Q2 2025 WillScot Holdings Corp Earnings Call

Welcome to the second quarter 2025 WillScot Holdings Corp earnings conference call. My name is Sheree, 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 recorded.

I will now turn the call over to Charlie Walter. Charlie, you may begin.

All right, thank you Sheree. Good afternoon and welcome to the Wolf. Scott second quarter 2025 earnings call.

Participants on today's call include Brad, saltz, chief executive officer Tim Boswell, president and Chief Operating Officer and Matt Jacobson Chief Financial Officer. Today's presentation material may be found on our investor relations website and investors, God will scott.com

I'd like to direct your attention to slide 2 containing our Safe Harbor statements. 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 beyond our control.

Therefore our actual results May differ materially from comments, made on today's call.

For a more complete description of the factors that could cause actual results to differ, please refer to other possible risks.

Please refer to the safe harbor statements in our presentation and our filings with the SEC.

And with that, it's my pleasure to turn the call over to Brad. Saltz again, thanks Charlie. Good afternoon, everyone. And thank you for joining us today. I'm Brad Schultz, Chief Executive Officer of, will Scott, please turn to slide 7 in our Q2 earnings release deck?

Our second-quarter financial results were broadly in line with our expectations.

We delivered adjusted. Eva of 249 million.

Representing a 42.3% margin or an increase of 140 basis point sequentially.

On a trailing 12-month basis, our adjusted e, but our margin stands at 43.8%.

I was pleased with both the sequential improvement in lease revenues and our continued robust adjusted free cash flow performance of $130 million at a 22.1% margin in the quarter and a 23.6% margin over the past 12 months.

Which will continue to be supported by the impact of recent legislation changes which Matt will discuss later.

Positions included the addition of a leading regional climate-controlled temporary storage business.

Customer demand for this product is high and fits well with our portfolio and service capabilities. We also continue to return value to shareholders through share repurchases and dividends

our focus on further advancing. Service Excellence is also showing positive signs and customer satisfaction as we optimize our platform.

Addressing feedback from our customer base has been a major focal point for us and is being recognized through higher net promoter scores, particularly in the work we're doing to improve our ordered cash process, which Tim will further expand upon.

Both process-driven and technological. Enhancements are elevating the customer experience increasing the ease of doing business with us and beginning to unlock some of our working capital opportunities. We previously highlighted

This is just one of the many internal opportunities we have that sets us up for achieving the milestones we outlined for our March 2025 Investor Day, which includes achieving $3 billion in revenue, $1.5 billion in adjusted EBITDA, and $700 million in adjusted free cash flow, all in the next 3 to 5 years.

Now turning to the broader macroeconomic environment, although large projects do continue to remain robust, we're expecting second-half demand to be below our prior expectations, giving lingering questions around the ultimate implications from trade and U.S. monetary policies, resulting in ongoing uncertainty in many of our markets.

Many customers are continuing to take a wait-and-see approach, which is influencing current and near-term demand. This is generally contained among the smaller projects, which tend to be more interest rate and economic sensitive, unlike the larger projects where demand remains strong and our ability to serve is unmatched.

Looking ahead, I am very excited about how our strategic initiatives are evolving and setting us up for continued success. I will now turn it over to Tim to discuss these initiatives in more detail.

Thanks, Brad, and hello everybody.

I'll pick up where Brad left off and provide a bit more color on commercial activity since. That's probably the biggest variable impacting your term results.

The mix of market activity, favoring larger-scale projects and larger customers, has continued for some time now.

And remain consistent through Q2. So, there's nothing new there to highlight.

In terms of the things that are within our control, in which we talked about in March, we're taking specific actions to build our Enterprise account relationships, improve execution across our field sales team, and reposition our offering in favor of higher value-added services.

Starting with enterprise accounts, we added new leadership to this team in Q2 and made significant progress, building out the organization to focus on developing underpenetrated industry verticals.

The Enterprise portfolio has been outperforming the overall business simply based on the mix of market activity, and we expect to build on this strength by reallocating resources here.

Modular units on rent were up 4% year-over-year, while storage units on rent were down only 1% year-over-year as of the end of Q2. This gives you a feel for the relative strength that we see in the Enterprise portfolio.

Our value proposition resonates very well with these customers, and we announced deals with organizations like Penske and the FIFA Club World Cup in the quarter. Just as examples of the success, we see that when we target these opportunities more proactively.

Execution across our field sales organization is improving, although not yet to our target productivity levels.

Overall organizational stability and turnover has improved meaningfully into Q2, which is good and necessary. First step,

As we talked about in March, we rolled out our AI-enabled pricing engine as well as our enhanced sales HQ platform in Q2 as planned.

As we talked about in March, these are best-in-class tools to drive sales and productivity, and our team is in the early stages of adopting and optimizing these.

Sales staffing increased by approximately 9% sequentially from Q1 to Q2, which is a somewhat slower pace than we originally planned for the year. Just given, we're still taking a cautious view on end markets.

Whether or not we drive towards budgeted levels will be a function of both end market activity and our own productivity levels, all of which are contemplated in the guidance range that Matt will talk about.

Which validates our focus on our higher value-added offerings.

Within storage, our climate-controlled units on rent are up 30% year-over-year, both organically and through the acquisition of Portable in April.

We have a very strong conviction in this area and are continuing to deploy capital across the network to build this portfolio.

Similarly, within modular, our flex units on rent are also up by 30% year-over-year. As of the end of June, we are primarily supporting large-scale, longer-duration projects where we have a truly unrivaled value proposition.

So, within both the storage and modular categories, we are driving mixed changes that are positive, both strategically and financially.

And value-added products remain an opportunity.

VAPS revenues are up approximately 7% year-over-year on a per-unit basis for modular units and about 12% for storage units. Although slightly behind our plans for the year, this remains an area of focus for the sales team.

And I'll highlight several of the other operational initiatives that are ongoing under the hood and that are supporting margins and cash flows, both of which are outperforming our original plans through Q2.

In our field operations, we have a focus across our network on optimizing our logistics and field service resources.

Service call management, billing, cross-training, and dispatching of our drivers, along with all support, gross profit margins, and the customer experience.

We're making significant investments in these team members, given the critical role they play in our business, especially relative to the competition, who largely outsourced these activities.

And in our centralized operation, we're seeing the impact of the organizational and operational changes that we made to start the year, with an initial focus on the order-to-cash process.

You will note modest improvement in days sales outstanding progressing towards the low 70s and achieving an 18-month low as of June.

If sustained, this will drive reductions in bad debt expense in the P&L as we head into 2026. So, we're on track to unlock the working capital and margin opportunities that we highlighted in March.

You can see the impact in cash flow from operations, which were up 17% year-over-year in the second quarter. Despite a flat revenue environment, you can see the impact in our net promoter and customer satisfaction scores, which are up sequentially since we met in March, with the biggest improvements in our billing and collections functions.

So overall, we remain focused on executing the plans we articulated in March.

The team is aligned and energized around these plans.

I'm humbled by the passion and urgency that the team brings to WillScot every day.

And as we execute these building blocks, they put us on track to achieve the longer-term milestones that we've committed to.

With that, I'll pass it over to Matt to talk about Q2 financials and the outlook. Matt?

Thanks Tim. Hello, everyone.

Before we dive in, I'll cover just a few highlights for the quarter.

Revenue and adjusted EVA performed just as we expected, and we continue to progress towards a return to revenue growth.

Our cash from operations was up 17% year-over-year, as Tim noted, with free cash flow in the quarter of $130 million, which were both our expectations and reaffirm the strength and stability of our business model.

I'll begin my more detailed remarks on slide 22.

Total revenue of $589 million and leasing revenues of $443 million were both in line with expectations. We laid out in our Q1 call that this represented a 3% year-over-year decline in leasing revenues, and both delivery and installation and sales revenues were flat.

However, on a sequential basis, leasing revenues grew 2% in the second quarter versus a sequential decline of 0.4% in 2024. Importantly, this is the first quarter since Q3 of '23 of sequential leasing revenue growth, excluding Q4 seasonal impacts. So, we're seeing our rental revenues beginning to inflect positively sequentially, which is an important first step in returning to year-over-year revenue growth.

Looking at our KPIs, positive contributions from pricing and VAPS drove the average monthly rental rate up 5% year-over-year for modular products and up 7% for storage products, driven by a favorable mix from growth in our climate-controlled storage business.

That said, average monthly Runner rates for steel containers have held steady, with growth and an average monthly rental rate of approximately 2% both year-over-year and sequentially.

These benefits offset much of the impact from lower volumes, as average units on rent for modular products were down 5.6% year-over-year and down 3.8% for storage.

Adjusted EBITDA was $249 million, in line with our expectations and down 6% year-over-year.

Increase of 140 basis points sequentially from the first quarter, as we had guided with sequential improvements, to delivering installation margins, sales margins, and reductions in SG&A.

Versus prior year, even-to-margin was down 130 basis points, which is primarily driven by our delivery and installation margins, as Tim touched on in his comments. We've been progressing on our insourcing initiative, and there is upfront investment required to drive margin expansion in the medium term. However, that investment, along with negative operating leverage in the business due to lower activity, is creating some near-term margin compression year-over-year. As we expected, though, improving sequentially.

Flipping quickly back to slide 20.

Our contributions from value-added products and services in the quarter represented 17% of total revenue, with the last 12 months at 16.9%.

Vaps as a percentage of revenue, both in the quarter and over the last 12 months, increased by 40 basis points year-over-year, underscoring the growing demand for vaps and the opportunity that we see for this category going forward.

On slide 23, you'll see several charts detailing our cash flows for the quarter.

Q2 was another strong quarter, with cash from operations increasing 17% year-over-year to $205 million, including some early benefits from the increased focus on back office productivity and working capital management, as Tim noted.

We continue to fund planned increases in net capex, which I’ll touch on a bit more in a minute, and we delivered adjusted free cash flow of $130 million in the quarter and an adjusted free cash flow margin of 22.1%, which was 80 basis points higher than the previous year.

Adjusted free cash flow per share was 72 cents for the quarter. Over the past 12 months, we generated $5,555 million of adjusted free cash flow, achieving a 24% margin and $3 per share.

The recent tax legislation is another positive development for our business as well, which I'll touch on in a bit more detail in our Outlook.

The consistency of our cash flows remains a key strength of our business model, providing us with meaningful flexibility to deploy capital and reinvest at attractive returns.

Moving on to slide 25.

We invested 75 million in net capex in Q2, representing a 37% increase over the 55 million invested in the prior year, driven largely by continued refurbishments investments in our flex and larger complexes to support the strength and large projects that we're seeing and organic investments in vaps, namely perimeter Solutions, and our new solar offering.

We completed two tuck-in acquisitions this quarter: Portable, a climate-controlled storage provider serving the Eastern U.S. and Gulf region, and a local market clear span provider to support our strategy of bringing more adjacent offerings to new and existing customers.

We continue to work the pipeline with a number of tucking opportunities that can still be actioned in the year.

We returned $53 million to shareholders during the quarter through share repurchases and our dividend.

We repurchased approximately 1.5 million shares for $40 million in Q2 and have reduced our share count by 3.4% over the last 12 months.

Lastly, we issued $13 million in dividends.

Given the M&A activity of $134 million in the quarter, our leverage exiting Q2 was up slightly at 3.6 times. We're comfortable progressing gradually into our 3 to 5 year target range as the business in Flex.

Now, turning to our updated full-year 2025 outlook on slide 27.

As we said entering this year and with last quarter's results,

We deliberately maintained wider guidance ranges for the year to account for the macroeconomic uncertainty and noted that red non-residential construction starts activity remained a gating factor to near-term volume growth and a key factor in where results would fall within the range.

It's Tim noted in his comments that demand from large projects continues to perform well, and we continue to see strong activity on our large complex product types.

However, we have not seen improvement in small projects, and our smaller modular units and containers continue to face market demand headwinds.

This has resulted in lower units on rent exiting the second quarter than what was implied at the midpoint of our prior full-year outlook.

Due to the macroeconomic outlook, we do not expect an inflection in units on rent to occur by the end of the year and have narrowed our revenue outlook to a range of $2.3 billion to $2.35 billion, and adjusted EBITDA to a range of $1 billion to $1.02 billion.

As I noted earlier, we were pleased to see sequential leasing revenue inflect positively in the second quarter by 2%, which is the first step in a return to year-over-year revenue growth.

Around, 3% year-over-year.

It's important to note that we did have a very large project with the Rams last year in the third quarter that elevated our delivery and installation revenues pretty significantly.

This project won't recur this year, and this accounts for a large portion of the year-over-year change in total revenues expected in Q3.

And for margins, we expect to see continued progress on a sequential basis of 50 to 100 basis points of expansion compared to Q2 as we continue our focus on optimizing our logistics and field service resources, including further cross-training of our drivers and adjusting other variable costs in the business in line with demand.

And finally, year-to-date cash from operations of $412 million and adjusted free cash flow of $275 million have been driven by the continued strength of the business, supported in part by modest improvements in days sales outstanding and working capital, as our Central Operations team drives continued improvements.

Additionally, as a result of the corporate tax legislation enacted on July 4th that permanently extended 100% bonus depreciation and modified interest expense deductibility to EBITDA from EBIT, we no longer expect to pay meaningful U.S. Federal cash taxes this year.

All of this together gives us confidence in raising our expectations for free cash flow for the year to a range of $500 to $550 million.

Before I hand it back.

To Brad. I wanted to close and thank our team for a solid quarter performance in a tough economic environment. I'm encouraged by the sequential rental revenue growth that we delivered in Q2. Additionally, our adjusted free cash flow continues to be a positive attribute of the business, and we will continue to drive the margin-enhancing initiatives that we laid out at our Investor Day to support margin expansion into our 45% to 50% EBIT margin range.

I'll now hand it back to Brad for some closing remarks.

Thank you, Charlie. Tim, and Matt, thank you to our customers for their continued business. Thank you to our team for their focus on each other, safety, and customer satisfaction, and thank you to our shareholders for their trust with their capital. 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?

Thank you as a

Rep and wait for your name to be announced. So withdraw your question, please? Press star, 1, 1. Again, due to time restraints, we ask that you please limit yourself to 1 question and 1 follow-up question. Stand by while we compile the Q&A roster.

And our first question will come from the line of Angel Castillo with Morgan Stanley. Your line is open.

Hi, good evening. Thanks for taking my question. Just uh, wanted to touch base a little bit more I guess on the on the modular side. Uh there were some kind of subtle improvements in in the in the data there, both the rental rate and utilization, uh, kind of a sequential basis. Could you just help us on back that a little bit more? You know, just what drove that was it just kind of seasonality mix or are there any other kind of, uh, inflections and and what you're seeing and I thought it was notable. I think you called out 7% growth in vaps, um, if I'm not mistaken. That's kind of the, the best we've seen in, in several quarters. So just, uh, yeah, if you could just kind of unpack that a little bit more and maybe why that doesn't give you maybe a little bit more, um, confidence for a second half.

Angel, this is Tim and I'll let the, my colleagues jump in with anything they'd like to, uh, add. But this has been going on for, for some time now where we've seen kind of a bifurcation of performance within the overall portfolio, uh, with modular outperforming, uh, storage and within the modular, uh, portfolio, I commented in my remarks that Flex units on rent, for example, were up 30% year-over-year. Uh, we've had very solid performance across, um, all of the complex, um, uh, product line within the modular category. So there is an underlying mixed shift in that category that is, um, helpful in.

About 1% year-over-year and it's been up, uh, all year really since we met uh, together in March. Um, the order rates in the business did plateau in kind of the April May, uh, time frame, kind of going into June but have stabilized, uh, in in modular. So, overall that's, uh, that's a bright spot in the business. And and we've kind of extrapolated that that Trend that I would say in, uh, in Matt's guidance.

It sounds very helpful and then could you help us understand? I guess the, the second half, I think, um, just maybe to what degree, that's some amount of just kind of conservatism given. Um, again, what we've seen thus far, you mentioned some of the kind of exit rates out of the second quarter. Just because as, as we talked to other, um, companies you also hear for instance, the 1, big beautiful, Bill and potential inflection higher kind of in construction. So are you just is it, is it simply, you're not assuming any of that Improvement happens? Or is there something about the portable storage business or, or other aspects of your your business that maybe, um, you know, kind of makes it more of a muted impact this? This second half.

Yeah, no angel. This is Matt. Um, I think that's, you know, some of the points you hit there are are right on. Tim talked about the strength. And, you know, the larger complexes. We're not seeing the same strength on the smaller projects and smaller, uh, smaller units that we have in the modular business. And so in aggregate, um, you know, exiting the second quarter modular units on rent, we're down a little bit from where we,

Had anticipated in that original Outlook. And so as you look at the second half, that's that's really bringing in kind of that change, um, in the exit Point. Uh, but your point around the big beautiful Bill and and you know, some of the Investments there, you know, similar to. Um, you know, what could happen with changes in interest rates, those are all things that could stimulate incremental small project activity. Uh, which is very important, uh, to help you know, drive, you know, the the, the demand on some of our smaller projects. So, I would say that, you know, we've, we've probably got some of that within the full range that we've anticipated. Um, if that were to accelerate more quickly, could that change something potentially, um, but, uh, right now, you know, we just, we don't see a, an immediate near-term impact of that.

And you'll probably remember this is Brad. The only thing I would add, just on the margin, is you'll recall there's a seasonal aspect to the modular. So, you know, you're typically not going to see improvements in demand until like March or April of next year, if you don't see it in the third quarter. I am pretty optimistic in terms of the outlook going forward; I just think now we're not going to see much of it this year.

Makes a lot of sense. Thank you.

1 moment for our next question.

And that will come from the line of Brent Theman with DA Davidson. Your line is open.

Hey, great. Thank you. Um, hey Matt, I was hoping to get a little more, um, color or clarification on the drivers behind the sequential margin expansion you're looking for in the third quarter, just given some of the sustaining demand pressures.

That you're seeing on the business. Yeah. So Q2 to Q3 you're asking, Brent. Yeah, yeah. Yeah. No. I think that's uh, you know, typically, you know, it's pretty similar to what we actually saw from the from the first quarter to the second quarter. So as we went from q1 to Q2, there's a little bit of seasonality in that as well. But the 140 basis point expansion, we saw there. A good chunk of that was coming from our delivery and installation margins. So, our our Logistics and like we talked about the Investments we've made up front uh, to insource, more of that activity to cross-train drivers. That is a continued process. We're not, we're not done with that, and as we look forward and, you know, each quarter, um, that is an area, we expect to continue to expand margins. So that's probably the, the first 1 I would point to and there's a little bit of sgna Leverage as well. Uh, that occurs here in the third quarter um going into it. So those are the 2 big that I would point to that kind of get you that 50 to 100 basis points of expansion that I that I talked about.

For Q3.

Okay. And then in the context of some of the more, um, I guess complex solutions you offer, I mean you mentioned climate control up 30%, I think Flex up 30%. Are those sort of sustaining run rates for those solutions into the second half of the year, even against this sort of backdrop of end markets? Just curious, because it's impressive growth there.

The second half is very encouraging and supported, uh, supportive of continued Flex unit on rent and growth. I'm not going to uh, estimate the exact, uh, magnitude. And, you know, sitting here right now, looking at order rates, for example, in our climate controlled storage business, they're up about 60% year-over-year. Um, and, um, uh, I expect we have a, a interesting level of seasonal demand for that product category as well in Q4 so whether it stays at exactly that trajectory Brent, I don't know, but we are seeing uh, strong Trends across those uh, those categories.

Very good. Thank you.

1 moment for our next question.

And that will come from the line of Steven Ramsey with Thompson Research Group. Your line is open.

Hi, good evening. I wanted to dig in on Enterprise Leasing Revenue, which is up 4%. First, can you clarify if that's for Q2 or year-to-date? And then, secondly, can you dissect the drivers of that? Specifically, the units on rent and the pricing dynamics that support that result.

Hi, Stephen, this is Tim. My comment in the prepared remarks was specific to volumes within the Enterprise portfolio. I mentioned that modular units on rent, as of the end of June, in the Enterprise portfolio were up 4% year-over-year, while storage units on rent were down just 1% year-over-year. So I was just trying to contrast.

The activity levels that we're seeing, uh, among our Enterprise customers with the rest of the portfolio. And those Enterprise customers tend to be focused on larger longer duration projects. Uh, they tend to be biased towards our modular complex, uh, Fleet. And, uh, there are associated pricing and value added products opportunities when you, when you see projects of those, uh, of that of that nature. So, um, just trying to compare and contrast a little bit where we're seeing strength in the business, um, versus relative weakness. And as we talked about in March, uh, we're putting a lot of effort behind our Enterprise, uh, strategy. This is something that we had, um, kind of built out and developed through the second half of last year and we moved into execution mode. In kind of the April May time frame. Um, bolstering kind of the leadership team, there adding resources. So, that's not just an account.

Account management function, but we actually have a proactive Business Development capability within each of our Target. Um, verticals focused on uh, penetrating sectors outside of construction and outside of the Legacy retail relationships, where, you know, the the current Enterprise portfolio is heavily weighted. Today, you know, we see very interesting opportunities and, and energy and Industrial government Professional Services, and special events and mentioned FIFA. For example, is just 1 example of that, where we're serving, you know, a dozen locations across North America, all at once with all of our product offering um in a very sophisticated uh way in terms of the logistics and and service capabilities that are involved. So those are examples of areas where I think we've got opportunity over the next 3 to 5 years.

That's helpful, super helpful. And then, continuing that line of thought on enterprise and large projects, which have been a good guide for now a couple of years, while local markets have been weak now for a couple of years, are you nearing a crossover point where that dynamic alone could stabilize the revenue base? Or do you really need local markets to come back to shift the units on rent upwards?

I mean, I I would look at more from a revenue perspective uh and we saw you know, at least sequentially, right? We saw in the second quarter uh that 2%, increase sequentially and that that is our first step to get to year-over-year revenue growth. So I think we are seeing, you know, some of that stability here. Um, we just got a, you know, sustain that going forward and and we'll flip to your your, uh, growth here. So that's been going on as you said in the business for quite some time and continues to be, where we see the strength. So if some of the local markets stuff, uh, you know, can can increase as well that there's maybe gets us there quicker.

Great. Thank you.

For our next question.

And that will come from the line of filling with Jeffrey. Your line is open.

That retail remodel activity piece has been a little noisy. So, just wondering if there's any update on, you know, what your conversations with those customers are like for the outlook. Um, I think we're kind of past the point in '25 where that would be a big impact, but, um, you know, maybe planning assumptions for '26, how that could factor into volumes next year.

Maggie, it's Tim. I'll start; Matt, you can jump in. We have been seeing some of that activity this year. I wouldn't say not at the same scale, um, that we may have, uh, uh, experienced going back a few years. Um, those tend to be shorter duration, right? They can be less than six months in duration. So, at least the activity that we're seeing so far this year, we did have, um, you know, meaningful remodel demand in Q1. But a lot of that also cycled out, um, uh, acute in Q2 and heading into Q3. Um, so it's, uh, generating revenue, right? It's not necessarily building the unit on rents base given the duration of that activity, uh, but we're definitely seeing some of that come back. I can't really comment on Rhema remodel specifically for 2026. I did mention in the remarks, we are engaged with, um, many of the larger retailers right now as it relates to.

Seasonal storage demand and that seems to be shaping up uh reasonably well. But there's there's definitely a range of potential outcomes around that given. We're still pretty early in the order taking process as it relates to uh seasonal storage demand. Yeah.

Yeah, I don't think I have much else uh, to add their Maggie. Other than, you know, we haven't heard any change, you know, for 26 at this point regarding re uh, retail remodel activity. Um, so that's 1. We'll just have to keep an eye on as we get get later into the year.

Okay. Okay, that's helpful. Um and then you know you've talked for several quarters now um about the larger projects, I'll performing kind of that smaller transactional activity. Um, and I think you talked about, you know, customers taking more of a wait and see approach on those transactional units. Um, maybe if you could just give us more context around, you know what they're looking for? Is that tariff uncertainty? Is it interest rates? Um, you know, what could happen that would I guess give them more clarity to to make that decision. Um, and and how we should think about maybe that factoring into the back half of this year.

Yeah, Maggie, this is Brad. I'll start. I think there's 3 factors that play with those smaller Regional projects and that's certainly Clarity around monetary policy and interest rates, um, Clarity around trade policy and such. And then, as we've said, there's there's always an interplay of Labor constraints here. So I think it's, it's those 3 factors and

Um, we see it as something that’s kind of moving sideways at a high level right now.

Okay, great. Thanks, guys.

1 moment for our next question.

And that will come from the line of Scott Schneberger with Oppenheimer. Your line is open.

Uh, thanks very much, good afternoon all. Um, I'm gonna be asking, uh, first, 1 on generation of cash and then and then second 1 on use of, uh, of capital. So, first off. Um, thanks. Matt for the, the caller. On the, uh, the, the, um, the new federal tax legislation. How how?

Much of that is, is driving the improved guidance and how much of it is the working capital and and then kind of the follow-up to that part is how much of that, uh, federal tax legislation benefit is is going to carry over into the 26th and and 27 that you can tell thus far, thanks.

Probably see a similar type of benefit next year. Um, and even potentially for, for the next couple years after that. So it does meaningfully push us, uh, you know, to the right from a, from a tax payment, uh, perspective, Scott. So I think there's a kind of a, you know, 3 4 year impact of this for us to the net positive, which is, which is great to see from a cash flow perspective.

Um on the working capital piece. Um, if I you know, look at, you know, kind of where we've gone here from uh from you know the end of the end of the year. I think we're down around 12 or so million in in our um and we've been working through, you know, some of the cleanup as well. Right. We've had a reserve that's, you know bigger. We've kept it open for longer than we would have if we hadn't had as much of the system changes that we've had, and the team's really working through that. So we're making great progress there. Uh, it's contributing, um, you know, somewhere in that kind of 10 to 15 million, I think, and working cap, or on the, on that piece. Scott. But it's, it's 1 that uh, also probably leaves our range of the 500 to 550 a little bit wider than it might have otherwise because I think there's really good potential for that to to accelerate, but it's still early in that process. And we've got some other things that we're doing there with systems that will help us. So, um, both very positive things for us. Um, are really, uh, driving, you know,

Cash flow from the business has us excited about what we can continue to do over the next coming years.

Thanks, appreciate that. And then on the follow-up, um, on on the use of capital, uh, the m&a, it was big in the quarter. The largest in about a couple years. Um, yep. So, the a couple parts to this uh, 1. What, what, what, multiple it looks like you did 2 acquisition, uh, and, and it looks like the, uh, the climate control storage was probably the bigger because you give a sense of, of size of each. And then kind of multiple paid, which I'm what I'm getting at is what is going to be the iba.com contribution from those in this year and and and going forward. And then the the follow up to all this is just um, you know, what are we going to see a lot more m&a over the balance of the year? Or is it going to be BuyBacks? What's the decision process there? Thanks.

Yeah, a couple of pieces to unpack there, so, I'll just talk. Yeah, portable was the, the bigger of the 2, uh, by by quite a bit, I'm not going to get into the specific uh, multiple that we paid, but I, I can't say in the quarter. It was about 3 million of Revenue contribution and and maybe a million, but that was only of ibida. But I was only a partial piece and similar to A&M. So we talked about this at investor day, right? This product category, um, is 1 where, you know, typically logistic margins are kind of at a, at a zero, you know, Break Even margin. And we see really big opportunities here using our internal, uh, our internal Logistics network, uh, to be able to

Really expand the margins in this business. So, um, it might be a little bit more than that average of 8%, but still, when you take the whole thing into consideration and you know what that synergies, you know, what you can do from a margin perspective, um, it kind of, you know, gets you back into a range that we've been comfortable with here in the past. Um, related to—I'm trying, Scott. I'm sorry, I'm, I'm, I'm missing this second part. No worries. It just, are we going to see a lot more acquisitions in the back half or, uh, or buybacks if you use the capital from here? Thanks.

Yeah, I think we'll look at all those capital allocation priorities. I mean, I mentioned in my prepared comments we continue to have a pipeline there, and there are several of those that could happen in the back half. But, you know, these things are never 100% predictable from a timing perspective, so we'll continue to look at all the options.

Thanks for all that, man. Appreciate it.

1 moment for our next question.

And that will come from the line of Andrew Whitman with a beard. Your line is open.

Great. Uh, thanks for taking my questions, guys. So I guess I wanted to drill in on the order book because I think this was one of the things that, um, last quarter was seen as a positive. I think you were saying at the time that the order book was like plus 7%, and if I didn't screw you in correctly, I think this quarter you said it's plus 1%. So I guess, um,

Is is is is this just a sign that the the economy is giving us kind of fits and starts? Or was there a seasonal Dynamic going on there? Um, I guess it's it's it's probably just catching people a little bit off guard, about kind of the, the change that happened there. And so I thought, maybe I'd give you a form to talk about that a little bit.

March and in the modular business, uh, we saw those order rates kind of plateau in the April and May time frame, so no deceleration, but no continued acceleration that you would, you know, typically expect in a, a seasonal Q2, uh, construction season in our business, so a little unusual, but still, as I zoom out in aggregate, um, strong and remaining up year-over-year. Uh, again, with strength on the, the complex side, which we've already talked about storage a little bit different. You had the same, um, acceleration to start the year. We did see the order rates, uh, decline, um, from April into may but have kind of stabilized for May into June. Uh, there's some noise in the storage side of the business Sandy just to do the timing of seasonal orders, which last year would have started coming in, uh, throughout the course of uh, uh,

July is when they really started to build and we're probably, you know, a few weeks behind that this year just based on, uh, some changes in the, uh, procurement process at a couple of the larger retailers, but I'm not not really concerned about that. Just given the engagement level is super high there. Um, so, uh, overall yes, the the magnitude of the, uh, difference versus prior year has come down a bit. Um, but that's a function of kind of how the the order rates have sequentially trended.

From, you know, January through July here.

Got it. Okay, thanks for that color. I I guess the other thing I wanted to uh talk about a little bit or have you talked about a little bit? Was the the this idea of the large projects and there's been a lot of questions on it, but I want to ask it this way. It, it's been now several years that the large projects have been um

Been the, the area of strength. And and in in fact, you said this quarter, there's still, uh, but as you look at the phasing of these large projects, which you said are, are typically longer in duration where where are these in the large project cycle are? Are are we is, is, are they, are they starting to ramp down? Or the is the total number of units on rent, for large projects, still going up in total? Um, or or is is are these starting to are? They've been in, in process long enough that some of these large projects are starting to roll off. I'm just trying to get a sense of of, of where those are in in the overall, I guess you'd say cycle, or I'd say cycle.

Yeah, it's, it's, uh, hard to put a a fine point on it. Andy, this is Tim, I would point to the Enterprise book that we've talked about with modular units on rent. Still up 4% year-over-year. So, yes, these projects are churning, uh, but there has been enough, new project activity, um, you know, in that 20% of our book that is the Enterprise portfolio, um, to drive, not only volume growth, but overall, overall Revenue growth, um, among those projects and as we go through our quarterly forecast,

Process that goes down to the the region and Market level. Um, the point of strength that we see in the business, uh, persisting into the second half is still being driven, um, by these these types of larger opportunities. So we haven't seen, uh, a deceleration there. We haven't seen a unit on rent um, uh inflection uh, downwards there. And um, it's, you know, a stronger part of the Outlook as we look into the second half of the Year. Yep.

Yep. Thanks.

Thank you. One moment for our next question.

And that will come from the line of Manov Patnick with Barkley. Is your line open?

Hi, this is Ronnie Kennedy. I'm from BANA. Thank you for taking my questions. Um, the updated guide references more clarity on interest rate policy and trade, but interest rate policy is still pretty uncertain, and trade policy is volatile. Um,

I mean, rate path policy is likely dependent on the effects of tariffs. I'm not asking you for a precise prognostication as to rates, but it's a two-part question, if I may. What is your outlook? What does your data tell you about the historical correlation between interest rates and demand? I get a third part. Matt said, if I'm not mistaken, that rates could help stimulate some incremental project activity. That was contemplated to a certain extent, but how should we think about it as we get...?

Outlook for a rate cut, and we're off to the races on the local projects, or is there a lag? Just some help with that, please.

Hey, Ron, thanks for the question. Uh, there's quite a bit of...

You know, some are saying, you know, one cut this year; some are saying no cuts. I mean, I think we'll see what it is, but I think the reality for this year is...

Um, and it's probably more in the 2026 where, you know, some forecasts have you know, 6, some have maybe even more than that of of uh, of rate Cuts. So it's not something I think that this year. You know, there might have been earlier in the year. Some thoughts that rates could come down but it's not seeming. Like it's going to be a significant impact to some of those smaller projects. So so we're looking more into into next year. Probably where where that's a stimulus. Um but you know the tax piece is 1 that you know we don't know yet, right? But how quickly can a project?

Start. I don't know if you have a shovel-ready project that you're just waiting for something; you know, maybe that could go quickly, but that's probably not typically the case. I think these both probably take a few quarters to stimulate some of that smaller project demand if things keep moving in that direction.

Yeah, Ron. And the only thing that I would add is back to my earlier comment about seasonality, right? We're already setting into the third quarter here, and we have the visibility, or lack thereof, that we have.

So, I think any improvement is likely to benefit 2026, potentially starting in kind of that March, April time frame. Yep. Just giving the normal kind of winter slowdown, if you will, with the construction starts.

Got it. Thank you. And then, uh, I think it was indicated you no longer expect.

The positive inflection in Ur. Um, so 2 2 part on this is, I may as well, if, if I'm not mistaken, there's a new chart with with what looks like a forecasted non-res square, footage starts for 2 H. Um, what informs forecast is that straight from Dodges forecast, is it consensus? That's right, and okay. Um, and when so when would you um,

Contemplate a potential inflection to positive UR.

Yeah, Ron, I don't think we have, um, you know, not in the, uh, the forecasting game related to non-res starts. Um, and we know that, you know, these are forecasts; this is not, you know, necessarily exactly what's going to happen. But if you look at the 2025 levels, um, you know, the second half is relatively consistent, at least from a forecast perspective from the last couple of years.

Um, and we haven't yet seen that turn, so, you know, we don't think it's based on what we know. Now we're pretty sure it probably doesn't happen by the end of the year this year. Um, but we're going to have to wait and see until we have a bit more clarity into 2026 on, you know, some of the things we just talked about. Um, and if those will drive us to inflection.

Got it. Thank you. I appreciate it.

Thank you. As a reminder, if you would like to ask a question, please press *11. Our next question will come from the line of Tim Moloney with William Blair. Your line is open.

Tim Matt, good afternoon.

Hey, Tim.

1, um, storage portable storage. We recently heard from another larger player in the space that shipment volumes on portable storage units are up.

I think they said up meaningfully in June and are showing positive trends heading into the second half of the year.

I'm curious if you noticed similar Trends and in your own storage business in in the in in the latter half of the quarter and how we should think about you you you are sequentially into the third quarter here and I'm talking specifically about portable storage thanks.

Tim, this is Tim Boswell. We did see sequential improvements in units on rents across the.

Storage portfolio within Q2, um, order rates year-over-year are still down, right? So I'm not, um, assuming that, um, we see significant continued sequential growth in Q3. But, you know, it's a shorter sales cycle in that business. So it's, uh, it's certainly possible and that can take you through kind of the.

Uh, that puts intakes in the in the Outlook if that's uh, helpful. But, you know, we saw modest sequential unit on rent Improvement in, um, uh, you know, up up through June in in the storage portfolio. So that not knowing exactly who you're referring to. That, that could be, uh, correlated.

Okay, yeah, no, that's helpful, Tim. And, Tim, while I got you just for my follow-up.

Bouncing around calls here. But I thought I heard you say, in your preparatory remarks or in your response to somebody else, something about.

Pricing was flat on new contracts, and I didn't know if you were referring specifically to...

modular, or

Something along those lines. Pricing flat on new contracts and Q. Remind me, what? What you were referring to? Maybe flesh that out a little bit. Thank you.

I remember it very clearly. I I was I was referring to the pricing on new contracts in the modular business. Um, being flat year-over-year, right? And actually value added products on new contracts are roughly flat flat as well. So, I see that as stable for sure. There are some puts and takes, as you, uh, zoom in by product category as there always are, you know, Flex for example, volumes and spot rates. Um are, uh, are all up here over here. Uh, ground level offices for ex in. Uh, for example, we've got a little more uh, spot rate pressure there. But when you mix all of the modular category together, you're you're in a a flat spot rate environment which uh, which is fine, given the focus on driving organic volume across the business right now. Um, so that's what we were referring to. And, and honestly, it's largely largely similar on the container side of the business. Also. Yep.

Understood, thank you very much.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Charlie Walter for any closing remarks.

All right. Thank you, Sheree, for your interest in WillScot and participation in today’s call. If you have additional questions, please feel free to contact me. We look forward to connecting with you at upcoming investor conferences or on our next earnings call. Thanks and have a great day.

Includes today's.