WillScot Holdings Corporation (WSC) Earnings

Management highlights

Operationally, the company is on track with network optimization efforts, including real estate and fleet dispositions. They are increasing work order volumes to drive unit availability and reduce lead times. Enhanced dispatch and route optimization tools are being rolled out across the field, improving utilization and customer experience. Focus is on improving service levels across all customer touchpoints, reducing cost to serve while maintaining a strong safety culture with a recordable incident rate below 0.5 for the last three months. The common denominator in successful outcomes is the people, with Will Scott recertified as a great place to work for the fourth consecutive year. Other commercial strategies like developing enterprise accounts, new verticals, and differentiated offerings show strong momentum, and the multi-year operational improvement roadmap is expected to drive differentiated execution capabilities and structural margin expansion.

Guidance

Based on first quarter performance and current order book visibility, the company is raising its full year 2026 outlook. Now expecting revenue of approximately $2.25 billion, adjusted EBITDA of approximately $915 million, and net capex of approximately $325 million. The increase in revenue and adjusted EBITDA reflects stronger than expected project activity and improved visibility into the middle of the year. Expect leasing revenues to inflect year-over-year at some point in the second half of 2026. Q2 total revenues are expected to increase about 7% sequentially to approximately $585 million, but Q2 margins are expected to be pressured by about 30 basis points sequentially from Q1.

Segment performance

Total revenue for the quarter was $549 million, modestly lower year over year due to lower sales activity but ahead of outlook. Leasing and services revenue was up year-over-year by $2 million, or about half a percent. Leasing revenue totaled $426 million, down approximately 2% year-over-year, with container unit on rent volumes driving most of the decline, but pricing and product mix offsetting some volume impacts. Delivery and installation revenue increased more than 12% year over year to $100 million. Modular unit activations increased 8% year over year in Q1. VAPS revenue in the quarter ticked up modestly year over year in absolute dollars and rose 50 basis points year over year to 17.7% of total revenue.

Risks & headwinds

Cautious around local market demand, as it remains a variable outside of control. There are potential delays in project starts for large projects, which are outside of the company's control. Variable market pricing pressures exist on certain product lines, such as ground-level office products.

Analyst Q&A

• Q: Discuss guidance and the anticipation of leasing revenue inflection in the back half, including factors that could put it earlier and concerns.

  A: Tim mentioned that the company hasn't assumed real improvement in local market activity and hasn't assumed continued erosion either. Activation growth is being driven by the enterprise accounts portfolio, but there's still work to be done on the local field sales org productivity. Project starts for large projects can be delayed, which is outside of control, but the team is huddling weekly on sourcing supply for major opportunities.

• Q: Talk about the second quarter outlook regarding margins, and the cadence of margins in the third and fourth quarters.

  A: Matt said there will be a bit of dilution into the second quarter sequentially, but he doesn't expect that to persist into Q3 and Q4. Q2, even without the World Cup, is generally a period with higher upfront costs, but exiting Q2, margin expansion is expected.

• Q: Address AMR rates, noting modular was up slightly year over year but sequentially down, and focus on base pricing.

  A: Andy said it's not attributable to enterprise accounts. Market pricing varies by product category, with ground-level office products having been under pressure but stabilizing, while complex business and flex are seeing good price momentum.

• Q: Inquire about order book growth, specifically for modular and storage.

  A: Tim said pending orders in modular are up 14% year-over-year, up 7% for storage, and climate-controlled pending orders are up 100% year-over-year.

• Q: Discuss returned units, particularly in the modular segment.

  A: Returns are subsiding, the first quarter was the best since 2022, and they are in line with the company's original plans for the year.

• Q: Ask about VAPS leasing revenue growth.

  A: The company expects VAPS leasing revenue to grow, needs to improve penetration, and new product introductions are contributing to its growth.

• Q: Talk about the mega project mix and D&I.

  A: Tim said larger projects have longer lead times and an involved setup/installation component, and D&I revenue mix is driving margin down.

• Q: Inquire about CapEx, specifically in VAPS.

  A: CapEx is demand-driven, going into the complex modular business associated with larger projects.

• Q: Discuss the local market and rate growth.

  A: The local market is stable, and rate growth varies by product, with a conservative approach on pricing.

• Q: Talk about the leasing revenue inflection, differentiating between modular and storage.

  A: Modular is showing inflection first due to volume headwind reduction.

• Q: Inquire about fleet disposition and its outlook for the next few quarters.

  A: Fleet count had no change, but there are real estate and other benefits from optimization.

• Q: Discuss data center growth.

  A: Tim said the data center vertical was up 70% in the quarter, and overall project activity is diverse across various sectors.

• Q: Talk about the allocation of sales resources between enterprise accounts and the local market.

  A: It's a combination of sales resource focus, market mix, and the company's competitive strengths.