ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand WillScot Mobile Mini Holdings Corp. ("WillScot Mobile Mini"), our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto, contained in Part I, Item 1 of this report. The discussion of results of operations in this MD&A is presented on a historical basis, as of or for the three months ended March 31, 2022 or prior periods.
The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US (“GAAP”). We use certain non-GAAP financial metrics to supplement the GAAP reported results in order to highlight key operational metrics that are used by management to evaluate Company performance. Reconciliations of GAAP financial information to the disclosed non-GAAP measures are provided in the Reconciliation of Non-GAAP Financial Measures section.
Executive Summary and Outlook
We are a leading business services provider specializing in innovative flexible work space and portable storage solutions. We service diverse end markets across all sectors of the economy throughout the United States ("US"), Canada, Mexico and the United Kingdom ("UK"). We are also a leading provider of specialty containment solutions in the US with approximately 13,200 tank and pump units in our fleet. As of March 31, 2022, our branch network included approximately 280 branch locations and additional drop lots to service over 85,000 customers. We offer our customers an extensive selection of “Ready to Work” modular space and portable storage solutions with over 162,000 modular space units and over 214,000 portable storage units in our fleet.
We primarily lease, rather than sell, our modular and portable storage units to customers, which results in a highly diversified and predictable recurring revenue stream. Over 90% of new lease orders are on our standard lease agreement, pre-negotiated master lease or national account agreements. The initial lease periods vary, and our leases are customarily renewable on a month-to-month basis after their initial term. Our lease revenue is highly predictable due to its recurring nature and the underlying stability and diversification of our lease portfolio. Furthermore, given that our customers value flexibility, they consistently extend their leases or renew on a month-to-month basis such that the average effective duration of our modular space and portable storage lease portfolio, excluding seasonal portable storage units, is nearly 31 months. We complement our core leasing business by selling both new and used units, allowing us to leverage scale, achieve purchasing benefits and redeploy capital employed in our lease fleet.
Our customers operate in a diversified set of end markets, including construction, commercial and industrial, retail and wholesale trade, energy and natural resources, education, government and institutions, and healthcare. Core to our operating model is the ability to redeploy standardized assets across end markets, as we did in 2020 and 2021 to service emerging demand in the healthcare and government sectors related to COVID-19, as well as expanded space requirements related to social distancing. We track several market leading indicators in order to predict demand, including those related to our two largest end markets, the commercial and industrial segment and the construction segment, which collectively accounted for approximately 46% and 41% of our revenues, respectively, for the three months ended March 31, 2022.
We remain focused on our core priorities of growing leasing revenues by increasing units on rent, both organically and through our consolidation strategy, delivering “Ready to Work” solutions to our customers with value added products and services ("VAPS"), and on continually improving the overall customer experience.
Significant Developments
Asset Acquisitions
During the first quarter of 2022, we acquired certain assets and liabilities, which consisted primarily of approximately 400 blast resistant modular units. When combined with other recent acquisitions over the past three quarters, we have acquired assets and liabilities from eight regional and local storage and modular companies, consisting primarily of 15,700 storage units and 6,200 modular units.
Share and Warrant Repurchases
During the three months ended March 31, 2022, we repurchased and cancelled 11,032 of the 2018 Warrants for $0.2 million. In addition, during the three months ended March 31, 2022, 929,379 of the 2018 Warrants were exercised on a cashless basis, resulting in the issuance of 573,483 shares of common stock. At March 31, 2022, 3,137,762 of the 2018 Warrants were outstanding.
During the three months ended March 31, 2022, we repurchased a total of 2,070,054 shares of Common Stock and stock equivalents for $77.4 million, including the repurchased warrants. As of March 31, 2022, we had $879.3 million remaining of a $1 billion share repurchase authorization under our stock repurchase program. Given the predictability of our free cash flow, we believe that repurchases will be a reoccurring capital allocation priority.
First Quarter Highlights
For the three months ended March 31, 2022, as compared to the three months ended March 31, 2021 unless otherwise noted, key drivers of our financial performance included:
•Total revenues increased by $83.6 million, or 19.7%, attributable to organic revenue growth levers in the business and due to the impact of acquisitions. Leasing revenue increased $77.5 million, or 24.5%, and delivery and installation revenue increased $16.8 million, or 20.1%. These increases were offset by decreased sales; rental unit sales decreased $6.4 million, or 42.1%, and new unit sales revenue decreased $4.4 million, or 40.0%. We estimate that recent acquisitions contributed approximately $12.0 million to total revenues for three months ended March 31, 2022.
Key leasing revenue drivers include:
–Average portable storage units on rent increased 34,877 units, or 24.0%, and average modular space units on rent increased 1,670 units, or 1.5%. Approximately 50% of the increase in total average units on rent was driven by increases in organic delivery activity and lower return activity during 2021 and into the first quarter of 2022 as economic activity rebounded versus 2020 and the other 50% was driven by units on rent acquired as a result of recent acquisitions.
–Average modular space monthly rental rate increased $123, or 18.1%, to $802 driven by strong pricing performance across all relevant segments. Average modular space monthly rental rates increased by $147, or 19.9%, in the NA Modular segment, by $59, or 11.0%, in the NA Storage segment, and by $24, or 5.9% in the UK Storage segment.
–Average portable storage monthly rental rate increased $20, or 14.8%, to $155 driven by increased pricing as a result of our price management tools and processes, further supported by tight supply on portable storage containers in the markets in which we operate.
–Average utilization for portable storage units increased to 84.0% from 74.4% for the same period in 2021 driven by increased demand in 2022 as compared to the same period in 2021. Average utilization for modular space units decreased 140 basis points ("bps") to 68.9%.
•NA Modular segment revenue, which represents 58.9% of consolidated revenue for the three months ended March 31, 2022, increased $33.5 million, or 12.6%, to $299.7 million. The increase was driven by our core leasing revenue, which grew $33.4 million, or 16.7%, due to continued growth of pricing and value added products. Delivery and installation revenues increased $6.9 million, or 14.2%, driven by increased pricing on new deliveries and returns as compared to 2021. The increases to leasing revenue and delivery and installation revenues were partially offset by declines in revenues for portable storage units as the result of transitioning the majority of the portable storage product business within the NA Modular segment to the NA Storage segment. Rental unit sales decreased $4.2 million, or 40.4%, and new unit sales decreased $2.7 million, or 36.0%. NA Modular revenue drivers for the three months ended March 31, 2022 included:
–Modular space average monthly rental rate of $884, increased 19.9% year over year representing a continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio.
–Average modular space units on rent increased 212, or 0.3%, year over year driven primarily by units on rent acquired as a result of recent acquisitions. Sequentially from December 31, 2021, modular space units on rent increased by approximately 1,800 units, or 2.1%. Excluding units acquired from acquisitions during the quarter, sequential modular space units on rent from December 31, 2021 increased by approximately 1,400 units, or 1.7%.
–Average modular space monthly utilization decreased 60 bps to 67.0% for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. Sequentially from the fourth quarter 2021, average modular utilization decreased 50 bps, however end of period utilization increased over 100 bps from December 31, 2021 to March 31, 2022.
•NA Storage segment revenue, which represents 29.8% of consolidated revenue for the three months ended March 31, 2022, increased $43.7 million, or 40.5%, to $151.5 million. The increase was driven by our core leasing revenue, which grew $38.2 million, or 47.5%, due to increased units on rent driven by significant increases in delivery activity during 2021 and into the first quarter of 2022 as economic activity rebounded versus 2020, recent acquisition activity, and increased pricing. Delivery and installation revenues increased $8.5 million, or 39.7%, driven by increased demand for new project deliveries, and by increased pricing on new deliveries and returns as compared to 2021. The increases to leasing revenue and delivery and installation revenues in the NA Storage segment were also impacted
as the result of transitioning the majority of the portable storage product business within the NA Modular segment to the NA Storage segment. Rental unit sales decreased $1.7 million, or 44.7%, and new unit sales decreased $1.3 million, or 59.1%.
NA Storage revenue drivers for the three months ended March 31, 2022 included:
•Portable storage average monthly rental rate of $166, increased 12.2% year over year as a result of our price management tools and processes, further supported by tight supply on portable storage containers in the markets in which we operate. Modular space average monthly rental rate of $594, increased 11.0% year over year as a result of price optimization and early benefits from increased VAPS penetration opportunities.
•Average portable storage units on rent increased 46,516, or 44.0%, year over year. Increases in organic activity in 2021 and the first quarter of 2022 drove an increase to average portable storage units on rent of approximately 18% or 19,000 units on rent. Of the remaining increase, approximately 15,500 units on rent was driven by units acquired from recent acquisitions, and approximately 12,000 units on rent was driven by transitioning the portable storage product business within the NA Modular segment to the NA Storage segment, which occurred in the third quarter of 2021. Combined, average portable storage units on rent for the NA Storage and NA Modular segments increased approximately 32,076 units, or 26.6%. Average modular space units on rent increased 2,120, or 12.9% year over year driven by increases in organic delivery activity as well as due to units on rent acquired.
•Average portable storage monthly utilization increased 930 bps to 83.2% for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. Average modular space monthly utilization decreased 310 bps to 76.3% for three months ended March 31, 2022, as compared to the three months ended March 31, 2021.
•Generated consolidated net income of $51.2 million for the three months ended March 31, 2022 representing an increase of $46.7 million versus the three months ended March 31, 2021, and included $4.4 million of discrete costs expensed in the period related to integration activities. Discrete costs in the period included $4.1 million of integration costs and $0.3 million of restructuring costs, lease impairment expense and other related charges. Net Income Excluding Gain/Loss from Warrants of $51.2 million three months ended March 31, 2022 represented an increase of $19.5 million, or 61.5% as compared to the three months ended March 31, 2021.
•Generated Adjusted EBITDA of $191.8 million for the three months ended March 31, 2022, representing an increase of $28.2 million, or 17.2%, as compared to the same period in 2021. This increase was driven primarily by increased leasing gross profit.
▪Consolidated Adjusted EBITDA Margin was 37.7% in the first quarter of 2022 and decreased 80 bps versus prior year driven by increased variable costs as a result of higher activity levels in the current quarter and inflationary pressures across many of our cost categories.
•Generated Free Cash Flow of $54.6 million for the three months ended March 31, 2022 representing a decrease of $36.6 million as compared to the same period in 2021. Net cash provided by operating activities increased $23.4 million to $145.5 million. Net cash used in investing activities increased by $117.5 million to $148.4 million to support increases in delivery activity during 2022 as economic activity rebounded versus 2021, to support unit on rent growth and to support a 2022 acquisition.
•Returned $77.4 million to shareholders through stock and warrant repurchases and closed one acquisition totaling approximately 400 modular units for $57.5 million in cash during the three months ended March 31, 2022. The predictability of our free cash flow allows us to pursue multiple capital allocation priorities opportunistically, including investing in organic opportunities we see in the market, continuing our deleveraging trajectory, opportunistically executing accretive acquisitions, and returning capital to shareholders.
Consolidated Results of Operations
Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021
Our condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 are presented below.
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | 2022 vs. 2021 $ Change |
(in thousands) | 2022 | | 2021 | |
Revenues: | | | | | |
Leasing and services revenue: | | | | | |
Leasing | $ | 393,192 | | | $ | 315,662 | | | $ | 77,530 | |
Delivery and installation | 100,331 | | | 83,504 | | | 16,827 | |
Sales revenue: | | | | | |
New units | 6,597 | | | 10,955 | | | (4,358) | |
Rental units | 8,774 | | | 15,202 | | | (6,428) | |
Total revenues | 508,894 | | | 425,323 | | | 83,571 | |
Costs: | | | | | |
Costs of leasing and services: | | | | | |
Leasing | 88,878 | | | 69,895 | | | 18,983 | |
Delivery and installation | 81,515 | | | 70,136 | | | 11,379 | |
Costs of sales: | | | | | |
New units | 4,326 | | | 7,109 | | | (2,783) | |
Rental units | 5,144 | | | 9,105 | | | (3,961) | |
Depreciation of rental equipment | 62,216 | | | 55,698 | | | 6,518 | |
Gross profit | 266,815 | | | 213,380 | | | 53,435 | |
Expenses: | | | | | |
Selling, general and administrative | 150,210 | | | 117,329 | | | 32,881 | |
| | | | | |
Other depreciation and amortization | 19,604 | | | 18,324 | | | 1,280 | |
Lease impairment expense and other related charges | 263 | | | 1,253 | | | (990) | |
Restructuring costs | — | | | 3,142 | | | (3,142) | |
Currency losses, net | 138 | | | 36 | | | 102 | |
Other income, net | (1,309) | | | (1,988) | | | 679 | |
Operating income | 97,909 | | | 75,284 | | | 22,625 | |
Interest expense | 30,990 | | | 29,964 | | | 1,026 | |
Fair value loss on common stock warrant liabilities | — | | | 27,207 | | | (27,207) | |
Loss on extinguishment of debt | — | | | 3,185 | | | (3,185) | |
Income before income tax | 66,919 | | | 14,928 | | | 51,991 | |
Income tax expense | 15,748 | | | 10,481 | | | 5,267 | |
| | | | | |
| | | | | |
Net income | $ | 51,171 | | | $ | 4,447 | | | $ | 46,724 | |
Comparison of Three Months Ended March 31, 2022 and 2021
Revenue: Total revenue increased $83.6 million, or 19.7%, to $508.9 million for the three months ended March 31, 2022 from $425.3 million for the three months ended March 31, 2021. Leasing revenue increased $77.5 million, or 24.5%, as compared to the same period in 2021 driven by improved pricing and value added products, and an increase of 34,877 average portable storage units on rent driven by significant increases in delivery activity during 2021 and into the first quarter of 2022 as economic activity rebounded versus 2020 and recent acquisition activity. Delivery and installation revenues increased $16.8 million, or 20.1%, due to increased overall activity across all of our segments. Rental unit sales decreased $6.4 million, or 42.1%, and new unit sales decreased $4.4 million, or 40.0%. We estimate that recent acquisitions contributed approximately $12.0 million to total revenues for three months ended March 31, 2022.
Total average units on rent for the three months ended March 31, 2022 and 2021 were 292,256 and 255,709, respectively, representing an increase of 36,547, or 14.3%. Portable storage average units on rent increased by 34,877 units, or 24.0%, for the three months ended March 31, 2022 driven by strong demand. The average portable storage unit utilization
rate during the three months ended March 31, 2022 was 84.0%, as compared to 74.4% during the same period in 2021. Modular space average units on rent increased 1,670 units, or 1.5%, for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 driven primarily by acquisitions. The average modular space unit utilization rate during the three months ended March 31, 2022 was 68.9%, as compared to 70.3% during the same period in 2021. In total, approximately 50% of the increase in total average units on rent was driven by increases in organic delivery activity and lower return activity during 2021 and into the first quarter of 2022 and the other 50% of the growth was driven by units on rent acquired as a result of recent acquisitions.
Modular space average monthly rental rates increased 18.1% to $802 for the three months ended March 31, 2022. Improved pricing was achieved across all relevant segments. Average modular space monthly rental rates increased by $147, or 19.9%, to $884 in the NA Modular segment, by $59, or 11.0%, in the NA Storage segment, and by $24, or 5.9% in the UK Storage segment. Increases were driven by a continuation of the long-term price optimization and VAPS penetration opportunities across our NA Modular segment as well as by some early application of these same price management tools and processes across the NA Storage and UK Storage segments. NA Storage also is beginning to see early benefits from increased VAPS penetration opportunities.
Average portable storage monthly rental rates increased 14.8% to $155 for the three months ended March 31, 2022 driven by our price management tools and processes, further supported by tight supply on portable storage containers in the markets in which we operate.
Gross Profit: Our gross profit percentage was 52.4% and 50.2% for the three months ended March 31, 2022 and 2021, respectively. Our gross profit percentage, excluding the effects of depreciation, was 64.7% and 63.3% for the three months ended March 31, 2022 and 2021, respectively.
Gross profit increased $53.5 million, or 25.1%, to $266.8 million for the three months ended March 31, 2022 from $213.4 million for the three months ended March 31, 2021. The increase in gross profit is a result of a $58.5 million increase in leasing gross profit and increased delivery and installation gross profit of $5.4 million, partially offset by decreased new and rental unit sale margins of $4.0 million. Increases were primarily a result of increased revenues due to favorable average monthly rental rates across both portable storage and modular space units, as well as due to increased units on rent, partially offset by increased variable costs during the period as a result of higher activity levels in the current year quarter and inflationary pressures across many of our cost categories. Depreciation increased $6.5 million as a result of capital investments made over the past twelve months in our existing rental equipment, including the impact of recent acquisitions.
SG&A: Selling, general and administrative ("SG&A") expense increased $32.9 million, or 28.0%, to $150.2 million for the three months ended March 31, 2022, compared to $117.3 million for the three months ended March 31, 2021. Employee costs excluding stock compensation increased $19.6 million, or 33.9%, driven by recent investments in new roles to fund both organic and inorganic growth, and increased variable compensation as a result of the growth achieved. Integration costs decreased $3.2 million to $4.1 million for the three months ended March 31, 2022, compared to $7.3 million for the three months ended March 31, 2021, and stock compensation expense increased $2.9 million to $6.4 million for the three months ended March 31, 2022, compared to $3.5 million for the three months ended March 31, 2021. The remaining increases were driven primarily by occupancy and office costs, legal and professional fees, travel expenses, and marketing cost increases.
Other Depreciation and Amortization: Other depreciation and amortization increased $1.3 million to $19.6 million for the three months ended March 31, 2022 compared to $18.3 million for the three months ended March 31, 2021. The increase was driven by increased depreciation as a result of our 2021 investments in our enterprise resource planning system and other infrastructure investments across our branch network.
Lease Impairment Expense and Other Related Charges: Lease impairment expense and other related charges was $0.3 million for the three months ended March 31, 2022 as compared to $1.3 million for the three months ended March 31, 2021. The decrease resulted from fewer closed locations during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.
Restructuring Costs: Restructuring costs were $3.1 million for the three months ended March 31, 2021 primarily driven by employee termination costs resulting from the elimination of positions due to the Merger.
Currency Losses, net: Currency losses, net changed by $0.1 million to a $0.1 million loss for the three months ended March 31, 2022 from $0 for the three months ended March 31, 2021. This change was primarily attributable to the impact of foreign currency exchanges rate changes on intercompany receivables and payables denominated in a currency other than the subsidiary's functional currency.
Other Income, net: Other income, net was $1.3 million for the three months ended March 31, 2022 compared to $2.0 million for the three months ended March 31, 2021. Other income, net of $1.3 million for the three months ended March 31, 2022 is primarily related to gains incurred related to Hurricane Ida in the Gulf Coast area of the United States, and other income, net of $2.0 million for the three months ended March 31, 2021 was primarily the result of gains recorded on the sale of real estate during the period.
Interest Expense: Interest expense increased $1.0 million, or 3.3%, to $31.0 million for the three months ended March 31, 2022 from $30.0 million for the three months ended March 31, 2021. See Note 9 to the condensed consolidated financial statements for further discussion of our debt.
Fair Value Loss on Common Stock Warrant Liabilities: The fair value loss on common stock warrant liabilities was $27.2 million for the three months ended March 31, 2021, primarily due to the change in estimated fair value of common stock warrant liabilities. At March 31, 2022, no 2015 Public or Private Warrants were outstanding, and as a result, there was no fair value loss on common stock warrant liabilities recorded for the three months ended March 31, 2022.
Loss on Extinguishment of Debt: During the three months ended March 31, 2021, using cash on hand and borrowings on the ABL Facility, the Company redeemed 10% of the outstanding principal, $65.0 million, of its 2025 Secured Notes and recorded a loss on extinguishment of debt of $3.2 million comprised of a redemption premium of $1.9 million and write off of unamortized deferred financing fees of $1.3 million.
Income Tax Expense: Income tax expense increased $5.2 million to $15.7 million for the three months ended March 31, 2022 compared to $10.5 million for the three months ended March 31, 2021. The increase in expense was driven by the pre-tax income increase for the three months ended March 31, 2022.
Business Segment Results
The Company operates in four reportable segments as follows: NA Modular, NA Storage, UK Storage and Tank and Pump. NA Modular represents the activities of the North American modular business. NA Storage represents the activities of the North American portable storage business. UK Storage represents the results of all modular and portable storage operations in the UK. Tank and Pump represents the results of all operations for Tank and Pump services. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2021 were transferred to the NA Storage segment, representing a shift of approximately $5.0 million of revenue and gross margin per quarter from the NA Modular segment to the NA Storage segment. This adjustment was not made to the historical segment results of prior periods, given its relative immateriality.
The following tables and discussion summarize our reportable segment financial information for the three months ended March 31, 2022 and 2021.
Comparison of Three Months Ended March 31, 2022 and 2021
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| Three Months Ended March 31, 2022 |
(in thousands, except for units on rent and rates) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
Revenue | $ | 299,686 | | | $ | 151,484 | | | $ | 27,440 | | | $ | 30,284 | | | $ | 508,894 | |
Gross profit | $ | 128,931 | | | $ | 105,130 | | | $ | 17,921 | | | $ | 14,833 | | | $ | 266,815 | |
Adjusted EBITDA | $ | 103,948 | | | $ | 63,825 | | | $ | 12,544 | | | $ | 11,506 | | | $ | 191,823 | |
Capital expenditures for rental equipment | $ | 57,577 | | | $ | 20,171 | | | $ | 9,615 | | | $ | 7,873 | | | $ | 95,236 | |
Average modular space units on rent | 85,007 | | | 18,559 | | | 8,453 | | | — | | | 112,019 | |
Average modular space utilization rate | 67.0 | % | | 76.3 | % | | 73.7 | % | | — | % | | 68.9 | % |
Average modular space monthly rental rate | $ | 884 | | | $ | 594 | | | $ | 428 | | | $ | — | | | $ | 802 | |
Average portable storage units on rent | 463 | | | 152,326 | | | 27,448 | | | — | | | 180,237 | |
Average portable storage utilization rate | 52.6 | % | | 83.2 | % | | 89.8 | % | | — | % | | 84.0 | % |
Average portable storage monthly rental rate | $ | 160 | | | $ | 166 | | | $ | 94 | | | $ | — | | | $ | 155 | |
Average tank and pump solutions rental fleet utilization based on original equipment cost | N/A | | N/A | | N/A | | 75.8 | % | | 75.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
(in thousands, except for units on rent and rates) | NA Modular | | NA Storage | | UK Storage | | Tank and Pump | | Total |
Revenue | $ | 266,224 | | | $ | 107,748 | | | $ | 27,007 | | | $ | 24,344 | | | $ | 425,323 | |
Gross profit | $ | 113,002 | | | $ | 72,619 | | | $ | 16,493 | | | $ | 11,266 | | | $ | 213,380 | |
Adjusted EBITDA | $ | 97,371 | | | $ | 46,322 | | | $ | 11,064 | | | $ | 8,828 | | | $ | 163,585 | |
Capital expenditures for rental equipment | $ | 39,135 | | | $ | 3,472 | | | $ | 6,770 | | | $ | 3,158 | | | $ | 52,535 | |
Average modular space units on rent | 84,795 | | | 16,439 | | | 9,115 | | | — | | | 110,349 | |
Average modular space utilization rate | 67.6 | % | | 79.4 | % | | 83.8 | % | | — | % | | 70.3 | % |
Average modular space monthly rental rate | $ | 737 | | | $ | 535 | | | $ | 404 | | | $ | — | | | $ | 679 | |
Average portable storage units on rent | 14,903 | | | 105,810 | | | 24,647 | | | — | | | 145,360 | |
Average portable storage utilization rate | 60.3 | % | | 73.9 | % | | 89.2 | % | | — | % | | 74.4 | % |
Average portable storage monthly rental rate | $ | 124 | | | $ | 148 | | | $ | 82 | | | $ | — | | | $ | 135 | |
Average tank and pump solutions rental fleet utilization based on original equipment cost | N/A | | N/A | | N/A | | 67.4 | % | | 67.4 | % |
NA Modular
Revenue: Total revenue increased $33.5 million, or 12.6%, to $299.7 million for the three months ended March 31, 2022 from $266.2 million for the three months ended March 31, 2021. The increase was primarily the result of a $33.4 million, or 16.7%, increase in leasing revenue, and a $6.9 million, or 14.2% increase in modular delivery and installation revenue. The increases to leasing revenue and delivery and installation revenues were partially offset by a decrease of $4.2 million, or 40.4%, in rental unit sales revenue and a $2.7 million, or 36.0%, decrease in new unit sales. Average modular space monthly rental rates increased 19.9% for the three months ended March 31, 2022 to $884 driven by the continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio. Average modular space units on rent increased by 212 units, or 0.3%, year over year.
Gross Profit: Gross profit increased $15.9 million, or 14.1%, to $128.9 million for the three months ended March 31, 2022 from $113.0 million for the three months ended March 31, 2021. The increase in gross profit was driven by higher leasing gross profit, which increased $20.5 million, or 13.8%, driven from improved pricing including VAPS. The increase in gross profit from leasing for the three months ended March 31, 2022 was further complemented by a $2.5 million increase in delivery and installation gross profit. These increases were partially offset by a $2.0 million decrease in rental unit sales gross profit, a $1.1 million decrease in new unit sales gross profit, and a $4.2 million increase in depreciation of rental equipment related to capital investments made in our existing rental equipment and additional depreciation from recent acquisitions.
Adjusted EBITDA: Adjusted EBITDA increased $6.5 million, or 6.7%, to $103.9 million for the three months ended March 31, 2022 from $97.4 million for the three months ended March 31, 2021. The increase was driven by higher leasing gross profit discussed above. SG&A, excluding discrete items, increased $15.1 million, or 24.2%, for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021 driven primarily by increased costs for personnel, including commissions and other variable compensation, the return of more normal travel expenses, and increased subscription and professional fees.
Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments increased $18.5 million, or 47.3%, to $57.6 million for the three months ended March 31, 2022 from $39.1 million for the three months ended March 31, 2021. Net CAPEX increased $29.3 million, or 160.1%, to $47.6 million. These increases were driven by increased refurbishments and VAPS purchases as well as by an $11.8 million reduction in proceeds from the sale of property, plant and equipment primarily related to real estate sales that occurred during the three months ended March 31, 2021.
NA Storage
Revenue: Total revenue increased $43.7 million, or 40.5%, to $151.5 million for the three months ended March 31, 2022 from $107.8 million for the three months ended March 31, 2021. Leasing revenues increased $38.2 million in the current quarter compared to the prior-year quarter. Modular space average units on rent increased 12.9% and average modular space monthly rental rates increased 11.0% year-over-year driven primarily by increased pricing on new deliveries. Portable storage units on rent increased 46,516, or 44.0%, driven by increased organic economic activity (approximately 19,000 units on rent increase), acquisitions (approximately 15,500 units on rent increase), and due to the transfer of approximately 12,000 portable storage units on rent from the NA Modular segment, which occurred in the third quarter of 2021. Combined, average portable storage units on rent for the NA Storage and NA Modular segments increased approximately 32,076 units, or 26.6%. Average portable storage monthly rental rates increased 12.2% year-over-year also as a result of increased pricing on new deliveries. Delivery and installation revenues increased $8.5 million year-over-year driven by the increase in overall volumes. Sales revenues decreased $3.0 million compared to the prior-year quarter.
Gross Profit: Gross profit increased by $32.5 million, or 44.8%, to $105.1 million for the three months ended March 31, 2022 compared to $72.6 million for the three months ended March 31, 2021. Gross profit on leasing activity increased by $32.7 million year-over-year driven both by increased volume and pricing as described above. For delivery and installation, gross profit increased $2.8 million. Sales gross profit decreased by $1.1 million to $1.1 million.
Adjusted EBITDA: Adjusted EBITDA increased $17.5 million, or 37.8%, to $63.8 million for the three months ended March 31, 2022 from $46.3 million for the three months ended March 31, 2021 and the margin contracted to 42.1% from 43.0%. The increase in Adjusted EBITDA was driven primarily by increased leasing gross profit as described above, partially offset by increased SG&A. Excluding acquisition costs and stock-based compensation, SG&A increased $16.8 million in this segment. The increase was comprised of increased costs for personnel, including commissions and other variable compensation to support increased commercial activity, the return of more normal travel expenses, and increased subscription and professional fees.
Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments increased $16.7 million, or 477.1%, to $20.2 million for the three months ended March 31, 2022 from $3.5 million for the three months ended March 31, 2021. Net CAPEX increased $19.3 million, or 393.9%, to $24.2 million. These increases were driven primarily by increased purchases of portable storage containers during the period to support organic growth, as well as by reduced proceeds from sales of rental fleet given high utilization.
UK Storage
Revenue: Total revenue increased $0.4 million, or 1.5%, to $27.4 million for the three months ended March 31, 2022 from $27.0 million for the three months ended March 31, 2021. In local currency total revenues increased 4.5%. Leasing revenues increased $1.9 million in the current quarter compared to the prior-year quarter. Modular space average units on rent decreased 7.3%, while portable storage units on rent increased 11.4%. Average monthly rental rates for modular space units and portable storage units increased 5.9% and 14.6% year-over-year, respectively, including the impacts of currency fluctuations. Delivery and installation revenues decreased $0.3 million year-over-year. Sales revenues decreased $1.2 million compared to the prior-year quarter.
Gross Profit: Gross profit increased $1.4 million, or 8.5%, for the three months ended March 31, 2022 to $17.9 million from $16.5 million for the three months ended March 31, 2021. In local currency, gross profit increased 11.7%. This increase was driven by rental rate growth and strategic cost management.
Adjusted EBITDA: Adjusted EBITDA increased $1.4 million, or 12.6%, to $12.5 million for three months ended March 31, 2022 from $11.1 million for the three months ended March 31, 2021 and the margin expanded to 45.7% from 41.0%. The increase results primarily from the favorable gross profit discussed above, partially offset by increased SG&A of $0.2 million driven by increased costs for personnel, including commissions and other variable compensation.
Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments increased $2.8 million, or 41.2%, to $9.6 million for the three months ended March 31, 2022 from $6.8 million for the three months ended March 31, 2021. Net CAPEX increased $6.8 million, or 147.8%, to $11.4 million. These increases were driven primarily by increased purchases of portable storage containers during the period to support organic growth, as well as by reduced proceeds from sales of rental fleet given high utilization.
Tank & Pump
Revenue: Total revenue increased $6.0 million, or 24.7%, to $30.3 million for the three months ended March 31, 2022 from $24.3 million for the three months ended March 31, 2021. These increases were driven by increased average original rental cost ("OEC") rental fleet utilization, which increased 840 bps to 75.8% for the three months ended March 31, 2022 from 67.4% for the three months ended March 31, 2021.
Gross Profit: Gross profit increased $3.5 million, or 31.0%, for the three months ended March 31, 2022 to $14.8 million from $11.3 million for the three months ended March 31, 2021. This increase was driven by increased gross profit for leasing activity, which increased $3.6 million driven by the increased revenue as discussed above.
Adjusted EBITDA: Adjusted EBITDA increased $2.7 million, or 30.7%, to $11.5 million for the three months ended March 31, 2022 from $8.8 million for the three months ended March 31, 2021 and the margin expanded to 38.0% from 36.3%. The increase in Adjusted EBITDA was driven by the increased gross profit discussed above, partially offset by a $1.2 million increase in SG&A expense driven primarily by increased personnel costs, including commissions and other variable compensation.
Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments increased $4.7 million, or 146.9%, to $7.9 million for the three months ended March 31, 2022 from $3.2 million for the three months ended March 31, 2021. Net CAPEX increased $4.6 million, or 143.8%, to $7.8 million. These increases were driven primarily by increased purchases of rental fleet during the period to support organic growth given high utilization, as well as by reduced proceeds from sales of rental fleet given high utilization.
Reconciliation of Non-GAAP Financial Measures
In addition to using GAAP financial measurements, we use certain non-GAAP financial measures to evaluate our operating results. As such, we include in this Quarterly Report on Form 10-Q reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures. Set forth below are definitions and reconciliations to the nearest comparable GAAP measure of certain non-GAAP financial measures used in this Quarterly Report on Form 10-Q along with descriptions of why we believe these measures provide useful information to investors as well as a description of the limitations of these measures. Each of these non-GAAP financial measures has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for analysis of, results reported under GAAP. Our measurements of these metrics may not be comparable to similarly titled measures of other companies.
Adjusted EBITDA
We define EBITDA as net income (loss) plus interest (income) expense, income tax expense (benefit), depreciation and amortization. Our adjusted EBITDA ("Adjusted EBITDA") reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what we consider transactions or events not related to our core business operations:
•Currency (gains) losses, net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency gains (losses) are unrealized and attributable to financings due to and from affiliated companies.
•Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and property, plant and equipment.
•Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee and lease termination costs.
•Transaction costs including legal and professional fees and other transaction specific related costs.
•Costs to integrate acquired companies, including outside professional fees, non-capitalized costs associated with system integrations, non-lease branch and fleet relocation expenses, employee training costs and other costs required to realize cost or revenue synergies.
•Non-cash charges for stock compensation plans.
•Gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities.
•Other expense, including consulting expenses related to certain one-time projects, financing costs not classified as interest expense and gains and losses on disposals of property, plant and equipment.
Our Chief Operating Decision Maker ("CODM") evaluates business segment performance utilizing Adjusted EBITDA as shown in the reconciliation of the Company’s consolidated net income to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic and ongoing operating results of the Company and captures the business performance of the segments, inclusive of indirect costs.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing WillScot Mobile Mini’s results as reported under GAAP. Some of these limitations are:
•Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs;
•Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;
•Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;
•Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•Adjusted EBITDA does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as measures of cash that will be available to meet our obligations.
The following table provides unaudited reconciliations of Net income to Adjusted EBITDA:
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Net income | $ | 51,171 | | | $ | 4,447 | | | | | |
Income tax expense | 15,748 | | | 10,481 | | | | | |
Loss on extinguishment of debt | — | | | 3,185 | | | | | |
Fair value loss on common stock warrant liabilities | — | | | 27,207 | | | | | |
Interest expense | 30,990 | | | 29,964 | | | | | |
Depreciation and amortization | 81,820 | | | 74,022 | | | | | |
Currency losses, net | 138 | | | 36 | | | | | |
Restructuring costs, lease impairment expense and other related charges | 263 | | | 4,395 | | | | | |
Transaction costs | 20 | | | 844 | | | | | |
Integration costs | 4,087 | | | 7,342 | | | | | |
Stock compensation expense | 6,395 | | | 3,514 | | | | | |
Other | 1,191 | | | (1,852) | | | | | |
Adjusted EBITDA | $ | 191,823 | | | $ | 163,585 | | | | | |
Net Income Excluding Gain/Loss from Warrants
We define Net Income Excluding Gain/Loss from Warrants as net income plus or minus the impact of the change in the fair value of the common stock warrant liability. Management believes that the presentation of our financial statements excluding the impact of the mark-to-market adjustment provides useful information regarding our results of operations and assists in the review of our actual operating performance. The following table provides unaudited reconciliations of Net income to Net Income Excluding Gain/Loss from Warrants:
| | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
(in thousands) | 2022 | | 2021 | | | |
Net income | $ | 51,171 | | | $ | 4,447 | | | | |
Fair value loss on common stock warrant liabilities | — | | | 27,207 | | | | |
Net Income Excluding Gain/Loss from Warrants | $ | 51,171 | | | $ | 31,654 | | | | |
Adjusted Gross Profit and Adjusted Gross Profit Percentage
We define Adjusted Gross Profit as gross profit plus depreciation on rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by revenue. Adjusted Gross Profit and Adjusted Gross Profit Percentage are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance measures derived in accordance with GAAP. In addition, our measurement of Adjusted Gross Profit and Adjusted Gross Profit Percentage may not be comparable to similarly titled measures of other companies. Management believes that the presentation of Adjusted Gross Profit and Adjusted Gross Profit Percentage provides useful information to investors regarding our results of operations and assists in analyzing the performance of our business.
The following table provides unaudited reconciliations of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage:
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Revenue (A) | $ | 508,894 | | | $ | 425,323 | | | | | |
| | | | | | | |
Gross profit (B) | $ | 266,815 | | | $ | 213,380 | | | | | |
Depreciation of rental equipment | 62,216 | | | 55,698 | | | | | |
Adjusted Gross Profit (C) | $ | 329,031 | | | $ | 269,078 | | | | | |
| | | | | | | |
Gross Profit Percentage (B/A) | 52.4 | % | | 50.2 | % | | | | |
Adjusted Gross Profit Percentage (C/A) | 64.7 | % | | 63.3 | % | | | | |
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, plant and equipment (collectively, "Total Proceeds"), which are all included in cash flows from investing activities. Management believes that the presentation of Net CAPEX provides useful information to investors regarding the net capital invested into our rental fleet and plant, property and equipment each year to assist in analyzing the performance of our business. The following table provides unaudited reconciliations of Net CAPEX:
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Total purchases of rental equipment and refurbishments | $ | (95,236) | | | $ | (52,535) | | | | | |
Total proceeds from sale of rental equipment | 14,554 | | | 15,202 | | | | | |
Net CAPEX for Rental Equipment | (80,682) | | | (37,333) | | | | | |
Purchase of property, plant and equipment | (10,481) | | | (7,307) | | | | | |
Proceeds from sale of property, plant and equipment | 260 | | | 13,729 | | | | | |
Net CAPEX | $ | (90,903) | | | $ | (30,911) | | | | | |
Liquidity and Capital Resources
Overview
WillScot Mobile Mini is a holding company that derives its operating cash flow from its operating subsidiaries. Our principal sources of liquidity include cash generated by operating activities from our subsidiaries, borrowings under the ABL Facility, and sales of equity and debt securities. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements over the next twelve months.
We have consistently accessed the debt and equity capital markets both opportunistically and as necessary to support the growth of our business, desired leverage levels, and other capital allocation priorities. We believe we have ample liquidity in the ABL Facility and are generating substantial free cash flow, which together support both organic operations and other capital allocation priorities as they arise.
We continue to review available acquisition opportunities with the awareness that any such acquisition may require us to incur additional debt to finance the acquisition and/or to issue shares of our Common Stock or other equity securities as acquisition consideration or as part of an overall financing plan. In addition, we will continue to evaluate alternatives to optimize our capital structure, which could include the issuance or repurchase of additional unsecured and secured debt, equity securities and/or equity-linked securities. There can be no assurance as to the timing of any such issuance. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. Availability of financing and the associated terms are inherently dependent on the debt and equity capital markets and subject to change. From time to time, we may also seek to streamline our capital structure and improve our financial position through refinancing or restructuring our existing debt or retiring certain of our securities for cash or other consideration.
Our revolving credit facility provides an aggregate principal amount of up to $2.4 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $2.0 billion (the “US Facility”), and (ii) a $400.0 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility") together with the US Facility (collectively, the “ABL Facility”), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros. Borrowing availability under the ABL Facility is equal to the lesser of $2.4 billion and the applicable borrowing bases. The borrowing bases are a function of, among other things, the value of the assets in the relevant collateral pool. At March 31, 2022, we had $646.9 million of available borrowing capacity under the ABL Facility.
Cash Flow Comparison of the Three Months Ended March 31, 2022 and 2021
Significant factors driving our liquidity include cash flows generated from operating activities and capital expenditures. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets. The following summarizes our change in cash and cash equivalents for the periods presented:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2022 | | 2021 |
Net cash from operating activities | $ | 145,527 | | | $ | 122,071 | |
Net cash from investing activities | (148,360) | | | (30,911) | |
Net cash from financing activities | 1,586 | | | (89,220) | |
Effect of exchange rate changes on cash and cash equivalents | (131) | | | 57 | |
Net change in cash and cash equivalents | $ | (1,378) | | | $ | 1,997 | |
Cash Flows from Operating Activities
Cash provided by operating activities for the three months ended March 31, 2022 was $145.5 million as compared to $122.1 million for the three months ended March 31, 2021, an increase of $23.4 million. The increase was due to an increase of $34.2 million of net income, adjusted for non-cash items, partially offset by a decrease of $11.7 million in the net movements of the operating assets and liabilities.
Cash Flows from Investing Activities
Cash used in investing activities for the three months ended March 31, 2022 was $148.4 million as compared to $30.9 million for the three months ended March 31, 2021, an increase of $117.5 million. The increase in cash used in investing activities was driven by a $57.5 million increase in cash used in an acquisition, a $42.7 million increase in cash used for the purchase of rental equipment and refurbishments, and a $3.2 million increase in cash used for the purchase of property, plant and equipment, a $0.6 million decrease in proceeds from the sale of rental equipment and a $13.5 million decrease in proceeds from sale of property, plant and equipment.
Cash Flows from Financing Activities
Cash provided by financing activities for the three months ended March 31, 2022 was $1.6 million as compared to $89.2 million cash used in financing activities for the three months ended March 31, 2021, an increase of $90.8 million. The increase is primarily due to a decrease of $107.1 million in repayment of borrowings, partially offset by a $9.5 million decrease in receipts from borrowing.
Free Cash Flow
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 in cash flows from investing activities. Management believes that the presentation of Free Cash Flow provides useful additional information concerning cash flow available to fund our capital allocation alternatives.
The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Net cash provided by operating activities | $ | 145,527 | | | $ | 122,071 | | | | | |
Purchase of rental equipment and refurbishments | (95,236) | | | (52,535) | | | | | |
Proceeds from sale of rental equipment | 14,554 | | | 15,202 | | | | | |
Purchase of property, plant and equipment | (10,481) | | | (7,307) | | | | | |
Proceeds from the sale of property, plant and equipment | 260 | | | 13,729 | | | | | |
Free Cash Flow | $ | 54,624 | | | $ | 91,160 | | | | | |
Free Cash Flow for the three months ended March 31, 2022 was an inflow of $54.6 million as compared to an inflow of $91.2 million for the three months ended March 31, 2021, a decrease in Free Cash Flow of $36.6 million. Free Cash Flow decreased year over year principally as a result of a $42.7 million increase in cash used in the purchase of rental equipment and refurbishments, a $13.4 million decrease in the proceeds from the sale of property, plant and equipment and a $0.6 million decrease in the proceeds from the sale of rental equipment. These were partially offset by a $23.4 million increase in cash provided by operating activities driven by increased profitability in the business. The $145.5 million in cash provided by operating activities for the three months ended March 31, 2022 was returned to shareholders through stock and warrant repurchases and cancellations and reinvested into the business to support the purchase of rental equipment, including VAPS, and refurbishments, as well as inorganic growth through mergers and acquisitions.
Material cash requirements
The Company’s material cash requirements include the following contractual and other obligations:
Debt
The Company has outstanding debt related to its ABL Facility, 2025 Secured Notes, 2028 Secured Notes, and finance leases, totaling $2.9 billion as of March 31, 2022, $19.8 million of which is obligated to be repaid within the next twelve months. Refer to Note 9 for further information regarding outstanding debt.
Operating leases
The Company has commitments for future minimum rental payments relating to operating leases, which are primarily for equipment and office space. As of March 31, 2022, the Company had lease obligations of $282.2 million, with $62.0 million payable within the next twelve months.
In addition to the aforementioned cash requirements, the Company has a Share Repurchase Program authorized by the Board of Directors which allows the Company to repurchase up to $1.0 billion of outstanding shares of Common Stock and equivalents. This program does not obligate the Company to repurchase any specific amount of shares.
The company believes its cash, cash flows generated from ongoing operations, continued access to its revolving credit facility, as well as access to debt markets, are sufficient to satisfy its currently anticipated cash requirements for the foreseeable future.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. GAAP requires that we make estimates and judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosure of contingent assets and liabilities. We base these estimates on historical experience and on various other assumptions that we consider reasonable under the circumstances, and reevaluate our estimates and judgments as appropriate. The actual results experienced by us may differ materially and adversely from our estimates.
The US Securities and Exchange Commission (the “SEC”) suggests companies provide additional disclosure on those accounting policies considered most critical. The SEC considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgments and estimates on the part of management in its application. For a complete discussion of our significant critical accounting policies, see the “Critical Accounting Policies and Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report on Form 10-K").
There were no significant changes to our critical accounting policies during the three months ended March 31, 2022.
Recently Issued Accounting Standards
Refer to Part I, Item 1, Note 1 of the notes to our financial statements included in this Quarterly Report on Form 10-Q for our assessment of recently issued accounting standards.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Act of 1934, as amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature and relate to expectations for future financial performance or business strategies or objectives. 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 we believe that these forward-looking statements are based on reasonable assumptions, we 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 successfully acquire and integrate new operations;
•the effect of global or local economic conditions in the industries and markets in which the Company operates and any changes therein, including financial market conditions and levels of end market demand;
•operational, economic, political and regulatory risks;
•the impact of public health crises, such as the global pandemic related to COVID-19, including the financial condition of the Company’s customers and suppliers and employee health and safety;
•risks associated with cybersecurity and IT systems disruptions, including our ability to manage the business in the event a disaster shuts down our management information systems;
•effective management of our rental equipment;
•trade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences;
•our ability to effectively compete in the modular space, portable storage and tank and pump industries;
•our ability to effectively manage our credit risk, collect on our accounts receivable, or recover our rental equipment;
•the effect of changes in state building codes on our ability to remarket our buildings;
•foreign currency exchange rate exposure;
•fluctuations in interest rates and commodity prices;
•significant increases in the costs and restrictions on the availability of raw materials and labor;
•fluctuations in fuel costs or oil prices, a reduction in fuel supplies, or a sustained decline in oil prices;
•our reliance on third party manufacturers and suppliers;
•risks associated with labor relations, labor costs and labor disruptions;
•impairment of our goodwill, intangible assets and indefinite-life intangible assets;
•various laws and regulations, including those governing government contracts, corruption and the environment;
•changes in the competitive environment of our customer base as a result of the global, national or local economic climate in which they operate and/or economic or financial disruptions to their industry;
•our ability to adequately protect our intellectual property and other proprietary rights that are material to our business;
•natural disasters and other business disruptions such as pandemics, fires, floods, hurricanes, earthquakes and terrorism;
•our ability to establish and maintain the appropriate physical presence in our markets;
•property, casualty or other losses not covered by our insurance;
•our ability to close our unit sales transactions;
•our ability to maintain an effective system of internal controls and accurately report our financial results;
•evolving public disclosure, financial reporting and corporate governance expectations;
•our ability to achieve our environmental, social and governance goals;
•our ability to use our net operating loss carryforwards and other tax attributes;
•our ability to recognize deferred tax assets such as those related to our tax loss carryforwards and, as a result, utilize future tax savings;
•unanticipated changes in tax obligations, adoption of a new tax legislation, or exposure to additional income tax liabilities;
•our ability to access the capital and credit markets or the ability of key counterparties to perform their obligations to us:
•our ability to service our debt and operate our business;
•our ability to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness;
•covenants that limit our operating and financial flexibility;
•uncertainty regarding the phase-out of LIBOR;
•our stock price volatility; and
•such other risks and uncertainties described in the periodic reports we file with the SEC from time to time (including our 2021 Annual Report on Form 10-K), 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 we undertake no obligation, and 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.