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WillScot Corporation Announces Third Quarter 2019 Results

November 07, 2019

BALTIMORE, Nov. 07, 2019 (GLOBE NEWSWIRE) -- WillScot Corporation (“WillScot” or the "Company") (Nasdaq: WSC) today announced its third quarter 2019 financial results.

Third Quarter 2019 Financial Highlights1,2

  • Revenues of $272.3 million, representing a 24.4% (or $53.4 million) year over year increase, driven by growth in core leasing and services revenues of $64.7 million, or 34.3%.
    • Modular space average monthly rental rate increased to $630 representing a 12.3% increase year over year. Pro forma modular space average monthly rental rates increased 13.9% year over year, driven primarily by a 15.1% year over year increase in our core Modular - US segment, marking the 8th consecutive quarter of double digit rate growth in the segment. Growth of 15.1% was driven 60% from unit rate growth, with the remaining 40% driven by growth in value added products and services ("VAPS").
    • Modular leasing revenue increased 7.9% on a pro forma basis, reflecting continued strong organic growth.
  • Adjusted EBITDA of $88.4 million represents a 36.8% (or $23.8 million) year over year increase.
    • Adjusted EBITDA margin increased 300 basis points ("bps") year over year and 600 bps on a pro forma basis to 32.5%.
    • 70% of the expected $70 million annualized cost synergies were in our third quarter 2019 results, marking the one-year anniversary of the ModSpace acquisition.
  • Net income of $0.8 million (including $8.4 million of discrete costs from acquisition and integration activities) increased by $37.5 million, and free cash flow of $1.3 million increased by $43.2 million year over year, consistent with our planned transition to net profitability and cash generation.
  • Management reaffirmed its run-rate expectation of $400 million Adjusted EBITDA and $200 million of discretionary free cash flow heading into 2020.
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018  2019  2018 
Revenue$272,340 $218,924  $793,473  $494,008 
Consolidated net income (loss)$762 $(36,729) $(22,174) $(43,185)
Net cash provided by operating activities$39,022 $(3,220) $99,076  $15,580 
Free Cash Flow1$1,261 $(41,877) $(23,698) $(76,742)


 Three Months Ended September 30, Nine Months Ended September 30,
Adjusted EBITDA1 by Segment (in thousands)2019 2018 2019 2018
Modular - US$80,424 $58,454  $238,572  $129,170 
Modular - Other North America7,953  6,164   23,040   12,856 
Consolidated Adjusted EBITDA$88,377 $64,618  $261,612  $142,026 

Management Commentary1,2,3

Brad Soultz, President and Chief Executive Officer of WillScot, commented, "WillScot delivered another quarter of substantial Adjusted EBITDA growth as we marked the one-year anniversary of the ModSpace acquisition midway through the third quarter. The transformation that we've undergone is evident in our third quarter results as revenue and Adjusted EBITDA for the third quarter were up 24.4% and 36.8%, respectively, over the prior year, and our Adjusted EBITDA margin of 32.5% increased 600 bps on a pro forma basis versus the third quarter of 2018 as a result of our increasing scale, solid synergy realization, and growth of our core leasing revenue through price optimization and the continued expansion of our "Ready-to-Work" platform. We were particularly pleased with strong sequential improvements in delivery volumes in Q3, with total deliveries up 7.8% in the quarter, giving us confidence in the positioning of our sales force and our commercial strategy headed into 2020. Our results to date support our expectation that we will exit 2019 with an annualized Adjusted EBITDA run rate of $400 million, $200 million of discretionary free cash flow, and de-leverage to below 4x by the second quarter of 2020."

Tim Boswell, Chief Financial Officer commented, "In Q3 we delivered solid year over year modular leasing revenue growth of $14.0 million or 7.9% on a pro forma basis, which is the best indicator of how the lease portfolio is performing organically heading into 2020. Modular space average rental rates in our Modular - US segment increased 15.1% year over year, due to the continued churn of our acquired portfolios and increased VAPS penetration and pricing on new rental contracts. Modular leasing revenue growth was offset on a pro forma basis by new and rental unit sales, which declined $41.0 million, or 68.1% driven by our strategic decision to focus acquired portfolios on higher quality lease revenue streams - importantly, Q3 marks the final quarter in which we expect to see meaningful year over year change in our mix of sale and leasing revenue. This revenue mix shift, organic lease revenue growth, and cost synergy realization, drove 600 bps of year over year Adjusted EBITDA margin expansion on a pro forma basis, albeit with 80 bps of contraction sequentially driven by direct variable costs supporting the significant sequential increase in delivery volumes, which have ramped later in the year than normal. In Q3, we also completed a third-party review of real estate acquired in the ModSpace acquisition and increased those book values by $28 million to reflect the fair market values at the time of acquisition. Overall, we are pleased with our synergy realization, our inflection towards consistent net income and Free Cash Flow generation that we committed to at the outset of the year, as well as progress towards our 2020 run-rate and leverage guidance."

Third Quarter 2019 Results1,2

Total revenues increased 24.4% to $272.3 million, as compared to $218.9 million in the prior year quarter driven by a 34.3% increase in leasing and services revenue due to increased volumes from acquisitions, improved pricing, and growth of VAPS. Pro forma revenues decreased $28.3 million, or 9.4%, driven by reduced sales revenues, which declined $41.0 million, or 68.1%, driven primarily by one large new sale recognized in 2018 in the amount of $26.3 million in our Modular - US segment. Our core modular leasing revenues increased $14.0 million on a pro forma basis, or 7.9%, driven primarily by a 13.9% increase in pro forma average modular space monthly rental rates.

  • Modular - US segment revenue increased 25.4% to $247.7 million, as compared to $197.6 million in the prior year quarter, with core leasing and services revenues up $59.6 million, or 35.1%, year over year.
    • Modular space average monthly rental rate of $632, increased 13.1% year over year including the dilutive impacts of acquisitions. Pro forma modular space monthly rental rates increased 15.1% year over year. Improved pricing was driven by a combination of our price optimization tools and processes, as well as by continued growth in our “Ready to Work” solutions and increased VAPS penetration across our customer base.
    • Average modular space units on rent increased 14,075, or a 20.7% year over year increase, due to an additional 1.5 months of contribution from the ModSpace acquisition in the third quarter of 2019. Pro forma units on rent decreased 5.6% year over year, and pro forma utilization decreased by 170 bps year over year.
  • Modular - Other North America segment revenue increased 15.5% to $24.6 million, compared to $21.3 million in the prior year quarter, with modular space average units on rent up 23.5% and average monthly rental rate up 5.3% compared to the prior year quarter.
    • On a pro forma basis, Modular - Other North America segment modular space rental rate increased 6.4% compared to the prior year quarter. Pro forma modular space units on rent decreased 0.8% to 9,180, and pro forma utilization for our modular space units increased to 57.2%, up 40 bps from 56.8%.

Adjusted EBITDA of $88.4 million was up 36.8% compared to $64.6 million in the prior year quarter, and Adjusted EBITDA margins improved 300 bps year over year to 32.5%.

  • Modular - US segment Adjusted EBITDA increased 37.7% to $80.4 million, and Modular - Other North America segment Adjusted EBITDA increased $1.8 million to $8.0 million from the prior year quarter.
  • Adjusted EBITDA margins improved by 300 bps year over year driven by a 100 bps improvement in gross profit margin as a result of improved delivery and installation rates and improved sales margins, as well as a 230 bps reduction in selling, general and administrative expenses, offset slightly by other items. We estimate that incremental cost synergies of approximately $10.0 million related to the Acton and ModSpace acquisitions were realized in the third quarter bringing total estimated synergies realized from the dates of the acquisitions to approximately $31.2 million. Approximately 70% of the annualized forecasted cost synergies of over $70 million were in our run rate as of September 30, 2019.

Net income of $0.8 million for the three months ended September 30, 2019 includes $8.4 million of discrete costs expensed in the period related to our acquisition and integration activities, including $5.5 million of integration costs and $2.0 million of restructuring costs, and $0.9 million of related items. This is up $37.5 million from a consolidated net loss of $36.7 million for the same period in 2018, which included $10.7 million of transaction costs, $6.1 million of restructuring costs, and $7.5 million of integration costs related to the Acton and ModSpace acquisitions.

Capitalization and Liquidity Update

Capital expenditures increased $2.3 million, or 4.7%, to $50.5 million for the three months ended September 30, 2019, from $48.2 million for the three months ended September 30, 2018. Net Capital Expenditures4 increased $3.4 million, or 8.8%, to $42.1 million for the three months ended September 30, 2019. The increase was driven primarily by increased investments to support the 21.0% year over year increase in modular units on rent and the 43.8% year over year increase in value-added products revenue.

During the three months ended September 30, 2019, we generated $1.3 million of Free Cash Flow1 including all cash flows related to the ModSpace integration, representing an increase of $43.1 million as compared to the three months ended September 30, 2018.  As a result, our total long-term debt balance was flat at $1,710.2 million as net cash provided by operating activities of $39.0 million offset net cash used in investing activities of $37.8 million. Within cash from operating and investing activities, $7.5 million of discrete costs related to the ModSpace integration were partly offset by $4.3 million of proceeds primarily from the sale of surplus real estate.

As of September 30, 2019, we had $489.2 million of available borrowing capacity under our ABL Facility.

2019 Outlook

Management reaffirmed the Company's outlook for the full year 2019, which we previously updated on August 1, 2019. This guidance is subject to risks and uncertainties, including those described in "Forward-Looking Statements" below. The 2019 guidance includes:

 Current Outlook
Total revenue$1.05 billion - $1.10 billion
Adjusted EBITDA1,3$355 million - $365 million
Net Capital Expenditures (after rental unit sales)4$150 million - $160 million

1 - Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow are non-GAAP financial measures. Further information and reconciliations for these Non-GAAP measures to the most directly comparable financial measure under generally accepted accounting principles in the US ("GAAP") is included at the end of this press release.
2 - The pro forma financial information and performance metrics contained in this press release include the results of WillScot and ModSpace on a pro forma basis for all periods presented. The ModSpace acquisition closed August 15, 2018.
3 - Information reconciling forward-looking Adjusted EBITDA and Net Capital Expenditures to GAAP financial measures is unavailable to the Company without unreasonable effort and therefore no reconciliation to the most comparable GAAP measures is provided.
4 - Net Capital Expenditures is a non-GAAP financial measure. Please see the non-GAAP reconciliation tables included at the end of this press release.

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, pro forma revenue, and Net Capital Expenditures. Adjusted EBITDA is defined as net income (loss) before income tax expense, net interest expense, depreciation and amortization adjusted for non-cash items considered non-core to business operations including net currency gains and losses, goodwill and other impairment charges, restructuring costs, costs to integrate acquired companies, costs incurred related to transactions, non-cash charges for stock compensation plans, and other discrete expenses. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Free Cash Flow is defined as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Net Capital Expenditures is defined as capital expenditures for purchases and capitalized refurbishments of rental equipment, plus purchases of property, plant and equipment, reduced by proceeds from the sale of rental equipment. Net Capital Expenditures for Rental Equipment is defined as capital expenditures for purchases and capitalized refurbishments of rental equipment, reduced by proceeds from the sale of rental equipment. Pro forma revenue is defined the same as revenue, but includes pre-acquisition results from ModSpace for all periods presented. WillScot believes that Adjusted EBITDA and Adjusted EBITDA margin are useful to investors because they (i) allow investors to compare performance over various reporting periods on a consistent basis by removing from operating results the impact of items that do not reflect core operating performance; (ii) are used by our board of directors and management to assess our performance; (iii) may, subject to the limitations described below, enable investors to compare the performance of WillScot to its competitors; and (iv) provide additional tools for investors to use in evaluating ongoing operating results and trends. WillScot believes that pro forma revenue is useful to investors because they allow investors to compare performance of the combined Company over various reporting periods on a consistent basis WillScot believes that Net Capital Expenditures and Net Capital Expenditures for Rental Equipment provide useful additional information concerning cash flow available to meet future debt service obligations. However, Adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. These non-GAAP measures should not be considered in isolation from, or as an alternative to, financial measures determined in accordance with GAAP. Other companies may calculate Adjusted EBITDA and other non-GAAP financial measures differently, and therefore WillScot’s non-GAAP financial measures may not be directly comparable to similarly-titled measures of other companies. For reconciliation of the non-GAAP measures used in this press release (except as explained below), see “Reconciliation of non-GAAP Financial Measures" included in this press release.

Information reconciling forward-looking Adjusted EBITDA to GAAP financial measures is unavailable to WillScot without unreasonable effort. We cannot provide reconciliations of forward looking Adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to WillScot without unreasonable effort. Although we provide a range of Adjusted EBITDA that we believe will be achieved, we cannot accurately predict all the components of the Adjusted EBITDA calculation. WillScot provides Adjusted EBITDA guidance because we believe that Adjusted EBITDA, when viewed with our results under GAAP, provides useful information for the reasons noted above.

Conference Call Information

WillScot will host a conference call and webcast to discuss its third quarter 2019 results and outlook at 10 a.m. Eastern Time on Friday, November 8, 2019. The live call can be accessed by dialing (855) 312-9420 (US/Canada toll-free) or (210) 874-7774 (international) and asking to be connected to the WillScot call. A live webcast will also be accessible via the "Events & Presentations" section of the Company's investor relations website https://investors.willscot.com. Choose "Events" and select the information pertaining to the WillScot Third Quarter 2019 Conference Call. Additionally, there will be slides accompanying the webcast. Please allow at least 15 minutes prior to the call to register, download and install any necessary software. For those unable to listen to the live broadcast, an audio webcast of the call will be available for 60 days on the Company’s investor relations website.

About WillScot Corporation

Headquartered in Baltimore, Maryland, WillScot is the public holding company for the Williams Scotsman family of companies. WillScot trades on Nasdaq under the ticker symbol "WSC," and is the specialty rental services market leader providing innovative modular space and portable storage solutions across North America. WillScot is the modular space supplier of choice for the construction, education, health care, government, retail, commercial, transportation, security and energy sectors. With over half a century of innovative history, organic growth and strategic acquisitions, WillScot serves a broad customer base from over 120 locations throughout the US, Canada and Mexico, with a fleet of over 150,000 modular space and portable storage units.

Forward-Looking Statements

This news release contains forward-looking statements (including the earnings guidance/outlook contained herein) within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” "outlook" and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Although WillScot believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance that any such forward-looking statement will materialize. Important factors that may affect actual results or outcomes include, among others, our ability to acquire and integrate new assets and operations; our ability to achieve planned synergies related to acquisitions; our ability to manage growth and execute our business plan; our estimates of the size of the markets for our products; the rate and degree of market acceptance of our products; the success of other competing modular space and portable storage solutions that exist or may become available; rising costs adversely affecting our profitability (including cost increases resulting from tariffs); potential litigation involving our Company; general economic and market conditions impacting demand for our products and services; implementation of tax reform; our ability to implement and maintain an effective system of internal controls; and such other risks and uncertainties described in the periodic reports we file with the SEC from time to time (including our Form 10-K for the year ending December 31, 2018), which are available through the SEC’s EDGAR system at www.sec.gov and on our website. Any forward-looking statement speaks only at the date which it is made, and WillScot disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Additional Information and Where to Find It

Additional information can be found on our investor relations website at http://investors.willscot.com.

Contact Information 
Investor Inquiries:Media Inquiries:
Mark BarbalatoScott Junk

WillScot Corporation
Condensed Consolidated Statements of Operations (Unaudited)

 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share and per share data)2019  2018  2019  2018 
Leasing and services revenue:       
Modular leasing$191,294  $141,660  $557,025  $340,171 
Modular delivery and installation61,883  46,777  168,643  104,440 
Sales revenue:       
New units11,536  20,920  38,064  33,584 
Rental units7,627  9,567  29,741  15,813 
Total revenues272,340  218,924  793,473  494,008 
Costs of leasing and services:       
Modular leasing58,168  39,215  160,476  93,506 
Modular delivery and installation54,364  42,390  146,175  98,038 
Costs of sales:       
New units7,421  15,089  26,298  23,780 
Rental units5,092  5,750  19,608  9,328 
Depreciation of rental equipment43,869  35,534  128,940  82,849 
Gross profit103,426  80,946  311,976  186,507 
Selling, general and administrative68,159  71,897  213,267  164,845 
Other depreciation and amortization3,707  3,720  9,878  7,726 
Impairment losses on long-lived assets    5,076   
Restructuring costs1,980  6,137  9,083  7,214 
Currency losses (gains), net234  (425) (436) 1,171 
Other income, net(1,053) (594) (3,293) (5,013)
Operating income30,399  211  78,401  10,564 
Interest expense30,857  43,447  

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