had $1.6 billion of available borrowing capacity under its ABL Facility and successfully refinanced its 2025 senior secured notes by issuing new 6.625% notes due 2030, a proactive step to strengthen the balance sheet and enhance financial flexibility. Leverage stood at 3.5x net debt to LTM Adjusted EBITDA at the end of Q1 2025, within the company's target range of 2.5x to 3.25x, with management expecting to deleverage naturally through earnings growth.

Comparing WillScot's financial profile to its peers using TTM ratios reveals nuances in its performance. WillScot's TTM Gross Profit Margin (53.51%) is competitive, even exceeding URI (40%) and HRI (30%), and comparable to MGRC (48%). However, its TTM Operating Profit Margin (16.73%) and Net Profit Margin (0.63%) lag behind MGRC (27% operating, 25% net) and URI (26% operating, 17% net), although its operating margin is slightly better than HRI (16%). This suggests that while WillScot effectively manages its cost of goods sold, higher operating expenses, potentially related to integration costs, investments in technology, or non-cash impairments (like the Mobile Mini tradename amortization which began in Q3 2024), impact its bottom-line profitability compared to some peers. WillScot's Debt/Equity ratio (3.84) is higher than MGRC (0.53) and URI (1.72) but comparable to HRI (3.63), indicating a more leveraged capital structure relative to some competitors, though management is focused on maintaining leverage within its target range. Despite these differences, WillScot's strong cash flow generation, particularly Adjusted Free Cash Flow, remains a key strength, enabling significant capital return and investment.

Outlook and Growth Trajectory

Based on its performance in the first quarter and the current visibility into the second quarter, WillScot reaffirmed its full-year 2025 outlook. The midpoint of the guidance ranges remains unchanged, projecting $2.375 billion in revenue, $1.045 billion in Adjusted EBITDA, and $265 million in Net CAPEX. This outlook is predicated on the assumption that demand remains consistent with the company's original expectations for the year, supported by the Q1 results and a pending order book that was up 7% year-over-year for both modular and storage products entering Q2. Management expects this order book to support anticipated new lease activation levels in the second quarter.

The company anticipates a sequential improvement in revenue in Q2 2025, with total revenues expected to be down approximately 2.5% year-over-year, a notable improvement from the nearly 5% decline in Q1. Looking ahead to the second half of the year, WillScot expects continued easing of volume headwinds. This, combined with the ongoing benefits from price optimization, VAPS penetration, and the growth of expanded product offerings, is projected to drive modest top-line year-over-year growth. Adjusted EBITDA margins are expected to expand sequentially in Q2, similar to or slightly better than the prior year, with flattish margins anticipated year-over-year in the second half of 2025.

WillScot's outlook reflects a focus on internal growth levers that are within its control, even amidst external market uncertainty. The company is actively investing in its sales organization, planning a 10% to 20% overall increase in headcount in 2025, supported by new productivity tools. Investments in the fleet, particularly in refurbishments and new units in select high-demand categories like office complexes, flex units, VAPS, climate-controlled storage, clearspan, and perimeter solutions, are expected to drive higher Net CAPEX compared to the prior year. These investments are aimed at meeting demand in growing areas and supporting future leasing revenue run rates.

Management acknowledges the potential for both upside and downside risks to the reaffirmed guidance. Moving towards the high end of the revenue range would likely require a combination of increased demand, better-than-expected pricing performance, and higher VAPS penetration. Conversely, downside risks primarily involve a potential deterioration in units on rent in the second half of the year if economic uncertainty leads to a significant reduction in customer demand. However, the company emphasizes its operational flexibility, highlighting its ability to quickly adapt by flexing its variable cost base to match demand levels and support margins if the market environment changes.

WillScot has set ambitious long-term financial milestones, targeting $3 billion in revenue, $1.5 billion in Adjusted EBITDA, and $700 million in Adjusted Free Cash Flow. The company believes it has multiple paths to drive free cash flow per share from the current LTM level of $3.02 towards the top end of its revised three-to-five-year range of $4 to $6 per share. This confidence is rooted in the predictable nature of its cash flows, the operational efficiencies gained through integration, the growth potential of VAPS and adjacencies, and a disciplined capital allocation strategy that includes organic investment, opportunistic M&A, and returning capital to shareholders.

Risks and Challenges

Despite the strategic progress and focus on internal levers, WillScot faces several pertinent risks and challenges that could impact its outlook and investment thesis. The most significant is the ongoing macro-related end-market uncertainty, particularly the continued weakness in non-residential construction activity. Higher interest rates have already reduced demand for services and deliveries, and a prolonged downturn could lead to further deterioration in units on rent, especially in the transactional segments. While the company's pending order book shows strength in larger accounts, sustained weakness in the broader market could negatively impact overall volumes.

Changes in trade policies and the imposition of tariffs introduce another layer of uncertainty. While WillScot estimates the direct financial impact of tariffs on its expense base to be manageable (2-4% annually, mostly on Net CAPEX) and expects to price through these increases, there is uncertainty about how these policies could indirectly influence customer demand in the second half of 2025. Increased costs for raw materials or labor, potentially exacerbated by trade policies or labor market dynamics (like immigration enforcement impacting construction employment), could also pressure margins if not fully offset by pricing actions.

Competition remains a constant factor. While WillScot highlights its technological advantages and operational efficiencies, competitors like URI leverage scale and acquisition strategies, while others like MGRC focus on specific market segments or cost efficiencies. WSC's ability to maintain pricing integrity and VAPS penetration in a competitive environment, particularly in the more price-sensitive transactional segments, is crucial. The success of newer product lines and the ability to effectively cross-sell the full portfolio are key to offsetting potential volume weakness in core segments and achieving growth targets.

Operational execution risks also exist, particularly related to the full realization of benefits from recent integration efforts and the successful rollout and adoption of new technology tools and processes. While significant progress has been made, ensuring consistent performance across the integrated organization and effectively managing logistics and back-office functions are critical to achieving targeted margin expansion and customer satisfaction improvements. Finally, the outcome of various legal proceedings, while not currently expected to have a material adverse effect, introduces inherent unpredictability.

Conclusion

WillScot Holdings is navigating a complex market environment marked by persistent weakness in key end markets. However, the company is not passively awaiting a macro recovery. Instead, it is actively executing a strategic transformation, leveraging the scale and operational efficiencies gained from the Mobile Mini merger, investing in differentiated technology, and expanding its portfolio of space solutions and value-added services. The Q1 2025 results, while reflecting volume headwinds, underscored the resilience of the business model, demonstrating the ability to mitigate revenue declines through pricing power, VAPS penetration, and cost management.

The reaffirmed 2025 outlook, projecting modest growth in the second half and continued margin expansion, is grounded in tangible internal levers, including a growing pending order book, planned sales force expansion, new productivity tools, and the rapid growth of newer adjacencies. WillScot's strong cash flow generation provides significant financial flexibility, enabling strategic investments and consistent capital return to shareholders through buybacks and dividends. While macro uncertainty and competitive pressures remain, the company's focus on operational excellence, technological differentiation, and portfolio expansion positions it to capitalize on opportunities as market conditions evolve and drive progress towards its long-term financial targets. Investors should monitor demand trends, the continued penetration of VAPS and adjacencies, and the successful execution of operational efficiency initiatives as key indicators of WillScot's ability to sustain growth and enhance shareholder value.