BALTIMORE, Aug. 01, 2019 (GLOBE NEWSWIRE) -- WillScot Corporation (“WillScot” or the "Company") (Nasdaq: WSC) today announced its second quarter 2019 financial results.
Second Quarter 2019 Financial Highlights1,2
|Three Months Ended|
|Six Months Ended|
|Consolidated net (loss) income||$||(11,775)||$||379||$||(22,936)||$||(6,456)|
|Three Months Ended|
|Six Months Ended|
|Adjusted EBITDA1 by Segment (in thousands)||2019||2018||2019||2018|
|Modular - US||$||81,380||$||38,104||$||158,148||$||70,716|
|Modular - Other North America||7,347||3,812||15,087||6,692|
|Consolidated Adjusted EBITDA||$||88,727||$||41,916||$||173,235||$||77,408|
Brad Soultz, President and Chief Executive Officer of WillScot, commented, "WillScot delivered another outstanding quarter, as we continued to execute our strategy which is resulting in a complete transformation of the company. The result of this focus is evident in our second quarter results as revenue and Adjusted EBITDA for the second quarter were up 89.7% and 111.7%, respectively, over the prior year, and our Adjusted EBITDA margin of 33.3% increased 340 basis points versus the second quarter of 2018 as a result of our increasing scale, solid synergy realization, and growing our core leasing revenue through price optimization and the continued expansion of our "Ready-to-Work" platform. Based on our strong results in the first half of the year, we are pleased to raise our 2019 outlook for full year Adjusted EBITDA to between $355 million and $365 million. We believe the growth levers driving our business are largely in management's control and our year-to-date results provide us with the confidence to achieve this updated guidance, exit 2019 with an annualized Adjusted EBITDA run rate of $400 million, and de-leverage to below 4x by the second quarter of 2020. I would like to thank the entire WillScot organization for their continued performance and remain convicted in my view that we have the right strategy and the right team to continue to increase long term shareholder value."
Tim Boswell, Chief Financial Officer commented, "Our second quarter results exceeded our expectations both financially and operationally. Pro forma modular space average rental rates in our Modular - US segment were up 16.1% year over year, reflecting an acceleration versus the first quarter driven by former ModSpace and Acton units that are now returning and being redeployed at prices and with value added products and services ("VAPS") penetration that are exceeding our initial expectations and offsetting volumes. In Q2, this drove a very robust growth of 9.2% year over year in pro forma modular leasing revenues, setting up a run-rate that is consistent with our original expectations for the remainder of 2019 and heading into 2020. The continued performance of our leasing operations, combined with a lower emphasis on new and rental unit sale revenue, represents a higher quality revenue mix and as a result, we expect Adjusted EBITDA and Adjusted EBITDA margins to be at the high-end of our original outlook ranges. Lastly, we maintain our expectations for free cash flow and net income generation in the second half of 2019, both of which were enhanced by the refinancing of our 10% 2023 senior unsecured notes, which will result in approximately $6.0 million of annual net interest savings beginning in the third quarter."
Second Quarter 2019 Results1,2
Total consolidated revenues increased 89.7% to $266.1 million, as compared to $140.3 million in the prior year quarter. Pro forma revenues increased $4.2 million, or 1.6%.
Consolidated Adjusted EBITDA of $88.7 million was up 111.7% compared to $41.9 million in the prior year quarter, and Adjusted EBITDA margins improved 340 bps year over year to 33.3%.
Consolidated net loss of $11.8 million includes $19.4 million of discrete costs expensed in the period related to the ModSpace integration and loss on extinguishment of debt related to the redemption of our 10% 2023 senior unsecured notes. The $19.4 million of discrete items include $8.2 million of integration costs, $1.2 million of restructuring costs, $2.8 million of non-cash impairment on long-lived assets associated with real estate consolidations, and a $7.2 million loss on extinguishment of debt. The loss on extinguishment of debt included $6.2 million, or a 3.1% premium including make-whole premiums, to redeem $200.0 million in aggregate outstanding principal on our 10% 2023 senior unsecured notes, and a $1.0 million non-cash write-off of unamortized deferred financing fees. This compares to consolidated net income of $0.4 million for same period in 2018, which included $0.4 million of restructuring cost and $4.8 million of integration cost related to the Acton and Tyson acquisitions.
Capitalization and Liquidity Update
Capital expenditures increased $30.2 million, or 90.7%, to $63.5 million for the three months ended June 30, 2019, from$33.3 million for the three months ended June 30, 2018. Net capital expenditures4 also increased $22.6 million, or 76.9%, to $52.0 million for the three months ended June 30, 2019. The increase was driven primarily by increased investments in refurbishments, as well as increased spend for value-added products to drive revenue growth, partly offset by a $7.6 million increase in proceeds from the sale of rental equipment, all resulting from the 58.9% increase in fleet size following the ModSpace acquisition.
During the three months ended June 30, 2019, our total long-term debt balance was flat at $1,709.5 million as net cash provided by operating activities of $44.8 million offset net cash used in investing activities of $43.2. Within cash from operating and investing activities, $9.4 million of discrete costs related to the ModSpace integration was partly offset by $8.9 million of proceeds primarily from the sale surplus real estate.
On May 14, 2019, we executed a $190.0 million tack-on to our existing 6.875% 2023 senior secured notes and used the proceeds to repay a portion of our ABL credit agreement (the "ABL Facility"). On June 19, 2019 we redeemed all $200.0 million of our 10% 2023 senior unsecured notes using cash on hand and availability under our ABL Facility. We expect the net result of these financing transactions to provide approximately $6.0 million of annual net interest savings, beginning in the third quarter. At June 30, 2019, we had $486.9 million of available borrowing capacity under our ABL Facility.
Updated 2019 Outlook
Management updated the Company's outlook for the full year 2019, which we previously reaffirmed on May 2, 2019. This guidance is subject to risks and uncertainties, including those described in "Forward-Looking Statements" below, and the 2019 guidance includes:
|Prior Outlook||Updated Outlook|
|Total revenue||$1.05 billion - $1.15 billion||$1.05 billion - $1.10 billion|
|Adjusted EBITDA1, 3||$345 million - $365 million||$355 million - $365 million|
|Net capital expenditures (after rental unit sales)4||$130 million - $160 million||$150 million - $160 million|
1 - Adjusted EBITDA and Adjusted EBITDA Margin 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 U.S. ("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 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, 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. 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 rental capital expenditures 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 rental capital expenditures 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 second quarter 2019 results and outlook at 10 a.m. Eastern Time on Friday, August 2, 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 second quarter WillScot earnings 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.
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.
|Investor Inquiries:||Media Inquiries:|
|Mark Barbalato||Scott Junk|
|Condensed Consolidated Statements of Operations (Unaudited)|
|Three Months Ended June 30,||Six Months Ended June 30,|
|(in thousands, except share and per share data)||2019||2018||2019||2018|
|Leasing and services revenue:|
|Modular delivery and installation||56,479||31,413||106,760||57,663|
|Costs of leasing and services:|
|Modular delivery and installation||48,468||30,127||91,811||55,648|
|Costs of sales:|
|Depreciation of rental equipment||43,968||23,470||85,071||47,315|
|Selling, general and administrative||71,623||47,734||145,108||92,948|
|Other depreciation and amortization||3,167||1,570||6,171||4,006|
|Impairment losses on long-lived assets||2,786||—||5,076||—|
|Currency (gains) losses, net||(354)||572||(670)||1,596|
|Other income, net||(1,289)||(1,574)||(2,240)||(4,419)|
|Loss on extinguishment of debt||7,244||—||7,244||—|
|Loss from operations before income tax||(12,955)||(6,266)||(23,738)||(13,521)|
|Income tax benefit||(1,180)||(6,645)||(802)||(7,065)|
|Net (loss) income||(11,775)||379||(22,936)||(6,456)|
|Net (loss) income attributable to non-controlling interest,
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