WillScot Holdings Corp Q4 FY2024 earnings call

Strategic Changes in 2024 - Merged Mobile Mini and WillScot field sales and operations teams for better streamlined execution. - Finalized major systems integration and consolidated field service and dispatch platforms and teams. - Unified brand under WillScot and introduced enhanced digital marketing tools in Q3. - Solidified cold storage and clearspan structures platforms in 2024, with perimeter solutions added to in - house VAPS offering. ### 2025 Priorities - Core commercial execution: Introduced new digital marketing capabilities, improved CRM sales dashboard, upgraded pricing technology, and implemented new quote configuration tool; planning to add sales headcount in certain markets. - Commercializing new product categories: Cold storage and clearspan offerings are broadly available and expected to be meaningful run rate contributors by 2026. - Operations excellence: Renewed focus on optimizing logistics resources, streamlining order to cash workflow, and prioritizing initiatives based on customer surveys. - Human capital: Adding external talent, prioritizing training for sales team and general managers, and turning up performance management and accountability.

In 2024, WillScot delivered modest full - year revenue and adjusted EBITDA growth, with full - year revenue reaching $2.4 billion and adjusted EBITDA $1.063 billion. For the fourth quarter, total revenue was $603 million, down about 2% year - over - year, with leasing revenue down about 3%. Modular average monthly rental rates were up 6% year - over - year and storage average monthly rental rates were up 5% year - over - year. Adjusted EBITDA in the fourth quarter was $285 million with a margin of 47.3%. Cash provided by operating activities remained strong, with adjusted free cash flow of $137 million in the fourth quarter and $554 million for the full year 2024.

2025 Outlook - Anticipates $2.375 billion of revenue and $1.045 billion of adjusted EBITDA at midpoint. - Expects first quarter revenues to be down mid - single digits versus prior year. - Anticipates modest top - line growth in the second half of 2025 as average rates inclusive of VAPS and expanded product offerings offset volume - related headwinds. - Net CapEx guidance at midpoint for 2025 is $265 million, expecting free cash flow of about $500 million. - Programmatic tuck - in acquisitions remain a high priority for capital allocation, with current pipeline of potential acquisitions supporting continuation at past pace.

Risks - Business and operations subject to a variety of risks and uncertainties beyond control, including end market challenges, political and policy changes, higher - for - longer interest rates, and tariff implications. Actual results may differ materially from forward - looking statements.

Q: I wanted to go back to maybe the comments or the dynamics around net CapEx, which is a little bit higher year - over - year. I see kind of the outline in the slides as to what you're kind of investing in. But I was wondering if you could talk about this more longer term as we think about more kind of normalized business and in the absence of perhaps inorganic growth, what do you kind of see as the normal level of CapEx required to continue to drive your business in terms of percentage of sales and if you could think about that in terms of kind of maintenance and growth CapEx separately.

A: This is Matt. I'll address that. As we look at maintenance capital, based on the business right now, I think $200 million is a good general number to look at. We are investing in some other product areas. We have been this last year in 2024 as we are expanding cold. We're now for 2025 investing incrementally in cold, but also a bit more into clearspan and some of these other product development areas that Tim mentioned. Perimeter solutions will be one of those. A little bit of solar some of these other products, but I think $200 million is kind of that right range. And these other product categories for 2025 are really taken to that midpoint of a guide based on kind of a neutral, in kind of a neutral volume environment going forward. Obviously, at different ends of the range, depending on your volume assumptions, that'll ramp up or down.

Q: I wanted to just kind of speak a little bit to the 2024 to 2025 EBITDA bridge. I know there were some cost savings from past summer that carry through to next year on half contribution, which is probably a sizable component. And then we've heard a lot, you guys speak, about a lot of the investment. And then, of course, the macro is probably going to be a deciding factor. But could you just fill in the blanks there and maybe prioritize what are the swing factors? What are the main drivers on the year - over - year bridge to get you to the low end and the high end of your guide for 2025 EBITDA.

A: I'll probably talk to the midpoint first. That's probably a little bit more straightforward. As we look at where we're exiting the year, obviously, volume is down 5% in modular and 17% in storage. So we're starting with that headwind. On the modular side, rate and VAPS are offsetting most of that here in the first quarter. On storage, we're not making up the full 17%. So storage, as we go work our way through the year, we're starting with a headwind and we expect that to moderate a bit. So that's kind of more of the top line piece. Again, starting kind of flattish in modular, growing through the year, starting down in storage and working that back. On the cost side, maybe I'll talk sequentially from the fourth quarter, we did see in the second half of the year the benefits of the Q2 cost takeouts that we did. And as we look into 2025, we do have some variable compensation costs will come into 2025 as we have better performance from where we originally expected. We are making an investment here in the first quarter for a manual kind of company meeting that will drag that a little bit in the first quarter. And then as we talked about, we're starting to add additional sales resources to help drive organic growth in the business. So I think those are some of the bigger components. As you kind of look forward from current SG&A and what that looks like. At the end of the year, basically from a margin perspective, it's relatively in line, especially in the second half with a little bit of headwind, maybe here in the first half as I talked about.