Q4 2023 WillScot Mobile Mini Holdings Corp Earnings Call

Welcome to the fourth quarter 2023 well Scott Mobile Mini earnings Conference call. My name is Amy and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct the question and answer session. Please note that this conference is being record.

Operator: I will now turn the call over to Nick Girardi, Senior Director of Treasury and Investor Relations. Nick, you may begin.

It is.

Now I'll turn the call over to Nick Gerardi Senior director of Treasury and Investor Relations. Nick you may begin.

Ross Gilardi: Good afternoon and good evening, and welcome to the WillScot Mobile Mini 4th Quarter 2023 Earnings Call. Participants on today's call include Brad Soultz, Chief Executive Officer, and Tim Boswell, President and Chief Financial Officer. Today's presentation material may be found in the Investor Relations section of the WillScot Mobile Mini. Slides 2 and 3 contain our Safe Harbor State.

Nick Gerardi: Good afternoon, and good evening and welcome to the World Scott Mobile Mini fourth quarter 2023 earnings call participants on today's call include Brad salts, Chief Executive Officer, and Tim Boswell, President and Chief Financial Officer. Today's presentation material may be found on the Investor Relations section of the well Scott mobile mini website.

Nick Gerardi: Slides, two and three contain our safe Harbor statement.

Ross Gilardi: We will be making forward-looking statements during the presentation and our Q&A session. Our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control. As a result, our actual results may differ materially from today's comments. For a more complete description of the factors that could cause actual results to differ and other possible risks, please refer to the safe harbor statements in our presentation and our filings with the SEC. With that, I'll turn the call over to Brad Soultz. Thanks, Nick. Good afternoon, everyone, and thank you for joining us today.

Nick Gerardi: We will be making forward looking statements during the presentation and our Q&A session, our business and operations are subject to a variety of risks and uncertainties many of which are beyond our control as a result, our actual results may differ materially from todays comments for a more complete description of the factors that could cause actual results to differ in other.

Nick Gerardi: Possible risks please refer to the safe Harbor statements in our presentation and our filings with the SEC with that I'll turn the call over to Brad salts.

Nick Gerardi: Thanks, Nick Good afternoon, everyone and thank you for joining us today I'm, Brad Salt CEO of will Scott mobile mini.

Bradley L. Soultz: I'm Brad Soultz, CEO of WillScot Mobile Management. Starting on slide six, 2023 was a record year for our company. We built a platform to deliver consistent, predictable compounding returns irrespective of market conditions, and the strength of that platform was abundant. We are ahead of expectations financially, eclipsing $1 billion of adjusted EBITDA faster than we expected. We delivered $577 million of free cash flow, which is $3 of free cash flow per share, a return on invested capital of 18%, and we grew earnings per share from continuing operations by 35% to $1.69. All of these metrics are company records.

Bradley L. Soultz: Starting on slide six 2023 was a record year for our company, we built our platform to deliver consistent predictable compounding returns irrespective of market conditions and the strength of that platform was abundantly clear.

Bradley L. Soultz: We are ahead of expectations financially eclipsing $1 billion of adjusted EBITDA faster than we expected, we delivered $577 million of free cash flow, which is $3 free cash flow per share return on invested capital of 18% and we grew earnings per share from continuing ops by 35%.

Bradley L. Soultz: $2 69.

Bradley L. Soultz: All of these metrics are company records. These compounding returns along with a clear line of sight to continued growth sets us up for years of long term value creation.

Bradley L. Soultz: These compounding returns, along with our clear line of sight to continued growth, set us up for years of long-term value creation. In 2023, we will continue to invest in our portfolio for the long-term benefit of our customers, team, and shareholders. We upgraded and harmonized our CRM system, which provides a world-class IT platform upon which we can easily scale our offering and integrate acquired business. We continued our history of innovation, expanding our VAPS offering and establishing market leadership positions in climate-controlled storage and clear-span structures. We now offer our customers over 129 million square feet of comprehensive temporary space solutions. And as the only pure play provider, we're excited to continue to expand and reinvent this space for years to come. As we begin 2024, our strategy is unchanged.

In 2023, we continue to invest in our portfolio for the long term benefit of our customers team and shareholders, we upgraded and harmonize our CRM system, which provides a world class platform upon which we can easily scale, our offering and integrate acquired businesses.

Bradley L. Soultz: We continued our history of innovation, expanding our <unk> offering and establishing market leadership positions and climate controlled storage and clear spanned structures. We now offer our customers over 129 million square foot of comprehensive temporary space solutions and as the only pure play provider.

Bradley L. Soultz: We're excited to continue to expand and reinvent this space for years to come.

Bradley L. Soultz: As we begin 2024, our strategy is unchanged, we safely and frugally grow leasing and service revenues by driving Baps rate and volumes underpinned by investments in best in class technology, and our team to consistently improve the customer experience.

Bradley L. Soultz: We safely and frugally grow leasing and service revenues by driving VAPs, rate, and volumes, underpinned by investments in best-in-class technology and our team to consistently improve the customer experience. We see immediate and significant tailwinds from VAPS rates and margins continuing into 2024. We also see continued opportunities to expand our solutions offering through programmatic tuck-in M&A, in addition to our previously announced definitive agreement to acquire McGrath. And we will continue to invest in capabilities to differentiate our portfolio of space solutions. Just a few highlights.

Bradley L. Soultz: We see immediate and significant tailwind from VAT rate and margins continuing into 2024. We also see continued opportunities to expand our solutions offering through programmatic tuck in M&A. In addition to our previously announced definitive agreement to acquire Mcgrath.

And we will continue to invest in capabilities to differentiate differentiate our portfolio of space solutions. Just a few highlights first we're making new investments in both human capital and digital tools I'm, particularly excited about our plans to improve our digital customer experience with enhanced field service and <unk>.

Bradley L. Soultz: First, we're making new investments in both human capital and digital tools. I'm particularly excited about our plans to improve our digital customer experience with enhanced field service and dispatch tools, while upgrading our web presence with a state-of-the-art customer portal and introducing more sophisticated demand generation tools. Second, we'll continue investing in innovation, especially in value-added products, and continue to scale our existing offering. Our proprietary PRO-RAC system is rolling out across 30 markets as we enter 2024. And some of you may have seen our solar prototype at the World of Concrete Convention, which we are now testing with customers and expect to place on the market in 2024.

Bradley L. Soultz: Batch tools, while upgrading our web presence with state of the art customer portal and introducing more sophisticated demand generation tools.

Bradley L. Soultz: Second we will continue investing in innovation, especially in the value added products, we continue to scale our existing offering.

Bradley L. Soultz: Our proprietary pro rack system is rolling out across 30 markets as we enter 2024 and some of you may have seen our solar prototype at the world of concrete convention, which we are now testing with customers and expect to place in the market in 2024, and we are introducing our proprietary ramp system for storage containers beginning.

Bradley L. Soultz: And we're introducing a proprietary ramp system for storage containers, beginning in Q1, all of which give us opportunities to build upon our lease revenues by providing a more comprehensive solution to our customers. And third, the build-outs of our climate-controlled storage and clear-span structures platforms are well underway. Each of these businesses has exciting multi-year growth prospects. In order to further accelerate our growth initiatives and improve customer service, we've recently unified our go-to-market approach, consolidating our legacy WillScot and Mobile Mini branches and sales teams into a single field leadership structure that is responsible for maximizing local market penetration of all of our space solutions. This new structure gives us a single team that's accountable to our customers in each geographical market, allows us to present our whole full suite of solutions to our customers all of the time, and allows us to leverage operational resources such as drivers, technicians, and real estate to support all of our solutions in that given market, all while providing increased career development and growth opportunities for our team.

Bradley L. Soultz: In Q1, all of which give us opportunities to build upon our lease revenues by providing a more comprehensive solution to our customers.

Bradley L. Soultz: And third the build outs of our climate controlled storage and clear spanned structures platforms are well underway. Each of these businesses have exciting multiyear growth prospects.

Bradley L. Soultz: And in order to further accelerate our growth initiatives and improve customer service. We've recently unified our go to market approach consolidated our legacy will Scott and mobile mini branches and sales teams into a single field leadership structure that is responsible for maximizing local market penetration of all of our space solutions.

Bradley L. Soultz: This new structure gives us a single team that's accountable to our customers in each geographical market allows us to present, our whole full suite of solutions to our customers all of the time it allows us to leverage operational resources, such as drivers technicians and real estate to support all of our.

Bradley L. Soultz: And that given market, all while providing increased career development and growth opportunities for our team.

Bradley L. Soultz: Turning to page 11, as we complete 2023, it's important to reflect on the growth of our portfolio. Investors sometimes ask me if I'm concerned about the cyclicality of the economy and the potential impact on our business. The reality is, we've operated like a duck on water through highly volatile market conditions over the last five years. 2019 was the last time there wasn't a major macro event occurring, and even then, we were busy integrating the Mott Space Acquisition.

Bradley L. Soultz: Turning to page 11, as we complete 2023. It is important to reflect on the growth of our portfolio investors. Sometimes asked me if I'm concerned about cyclicality in the economy and the potential impact on our business. The reality is we've operated like a duck on the water through highly volatile market conditions.

Bradley L. Soultz: <unk> over the last five years 2019 was the last time, there wasn't a major macro event occurring and even then we were busy integrating the <unk> acquisition.

Bradley L. Soultz: And while non-residential starts on both the dollar and per-square-foot basis slowed significantly in 2023, the modular quoting growth that we discussed in Q3 began converting into net orders and activations over the last three months and is now at levels above the same period a year ago. And this has given us confidence in our outlook, which Tim will discuss later. In this graphic, we've indexed our lease revenue, GDP, and non-residential square foot starts to Q1 of 2019. At that time, we were generating approximately $1 billion of lease revenue over the prior 12 months on a pro forma basis.

Bradley L. Soultz: And while nonresidential starts on both a dollar and per square foot basis slowed significantly in 2023.

Bradley L. Soultz: The modular quoting growth that we discussed in Q3 began converting into net orders in activations over the last three months and are now at levels above the same period the prior year.

Bradley L. Soultz: And this has given us confidence in our outlook, which Tim will discuss later.

Bradley L. Soultz: And this graphic we've indexed our lease revenue GDP and nonresidential square foot starts to Q1 of 2019.

At that time, we were generating approximately $1 billion of lease revenue over the prior 12 months on a pro forma basis over the next five years leasing revenue grew 80% to $1 8 billion, all while improving ROIC 1000 bps to 18%.

Bradley L. Soultz: Over the next five years, leasing revenue grew 80% to $1.8 billion, all while improving ROIC 1,000 BIPs to 18%. Despite macro movements that are outside of our control, our leasing and service revenue is recurring, predictable, and growing, and shows zero volatility. That's because of strategy and the $1 billion of idiosyncratic growth levers at our disposal, along with the value of the average three-year lease duration.

Bradley L. Soultz: Despite macro movements that are outside of our control our leasing and service revenue is recurring predictable and growing and shows zero volatility that's because of strategy in the $1 billion of idiosyncratic growth levers at our disposal along with the value of the average three year lease duration.

Bradley L. Soultz: Now turning to page 18, our strategy drives accelerated growth, differentiated positioning, and undisputed category leadership with demonstrated world-class execution and capital allocation. We're excited about how the recently announced definitive agreement to acquire McGrath Rent Corp will further accelerate our growth and extend our value proposition to new customers, all complementary to the extraordinary opportunity already within our existing platform. As a reminder of how the size of this transaction can further accelerate our growth, let's look back at our performance following the WillScot and Mobile Mini merger. At the time of the transaction closing, we were doing around $620 million of LTM EBITDA.

Bradley L. Soultz: Now turning to page 18, our strategy drives accelerated growth differentiated positioning and undisputed category leadership with demonstrated world class execution and capital allocation.

Bradley L. Soultz: We're excited about how the recently announced definitive agreement to acquire Mcgrath Ralcorp will further accelerate our growth and extend our value proposition to new customers all complimentary to the extraordinary opportunity already within our existing platform.

Bradley L. Soultz: As a reminder to how the size of this transaction can further accelerate our growth, let's look back to our performance following the Wil Scott and mobile mini merger at the time of the transaction closing, we were doing around $620 million of LTM EBITDA.

Bradley L. Soultz: Since then we've divested more EBITDA then we've acquired and we just delivered over $1 billion of EBITDA up approximately 70% since 2023.

Bradley L. Soultz: Since then, we've divested more EBITDA than we've acquired, and we just delivered over a billion dollars of EBITDA, up approximately 70% since 2012. Given our performance in 2023, we increased our near-term 2024 and 2026 operating ranges on a few of our key metrics. Notably, we believe we can achieve adjusted EBITDA margins between 45% and 50% and return on invested capital between 15% to 20%. We also believe we can achieve over $700 million of free cash flow within this three-year horizon. These milestones are achievable irrespective of the announced McGrath acquisition, which itself would be accretive to cash earnings in year one.

Bradley L. Soultz: Given our performance in 2023, we increased our near term 2024, and 2026 operating ranges on a few of our key metrics, notably we believe we can achieve adjusted EBITDA margin between 45% to 50% and return on invested capital between 15% to 20, we.

Bradley L. Soultz: We also believe we can achieve over 700 remain a free cash flow within this three year horizon. These milestones are achievable irrespective of the announced Mcgrath acquisition, which itself would be accretive to cash earnings in year one.

Bradley L. Soultz: Our investor value proposition is simple our financial performance is predictable and growing due to our $1 billion.

Bradley L. Soultz: Video syncretic growth levers all governed by three year lease durations.

Bradley L. Soultz: We can enter new markets from a position of strength and with clear market leadership, which creates more value for our customers and increases our total addressable market and most importantly, we generate a lot of cash, which we invest to maximize sustainable returns in our business and drive value for our shareholders with that I'll hand, it over to Tim.

Bradley L. Soultz: Our investor value proposition is simple. Our financial performance is predictable and growing due to our $1 billion of idiosyncratic growth levers, all governed by three-year lease duration. We can enter new markets from a position of strength and with clear market leadership, which creates more value for our customers and increases our total addressable market. And, most importantly, we generate a lot of cash, which we invest to maximize sustainable returns in our business and drive value for our shareholders. With that, I'll hand it over to Tim.

Thank you Brad and good afternoon, good afternoon, everyone.

Timothy D. Boswell: Page 23 shows a high level summary of the quarter.

Timothy D. Boswell: 2023 was the strongest year in our company's history and despite some market headwinds we are carrying momentum into 2024, which supports another year of record financial performance.

Timothy D. Boswell: Our commercial Kpis were mixed throughout the year with rates generally offsetting volume declines which were in line with contraction of nonresidential construction starts square footage plus the retail headwinds we discussed in our storage segment.

Timothy D. Boswell: Thank you, Brad, and good afternoon, everyone. Page 23 shows a high-level summary of the quarter. 2023 was the strongest year in our company's history, and despite some market headwinds, we are carrying momentum into 2024, which supports another year of record financial performance. Our commercial KPIs were mixed throughout the year, with rates generally offsetting volume declines, which were in line with the contraction of non-residential construction starts square footage, plus the retail headwinds we've discussed in our storage sector.

Timothy D. Boswell: Nonetheless leasing revenues grew by 5% year over year in Q4 with growth, obviously being stronger in the modular segment.

Timothy D. Boswell: Margins continue to be a bright spot heading into 2024 with a record 47% adjusted EBITDA margin in the quarter.

Timothy D. Boswell: We continue to see strong operating leverage on both our leasing costs and SG&A expenses, which we expect to continue into 2024.

Timothy D. Boswell: And with the stronger margins and lower capital expenditures in 2023, the business is cash flowing nicely with a 24% free cash flow margin for the year in the middle of our target operating range.

Timothy D. Boswell: Nonetheless, leasing revenues grew by 5% year over year in Q4, with growth obviously being stronger in the modular segment. Margins continue to be a bright spot heading into 2024, with a record 47% adjusted EBITDA margin in the quarter. We continue to see strong operating leverage on both our leasing costs and SG&A expenses, which we expect to continue into 2024. And with the stronger margins and lower capital expenditures in 2023, the business is cash flowing nicely, with a 24% free cash flow margin for the year in the middle of our target operating range. Strong cash flows and returns give us confidence to deploy capital in other areas. We invested $562 million in aid acquisitions through the course of the year, including our climate-controlled storage and ClearSpan Structures platforms, which you can see pictured throughout the deck. And we repurchased 18.5 million shares for $811 million during 2023, reducing our share count by 8.6% over the last 12 months.

Timothy D. Boswell: Strong cash flows and returns give us confidence to deploy capital in other areas, we invested $562 million in eight acquisitions through the course of the year, including our climate controlled storage and clear spanned structures platforms, which you can see pictured throughout the deck.

Timothy D. Boswell: And we repurchased $18 5 million shares for $811 million during 2023.

Timothy D. Boswell: Reducing our share count by eight 6% over the last 12 months.

Timothy D. Boswell: Return on invested capital of 18% continuous decline within our near term operating range of 15% to 20%.

Timothy D. Boswell: And our leverage of three three times net debt to adjusted EBITDA is comfortably inside our target range of 3.0 to three five times.

So overall it was an excellent year financially and the business has never been stronger from a profitability and capital efficiency standpoint.

Timothy D. Boswell: Volumes underperformed our plans consistently during the year. So those are a headwind in our run rate and an area of focus for the team.

Timothy D. Boswell: But regardless our trajectory supports another year of strong EBITDA free cash flow and margin growth, which you see in our guidance and which reflects the extraordinary resilience of our business model.

Timothy D. Boswell: Page 24 lays out revenue and adjusted EBITDA for the quarter, let's start with total revenues, which were up 4% in Q4 with some nuances between segments and revenue streams, which are worth noting.

Timothy D. Boswell: Return on invested capital of 18% continues to climb within our near-term operating range of 15 to 20%, and our leverage of 3.3 times net debt to adjusted EBITDA is comfortably inside our target range of 3.0 to 3.5 times. So overall, it was an excellent year financially, and the business has never been stronger from a profitability and capital efficiency standpoint. However, volumes underperformed our plans consistently during the year, so that is a headwind in our run rate and an area of focus for the team. But regardless, our trajectory supports another year of strong EBITDA, free cash flow, and margin growth, which you see in our guidance and which reflects the extraordinary resilience of our business model. Page 24 lays out revenue and adjusted EBITDA for the quarter.

Timothy D. Boswell: I mentioned, the leasing revenues were up 5% on a consolidated basis.

Timothy D. Boswell: Leasing revenues were up 10% in the modular segment and down 2% in the storage due to the much stronger retail contribution in storage in 2022.

Timothy D. Boswell: The slower retail season also drove a 3% year over year decline in our consolidated transportation revenues in Q4 again, all confined to the storage segment.

Timothy D. Boswell: 15% growth in our sales contribution helped to offset some of those headwinds and I expect that new and used sales are an area, where we have some additional opportunity in 2024.

Timothy D. Boswell: Margins continue to be a long term tailwind driven by increased pricing and value added products penetration as well as operating and scale efficiencies that we've discussed previously.

Timothy D. Boswell: Q4 margins expanded across all revenue line items with the exception of delivery and installation and overall EBITDA margins increased by 160 basis points to 47%, which was an all time high.

Timothy D. Boswell: Let's start with total revenues, which were up 4% in Q4, with some nuances between segments and revenue streams which are worth noting. As a reminder, I mentioned the leasing revenues were up 5% on a consolidated basis. Leasing revenues were up 10% in the modular segment and down 2% in storage due to the much stronger retail contribution in storage in 2022. The lower retail season also drove a 3% year-over-year decline in our consolidated transportation revenues in Q4, again, all confined to the storage segment.

Timothy D. Boswell: Margins will compress sequentially from Q4 into Q1 and likely compressed year over year in Q1, as maintenance and delivery volumes pick up based on the modular activity that we're seeing in Brad referenced.

Timothy D. Boswell: Our longer term trajectory is however.

Timothy D. Boswell: Get attractive and we're expecting another year of margin expansion overall for 2024, and we increased our near term annual operating range to 45% to 50% to reflect that.

Timothy D. Boswell: Overall, the growth and margin expansion in Q4 drove EBITDA up by 7% to $288 million in the quarter with growth being consistent across both segments.

Timothy D. Boswell: And it was an exceptional year for earnings growth with earnings per share from continuing operations up 35% and free cash flow per share of $3 four up 104% versus 2022.

Timothy D. Boswell: Fifteen percent growth in our sales contribution helped to offset some of those headwinds, and I expect that new and used sales will be an area where we have some additional opportunity in 2024. Margins continue to be a long-term tailwind, driven by increased pricing and value-added product penetration, as well as operating and scale efficiencies that we've discussed previously. Q4 margins expanded across all revenue light items, with the exception of delivery and installation. And overall EBITDA margins increased by 160 basis points to 47%, which was an all-time high.

Timothy D. Boswell: And we see this compounding continuing into 2024 and beyond.

Timothy D. Boswell: Moving to page 25.

Timothy D. Boswell: We continue to see very healthy net cash flows from operating activities and expect the cash flow will continue to compound predictably into 2024 based on our outlook.

Timothy D. Boswell: Net net capex was at maintenance levels in 2023 down approximately 50% year over year.

Timothy D. Boswell: Obviously volumes were the biggest driver of the capital expenditure reduction. Although we also continue to benefit from more efficient work order spending and moderating inflation, both of which I expect we will sustain as volumes return.

Timothy D. Boswell: Margins will compress sequentially from Q4 into Q1 and likely compress year-over-year in Q1 as maintenance and delivery volumes pick up based on the modular activity that we're seeing in Brad. Our longer-term trajectory is, however, quite attractive, and we're expecting another year of margin expansion overall for 2024, and we increased our near-term annual operating range to 45 to 50 percent to reflect that. Overall, growth and margin expansion in Q4 drove EBITDA up by 7% to $288 million in the quarter, with growth being consistent across both segments.

Timothy D. Boswell: As I noted on the Q3 call net Capex did increase sequentially from Q3 into Q4 due to growth investments primarily in our climate controlled storage platform.

Timothy D. Boswell: Overall free cash flow increased approximately 35% year over year to $166 million in the quarter and free cash flow margin increased to 27% in Q4.

Timothy D. Boswell: Over the last 12 months, we generated $577 million of free cash flow and a $3 four of free cash flow per share both company records.

Timothy D. Boswell: And free cash flow margin increased to 24% in the middle of our target operating range.

Timothy D. Boswell: Based on our outlook for 2024, we're set up for another year of strong free cash flow per share growth with a best in class margin profile. So this continues to be a differentiating feature of our business model, particularly as we scale.

Timothy D. Boswell: And it was an exceptional year for earnings growth, with earnings per share from continuing operations up 35 percent and free cash flow per share of $3.04, up 104 percent versus 2022. And we see this compounding continuing into 2024 and beyond. Moving to page 25.

Timothy D. Boswell: We see multiple pathways to $700 million of free cash flow as we roll forward our model into 2025 and 2026. So we're quite comfortable eclipsing the $4 of free cash flow per share milestone over that horizon and before incorporating mcgrath.

Timothy D. Boswell: Turning to page 26.

Timothy D. Boswell: We maintained leverage sequentially from Q3 to Q4 at three three times net debt to last 12 months' adjusted EBITDA, which is comfortably inside our target range as.

Timothy D. Boswell: We continue to see very healthy net cash flows from operating activities and expect that cash flow will continue to compound predictably into 2024 based on our outlook. However, net capex was at maintenance levels in 2023, down approximately 50% year-over-year. Obviously, volumes were the biggest driver of the capital expenditure reduction, although we also continue to benefit from more efficient work order spending and moderating inflation, both of which I expect we will sustain as volumes return. As I noted on the Q3 call... Net capex did increase sequentially from Q3 into Q4 due to growth investments primarily in our climate-controlled storage platform. Overall, free cash flow increased approximately 35% year-over-year to $166 million in the quarter, and free cash flow margin increased to 27% in Q4. In the last 12 months, we generated $577 million of free cash flow, which translates into $3.04 of free cash flow per share, both company records.

Timothy D. Boswell: As I've said previously we can easily deleverage by approximately one turn per year. When we so choose so we're comfortable at this level and intend to flex leverage upwards opportunistically for the Mcgrath acquisition, and then deleverage again back into our target range.

Timothy D. Boswell: In January 2024, we executed another floating to fixed so first swap for a $500 million of notional value at a fixed rate of three 7% for one month term sofer we.

Timothy D. Boswell: We incorporated this transaction here to present, the most current view of our cash interest costs and weighted average pretax cost of debt.

Timothy D. Boswell: As of December 31, inclusive of all swaps are pretax weighted average interest rate was approximately five 9%.

Timothy D. Boswell: Our annualized cash interest was approximately $212 million and our debt structure was approximately 77% fixed and 23% floating rate.

Timothy D. Boswell: We have approximately $1 $2 billion of liquidity and our ABL revolver, which gives us ample flexibility to fund our capital allocation priorities and as a reminder, as part of the Mcgrath acquisition, we have commitments from our bank group to upsize, our ABL revolver to a $445 billion facility size and <unk>.

Timothy D. Boswell: And pre-cash flow margin increased to 24% in the middle of our target operating range. Based on our outlook for 2024, we're set up for another year of strong free cash flow per share growth with a best in class margin profile. So this continues to be a differentiating feature of our business model, particularly as we scale. We see multiple pathways to $700 million of free cash flow as we roll forward our model into 2025 and 2026. So we're quite comfortable eclipsing the $4 of free cash flow per share milestone over that horizon and before incorporating McGrath. Turning to page 26.

Timothy D. Boswell: <unk> Mcgrath assets in our borrowing base at closing, which will continue to give us excess availability in that facility.

Timothy D. Boswell: Overall, we have abundant liquidity and a flexible capital structure and we're obviously taking advantage of that strength to undertake the highly synergistic combination with Mcgrath.

Timothy D. Boswell: Page 27 shows our capital allocation framework and our performance over the last 12 months.

We generated $1 7 billion of capital on a leverage neutral basis in the year inclusive of the UK divestiture.

Timothy D. Boswell: Our capital allocation in Q4 and for 2023 was consistent with our framework.

Timothy D. Boswell: We invested $185 million of net Capex in 2023, which approximates maintenance levels we.

Timothy D. Boswell: We maintained leverage sequentially from Q3 to Q4 at 3.3 times net debt to last 12 months' adjusted EBITDA, which is comfortably inside our target range. As I've said previously, we can easily deleverage by approximately one turn per year when we so choose. So we're comfortable at this level and intend to flex the leverage upwards opportunistically for the McGrath acquisition and then deleverage again back into our target range. In January 2024, we executed another floating-to-fixed SOFR swap for $500 million of notional value at a fixed rate of 3.7% for one-month term SOFR. We have incorporated this transaction here to present the most current view of our cash interest costs and weighted average pre-tax cost of debt. As of December 31st, and inclusive of all swaps, our pre-tax weighted average interest rate was approximately 5.9%.

Timothy D. Boswell: We invested $562 million in M&A, while expanding our solutions and total addressable market.

Timothy D. Boswell: And we invested $811 million in share repurchases, resulting in an eight 6% reduction in economic shares outstanding over the last 12 months.

Timothy D. Boswell: Again, we create shareholder value by generating sustainable growth and returns over time.

Timothy D. Boswell: And you can see this in our annual free cash flow of 75% year over year free cash flow per share and earnings per share from continuing operations up 104% and 35% respectively.

Timothy D. Boswell: And our return on invested capital up 230 basis points for the year to 18%.

Timothy D. Boswell: Lastly, before turning it back to Brad.

Page 28 shows our outlook for 2020 for.

Timothy D. Boswell: While we are navigating some headwinds we fully intend to build upon all of the record financial metrics that we achieved in 2023 and deliver a compelling run rate heading into 2025.

Our view of the macro environment for 2024 has become more cautious since the last quarter given the contraction in Q4 nonresidential construction square footage starts.

Timothy D. Boswell: Our annualized cash interest was approximately $212 million, and our debt structure was approximately 77% fixed and 23% floating rate. We have approximately $1.2 billion of liquidity in our ABL revolver, which gives us ample flexibility to fund our capital allocation priorities. And as a reminder, as part of the McGrath acquisition, we have commitments from our bank group to upsize our ABL revolver to a $4.45 billion facility size and include McGrath's assets in our borrowing base at closing, which will continue to give us excess availability in that facility. Overall, we have abundant liquidity and a flexible capital structure, and we're obviously taking advantage of that strength to undertake the highly synergistic combination with Page 27 shows our capital allocation framework and our performance over the last 12 months. We generated $1.7 billion of capital on a leverage-neutral basis during the year, inclusive of the UK divestiture.

Timothy D. Boswell: We are seeing continued tailwind from larger scale projects within our industrial and manufacturing end markets for which we are uniquely well positioned to compete.

Timothy D. Boswell: We also expect continued headwinds related to smaller projects in end markets, such as commercial office and warehousing.

Timothy D. Boswell: However, we do see a scenario where those segment stabilize if the interest rate cycle turns through the course of 2024.

Timothy D. Boswell: With this backdrop, our base cases for mid single digit delivery volume growth year over year, which would cause the average units on rent to inflect positively in the second half of the year.

Timothy D. Boswell: Delivery activity across our modular fleet through February is encouraging and exceeding this growth expectation.

Timothy D. Boswell: As the year over year retail headwind in storage is still rolling off through Q1, so storage delivery volumes have not yet turned the corner.

Speaker Change: So we're taking a cautious approach with respect to volumes at this point in the year and I think the risks and opportunities are balanced across those solutions.

Speaker Change: Pricing remains strong across all product lines. So we're continuing to benefit from that $200 million tailwind in our guidance.

Speaker Change: And similarly value added products are continuing to grow both on an absolute and a delivered basis.

Speaker Change: Year to date, our delivered rates on value added products are up year over year across all product lines.

Timothy D. Boswell: Our capital allocation in Q4 and for 2023 was consistent with our framework. We invested $185 million in net CapEx in 2023, which approximates maintenance levels. We invested $562 million in M&A while expanding our solutions and total addressable market. And we invested $811 million in share repurchases, resulting in an 8.6% reduction in economic shares outstanding over the last 12 months.

Speaker Change: Value added products into storage segment continued to continue to build consistently as penetration levels increase and.

Speaker Change: And delivered value added products rates in the modular segment year to date are in line with historical highs so an encouraging start to the year.

Speaker Change: These base case assumptions for our leasing Kpis combined combined with approximately a $75 million incremental benefit from acquisitions that were completed in 2023 support the midpoint of our revenue range and roughly 8% total revenue growth for the year.

Speaker Change: From a timing standpoint, we expect to see a normal seasonal revenue contraction from Q4 into Q1.

Speaker Change: And then a steady sequential revenue build as we progress through the year.

Timothy D. Boswell: Again, we create shareholder value by generating sustainable growth and returns over time. And you can see this in our annual free cash flow, up 75% year-over-year. Free cash flow per share and earnings per share from continuing operations are up 104% and 35%, respectively, and our return on invested capital is up 230 basis points for the year to 18%. Lastly, before turning it back to Brad...

Speaker Change: So I would expect total revenue growth to be a bit lower in the first half of the year and higher in the second half with 8% overall revenue growth for the year at the midpoint.

Speaker Change: In terms of margins, we're expecting another strong year of margin expansion with approximately a 50 basis point increase in EBITDA margins for the year at the midpoint of our guidance ranges.

Speaker Change: I would expect margins to contract both sequentially and year over year in the first quarter and then expand as we progress through the year, assuming we have a stronger ramp and delivery volumes than we saw in 2023.

Timothy D. Boswell: Page 28 shows our outlook for 2024. While we are navigating some headwinds, we fully intend to build upon all of the record financial metrics that we achieved in 2023 and deliver a compelling run rate heading into 2025. Our view of the macro environment for 2024 has become more cautious since the last quarter, given the contraction in Q4 non-residential construction square footage starts.

Speaker Change: The net results should be a normal seasonal contraction of EBITDA from Q4 into Q1 sequentially.

Speaker Change: Followed by consistent sequential EBITDA growth through the course of the year.

Speaker Change: EBITDA would be up approximately 10% year over year at the midpoint of the guidance for the full year and.

Speaker Change: And similar to revenues I would expect that growth to be stronger in the second half of the year relative to the FERC.

Speaker Change: Capital expenditures should normalize relative to the extremes of the past two years based on our demand assumptions with increases in fleet purchases for newer product categories increases in modular Refurbishments and limited fleet investment in the storage category.

Timothy D. Boswell: We are seeing continued tailwinds from larger-scale projects within our industrial and manufacturing end markets, for which we are uniquely well positioned to compete. We also expect continued headwinds related to smaller projects and end markets such as commercial office and warehousing. However, we do see a scenario where those segments stabilize if the interest rate cycle turns through the course of 2024.

Speaker Change: Elting and approximately $275 million of net capex at the midpoint.

Speaker Change: Which would be up approximately $90 million or nearly 50% year over year.

Speaker Change: And with approximately $212 million of run rate cash interest costs. The guidance implies another year of solid free cash flow growth, which will compound meaningfully on a per share basis.

Timothy D. Boswell: With this backdrop, our base case is for mid-single-digit delivery volume growth year-over-year, which would cause average units on rent to inflect positively in the second half of the year. However, delivery activity across our modular fleet through February is encouraging and exceeding this growth expectation. Whereas the year-over-year retail head in storage is still rolling off through Q1, so storage delivery volumes have not yet turned the corner. So we're taking a cautious approach with respect to volumes at this point in the year, and I think the risks and opportunities are balanced across those solutions. Pricing remains strong across all product lines, so we're continuing to benefit from that $200 million tailwind in our guidance. And similarly, value-added products are continuing to grow both on an absolute and a delivered basis.

Speaker Change: As is our practice the guidance does not assume any contribution from new acquisitions, such as Mcgrath and we will update the guidance quarterly to incorporate transactions that have closed.

Speaker Change: As another housekeeping matter given our field realignment in January we expect to transition to a single reportable segment, beginning with Q1, 2024 reporting which is a better reflection of how we operate the business.

Speaker Change: Assuming we make this change we will continue to disclose all of our operating kpis with the same level of detail and we will provide historical data for comparability on our website.

Speaker Change: We are continuing to finalize this approach with our auditors.

Over the past six years since going public our company has transformed in a pace that is unprecedented in our peer group and we expect this transformation to continue as we execute our plans for 2024, while introducing the compounding benefits of Mcgrath.

Timothy D. Boswell: Year to date, our delivered rates on value-added products are up year over year across all product lines. Value-added products in the storage segment continue to build consistently as penetration levels increase, and Delivered Value-Added Products Rates in the Modular Segment year-to-date are in line with historical highs, so an encouraging start to the year. These base case assumptions for our leasing KPIs, combined with approximately a $75 million incremental benefit from acquisitions that were completed in 2023, support the midpoint of our revenue range and roughly 8% total revenue growth for the year. From a timing standpoint, we expect to see a normal seasonal revenue contraction from Q4 into Q1, and then a steady sequential revenue build as we progress through the year.

Speaker Change: I am extremely proud of the results delivered by our team in 2023 and have confidence that recent investments in our organization structure, our technology and our product offering will allow us to deliver another record year in 2024, while accelerating our run rate into 2025 with that Brad I'll hand, it back to you.

Brad: Thanks, Tim Thank you to our customers for their continued business. Thank you to our team for delivering the best financial year in company history, and our safest ever and thank you to our shareholders for their trust with their capital.

Speaker Change: We look forward to another strong performance in 2024 I wish all of you listening today continued safety and good health. This concludes our prepared remarks, operator would you. Please open the line for questions.

Timothy D. Boswell: So I'd expect total revenue growth to be a bit lower in the first half of the year and higher in the second half, with 8% overall revenue growth for the year at the midpoint. In terms of margins, we're expecting another strong year of margin expansion with approximately a 50 basis point increase in EBITDA margins for the year at the midpoint of our guidance ranges. I'd expect margins to contract both sequentially and year-over-year in the first quarter and then expand as we progress through the year, assuming we have a stronger ramp in delivery volumes than we saw in 2023. The net result should be a normal seasonal contraction of EBITDA from Q4 into Q1, sequentially, followed by consistent sequential EBITDA growth through the course of the year. EBITDA would be up approximately 10% year over year at the midpoint of the guidance for the full year.

Speaker Change: As a reminder to ask a question. Please press star one one on your telephone.

Speaker Change: For your name to be announced to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Speaker Change: And our first question comes from Tim Mulrooney with William Blair. Your line is open.

Tim Mulrooney: Brad good afternoon.

Tim Mulrooney: Good afternoon, Tim.

Tim Mulrooney: I wanted to make sure I understood the portable storage rate growth I saw on the slides that about half of the total increase was driven by your recent cold storage acquisitions, just to be clear does that mean that core organic.

Tim Mulrooney: Average storage rates were up about <unk>.

Tim Mulrooney: 100% year over year, excluding acquisitions.

Tim Mulrooney: Tim for purposes of Q4 that is.

Tim: That is correct. It does conceal the fact that the seasonal storage business, which is at a significantly higher average rental rate typically made up a lower mix of Q4.

Timothy D. Boswell: And, similar to revenues, I'd expect that growth to be stronger in the second half of the year relative to the first. Capital expenditure should normalize relative to the extremes of the past two years based on our demand assumptions, with increases in fleet purchases for newer product categories, increases in modular refurbishments, and limited fleet investment in the storage category, resulting in approximately $275 million of net capex at the midpoint, which would be up approximately $90 million, or nearly 50% year over year. And with approximately $212 million of run-rate cash interest costs, the guidance implies another year of solid free cash flow growth, which will compound meaningfully on a per share basis. As is our practice, the guidance does not assume any contribution from new acquisitions, such as McGrath, and we will update the guidance quarterly to incorporate transactions that have closed.

Tim: Storage pricing, so if we kind of strip out the mix effect of.

Tim: Seasonal retail storage pricing and that seasonal retail pricing was roughly flat year over year in Q4, and just comprised a lower mix of our total.

Tim: The core storage average rental rate would have been up about 20% year over year.

Tim: So still very strong average rental rate performance in the core storage.

Tim: Business.

Tim: Diluted a bit by a lower mix of seasonal retail volume in Q4, and then inflated a bit by the addition of the cold storage platform for a full quarter in Q4.

Speaker Change: Got it thank you for that clarification that's helpful.

Timothy D. Boswell: As another housekeeping matter, given our field realignment in January, we expect to transition to a single reportable segment beginning with Q1 2024 reporting, which is a better reflection of how we operate the business. Assuming we make this change, we will continue to disclose all of our operating KPIs with the same level of detail and will provide historical data for comparability on our website. We are continuing to finalize this approach with our auditors.

Taking all of that into account can you talk a little bit about what your expectation is for rate growth in portable storage this year.

Speaker Change: Yes, I think we're going to roll into Q1.

Speaker Change: Just stripping out cold storage with core.

Speaker Change: Storage rental rates that are continue to be up high double digits maybe.

Speaker Change: Maybe not the full 20% that we saw in Q4 that probably.

Timothy D. Boswell: Over the past six years since going public, our company has transformed at a pace that is unprecedented in our peer group, and we expect this transformation to continue as we execute our plans for 2024 while introducing the compounding benefits of McGrath. I'm extremely proud of the results delivered by our team in 2023 and have confidence that recent investments in our organization structure, our technology, and our product offering will allow us to deliver another record year in 2024 while accelerating our run rate into 2025. With that, Brad, I'll hand it back.

Speaker Change: It starts to taper down a bit as we go through the year, but high teens as my expectation as we enter 2024 for <unk>.

<unk>, excluding the cold storage business.

Speaker Change: Got it thank you.

Speaker Change: Our next question comes from the line of Manav Patnaik with Barclays. Your line is open.

roni Kennedy: Hi, Good evening. This is roni Kennedy on for Manav. Thank you for taking my question as a follow up to Tim's question, which covered off on the pricing aspect of storage can you just recap for store units ex the acquisitions that were announced.

roni Kennedy: Our recapture unit decline and what the drivers of those were for both <unk> and for full year.

Bradley L. Soultz: Thanks, Tim. Thank you to our customers for their continued business. Thank you to our team for delivering the best financial year in company history and the safest ever. And thank you to our shareholders for their trust in our capital. I look forward to another strong performance in 2024. I wish all of you listening today continued safety and good health.

roni Kennedy: Yes, Ron this is Tim I'll, just focus on the <unk> components and average units on rent were down about 35000 units versus prior year and you can think of that as roughly half attributable to our retail clientele.

roni Kennedy: Of that seasonal some of that.

roni Kennedy: Related to Remodels or other other use cases within the retail segment.

Operator: This concludes our prepared remarks. Operator, would you please open the line for questions? As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. And our first question comes from Tim Mulrooney with William Blair. Your line is open. Brad, Tim, good afternoon. Good afternoon to everyone.

roni Kennedy: And the other unit on rent component is attributable to kind of core construction commercial and industrial clientele and has through the course of the year is tracked with.

roni Kennedy: The overall market declines in nonresidential square footage, which were down about 18% overall for the year. So overall those are the two primary.

roni Kennedy: Drivers of the storage volumes.

Speaker Change: Got it. Thank you and then just on the overall demand I guess.

Speaker Change: <unk> overall and more specifically by kind of your end markets. I know you had said you'd seen gotten more cautious from a macro standpoint, given what happened in non as he starts and continued headwinds.

Tim Mulrooney: I wanted to make sure I understood the portable storage growth. I saw on the slides that about half of the total increase was driven by your research and cold storage acquisition. Just to be clear, does that mean that core organic?

Speaker Change: Our tailwind in industrial manufacturing headwinds in commercial office and warehousing any other any other.

Timothy D. Boswell: Average storage rates were up about 10% year-over-year, excluding acquisitions. Tim, for purposes of Q4, that is correct. It does conceal the fact that the seasonal storage business, which is at a significantly higher average rental rate typically, made up a lower mix of Q4 storage price types. So if we kind of stripped out the mix effect of seasonal retail storage pricing and that seasonal retail pricing was roughly flat year-over-year in Q4 and just comprised our mix of our total, the core storage average rental rate would have been up about 20%. So, still very strong average rental rate performance in the core storage business, although it was diluted a bit by a lower mix of seasonal retail volume in Q4, and then inflated a bit by the addition of the cold storage platform for a full quarter in Q4. I got it.

Speaker Change: Segments to call out and then if you can give us some insight into kind of your leading indicators that you typically touch on such as the quoting volumes and what you're seeing broadly from say quote closed lead time project elongation or delays that type of thing for some insights on the demand picture.

Speaker Change: Yes. This is an interesting one and as Brad mentioned in his prepared remarks, we started to see year over year quoting growth in the modular business in the mid to high single digits.

Speaker Change: As far back as our Q3 call and what we're starting to see now year to date to start the year.

Speaker Change: Is net order year over year net order growth that actually exceeds that exceeds that level approaching double digits and our modular business. Excluding the ground level offices. So we are seeing that quote growth.

Speaker Change: That we saw in Q4 converting into Activations in our modular business to start the year.

Timothy D. Boswell: Thank you for that clarification. That's helpful. Taking all of that into account, can you talk a little bit about what your expectation is for rate growth in portable storage this year? Yeah, I think we're going to roll into Q1 with just stripping out cold storage with core storage rental rates that continue to be up high double digits, maybe not the full 20% that we saw in Q4 that probably starts to taper down a bit as we go through the year. But high teens is my expectation as we enter 2024 for storage, excluding cold storage. Got it.

Speaker Change: Year to date through February and Thats, giving us some reason for optimism as it relates to the demand environment that we are heading into given that we usually see a seasonal build in activations as we go from January into February into March and April.

Speaker Change: So the signs are there in the modular business are are pretty encouraging and frankly exceed our base case assumptions, so far which are centered around mid single digit delivery volume growth for the year as I said in my remarks, the storage business isn't quite there yet we are still experiencing runoff from the seasonal retail demand.

Q4, and on a year over year basis.

Timothy D. Boswell: Thank you. Our next question comes from the line of Manav Patnaik with Barclays. Your line is open. Hi, good evening. This is Ronan Kennedy on from the knob.

Speaker Change: That seasonal contribution was still fairly pronounced if we look at Q1 2023. So I think we still have a headwind there in the storage volumes for purposes of Q1.

Ronan Kennedy: Thank you for taking my question as a follow-up to Tim's question, which covered the pricing aspect of storage. Can you just recap for store units X, the acquisitions that were announced? recap the unit decline and what the drivers of those were for both 4Q and for full year? Hey, Ronan, this is Tim.

But I think we're running a bit ahead.

Speaker Change: Of that in terms of our modular volumes, which again I think we've got a balanced outlook.

Speaker Change: When we take both segments into account heading into 2024.

Speaker Change: Okay.

Speaker Change: Thank you I appreciate it.

Speaker Change: Our next question comes from the line of Seth Weber with Wells Fargo. Your line is open.

Seth Weber: Hey, guys good afternoon.

Timothy D. Boswell: I'll just focus on the 4Q components. In average units on rent, we're down about 35,000 units versus the prior year. And you can think of that as roughly half attributable to our retail clientele, some of that seasonal, some of that related to remodels or other use cases within the retail segment. And the other unit on rent component is attributable to a kind of core construction, commercial, and industrial clientele and is, through the course of the years, tracked with the overall market declines in non-residential square footage, which we're down about 18% overall for So, overall, those are the two primary drivers of storage volume. Got it, thank you.

Seth Weber: I guess, Tim I heard I heard your comments about first quarter margin being down year to year.

Seth Weber: I guess my question is do you need volumes to flip positive to inflect positively for margin comps to be up year over year for the rest of the year or.

Seth Weber: Do you think margin comps could turn positive in the second quarter, even without volumes turning positive.

Tim: Very much the latter SaaS absolutely margins can inflect.

Tim: Thankfully even quicker.

Tim: Without the activation growth and it is the activation growth in our business when we incur maintenance expenses as we're performing maintenance activities. Those units then go on rent and build our lease revenue run rate.

Timothy D. Boswell: And then just on overall demand, or I guess demand overall and more specifically by kind of your end markets, I know you've seen, you know, gotten more cautious from a macro standpoint, given what happened to non-resi starts, some continued headwinds, or Tailwinds and Industrial Manufacturing, Headwinds and Commercial Office, and Warehousing. Any other, any other, segments to call out? And then if you can give us some insight into kind of your leading indicators that we typically touch on, such as the quoting volumes and what you're seeing broadly from, say, quote to close lead time, project elongation, or delays, for some insights on demand. Yeah, this is an interesting one.

Tim: So we are actually incurring more of those upfront maintenance expenses in the business right now in Q1 to support the.

Tim: Activations in the modular business that Brad was talking about that creates a short term pressure, especially when you look at it on a year over year basis.

Tim: And your comparison last year was pretty light in terms of the activation and the maintenance volumes.

Tim: So this is actually is a good thing.

Tim: Positive indicator, because youre getting stronger activation activity youre supporting that activity with more maintenance investment. The short term implication is that youll get a quarter or so of margin compression.

Tim: But then that compression kind of reverses itself as you progress through the year if for whatever reason activation volumes were to slow.

Timothy D. Boswell: And as Brad mentioned in his prepared remarks, we started to see year-over-year quoting growth in the modular business in the mid-to-high single digits as far back as our Q3 call. And what we're starting to see now, year-to-date, to start the year, is year-over-year net order growth that actually exceeds that level, approaching double digits in our modular business, excluding the ground-level offices So we are seeing that quote growth that we saw in Q4 converting into activations in our modular business to start the year in year-to-date through February. And that's giving us some reason for optimism as it relates to the demand environment that we're heading into, given that we usually see a seasonal build in activations as we go from January into February into March and April. So the signs there in the modular business are pretty encouraging and, frankly, exceed our base case assumptions so far, which are centered around mid-single-digit delivery volume growth for the year. But, as I said in my remarks, the storage business isn't quite there yet. We're still experiencing runoff from seasonal retail demand in Q4.

Tim: Margins will bounce back even faster.

Tim: So it's a positive sign that we're seeing in the business that said its early its year to date middle of February.

Tim: And the true seasonal build in the business typically starts to take place in the second half of March going into April.

Tim: A similar phenomenon if you went back to our.

Tim: Sequential progression from Q4 2021 into Q1 of 2022, we had the same exact dynamic where the business was rebounding pretty significantly coming out of the pandemic year.

Tim: Year over year Activations in the first half of 2022 exceeded prior year levels.

Tim: And we incurred more maintenance as a result tighter margins as a result, but.

Tim: But I think at the time I described that as being kind of like a coiled spring. The margin then just pops back as lease revenues kind of stabilize through the rest of the year.

Speaker Change: Yes Super helpful. Thank you and then just I think I heard discussion around consolidating sales force and stuff like that.

Is there any are you, making any changes to comp structure or anything from an incentive perspective with respect to.

Timothy D. Boswell: And on a year-over-year basis, that seasonal contribution was still fairly pronounced if we look at Q1 2023. So I think we still have a headwind there in the storage volumes for purposes of Q1. But I think we're running a bit ahead of that in terms of our modular volumes, which, again, I think we've got a balanced outlook when we take both segments into account heading into 2024. Thank you. Our next question comes from the line of Seth Weber with Wells Fargo. Your line is open.

Speaker Change: Cross selling or selling adjacencies or.

Speaker Change: Anything that we should be aware of just how you are.

Speaker Change: Addressing this more consolidated sales sales force.

Speaker Change: Yes, Seth it's Brad is something we're really excited about.

Brad: Characterize those a little more evolutionary than revolutionary.

Brad: We effectively operated the many sales team focused on storage and ground level offices, and the wheel Scott side by side very complementary very collaborative, but if youll recall they were running two separate CRM.

Seth Weber: Hey guys, good afternoon. I guess, Tim, I heard your comments about first quarter margin being down year-over-year. I guess my question is, do you need volumes to flip positive, to inflect positively, for margin comps to be up year-over-year for the rest of the year? We think margin comms could turn positive in the second quarter even without volumes turning positive. Very much the latter, Seth.

Brad: Up until early last year, so the combination of the CRM.

Brad: Afforded us the ability to make this shift if you will so every geographical end market as one P&L covers all products, which is particularly important as we add.

Brad: Climate control clear span another products so.

Timothy D. Boswell: Absolutely, margins can inflect, frankly, even quicker without the activation growth. And it is the activation growth in our business when we incur maintenance expenses as we're performing maintenance activities. Those units then go on rent and build our lease revenue run rate. So we're actually incurring more of those upfront maintenance expenses in the business right now in Q1 to support the activations in the modular business that Brad was talking about. That creates short-term pressure, especially when you look at it on a year-over-year basis, and your comparison last year was pretty light in terms of the activation and maintenance volumes. So this actually is a good thing and a positive indicator because you're getting stronger activation activity.

Brad: We've aligned.

Brad: Similar to the past every territory. If you will think of it as a band of ZIP codes would have had two sales reps covering at one more storage focus one more modular that's now.

Brad: One person accountable for the whole territory thinks about the territory has probably got a bit smaller with a massive team behind it to support inside sales activity.

Brad: And then as I mentioned in my prepared comments, a pretty significant investment this year and demand acceleration creation tools as.

Brad: As well as the whole digital platform to further accelerate that so we're super excited.

Brad: The change went very very well in the field.

Timothy D. Boswell: You're supporting that activity with more maintenance investment. The short-term implication is that you'll get a quarter or so of margin compression, but then that compression kind of reverses itself as you progress through the year. If, for whatever reason, activation volumes were to slow, margins would bounce back even faster. So it's a positive sign that we're seeing in the business. That said, it's early.

Brad: Again think of it as more evolutionary but it does put us in a great spot to accelerate cross sell modular and storage and that all of these new great products.

Speaker Change: Got it appreciate the color guys. Thank you.

Speaker Change: Our next question comes from the line of Andy Wittmann with Baird. Your line is open.

Andrew John Wittmann: Okay, great. Thanks for taking my questions I thought it looks like.

Timothy D. Boswell: It's year-to-date, the middle of February, and the true seasonal build in the business typically starts to take place in the second half of March going into April. A similar phenomenon, if you went back to our sequential progression from Q4 2021 into Q1 of 2022, we had the same exact dynamic where the business was rebounding pretty significantly coming out of the pandemic. Year-over-year activations in the first half of 2022 exceeded prior-year levels, and we incurred more maintenance as a result, and tighter margins as a result. But I think at the time I described it as being kind of like a coiled spring.

Andrew John Wittmann: From your slides here it looks like you reclassified.

Andrew John Wittmann: Guys are talking about spot fabs.

Andrew John Wittmann: In the modular segment.

Andrew John Wittmann: <unk> was just modular and modular now, it's modular and Clos and modular.

Andrew John Wittmann: So Tim I was just hoping you could shed some light on this just for comparison purposes as to how that spot vast metric has been trending if you could kind of give us that number on the on.

Andrew John Wittmann: On the old basis, the modular modular basis, if you will see the comment here.

Andrew John Wittmann: I guess it was down 7% on the old basis, but I think thats I think thats. The total <unk> not just the spot fast so I thought I would ask for clarification on that.

Speaker Change: Yes through February do you look at the vats.

Bradley L. Soultz: The margin then just pops back as lease revenues kind of stabilize through the rest of the year. Yeah, super helpful. And then just, I think I heard a discussion around consolidating Salesforce and stuff like that. Is there any, are you making any changes to, you know, the comp structure or anything from an incentive perspective with respect to, you know, cross-selling or selling adjacencies or anything that we should be aware of just how you're, you know, addressing this more consolidated sales force? Yes, Seth, it's Brad.

Speaker Change: Delivered rate has reported as we would have historically you are north of 480 box.

Speaker Change: As I said in my prepared remarks, we're back to kind of all time high levels.

Speaker Change: You were to go back and look at that delivered metric relative to how we used to report this as I mentioned in my remarks, Andy we are very likely moving to a single segment. So this.

Speaker Change: Dynamic, where you've got modular product in the modular segment and modular product and storage kind of goes away and we will look at the modular fleet and will operate the modular fleet.

Speaker Change: Fortunately.

Speaker Change: As a as a <unk>.

Speaker Change: Single combined asset class and that's how we're going to market.

Speaker Change: When you include the ground level offices, obviously penetrates penetration has been growing very rapidly across.

Bradley L. Soultz: This is something we're really excited about, and I would characterize it as a little more evolutionary than revolutionary. We effectively operated the mini sales team focused on storage in ground-level offices and the WillScot side-by-side, very complementary, very collaborative. But if you'll recall, they were running two separate CRMs up until early last year.

Speaker Change: That asset class for some time now quite consistently and based on some of the changes we made systematically and in the quoting process through the course of the second half of last year, we're seeing very good.

Speaker Change: <unk>.

Speaker Change: <unk> rates.

Bradley L. Soultz: So the combination of the CRMs has afforded us the ability to make this shift, if you will. So every geographical wind market has one P&L, covers all products, which is particularly important as we add climate control, ClearSpan, and other products. So we've aligned, similar to the past; every territory, if you will, think of it as a band of zip codes, would have had two sales reps covering it, one more storage-focused, one more modular. That's now one person accountable for the whole territory.

Speaker Change: If you were to look at it through the lens of the prior reporting methodology.

Speaker Change: Got it Okay. That's helpful and then I.

Speaker Change: Yes, just a follow up a question that's been asked of plenty of times before but I think worth asking again, given that the demand environment is still dynamic and even changing a little bit.

Speaker Change: Per your earlier comments I thought I would ask just on on your rate sensitivity.

If you could talk about that.

Has the is the change in demand at all affected your ability for what I'd call raw price.

Speaker Change: Yes.

Speaker Change: No. It hasn't I believe one of the first questions was breaking down the price performance in our core.

Bradley L. Soultz: Think about the territories probably got a bit smaller, with a massive team behind them to support inside sales activity. And then, as I mentioned in my prior comments, a pretty significant investment this year in demand acceleration creation tools, as well as the whole digital platform, to further accelerate that. So we're super excited. The change went very, very well in the field. Again, think of it as more evolutionary, but it does put us in a great spot to accelerate cross-sell, modular, and storage and add all these new great products. Appreciate the color, guys.

Speaker Change: Container category, excluding cold storage and those rates were up approximately 20% year over year in Q4.

Speaker Change: So that's a good indication of the momentum that.

Speaker Change: That we are carrying into 2024, and then if I look at the spot rate spreads in our modular products, we still got a favorable spread of around 29%. So that hasnt contracted meaningfully in our ground level office spread is approximately 22% so that continues.

Speaker Change: Used to be quite.

Speaker Change: Sure.

Speaker Change: Indicative of a powerful tailwind across the modular product so feeling good about.

Speaker Change: The rate environment going into 2024, and we haven't changed our approach.

Speaker Change: Great. Thanks, guys.

Speaker Change: Our next question comes from the line of Scott Schneeberger with Oppenheimer. Your line is open.

Seth Weber: Thank you. Our next question comes from the line of Andy Wittmann with Baird. Your line is open.

Andrew John Wittmann: Yeah, great. Thanks for taking my questions. I thought it looks like, judging from your slides here, you reclassified the way you guys are talking about spot VAPs in the modular segment, but before it was just modular in modular, now it's modular and glow in modular. So, I was just hoping you could shed some light on this just for comparison purposes as to how that spot VAPs metric has been trending. If you could kind of give us that number on the old basis, the modular modular basis, if you will. I see the comment here that that AMR, I guess, is down 7% on the old basis, but I think that's, I think that's the total AMR, not just the spot VAPs. So, I thought I would ask for clarification.

Scott Schneeberger: Thank you very much good afternoon.

Scott Schneeberger: Could you address.

What the contribution is from from climate control unclear span in year 2020 for guidance.

Scott Schneeberger: Kind of what that contribution is and then what everything else is at the high end or the low end or midpoint or however, you want to address it.

Scott Schneeberger: A bridge of what price what volume is in the in the 2024 guidance. Thanks.

Speaker Change: Okay, I don't know that I'm going to bridge every metric here, but I will say, if we look at all of our acquisitions in two.

Speaker Change: 2023, we invested about $262 million.

Speaker Change: There is about that was for about 70 million of acquired EBITDA, which implies about an eight times blended purchase multiple.

Timothy D. Boswell: Yeah, through February, if you look at the VAPS delivered rate as reported as we would have historically, you're north of 480 bucks. So, as I said in my prepared remarks, we're back to kind of all-time high levels. If you were to go back and look at that delivered metric relative to how we used to report it, as I mentioned in my remarks, Andy, we are very likely moving to a single segment. So, this dynamic where you've got modular product in the modular segment and modular product in storage kind of goes away. And we'll look at the modular fleet, and we'll operate the modular fleet, more importantly, as a single combined asset class.

Speaker Change: And about $35 million of that acquired EBITDA has yet to flow through our numbers.

Speaker Change: So in terms of the incremental EBITDA lift that we expect to get in 2024 $35 million of that will be coming from.

Speaker Change: Just the rollover of acquisitions that we've already executed.

Speaker Change: And then the remaining call it 65 million of EBITDA growth to get to the midpoint of our guidance.

Speaker Change: Would be coming from other organic levers in the business.

Speaker Change: I mentioned 50 basis points of margin expansion at the midpoint I mentioned volumes.

Speaker Change: Likely inflect ing.

Speaker Change: Somewhere in the second half of the year, so likely flat to down on average if you look at the year as a whole and then you can infer that pricing and value added products are driving the rest of the.

Timothy D. Boswell: And that's how we're going to market. When you include ground-level offices, obviously, penetration has been growing very rapidly across that asset class for some time now quite consistently. And based on some of the changes we made systematically and in the quoting process through the course of the second half of last year, we're seeing very good VAPS attachment rates if you were to look at them through the lens of the prior reporting methodology.

The growth to get us to the EBITDA midpoint for 2024.

Speaker Change: Okay.

Speaker Change: Thanks appreciate that and then for a follow up just had.

Speaker Change: Been plenty of questions on storage in retail, but I am going to add on to that how are you thinking about.

Speaker Change: The retail and the bounce back.

Speaker Change: I heard from Walmart remodeling nearly 1000 stores globally 650 in the U S.

Timothy D. Boswell: Okay, that's helpful. And I guess just to follow up on a question that's been asked plenty of times before, but I think it's worth asking again, given that the demand environment is still dynamic and even changing a little bit, as per your earlier comments, I thought I'd ask just about your rate sensitivity, if you could talk about that. Has the change in demand at all affected your ability to get what I'd call the raw price? No, it hasn't.

Speaker Change: It seems like Theres going to be a lot of activity there theres, some very easy comps.

Speaker Change: Have your guidance, but I'm, just curious how you're how you're thinking about the retail component here.

We moved through 2024, thank you.

Speaker Change: We haven't baked in is a significant rebound from that vertical in our guidance. If we look at it kind of first half delivery expectations for storage for example.

Speaker Change: Modest.

Speaker Change: Despite the comps that we're we're looking back to in 2023.

Speaker Change: We have assumed.

Timothy D. Boswell: I believe one of the first questions was breaking down the price performance in our core container category, excluding cold storage. And those rates were up approximately 20% year-over-year in Q4. So that's a good indication of the momentum that we are carrying into 2024. And then if I look at the spot rate spreads in our modular products, we've still got a favorable spread of around 29%. So that hasn't contracted meaningfully.

Speaker Change: That delivery volumes.

Speaker Change: Then begin to grow a bit more in the second half of the year.

Speaker Change: But it would not assume.

Speaker Change: A dramatic increase in remodels or seasonal activity. So we've taken a cautious view as it relates to those volumes were aware of.

Speaker Change: The one data point that you referenced we're also aware of some others that may not begin that store remodel activity until 2025. So we're trying to be balanced about that outlook and the outlook isn't predicated on a strong recovery there.

Speaker Change: Great. Thanks.

Speaker Change: Our next question comes from the line of Faiza <unk> with Deutsche Bank. Your line is open.

Timothy D. Boswell: And our ground-level office spread is approximately 22%. So that continues to be quite indicative of a powerful tailwind across the modular products. So I'm feeling good about the rate environment going into 2024, and we haven't changed our approach. Great, thanks guys. Our next question comes from the line of Scott Schneeberger with Oppenheimer. Your line is open. Thank you very much, good afternoon.

Faiza: Yes, hi, Thank you good evening, Dan I wanted to follow up on your macro comments around.

Being incrementally cautious.

Faiza: On the one hand Im hearing you talk about some optimism on the modular side.

Faiza: And then we were just talking about retail and how.

Faiza: It doesn't seem like things got incrementally worse because we.

Faiza: We knew that the issue is around remodeling getting pushed out so I'm just curious like where.

Scott Schneeberger: Can you address what the contribution is from from climate control and ClearSpan in your 2024 guidance, kind of what that contribution is and then what everything else is at the high end or the low end or midpoint or however you want to address it of a kind of a bridge of what price and volume is in in the 2024 guidance? Thanks. Okay, I don't know that I'm gonna bridge every metric here, but I will say, if we look at all of our acquisitions in 2023, we invested about $262 million. There's about, that was for about 70 million of acquired EBITDA, which implies about an eight times blended purchase multiple, and about 35 million of that acquired EBITDA has yet to flow through our numbers.

Faiza: What's changed from a macro perspective in the last few months, that's leading you to be incrementally cautious.

Speaker Change: Youre right there.

Speaker Change: There are mixed indicators out there right.

Speaker Change: New data point that we have is the fourth quarter nonresidential construction construction square footage.

Speaker Change: Which was down 29% year over year. So that's a big that's a big drop right. It was down 18% for the year with Q4 being the softest quarter.

Speaker Change: Now those overall square footage levels are still kind of in line or above 2018 in 2019 levels. So there is still a healthy healthy operating environment. It's just we're coming off of.

Speaker Change: A 2022.

Speaker Change: That was pretty extraordinary and set some all time highs right and we saw that impact.

Scott Schneeberger: So in terms of the incremental EBITDA lift that we expect to get in 2024, 35 million of that will be coming from just the rollover of acquisitions that we've already executed. And then the remaining, call it 65 million of EBITDA growth to get to the midpoint of our guidance would be coming from other organic levers in the business. I mentioned 50 basis points of margin expansion at the midpoint.

Speaker Change: In our Q4 storage volumes, excluding retail I agree with your point that the retail assumptions are not materially worse than we would have talked about.

Speaker Change: In Q3, they are just rolling over a bit later.

Speaker Change: Just because there was some contribution from that demand in Q1 2023, so from a year over year perspective that headwind will.

Kind of ease as we get into Q2.

Speaker Change: Specific to the storage segment, and then contrast that with what we're seeing with modular demand to start the year again, we're seeing good conversion of the quoting activity that we were seeing in Q4, and we're seeing strong year over year growth in net orders and Activations now if we sustain that.

Timothy D. Boswell: I mentioned volumes likely inflecting somewhere in the second half of the year, so likely flat to down on average if you look at the year as a whole. And then you can infer that pricing and value-added products are driving the rest of the growth to get us to the EBITDA midpoint for 2025. We appreciate that.

Speaker Change: Mid single digit growth levels through the course of this year, we're going to inflect units on rent and we're going to have a pretty pretty compelling trajectory going into 2025.

Scott Schneeberger: And then for a follow-up, just, there have been plenty of questions on storage and retail, but I'm going to add on to this. How are you thinking about retail and the bounce back? We've heard from Walmart about remodeling nearly 1,000 stores globally, 650 in the U.S. It seems like there's going to be a lot of activity there. There are some very easy comps.

But it's just the end of February and that normal seasonal build in our business.

Starts to become a law.

Not clear as we get into the second half of March and April and April.

Speaker Change: Okay understood. Thanks for that and then I don't think the question around sort of modular pricing.

Speaker Change: <unk> has been asked yet and just curious it feels like the rental rate.

Scott Schneeberger: We have your guidance, but I'm just curious how you're really thinking about the retail component here as we move through. We haven't baked in a significant rebound from that vertical in our guidance. If we look at kind of first half delivery expectations for storage, for example, very modest despite the comps that we're looking back on in 2023, we have assumed that delivery volumes then begin to grow a bit more in the second half of the year, but this would not assume a dramatic increase in remodels or seasonal activity. So we've taken a cautious view as it relates to those volumes. We are aware of the one data point that you referenced.

Speaker Change: Just the growth in pricing.

Speaker Change: Decelerating through the course of the year right in the first half we were up 17, so a little bit less than.

Speaker Change: For Q.

Speaker Change: I'm curious if there was a mix impact there.

Speaker Change: And what that might be and then how we should think about.

Speaker Change: Modular pricing in 'twenty four.

Speaker Change: Yes, as I mentioned a minute ago, one place I typically look at is just the spread that we're seeing between our delivered spot rates and the average rental rates right and right now if we exclude ground level offices that spread is about 29% and if we isolate ground level offices that <unk>.

Faiza Alwy: We're also aware of some others that may not begin that store remodel activity until 2025. So we're trying to be balanced about that outlook, and the outlook isn't predicated on a strong recovery there. Great, thanks. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is open. Yes, hi, thank you. Good evening.

Speaker Change: <unk> is about 22% right. So those are very healthy.

Speaker Change: Spreads going into 2024.

Speaker Change: And a simple way to think about that is if you've got three year average lease duration divide that spread by three so you can get roughly 10%.

Speaker Change: Annual growth.

Timothy D. Boswell: So, Tim, I wanted to follow up on your macro comments around, you know, being incrementally cautious, because on the one hand, I'm hearing you talk about some optimism on the modular side, and then we were just talking about retail and how it doesn't seem like things got incrementally worse because we, you know, we knew sort of the issues around remodeling getting pushed out. So I'm just curious, like, where, like, what's changed from a macro perspective in the last few months that's leading you to be incrementally cautious? You're right, Faiza.

Speaker Change: Just by holding the current spot rates that we're seeing in the business. So that remains a very powerful tailwind.

Speaker Change: As we enter 2024 and that is our <unk>.

Speaker Change: Base case.

Speaker Change: Assumption across the modular products inclusive of close.

Speaker Change: Great. Thank you so much.

Speaker Change: Yeah.

Our next question comes from the line of Steven Ramsey with Thompson Research. Your line is open.

Steven Ramsey: Hi, good afternoon, so modular activations in orders trending up to start the year can you clarify on storage. If you exclude the holiday run off and if you exclude retail remodel kind of storage onto.

Timothy D. Boswell: There are mixed indicators out there, right? The latest data point that we have is the fourth quarter non-residential construction square footage, which was down 29% year-over-year. So that's a big drop, right? It was down 18% for the year, with Q4 being the softest quarter. Now, those overall square footage levels are still kind of in line with or above 2018 and 2019 levels. So this is still a healthy operating environment. It's just we're coming off of a 2022 that was pretty extraordinary and set some all-time highs, right?

Steven Ramsey: Construction industrial type job site.

Steven Ramsey: Is that true.

Steven Ramsey: <unk> casing behind where modular is to start the year and maybe this gets to how cross selling is happening in this period of modular activations moving up.

Speaker Change: In real time.

Speaker Change: Okay ill focus more on our outlook, Steve because that's probably the better better place to go.

Speaker Change: We've assumed that activations in the core storage business.

Speaker Change: Our relatively flat.

Timothy D. Boswell: And we saw that impact in our Q4 storage volumes, excluding retail. I agree with your point that the retail assumptions are not materially worse than we would have talked about in Q3. They're just rolling over a bit later, just because there was some contribution from that demand in Q1 2023. So from a year-over-year perspective, that headwind will kind of ease as we get into Q2, specific to the storage segment. And then contrast that with what we're seeing with modular demand to start the year. Again, we're seeing good conversion of the quoting activity that we were seeing in Q4. And we're seeing strong year-over-year growth in net orders and activations. Now, if we sustain that at mid-single-digit growth levels through the course of this year, we're going to inflect units on rent, and we're going to have a pretty compelling trajectory going into 2025. But it's just the end of February, and that normal seasonal build in our business starts to become a lot clearer as we get into the second half of March and April. Okay. Thanks for that!

Speaker Change: For keep for purposes of Q1, and Q2, and then start building as we get into the second half of the year.

Speaker Change: Mostly a function of the comps being easier as we get into the second half of the year.

Speaker Change: I wouldn't say that we've embedded assumptions specific to greater cross selling although I think that's definitely an opportunity I think there is opportunity within our enterprise account portfolio for sure.

Speaker Change: To the earlier question around store Remodels as well as other non retail related.

Speaker Change: Customers, but it's more a function of.

Speaker Change: Kind of what we see to start the year and making sure that we're taking a balanced approach with those assumptions across the across the portfolio given the non res activity that we just saw in Q4.

Okay got you and then on the Capex range thinking about the midpoint 50 million higher year over year.

Speaker Change: How much of that is.

Speaker Change: Tied to the revenue range basically do you foresee having to invest at the high end of Capex for the year to reach the high end of revenue. Thanks.

Faiza Alwy: And then I don't think the question around sort of modular pricing has been asked yet. I'm just curious. It feels like the rental rate, you know, like just the growth in pricing has been decelerating through the course of the year. Right in the first half, we were up 17.

Speaker Change: Look capex it is demand driven and just to clarify if we did about $185 million of net capex in 2023, the mid points about $90 million higher than that or about a 50% increase. So this is a significant.

Speaker Change: Increase although.

Speaker Change: Very much centered on where we would have pointed to in terms of our long term kind of normalized annual capex requirement. If you assume there is around $180 million of maintenance capex spend in the business. This does imply growth investments to support modular refurbishments as well as growth investments to support.

Timothy D. Boswell: It's a little bit less in 4Q. Curious if there was a mixed impact there, and what that might be, and then how we should think about modular. Yeah, as I mentioned a minute ago, one place I typically look is just the spread that we're seeing between our delivered spot rates and the average rental, right?

Speaker Change: Primarily the climate controlled.

Stephen Ramsey: And right now, if we exclude ground-level offices, that spread is about 29 percent. And if we exclude ground-level offices, that spread is about 22 percent. So those are very healthy spreads going into 2024, and a simple way to think about that is if you've got a three-year average release duration, divide that spread by three, and you can get roughly 10% annual growth just by holding the current spot rates that we're seeing in the business. So that remains a very powerful tailwind as we enter 2024, and that is our base case assumption across the modular products, inclusive of growth. Great, thank you so much. Our next question comes from the line of Stephen Ramsey with Thompson Research. Your line is open. Hi, good afternoon.

Speaker Change: Storage platform that we introduced.

Speaker Change: It is.

Speaker Change: Depending on where the growth to get you to the higher end of the range comes from it may or may not require incremental capex. If we got surprised to the upside in terms of storage demand well, we've got plenty of excess capacity those assets don't require refurbishment and you can capture that incremental storage demand without.

Speaker Change: A meaningful increase in capex above this midpoint if that demand came more from the modular side of the business I fully expect we'd be.

Speaker Change: Investing incremental refurbishment dollars in order to get there.

Speaker Change: The only area in the business, where we need new fleet would be across the new two new <unk>.

Speaker Change: Platforms, right and that'll be purely demand driven as those assets get absorbed into the market.

Timothy D. Boswell: So modular activations and orders trending up to start the year; can you clarify on storage if you exclude the holiday runoff and if you exclude retail remodel kind of storage onto a construction industrial type job site? Is that... trend pacing behind where modular is to start the year, and maybe this gets to how cross-selling is happening in this period of modular activations moving up kind of in real time. I'll focus more on our outlook, Stephen, because that's probably the better place to go. We've assumed that activations in the core storage business are, you know, relatively flat for the purposes of Q1 and Q2, and then start building as we get into the second half of the year. That's mostly a function of the comps being easier as we get into the second half of the year.

Speaker Change: We can we can feed more inventory into the branch network that obviously is a very good thing and would support our run rate going into 2025. So I think we can grow with a lot less capex on the storage side based on how we're positioned right now and normal modular refurbishment activity. We reassess every 90 days using our zero based capital.

Speaker Change: Allocation process and no change.

Speaker Change: And that from my perspective.

Speaker Change: Great. Thank you.

Speaker Change: Our next question comes from the line of Philip <unk> with Jefferies. Your line is open.

Philip: Hey, guys encouraging to see modular activations in net orders up year over year.

And markets that stand out thats driving the pickup in activity.

Philip: When we look at.

Philip: Modular versus storage trends, obviously have diverged a bit even to start the year outside of retail anything else, that's driving some of that divergence from your perspective.

Stephen Ramsey: I wouldn't say that we've embedded assumptions specific to greater cross-selling, although I think that's definitely an opportunity. I think there's opportunity within our enterprise account portfolio, for sure, for the earlier question around store remodels, as well as other non-retail-related customers, but it's more a function of kind of what we see to start the year and making sure that we're taking a balanced approach with those assumptions across the portfolio, given the non-retail activity that we just saw in Q4. Okay, I gotcha.

Speaker Change: I would say Phil that modular is pretty broad based.

Speaker Change: I mean, obviously with the decline we experienced in non resi construction.

Speaker Change: We're winning in infrastructure, other large or ensuring reassuring et cetera.

Speaker Change: And it is pretty broad based geographically and.

Speaker Change: And by end market so.

Speaker Change: Encouraged by that and as Tim mentioned in his prepared remarks.

Speaker Change: We just haven't seen the storage volumes turn.

Stephen Ramsey: And then on the CapEx range, thinking about the midpoint $50 million higher year-over-year, how much of that is tied to the revenue range? Basically, do you foresee having to invest in the high end of CapEx for the year to reach the high end of revenue? Thanks.

Speaker Change: Yeah. It accordingly.

Speaker Change: And Brad the uptick has been more on some of these mega projects infrastructure that youre seeing on the module side in terms of activity.

Speaker Change: Maybe a bit bias to that but it's been pretty broad base.

Speaker Change: Including ground level offices in modular.

Stephen Ramsey: Look, CapEx is demand-driven. And just to clarify, if we did about $185 million of net CapEx in 2023, the midpoint's about $90 million higher than that, or about a 50% increase. So this is a significant increase, although very much centered on where we would have pointed to in terms of our long-term kind of normalized annual CapEx requirement. If you assume there's around $180 million of maintenance CapEx spend in the business, this does imply growth investments to support modular refurbishments, as well as growth investments to support primarily the climate-controlled storage platform that we introduced. I think it is, depending on where the growth to get you to the higher end of the range comes from, it may or may not require incremental CapEx.

Speaker Change: Activations over the last three months are up low single digits, excluding ground level offices. They are up more than that so as Tim said its encouraging its early.

Speaker Change: So it's one we'll watch and we're prepared to invest.

Speaker Change: If that demand continues.

Okay.

Tim I guess your guidance of full year.

Tim: Heard you correctly I mean at least youre seeing some green shoots on modular. So your base case for units on rent inflicting there seems more than reasonable.

Tim: But what other retailers have gone back and kind of languishes here and you don't see that pick up perhaps in the back half I don't know if thats, what youre baking in for storage, how meaningful is that to your ability to kind of hit the midpoint of your full year EBITDA. It still seems like you've got enough levers on price mix, but any context would be helpful.

Stephen Ramsey: If we were surprised to the upside in terms of storage demand, well, we've got plenty of excess capacity. Those assets don't require refurbishment, and you could capture that incremental storage demand without a meaningful increase in CapEx above this midpoint. If that demand came more from the modular side of the business, I fully expect we'd be investing incremental refurbishment dollars in order to get there. The only area in the business where we need a new fleet would be across the two new platforms, right?

Speaker Change: To your point, we have so many levers in this business to offset what I would characterize in your question. There is a relatively minor headwind if that's what we're faced with is a.

Speaker Change: No storage storage retail recovery in the second half of the year, we've got pricing levers value added products levers margin levers.

Speaker Change: I don't view that as a significant concern relative to the midpoint of the guidance given we've taken a pretty conservative approach for the year as it relates to storage volume. So look as has been our history. We're trying to put forth numbers that we believe we can deliver.

Philip Ng: And that will be purely demand-driven. As those assets get absorbed into the market, we can feed more inventory into the branch network. That obviously is a very good thing and would support our run rate going into 2025. So I think we can grow with a lot less CapEx on the storage side based on how we're positioned right now and normal modular refurbishment activity we reassess every 90 days using our zero-based capital allocation process, and there's no change in that from my perspective. Great, thank you. Our next question comes from a line from Philip Ng with Jeffreys. Your line is open.

Speaker Change: In order to get to the upside of this range I think more has to go right and you probably need some of that.

Speaker Change: The storage end market recovery and a more significant way.

Maybe some tuck in M&A helps get you to the top end of the range.

Speaker Change: Stronger margin performance than we're expecting as an upside lever to get you to the top end of the range.

Speaker Change: But we've got multiple ways to win that I think get us to the midpoint okay.

Speaker Change: Okay I appreciate the color.

Speaker Change: Our next question comes from the line of.

Speaker Change: Brent Thielman with D. A Davidson your line is open.

Bradley L. Soultz: Hey guys, it's encouraging to see modular activations and net orders up year over year. Any end markets that stand out that's driving the pickup in activity? And when we look at modular versus storage,

Brent Thielman: Hey, Thanks, guys. Just a couple quick ones for me, Tim I was hoping you could just level set us on.

Brent Thielman: Interest expense expectations for 2024, just obviously pretty Mcgrath and then my second question is there anything that.

Philip Ng: Trends obviously have diverged a bit, even to start the year. Outside of retail, anything else that's driving some of that divergence from your perspective? I'd say, Phil, that modular is pretty broad-based.

Brent Thielman: Preclude you from continuing with the buyback while we wait for the.

Brent Thielman: Mcgrath closure.

Tim: Yes. So on your first question, it's actually a good one as we stay in.

Bradley L. Soultz: I mean, obviously, with the decline we experienced in non-resident construction, we're winning in infrastructure, other large on-shoring, reshoring, et cetera. And it is pretty broad-based geographically and by end market. So, quite encouraged by that.

Tim: The materials were on about a $212 million cash interest run rate.

Tim: Inclusive of the swaps that we executed in January.

Tim: That does not include about another $12 million or so.

Bradley L. Soultz: And as Tim mentioned in his prepared remarks, we just haven't seen the storage volumes turn yet. And Brad, the uptick's been more on some of these mega-projects' infrastructure that you're seeing on the monitor side in terms of activity. Maybe a bit biased to that, but it's been pretty broad-based.

Tim: Deferred noncash deferred financing fees that our image amortizing through the P&L and I know some analysts out there are missing that especially as you look at the Q4 numbers right. So you got to take the cash and the cash interest.

Tim: Add another $12 million and you should be around at least on our current run rate around $225 million of.

Tim: GAAP interest expense for the year.

Philip Ng: I mean, including ground-level offices and modular, the activations over the last three months are below single digits. And excluding ground-level offices, they're up more than that. As Tim said, it's encouraging, it's early, so it's one we'll watch and we're prepared to invest if that demand continues. Tim, I guess your guidance for the full year, if I heard you correctly, I mean at least you're seeing some green sheets on modular, so your base case for units on rent inflecting is more than reasonable. But what if retail doesn't come back? It kind of languishes here. You don't see that pickup, perhaps, and backup. I don't know if that's what you're baking in for storage.

Tim: That by four for the current quarterly run rate.

Tim: What we do with the debt balance as we progress through the year. Obviously, there are different scenarios. There that will we will adjust for but thats. The right baseline as you think about.

Tim: Where we're at heading into Q1.

Tim: We did pause the buyback in the middle of Q4, when we got to the point of having material nonpublic information relating.

Tim: So the possibility of a.

Tim: Mcgrath transaction right. So the buyback has been on hold.

Tim: Since that time.

Tim: And as long as we have material nonpublic information that we will not be in.

Tim: Repurchase market.

Tim: But that can change here as we.

Philip Ng: How meaningful is that to your ability to kind of hit the midpoint of your full year EBITDA? It still seems like you have enough levers on price mix, and any contacts. To your point, we have so many levers in this business to offset what I would characterize in your question. There's a relatively minor headwind, if that's what we're faced with, a no-storage retail recovery in the second half of the year. We've got pricing levers, value-added product levers, and margin levers.

Tim: Release release earnings obviously in and as the transaction progresses. So it's.

Tim: Kind of a.

Tim: Period by period determination as to whether or not we should be in the market from a repurchase standpoint.

Speaker Change: Okay understood I thought of one other if I could just.

Speaker Change: Talked a lot about the end markets, especially retail non red here I think I'm more interested in I guess some of the other things you're doing internally that can move the needle on volume without obviously wanting to sacrifice that the higher lease rates earned here I've heard you mention.

Timothy D. Boswell: I don't view that as a significant concern relative to the midpoint of the guidance, given we've taken a pretty conservative approach for the year as it relates to storage volumes. So, look, as has been our history, we're trying to put forth numbers that we believe we can deliver. In order to get to the upside of this range, I think more has to go right. You probably need some of that storage and market recovery in a more significant way. Maybe some tuck-in M&A helps get you to the top end of the range. Or maybe stronger margin performance than we're expecting is an upside lever to get you to the top end of the range. But we've got multiple ways to win that I think will get us to the midpoint. Appreciate it, Collar.

Speaker Change: <unk> branches sales forces et cetera.

Speaker Change: Anything we can think of it.

Speaker Change: Share capture initiatives irregardless of what these.

Speaker Change: These market over the next 12 months.

Speaker Change: Yeah. They are quite they are quite a few brands I mean, the field realignment is very meaningful we've got a single general manager now responsible for every geographic market that we serve.

Speaker Change: Single leader and team Thats accountable to our customers and responsible for presenting all of our solutions at every opportunity to all of our customers right. So that is.

Speaker Change: Structural change that supports cross selling it is enabled by the consolidation of our CRM.

Brent Thielman: Our next question comes from the line of... Brent Thielman with DA Davidson. Your line is open. Hey, thanks, guys. Just a couple quick ones for me.

Speaker Change: Not only did we consolidate the CRM.

Speaker Change: <unk> launched a.

Speaker Change: Algorithm enabled.

Timothy D. Boswell: Tim, I was hoping you could just level set us on interest expense expectations for 2024, just obviously pre-McGrath. And then my second question, is there anything that precludes you from continuing with the buyback while we wait for McGrath? Yes, so on your first question, it's actually a good one.

Speaker Change: Opportunity prioritization tool for our sales reps, which takes some of the guesswork out of what is the next best opportunity that a sales rep should be working.

Speaker Change: And those recommendations are tailored to our sales reps based on their role.

Timothy D. Boswell: As we state in the materials, we're on about a $212 million cash interest run rate, inclusive of the swaps that we executed in January. That does not include about another $12 million or so of deferred, non-cash deferred financing fees that are amortizing through the P&L. And I know some analysts out there are missing that, especially as you look at the Q4 numbers, right? So you got to take the cash interest, add another $12 million, and you should be around, at least on our current run rate, around $225 million of gap interest expense for the year, divided by four for the current quarterly run rate.

Speaker Change: Whether they are responsible for territory or maybe they're responsible for a certain product category.

Speaker Change: We are supporting that we're in the early stages of supporting that with much more sophisticated digital marketing tools, which we're starting to pilot here in Q1 and going into Q2.

Speaker Change: And we've got opportunity is in enterprise accounts and vertical business development. So there is a fairly long list of things in my opinion to have the potential to drive volumes irrespective of markets, but they're also relatively early stage. So we haven't assumed any benefit of those in our assumptions for the first half of the year.

Timothy D. Boswell: What we do with the debt balance as we progress through the year, obviously, there are different scenarios there that we'll adjust for, but that's the right baseline as you think about where we are heading into Q1. We did pause the buyback in the middle of Q4 when we got to the point of having material non-public information relating to the possibility of a McGrath transaction, right? So the buyback has been on hold since that time, and as long as we have material non-public information, we will not be in the repurchase market.

Speaker Change: But theyre all quite logical.

Speaker Change: Logical and potentially impactful.

Speaker Change: Both individually and collectively so I'm really excited about those investments and those changes in our structure that we made through the course of 2023 and frankly, we're getting a little bit in patient we want to see the production that comes out of those investments.

Speaker Change: What we're excited to see here in 2024.

Excellent. Thank you.

Speaker Change: Hi.

Yes.

Speaker Change: Our next question comes from.

Speaker Change: Angel Castillo with Morgan Stanley Your line is open.

Timothy D. Boswell: But that can change here as we release earnings, obviously, and as the transaction progresses. So it's kind of a period-by-period determination as to whether or not we should be in the market from a report. Okay. I thought of one other, if I could, talk a lot about the end markets, especially retail non-reds here. I think I'm more interested.

Angel Castillo: Alright, Thanks for fitting me in just a quick one just wanted to make sure I guess I understood correctly.

Angel Castillo: It sounds like just looking at the slides I guess average fast rate was down 274 for modular from 277, and I guess as I recall from the third quarter it sounded like.

Brent Thielman: I guess some of the other things you're doing internally that can move the needle on volume without obviously wanting to sacrifice the higher lease rates you've earned here. I've heard you mention, you know, consolidating branches, sales forces, et cetera, but anything we can think of as sort of share capture initiatives, irregardless of what, you know, these markets afford you. Yeah, there are quite a few, Brent.

Angel Castillo: You had seen kind of a strong inflection you deliver great. So just kind of trying to understand the bridge to that fourth quarter decline and then as we think about the comments and in the slides I talked about on an LTM deliver great. That's expected or I guess, it's down 7% and wont really inflect that until kind of the second or the middle part of 224, So just trying to understand that.

Timothy D. Boswell: I mean, the field realignment is very meaningful. We've got a single general manager now responsible for every geographic market that we serve, a single leader and team that's accountable to our customers, and responsible for presenting all of our solutions at every opportunity to all of our customers. Right, so that is a structural change that supports cross-selling. It is enabled by the consolidation of our CRM. Not only did we consolidate the CRM, but we launched an algorithm-enabled opportunity prioritization tool for our sales reps, which takes some of the guesswork out of what is the next best opportunity that a sales rep should be working on. And those recommendations are tailored to our sales reps based on their role, whether they're responsible for a territory or maybe they're responsible for a certain product category.

Angel Castillo: The $480 number that you talked about earlier.

Angel Castillo: Right the $480 net delivered rate that we've achieved through the <unk>.

Angel Castillo: Of course of February so far and I think that was more like $450 or so.

Angel Castillo: In the month of January so ramping up significantly relative to where.

Angel Castillo: We were performing in the second half of the year and assuming we sustain those levels, which are in line with the historically, our historical highs going back to 2022.

Angel Castillo: That LTM rate.

Angel Castillo: As reported under kind of prior quarters methodology would inflect and that kind of Q2.

Angel Castillo: Our timeframe. So I think it's just a reflection of you need more of that performance under kind of todays panel penetration rate to flow back into the LTM.

Timothy D. Boswell: We are supporting that. We're in the early stages of supporting that with much more sophisticated digital marketing tools, which we're starting to pilot here in Q1 and going into Q2. And we've got opportunities in enterprise accounts and vertical business development. So there's a fairly long list of things, in my opinion, that have the potential to drive volumes irrespective of markets. But they're also relatively early stage, so we haven't assumed any benefit of those in our assumptions for the first half of the year. But they're all quite logical and potentially impactful, both individually and collectively.

Offset some of those weaker periods.

Angel Castillo: Post the CRM cutover in Q2 of last year.

Speaker Change: Got it so I guess for the current match rate of 274 or was that just essentially the flow through of the CRM.

Speaker Change: Kind of impacting.

Speaker Change: Yes, the 274 was up 8% year over year, right and so that's going to be a reflection of the.

Speaker Change: Increasing globe penetration primarily in that number.

Timothy D. Boswell: So I'm really excited about those investments and those changes in our structure that we made through the course of 2023. And frankly, we're getting a little bit impatient. We want to see the production that comes out of those investments. That's what we're excited to see here in 2024.

Speaker Change: And Thats, probably the biggest biggest driver.

Got it and maybe just a quick housekeeping one just in terms of the sequential step up in new and rental unit sales for the fourth quarter.

Give us a little bit more color on that and I don't see your expectations for 2024.

Timothy D. Boswell: Thank you. Our next question comes from Angel Castillo with Morgan Stanley. Your line is open.

Speaker Change: Yeah, it's probably two two drivers primarily given.

Speaker Change: Our fleet utilization levels are at all else equal will be a bit more opportunistic with.

Angel Castillo: Hi, thanks for fitting me in. Just a quick one; just wanted to make sure I guess I understood correctly. It sounds like the, just looking at the slides, I guess the average VAPS rate was down $274 for modular from $277. And I guess, as I recall from the third quarter, it sounded like you had seen kind of a strong inflection in your delivered rates, so just kind of trying to understand the bridge to, you know, that fourth quarter decline. And then as we think about the comments in the slides that talked about an LTM delivered rate that's expected, or I guess it's down 7% and won't really affect it until kind of the second or the middle part of 2024. Trying to understand that and bridge it to the $480 number that you talked about earlier.

Speaker Change: Some of the rental fleet sales.

Speaker Change: One of the acquisitions that we executed G. I want to say it was August timeframe of last year last year has some niche manufacturing capabilities serving primarily.

Speaker Change: The education market on the West coast and the full quarter contribution of that business is flowing into the new sales.

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Speaker Change: Revenue line for purposes of Q4, so I think that kind of Q4, our mix is.

Speaker Change: A reasonable indicator of how we're operating going into 2024.

Speaker Change: Sales are inherently a little bit lumpier lumpier in terms of when they fall so that could that mix could fluctuate.

Speaker Change: Over the course of a given quarter the overall for the year.

Timothy D. Boswell: Right, $480 is the delivered rate that we've achieved through the course of February so far, and I think that was more like $450 or so in the month of January. So, ramping up significantly relative to where we were performing in the second half of the year, and assuming we sustain those levels, which are in line with the historical highs going back to 2022, that LTM rate, as reported under the kind of prior quarters methodology, would inflect in that kind of Q2 timeframe. So, I think it's just a reflection of you need more of that performance under kind of today's penetration rate to flow back into the LTM and offset some of those weaker periods post the CRM cutover in Q2 of last year. I got it.

Speaker Change: Like I said in my prepared remarks, I think there is there are some growth opportunity across new and used sales for purposes of 2024.

Speaker Change: Very helpful. Thank you.

Speaker Change: We have now reached the end of today's call I will now turn the call back over to Nick.

Nick Gerardi: Thanks, Amy Thank you all for your interest and we'll Scott mobile. Many if you have additional questions. After today's call. Please contact me.

Speaker Change: Thank you ladies and gentlemen. This concludes today's conference you may now disconnect.

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Angel Castillo: So I guess for the current VAST rate of 274, was that just essentially the flow-through of the CRM still kind of impacted? Yeah, the 274 was up 8% year over year, right, and so that's going to be a reflection of the increasing glow penetration, primarily in that number. And that's probably the biggest, biggest driver.

Speaker Change: Okay.

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Timothy D. Boswell: Got it, and maybe just a quick housekeeping question, just in terms of the sequential step-up in new and rental unit sales for the fourth quarter, could you just give us a little bit more color on that and then also your expectations for 2024? Yeah, it's probably two drivers primarily, you know, given where fleet utilization levels are at, they will be a bit more opportunistic with some of the rental fleet sales. One of the acquisitions that we executed, gee, I want to say it was in the August time frame of last year, last year, had some niche manufacturing capabilities serving primarily the education market on the West Coast.

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Timothy D. Boswell: And the full quarter contribution of that business is flowing into the new sales revenue line for purposes of Q4. So I think that kind of Q4 mix is probably a reasonable indicator of how we're operating going into 2024. However, sales are inherently a little bit lumpier in terms of when they fall, so that mix could fluctuate over the course of a given quarter.

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Timothy D. Boswell: Overall, for the year, like I said in my prepared remarks, I think there's some growth opportunity across new and used sales for the purposes of 2024. Very helpful. We have now reached the end of today's call. I will now turn the call back over to Nick. Thanks, Amy. Thank you all for your interest in WillScot Mobile Mini. If you have additional questions after today's call, please contact us. Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect. www.willscotcorp.com. Thanks for watching!

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