WillScot Holdings Corp 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand WillScot Mobile Mini Holdings Corp. ("WillScot Mobile Mini"), formerly known as WillScot Corporation ("WillScot"), our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto, contained in Part I, Item 1 of this report. The discussion of results of operations in this MD&A is presented on a historical basis, as of or for the three and nine months ended September 30, 2021 or prior periods. On July 1, 2020, WillScot and Mobile Mini, Inc. (“Mobile Mini”) merged (the “Merger”). As the Merger was completed on July 1, 2020, unless the context otherwise requires, the terms “we”, “us”, “our” “Company” and “WillScot Mobile Mini” as used in these financial statements mean WillScot Corporation and its subsidiaries when referring to periods prior to July 1, 2020 (prior to the Merger) and to WillScot Mobile Mini when referring to periods on or after July 1, 2020 (after the Merger). The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US (“GAAP”). We use certain non-GAAP financial information that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends. Reconciliations of non-GAAP measures are provided in the Other Non-GAAP Financial Data and Reconciliations section. Executive Summary and Outlook We are a leading business services provider specializing in innovative flexible work space and portable storage solutions. We service diverse end markets across all sectors of the economy throughout the United States ("US"), Canada, Mexico and the United Kingdom ("UK"). We are also a leading provider of specialty containment solutions in the US with over 12,800 tank and pump units in our fleet. As of September 30, 2021, our branch network included approximately 275 branch locations and additional drop lots to service over 85,000 customers. We offer our customers an extensive selection of “Ready to Work” modular space and portable storage solutions with over 155,000 modular space units and over 205,000 portable storage units in our fleet. We primarily lease, rather than sell, our modular and portable storage units to customers, which results in a highly diversified and predictable recurring revenue stream. Over 90% of new lease orders are on our standard lease agreement, pre-negotiated master lease or national account agreements. The initial lease periods vary, and our leases are customarily renewable on a month-to-month basis after their initial term. Our lease revenue is highly predictable due to its recurring nature and the underlying stability and diversification of our lease portfolio. However, given that our customers value flexibility, they consistently extend their leases or renew on a month-to-month basis such that the average effective duration of our lease portfolio excluding seasonal portable storage units is nearly 30 months. We complement our core leasing business by selling both new and used units, allowing us to leverage scale, achieve purchasing benefits and redeploy capital employed in our lease fleet. Our customers operate in a diversified set of end markets, including construction, commercial and industrial, retail and wholesale trade, education, energy and natural resources, government, and healthcare. Core to our operating model is the ability to redeploy standardized assets across end markets, as we did in 2020 to service emerging demand in the healthcare and government sectors related to COVID-19, as well as expanded space requirements related to social distancing. We track several market leading indicators including those related to our two largest end markets, the commercial and industrial segment and the construction segment, which together accounted for over 85% of our revenues for the three months ended September 30, 2021. We remain focused on our core priorities of growing leasing revenues by increasing units on rent, both organically and through our consolidation strategy, delivering “Ready to Work” solutions to our customers with value added products and services ("VAPS"), and on continually improving the overall customer experience. 36 Significant Developments Mobile Mini Merger On July 1, 2020, we closed the Merger at which time Mobile Mini became a wholly-owned subsidiary of WillScot. Concurrent with the closing of the Merger, we changed our name to WillScot Mobile Mini Holdings Corp. We believe that the Merger is resulting in strategic and financial benefits by combining the two industry leaders in the complementary modular space and portable storage solutions markets. As part of the Merger, we planned to integrate the two companies' customer relationship management, operating, and financial systems. A significant portion of these efforts to date had been focused on the conversion of the combined company onto a single enterprise resource planning system, which was successfully completed during the second quarter of 2021. Other Acquisitions On September 17, 2021, the Company acquired certain assets and liabilities of three companies in the United States that focus primarily in the portable storage solutions market for $56.3 million in cash. The primary assets acquired included approximately 11,000 storage units and 400 modular units, the majority of which were on rent. See Note 2 to the condensed consolidated financial statements for further discussion. We continue to manage a pipeline of potential acquisition targets and anticipate that mergers and acquisitions will be a significant portion of our capital allocation priorities. Reportable Segments Following the Merger, we operate in four reporting segments: NA Modular, NA Storage, UK Storage, and Tank and Pump. Prior to the Merger, WillScot had two reporting segments, US Modular and Other North America Modular. These two segments were combined to create the NA Modular segment, which represents the legacy WillScot operations. The other segments, NA Storage, UK Storage, and Tank and Pump, align to the legacy operations and segments reported by Mobile Mini. The reporting segments are aligned with how we operate and analyze our business results. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2021 were transferred to the NA Storage segment. Financing Activities On March 26, 2021, we redeemed $65.0 million of our 6.125% senior secured notes due 2025 (the “2025 Secured Notes”) at a redemption price of 103.0%, plus accrued and unpaid interest. This repayment was funded by internally generated cash flow and lower cost borrowings under the 2020 ABL facility. Upon redemption in the first quarter of 2021, we recorded a loss on extinguishment of debt in the condensed consolidated statement of operations of $3.2 million comprised of a redemption premium of $1.9 million and write off of unamortized deferred financing fees of $1.3 million. On June 16, 2021, we redeemed an additional $58.5 million of our 2025 Secured Notes at a redemption price of 103.0%, plus accrued and unpaid interest. This repayment was funded by internally generated cash flow and lower cost borrowings under the 2020 ABL facility. Upon redemption in the second quarter of 2021, we recorded a loss on extinguishment of debt in the condensed consolidated statement of operations of $2.8 million comprised of a redemption premium of $1.8 million and write off of unamortized deferred financing fees of $1.0 million. Share and Warrant Repurchases On March 1, 2021, we repurchased and cancelled 2,750,000 shares of our Common Stock directly from Sapphire Holding S.à r.l. (“Sapphire Holdings”), our largest shareholder at that time, which is controlled by TDR Capital LLP (“TDR Capital”), for $73.7 million. On June 29, 2021, we repurchased and cancelled an additional 3,900,000 shares of our Common Stock directly from Sapphire Holdings for $108.2 million. On September 9, 2021, we repurchased and cancelled an additional 2,379,839 shares of our Common Stock directly from Sapphire Holdings for $67.1 million. During the nine months ended September 30, 2021, we repurchased and cancelled 3,055,000 2015 Private Warrants for $25.5 million. In addition, during the nine months ended September 30, 2021, 9,655,000 2015 Private Warrants were exercised on a cashless basis, resulting in the issuance of 2,939,898 shares of Common Stock. As a result of these transactions, no 2015 Private Warrants were outstanding as of September 30, 2021. During the nine months ended September 30, 2021, we repurchased and cancelled 223,310 2018 Warrants for $2.3 million. In addition, during the nine months ended September 30, 2021, 2,981,195 of the 2018 Warrants were exercised on a cashless basis, resulting in the issuance of 1,372,548 shares of common stock. At September 30, 2021, 6,525,736 of the 2018 Warrants were outstanding. During the nine months ended September 30, 2021, we repurchased a total of 11,656,552 shares of Common Stock and stock equivalents for $322.6 million, including the shares repurchased from Sapphire Holdings and all repurchased warrants. As of September 30, 2021, we had $142.2 million remaining of a $500.0 million share repurchase authorization under our stock repurchase program. Given the predictability of our free cash flow, we believe that repurchases will be a reoccurring capital allocation priority. In October of 2021, the Company's Board of Directors replaced the existing share repurchase program with a new share repurchase program that authorizes the Company to repurchase up to $1.0 billion of its outstanding shares of Common Stock and equivalents. 37 COVID-19 Impact on Business Since the outbreak of COVID-19 was designated as a global pandemic by the World Health Organization (the “WHO”) in March 2020, our operations have generally continued to operate normally with additional safety protocols in place as we have been considered an essential business in most jurisdictions. The global macroeconomic backdrop and impact on our end markets has evolved rapidly since the beginning of 2020. However, overall our lease portfolio and financial results have proven to be durable and predictable despite the severity of the economic contraction in 2020 and the current expansion in 2021. On a pro forma basis, our deliveries were down 25% in the second quarter of 2020 year over year and 13% in the third quarter of 2020 year over year due to COVID-19 related economic contraction in our largest geographic markets. This reduced delivery demand slowed the growth of our leasing revenues as well as our delivery and installation revenues. However, we successfully implemented significant variable cost and capital expenditure reductions to help offset the financial impact of the temporarily reduced activity levels. Importantly, due to our long lease durations, the majority of our gross profit in any given period is from units already out on rent. This gives us significant forward visibility into our future cash flows, which allows us to plan ahead and adjust our capital expenditures and cost structure for varying demand levels. As expected, our portfolio of units already out on rent at the onset of the pandemic was resilient and largely unimpacted, despite the unprecedented swings in economic activity in 2020. Activity levels in the fourth quarter of 2020 and the first half of 2021 stabilized, and our volume of new lease activations grew significantly in the second quarter of 2021 as economic activity rebounded sharply with modular deliveries across our NA Modular and NA Storage segments up a combined 9% over 2020 levels and storage product deliveries across these two segments up a combined 39% over 2020 levels and on par with 2019 pro forma activity levels. This recovery continued in the third quarter of 2021 and for the three months ended September 30, 2021, both modular and storage product deliveries across our NA Modular and NA Storage segments were up a combined 6% over 2020 levels. Overall, while new lease activation volumes over the past seven quarters were impacted in line with the swings in economic activity, our lease revenue streams were stable and predictable and remain on an attractive upward long-term trajectory, which is a direct reflection of the diversification in our end markets, our long lease durations, and the success of the organic growth initiatives that we are executing. Third Quarter Highlights For the three months ended September 30, 2021, key drivers of our financial performance included: • Total revenues increased by $73.3 million, or 17.6%. Leasing revenue increased $63.3 million, or 21.1%, delivery and installation revenue increased $15.0 million, or 17.7%, rental unit sales decreased $1.6 million, or 12.1%, and new sales revenue decreased $3.5 million, or 18.0%. Key leasing revenue drivers include: – Average portable storage units on rent increased 19,408 units, or 13.5%, and average modular space units on rent decreased 1,395 units, or 1.3%. The increase in average portable storage units on rent was driven by significant increases in delivery activity during 2021 as economic activity rebounded versus 2020 more quickly across portable storage units than modular space units. – Average modular space monthly rental rate increased $127, or 19.8%, to $767 driven by strong pricing performance across all relevant segments. Average modular space monthly rental rates increased by $141, or 20.3%, in the NA Modular segment, by $97, or 19.2%, in the NA Storage segment, and by $98, or 27.5% in the UK Storage segment. – Average portable storage monthly rental rate increased $14, or 10.7%, to $145 driven by increased pricing as a result of our price management tools and processes, further supported by tight supply on portable storage containers in the markets in which we operate. – Average utilization for portable storage units increased to 83.9% from 73.2% for the same period in 2020 driven by increased demand in 2021 as compared to the same period in 2020. Average utilization for modular space units decreased 50 basis points ("bps") to 70.1%. • NA Modular segment revenue, which represents 61.0% of consolidated revenue for the three months ended September 30, 2021, increased $31.2 million, or 11.6%, to $299.1 million. The increase was driven by our core leasing revenue, which grew $27.5 million, or 14.3%, due to continued growth of pricing and value added products. Delivery and installation revenues increased $5.9 million, or 11.3%, driven by increased demand for new project deliveries as compared to 2020, which was significantly impacted by slowdowns associated with COVID-19. The increases to leasing revenue and delivery and installation revenues were partially offset by declines in revenues for portable storage units as the result of transitioning the majority of the portable storage product business within the NA Modular segment to the NA Storage segment. Rental unit sales decreased $1.8 million, or 18.8%, and new unit sales decreased $0.5 million, or 3.6%. NA Modular revenue drivers for the three months ended September 30, 2021 included: 38 – Modular space average monthly rental rate of $834, increased 20.3% year over year representing a continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio. – Average modular space units on rent decreased 2,182, or 2.5%, year over year driven by lower deliveries during 2020 as a result of the COVID-19 pandemic. Sequentially from June 30, 2021, modular space units on rent increased approximately 700 units, or 0.8% during the third quarter. – Average modular space monthly utilization decreased 70 bps to 67.6% for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020. Sequentially from the second quarter, average modular utilization decreased 10 bps, however end of period utilization increased over 100 bps from June 30, 2021 to September 30, 2021. • NA Storage segment revenue, which represents 27.3% of consolidated revenue for the three months ended September 30, 2021, increased $29.4 million, or 28.1%, to $133.9 million. The increase was driven by our core leasing revenue, which grew $24.2 million, or 31.4%, due to increased units on rent driven by significant increases in delivery activity during 2021 as economic activity rebounded versus 2020, and increased pricing. Delivery and installation revenues increased $7.4 million, or 35.4%, driven by increased demand for new project deliveries as compared to 2020, which was significantly impacted by slowdowns associated with COVID-19. The increases to leasing revenue and delivery and installation revenues in the NA Storage segment were also impacted as the result of transitioning the majority of the portable storage product business within the NA Modular segment to the NA Storage segment. Rental unit sales increased $0.3 million, or 10.7%, and new unit sales decreased $2.5 million, or 65.8%. NA Storage revenue drivers for the three months ended September 30, 2021 included: • Portable storage average monthly rental rate of $155, increased 6.9% year over year as a result of our price management tools and processes, further supported by tight supply on portable storage containers in the markets in which we operate. Modular space average monthly rental rate of $602, increased 19.2% year over year as a result of price optimization and early benefits from increased VAPS penetration opportunities. • Average portable storage units on rent increased 31,902, or 30.3%, year over year driven by significant increases in delivery activity during 2021 as economic activity rebounded versus 2020. NA Storage portable storage units on rent also increased as a result of the transitioning of the majority of the portable storage product business within the NA Modular segment to the NA Storage segment during the third quarter, which represented the transfer of approximately 12,000 units on rent. Combined, average portable storage units on rent for the NA Storage and NA Modular segments increased approximately 16,922 units, or 14.0%. Given the timing of acquisitions during the quarter, acquisition units did not have a material impact on average units on rent. Average modular space units on rent were essentially flat year over year. • Average portable storage monthly utilization increased 980 bps to 83.2% for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020. Average modular space monthly utilization decreased 280 bps to 77.6% for three months ended September 30, 2021, as compared to the three months ended September 30, 2020. • Generated consolidated net income of $61.1 million for the three months ended September 30, 2021. Net Income Excluding Gain/Loss from Warrants of $61.1 million for the three months ended September 30, 2021 represented an increase of $44.8 million versus the three months ended September 30, 2020, and included $11.1 million of discrete costs expensed in the period related to merger integration activities. Discrete costs in the period included $8.6 million of integration and transaction costs and $2.5 million of restructuring costs, lease impairment expense and other related charges. • Adjusted EBITDA of $190.1 million for the three months ended September 30, 2021 represented an increase of $26.5 million, or 16.2%, as compared to the same period in 2020. This increase was driven primarily by increased leasing gross profit. • Consolidated Adjusted EBITDA Margin was 38.8% in the third quarter of 2021 and decreased 50 bps versus prior year driven by an expected higher proportion of delivery and installation revenues to total revenues and increased variable costs as a result of higher activity levels in the current year quarter. • Generated Free Cash Flow of $78.5 million for the three months ended September 30, 2021 representing an increase of $50.5 million as compared to the same period in 2020. Net cash provided by operating activities increased $69.0 million to $130.4 million. Net cash used in investing activities increased by $18.7 million to support increases in delivery activity during 2021 as economic activity rebounded versus 2020. • Returned $106.3 million to shareholders through stock and warrant repurchases and closed three acquisitions totaling approximately 11,000 storage units and 400 modular units for $56.3 million in cash during the three months ended September 30, 2021. The predictability of our free cash flow allows us to pursue multiple capital allocation priorities opportunistically, including investing in organic opportunities we see in the market, continuing our deleveraging trajectory, opportunistically executing accretive acquisitions, and returning capital to shareholders. 39 Consolidated Results of Operations Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020 Our condensed consolidated statements of operations for the three months ended September 30, 2021 and 2020 are presented below. The below results only include Mobile Mini for the periods subsequent to the Merger: Three Months Ended September 30, 2021 vs. 2020 $ Change (in thousands) 2021 2020 Revenues: Leasing and services revenue: Leasing $ 363,396 $ 300,082 $ 63,314 Delivery and installation 99,699 84,694 15,005 Sales revenue: New units 15,860 19,360 (3,500) Rental units 11,597 13,179 (1,582) Total revenues 490,552 417,315 73,237 Costs: Costs of leasing and services: Leasing 82,448 64,788 17,660 Delivery and installation 80,991 66,354 14,637 Costs of sales: New units 11,499 12,935 (1,436) Rental units 5,603 8,837 (3,234) Depreciation of rental equipment 56,462 54,837 1,625 Gross profit 253,549 209,564 43,985 Expenses: Selling, general and administrative 133,424 112,079 21,345 Transaction costs 303 52,191 (51,888) Other depreciation and amortization 18,814 16,867 1,947 Lease impairment expense and other related charges 601 944 (343) Restructuring costs 1,856 3,854 (1,998) Currency losses (gains), net 127 (371) 498 Other expense (income), net 1,476 (1,012) 2,488 Operating income 96,948 25,012 71,936 Interest expense 29,201 33,034 (3,833) Fair value loss on common stock warrant liabilities — 22,303 (22,303) Loss on extinguishment of debt — 42,401 (42,401) Income (loss) before income tax 67,747 (72,726) 140,473 Income tax expense (benefit) 6,644 (66,675) 73,319 Net income (loss) attributable to WillScot Mobile Mini $ 61,103 $ (6,051) $ 67,154 Comparison of Three Months Ended September 30, 2021 and 2020 Revenue: Total revenue increased $73.3 million, or 17.6%, to $490.6 million for the three months ended September 30, 2021 from $417.3 million for the three months ended September 30, 2020. Leasing revenue increased $63.3 million, or 21.1%, as compared to the same period in 2020 driven by improved pricing and value added products, and an increase of 19,408 average portable storage units on rent driven by significant increases in delivery activity during 2021 across portable storage units as economic activity rebounded versus 2020. Delivery and installation revenues increased $15.0 million, or 17.7%, due to increased overall activity across all of our segments. Rental unit sales decreased $1.6 million, or 12.1%, and new unit sales decreased $3.5 million, or 18.0%. Total average units on rent for the three months ended September 30, 2021 and 2020 were 273,080 and 255,067, respectively, representing an increase of 18,013, or 7.1%. Portable storage average units on rent increased by 19,408 units, or 40 13.5%, for the three months ended September 30, 2021 driven by strong delivery growth in 2021 as a result of increased economic activity versus 2020. The average portable storage unit utilization rate during the three months ended September 30, 2021 was 83.9%, as compared to 73.2% during the same period in 2020. Modular space average units on rent decreased 1,395 units, or 1.3%, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 driven by lower deliveries during 2020 as a result of the COVID-19 pandemic and delivery activity in 2021 has not rebounded as significantly for modular products as it has for portable storage products. The average modular space unit utilization rate during the three months ended September 30, 2021 was 70.1%, as compared to 70.6% during the same period in 2020. Modular space average monthly rental rates increased 19.8% to $767 for the three months ended September 30, 2021. Improved pricing was achieved across all relevant segments. Average modular space monthly rental rates increased by $141, or 20.3%, to $834 in the NA Modular segment, by $97, or 19.2%, in the NA Storage segment, and by $98, or 27.5% in the UK Storage segment. Increases were driven by a continuation of the long-term price optimization and VAPS penetration opportunities across our NA Modular segment as well as by some early application of these same price management tools and processes across the NA Storage and UK Storage segments. NA Storage also is beginning to see early benefits from increased VAPS penetration opportunities. Average portable storage monthly rental rates increased 10.7% to $145 for the three months ended September 30, 2021 driven by our price management tools and processes, further supported by tight supply on portable storage containers in the markets in which we operate. Gross Profit: Our gross profit percentage was 51.7% and 50.2% for the three months ended September 30, 2021 and 2020, respectively. Our gross profit percentage, excluding the effects of depreciation, was 63.2% and 63.4% for the three months ended September 30, 2021 and 2020, respectively. Gross profit increased $44.0 million, or 21.0%, to $253.5 million for the three months ended September 30, 2021 from $209.6 million for the three months ended September 30, 2020. The increase in gross profit is a result of a $45.7 million increase in leasing gross profit and increased delivery and installation gross profit of $0.4 million, partially offset by decreased new and rental unit sale margins of $0.5 million. Increases were primarily a result of increased revenues due to favorable average monthly rental rates across both portable storage and modular space units, as well as due to increased portable storage units on rent, partially offset by increased variable costs during the period as a result of increased delivery activity. Depreciation increased $1.6 million as a result of capital investments made over the past twelve months in our existing rental equipment. SG&A: Selling, general and administrative ("SG&A") increased $21.3 million, or 19.0%, to $133.4 million for the three months ended September 30, 2021, compared to $112.1 million for the three months ended September 30, 2020. Approximately $6.9 million of the increase is related to variable compensation and commissions related to increased delivery activity and financial performance with other increases in occupancy costs, insurance costs, and increased travel and entertainment costs as travel reopened a bit more as compared to 2020. Additionally, as a result of the Merger and the related integration, integration costs increased $1.1 million to $8.2 million for the three months ended September 30, 2021, compared to $7.1 million for the three months ended September 30, 2020, and stock compensation expense increased $3.4 million to $6.3 million for the three months ended September 30, 2021, compared to $2.9 million for the three months ended September 30, 2020. Transaction Costs: Transaction costs decreased from $52.2 million for the three months ended September 30, 2020 to $0.3 million for the three months ended September 30, 2021. Transaction costs for the three months ended September 30, 2020 were related to the Merger which closed on July 1, 2020. Other Depreciation and Amortization: Other depreciation and amortization increased $1.9 million to $18.8 million for the three months ended September 30, 2021 compared to $16.9 million for the three months ended September 30, 2020. The increase was driven by increased depreciation as a result of our recent investments in our enterprise resource planning system and other infrastructure investments across our branch network. Lease Impairment Expense and Other Related Charges: Lease impairment expense and other related charges was $0.6 million for the three months ended September 30, 2021 as compared to $0.9 million for the three months ended September 30, 2020. Restructuring Costs: In the three months ended September 30, 2021, the Company had $1.9 million of restructuring costs. In the three months ended September 30, 2020, the Company had $3.9 million of restructuring costs. Restructuring costs in both periods were primarily driven by employee termination costs as a result of the elimination of positions due to the Merger. Currency Losses (Gains), net: Currency losses, net changed by $0.5 million to a $0.1 million loss for the three months ended September 30, 2021 from a $0.4 million gain for the three months ended September 30, 2020. This change was primarily attributable to the impact of foreign currency exchanges rate changes on intercompany receivables and payables denominated in a currency other than the subsidiary's functional currency. Other Expense (Income), Net: Other expense (income), net was expense of $1.5 million for the three months ended September 30, 2021 compared to income of $1.0 million for the three months ended September 30, 2020. Other expense, net 41 of $1.5 million for the three months ended September 30, 2021 is primarily related to losses incurred related to Hurricane Ida in the Gulf Coast area of the United States, and other income, net of $1.0 million for the three months ended September 30, 2020 reflected the reversal of a non-income tax liability of $1.3 million. Interest Expense: Interest expense decreased $3.8 million, or 11.5%, to $29.2 million for the three months ended September 30, 2021 from $33.0 million for the three months ended September 30, 2020. The decrease in interest expense is a result of the lower overall weighted average interest rates as a result of our financing activities. See Note 9 to the condensed consolidated financial statements for further discussion of our debt. Fair Value Loss on Common Stock Warrant Liabilities: The fair value loss on common stock warrant liabilities was a $22.3 million loss for the three months ended September 30, 2020. The loss for the three months ended September 30, 2020 was primarily due to the change in estimated fair value of common stock warrant liabilities. At September 30, 2021, no 2015 Public or Private Warrants were outstanding, and as a result, there was no fair value loss on common stock warrant liabilities recorded for the three months ended September 30, 2021. At September 30, 2021, 6,525,736 2018 Warrants were outstanding and classified as a component of equity, therefore, we will not reflect a common stock warrant liability on our balance sheet or related income or expense from changes in fair value on our statement of operations in the future. Loss on Extinguishment of Debt: During the three months ended September 30, 2020, as a result of the Merger and the related financing transactions, we recorded a loss on extinguishment of debt of $42.4 million. This loss was comprised of the redemption premium and write off of unamortized deferred financing costs associated with the following: (i) $15.2 million due to the redemption of the 2022 Secured Notes, (ii) $22.7 million due to the redemption of the 2023 Secured Notes, and (iii) $4.4 million associated with the 2017 ABL Facility. Income Tax Expense: Income tax expense increased $73.3 million to an expense of $6.6 million for the three months ended September 30, 2021 compared to a benefit of $66.7 million for the three months ended September 30, 2020. The increase in expense was driven by pre-tax income increase for the three months ended September 30, 2021. Additionally, a $54.1 million tax benefit was recorded in three months ended September 30, 2020 due to the reversal of the Company's valuation allowance after the Merger. 42 Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020 Our condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020 are presented below. The below results only include Mobile Mini for the periods subsequent to the Merger: Nine Months Ended September 30, 2021 vs. 2020 $ Change (in thousands) 2021 2020 Revenues: Leasing and services revenue: Leasing $ 1,022,237 $ 678,577 $ 343,660 Delivery and installation 274,883 187,404 87,479 Sales revenue: New units 37,823 38,736 (913) Rental units 42,034 25,281 16,753 Total revenues 1,376,977 929,998 446,979 Costs: Costs of leasing and services: Leasing 235,375 162,344 73,031 Delivery and installation 228,280 153,742 74,538 Costs of sales: New units 25,660 25,469 191 Rental units 22,870 16,446 6,424 Depreciation of rental equipment 175,053 146,279 28,774 Gross profit 689,739 425,718 264,021 Expenses: Selling, general and administrative 372,296 241,269 131,027 Transaction costs 1,147 63,241 (62,094) Other depreciation and amortization 58,760 22,824 35,936 Lease impairment expense and other related charges 2,328 3,999 (1,671) Restructuring costs 11,958 4,543 7,415 Currency losses, net 196 147 49 Other expense (income), net 207 (1,757) 1,964 Operating income 242,847 91,452 151,395 Interest expense 88,377 89,810 (1,433) Fair value loss (gain) on common stock warrant liabilities 26,597 (46,063) 72,660 Loss on extinguishment of debt 5,999 42,401 (36,402) Income before income tax 121,874 5,304 116,570 Income tax expense (benefit) 35,953 (66,170) 102,123 Net income 85,921 71,474 14,447 Net income attributable to non-controlling interest, net of tax — 1,213 (1,213) Net income attributable to WillScot Mobile Mini $ 85,921 $ 70,261 $ 15,660 43 Comparison of Nine Months Ended September 30, 2021 and 2020 Revenue: Total revenue increased $447.0 million, or 48.1%, to $1,377.0 million for the nine months ended September 30, 2021 from $930.0 million for the nine months ended September 30, 2020. The increase was driven by the addition of Mobile Mini's revenues to our consolidated results for the full year, as well as by increased activity in the third quarter of 2021. The Merger closed on July 1, 2020, and the addition of Mobile Mini's results for the first and second quarter of 2021 drove a $330.8 million year over year increase. Leasing revenue increased $343.7 million, or 50.6%, as compared to the same period in 2020 driven by an increase of 109,542 average modular space and portable storage units on rent as a result of the Merger and increased economic activity, and improved pricing and value added products in our NA Modular segment. Delivery and installation revenues increased $87.5 million, or 46.7%, due to increased overall activity as a result of the Merger and increased activity in 2021. Rental unit sales increased $16.8 million, or 66.4%, and new unit sales decreased $0.9 million, or 2.3%. Total average units on rent for the nine months ended September 30, 2021 and 2020 were 263,664 and 154,122, respectively. The increase was due to units acquired as part of the Merger, and increased units on rent year over year in the third quarter on portable storage units. In total, modular space average units on rent increased 14,779 units, or 15.5%, for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. Modular space average monthly rental rates increased 11.3% to $727 for the nine months ended September 30, 2021. Portable storage average units on rent increased by 94,763 units, or 161.5%, for the nine months ended September 30, 2021 driven by units acquired as part of the Merger and increased units on rent year over year in the third quarter. Average portable storage monthly rental rates increased 8.5% to $140 for the nine months ended September 30, 2021 driven by the accretive impact of higher rates from the Mobile Mini portable storage fleet and year over year increases during the third quarter. The average modular space unit utilization rate during the nine months ended September 30, 2021 was 70.2%, as compared to 69.8% during the same period in 2020. This increase was driven by higher utilization on units acquired as part of the Merger. The average portable storage unit utilization rate during the nine months ended September 30, 2021 was 78.7%, as compared to 71.3% during the same period in 2020. The increase in average portable storage utilization rate was driven by higher utilization on the acquired Mobile Mini units and continued improvement in portable storage utilization rates year over year in the third quarter. Gross Profit: Our gross profit percentage was 50.1% and 45.8% for the nine months ended September 30, 2021 and 2020, respectively. Our gross profit percentage, excluding the effects of depreciation, was 62.8% and 61.5% for the nine months ended September 30, 2021 and 2020, respectively. Gross profit increased $264.0 million, or 62.0%, to $689.7 million for the nine months ended September 30, 2021 from $425.7 million for the nine months ended September 30, 2020. The increase in gross profit is a result of a $270.6 million increase in leasing gross profit, increased delivery and installation gross profit of $12.9 million, and increased new and rental unit sale margins of $9.2 million. Increases in all were primarily a result of increased revenues due to the Merger and due to favorable average monthly rental rates on modular space and portable storage units, as well as favorable year over year volumes on portable storage units in the third quarter. Depreciation increased to $175.1 million as a result of fleet acquired in the Merger and capital investments made in our existing rental equipment. SG&A: Selling, general and administrative ("SG&A") increased $131.0 million, or 54.3%, to $372.3 million for the nine months ended September 30, 2021, compared to $241.3 million for the nine months ended September 30, 2020. The primary driver of the increase is related to additional SG&A costs related to operating a larger business as a result of the Merger. The Merger closed on July 1, 2020, and SG&A costs included in Adjusted EBITDA for the NA Storage, UK Storage, and Tank and Pump segments in the first and second quarters of 2021 drove $89.9 million of the year over year increase. Additionally, as a result of the Merger and the related integration, integration costs increased $12.3 million to $23.2 million for the nine months ended September 30, 2021, compared to $10.9 million for the nine months ended September 30, 2020 and stock compensation expense increased $7.5 million to $14.5 million for the nine months ended September 30, 2021, compared to $7.0 million for the nine months ended September 30, 2020. The primary driver of the remaining increases are related to additional SG&A costs related to increased economic activity, including increased employee and occupancy costs, insurance costs, and increased travel and entertainment costs as travel reopened a bit more as compared to 2020. Transaction Costs: Transaction costs decreased $62.1 million to $1.1 million for the nine months ended September 30, 2021 compared to $63.2 million for the nine months ended September 30, 2020. Transaction costs for the nine months ended September 30, 2020 were related to the Merger which closed on July 1, 2020. Other Depreciation and Amortization: Other depreciation and amortization increased $36.0 million to $58.8 million for the nine months ended September 30, 2021 compared to $22.8 million for the nine months ended September 30, 2020 driven by increased depreciation and amortization as a result of property, plant and equipment and intangible assets acquired in the Merger and our recent investments in our enterprise resource planning system, and the amortization of the customer relationship intangible assets acquired in the Merger. Lease Impairment Expense and Other Related Charges: Lease impairment expense and other related charges was $2.3 million for the nine months ended September 30, 2021 as compared to $4.0 million for the nine months ended September 30, 2020. 44 Restructuring Costs: In the nine months ended September 30, 2021, the Company had $12.0 million of restructuring costs primarily as a result of employee termination costs from the elimination of positions due to the Merger. $7.2 million of the employee termination costs were settled in stock, which is non-cash and non-recurring and not included in stock compensation expense. In the nine months ended September 30, 2020, $4.5 million of restructuring costs were primarily due to employee termination costs as a result of the Merger and, to a lesser extent, reductions in force across our branch network in response to COVID-19 economic conditions. Currency Losses, Net: Currency losses, net increased by $0.1 million to a $0.2 million loss for the nine months ended September 30, 2021 from a $0.1 million loss for the nine months ended September 30, 2020. This increase was primarily attributable to the impact of foreign currency exchanges rate changes on intercompany receivables and payables denominated in a currency other than the subsidiary's functional currency. Other Expense (Income), Net: Other expense (income), net was $0.2 million of expense for the nine months ended September 30, 2021 compared to $1.8 million of income for the nine months ended September 30, 2020. Other income, net of $1.8 million for the nine months ended September 30, 2020 was primarily related to the reversal of a non-income tax liability of $2.5 million. Interest Expense: Interest expense decreased $1.4 million to $88.4 million for the nine months ended September 30, 2021 from $89.8 million for the nine months ended September 30, 2020. The decrease in interest expense was a result of the lower overall weighted average interest rates as a result of our financing activities. See Note 9 to the condensed consolidated financial statements for further discussion of our debt. Fair Value Loss (Gain) on Common Stock Warrant Liabilities: The fair value loss (gain) on common stock warrant liabilities increased $72.7 million to a $26.6 million loss for the nine months ended September 30, 2021 from a $46.1 million gain for the nine months ended September 30, 2020. The increase was primarily due to the change in estimated fair value of common stock warrant liabilities. At September 30, 2021, no 2015 Public or Private Warrants remain outstanding. At September 30, 2021, 6,525,736 2018 Warrants were outstanding and classified as a component of equity, therefore, we will not reflect a common stock warrant liability on our balance sheet or related income or expense from changes in fair value on our statement of operations in the future. Loss on Extinguishment of Debt: During the nine months ended September 30, 2021, we redeemed $123.5 million of the outstanding principal of our 2025 Secured Notes and recorded a loss on extinguishment of debt of $6.0 million comprised of a redemption premium of $3.7 million and write off of unamortized deferred financing fees of $2.3 million. As a result of the Merger and the related financing transactions, we recorded a loss on extinguishment of debt of $42.4 million in the nine months ended September 30, 2020. This loss on extinguishment of debt was comprised of the redemption premium and write off of unamortized deferred financing costs associated with the following: (i) $15.2 million due to the redemption of the 2022 Secured Notes, (ii) $22.7 million due to the redemption of the 2023 Secured Notes, and (iii) $4.4 million associated with the 2017 ABL Facility. Income Tax Expense: Income tax expense increased $102.2 million to expense of $36.0 million for the nine months ended September 30, 2021 compared to a benefit of $66.2 million for the nine months ended September 30, 2020. The increase in expense was driven by pre-tax income increase for the nine months ended September 30, 2021. Additionally, a $56.8 million tax benefit was recorded in nine months ended September 30, 2020 due to the reversal of the Company's valuation allowance after the merger with Mobile Mini. Business Segment Results The Company operates in four reportable segments as follows: NA Modular, NA Storage, UK Storage and Tank and Pump. The NA Modular segment represents the activities of WillScot prior to the Merger. The NA Storage, UK Storage and Tank and Pump segments align to the three segments reported by Mobile Mini prior to the Merger. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2021 were transferred to the NA Storage segment, representing a shift of approximately $5.0 million of revenue and gross margin per quarter from the NA Modular segment to the NA Storage segment. This adjustment was not made to the historical segment results of prior periods, given its relative immateriality. The following tables and discussion summarize our reportable segment financial information for the three and nine months ended September 30, 2021 and 2020. The below results only include Mobile Mini for the periods subsequent to the Merger. A Summary Business Segment Supplemental Unaudited Pro Forma Financial Information section has been included in this MD&A in order to provide period over period comparable financial information for the NA Storage, UK Storage and Tank and Pump reporting segments as these segments were not included in our reported results for the first six months of 2020. 45 Comparison of Three Months Ended September 30, 2021 and 2020 Three Months Ended September 30, 2021 (in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Tank and Pump Total Revenue $ 299,051 $ 133,897 $ 28,099 $ 29,505 $ 490,552 Gross profit $ 127,854 $ 92,496 $ 18,876 $ 14,323 $ 253,549 Adjusted EBITDA $ 106,825 $ 59,123 $ 13,255 $ 10,946 $ 190,149 Capital expenditures for rental equipment $ 31,789 $ 11,920 $ 11,649 $ 5,016 $ 60,374 Average modular space units on rent 84,218 16,316 9,298 — 109,832 Average modular space utilization rate 67.6 % 77.6 % 83.4 % — % 70.1 % Average modular space monthly rental rate $ 834 $ 602 $ 454 $ — $ 767 Average portable storage units on rent 493 137,123 25,632 — 163,248 Average portable storage utilization rate 48.0 % 83.2 % 89.1 % — % 83.9 % Average portable storage monthly rental rate $ 179 $ 155 $ 90 $ — $ 145 Average tank and pump solutions rental fleet utilization based on original equipment cost — % — % — % 74.8 % 74.8 % Three Months Ended September 30, 2020 (in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Tank and Pump Total Revenue $ 267,867 $ 104,493 $ 21,653 $ 23,302 $ 417,315 Gross profit $ 112,079 $ 73,384 $ 12,671 $ 11,430 $ 209,564 Adjusted EBITDA $ 100,281 $ 46,465 $ 8,306 $ 8,507 $ 163,559 Capital expenditures for rental equipment $ 34,249 $ 7,234 $ 677 $ 431 $ 42,591 Average modular space units on rent 86,400 16,383 8,444 — 111,227 Average modular space utilization rate 68.3 % 80.4 % 79.1 % — % 70.6 % Average modular space monthly rental rate $ 693 $ 505 $ 356 $ — $ 640 Average portable storage units on rent 15,473 105,221 23,146 — 143,840 Average portable storage utilization rate 61.3 % 73.4 % 83.2 % — % 73.2 % Average portable storage monthly rental rate $ 124 $ 145 $ 75 $ — $ 131 Average tank and pump solutions rental fleet utilization based on original equipment cost — % — % — % 58.2 % 58.2 % NA Modular Revenue: Total revenue increased $31.2 million, or 11.6%, to $299.1 million for the three months ended September 30, 2021 from $267.9 million for the three months ended September 30, 2020. The increase was primarily the result of a $27.5 million, or 14.3%, increase in leasing revenue, and a $5.9 million, or 11.3% increase in modular delivery and installation revenue. The increases to leasing revenue and delivery and installation revenues were partially offset by declines in revenues for portable storage units as a result of transitioning the majority of the portable storage product business within the NA Modular segment to the NA Storage segment. Approximately 12,000 units were transferred during the third quarter to the NA Storage segment, reallocating approximately $5.0 million of revenue from NA Modular to NA Storage relative to the third quarter of 2020. The increases to leasing revenue and delivery and installation revenues were also partially offset by a decrease of $1.8 million, or 18.8%, in rental unit sales revenue and a $0.5 million, or 3.6%, decrease in new unit sales. Average modular space monthly rental rates increased 20.3% for the three months ended September 30, 2021 to $834 driven by the continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio. Improved pricing was partially offset by lower volumes as average modular space units on rent decreased by 2,182 units, or 2.5%, year over year. The decrease was driven primarily by reduced demand for new project deliveries as a result of the COVID-19 pandemic primarily in the second and third quarter of 2020. Economic activity in 2021 has improved and sequentially from June 30, 2021, modular space units on rent increased approximately 700 units, or 0.8% during the third quarter. Gross Profit: Gross profit increased $15.8 million, or 14.1%, to $127.9 million for the three months ended September 30, 2021 from $112.1 million for the three months ended September 30, 2020. The increase in gross profit was driven by higher leasing gross profit, which increased $17.7 million, or 12.4%, driven from improved pricing including VAPS, and partly offset by the reallocation of approximately $5.0 million of revenue and gross profit from NA Modular segment to the NA Storage segment relative to the third quarter of 2020. The increase in gross profit from leasing for the three months ended September 46 30, 2021 was further complemented by a $1.1 million increase in rental unit sales gross profit. These increases were partially offset by a $1.3 million decrease in delivery and installation gross profit driven by higher fleet relocation expenses, a $1.1 million decrease in new sales gross profit, and a $0.6 million increase in depreciation of rental equipment related to capital investments made in our existing rental equipment. Adjusted EBITDA: Adjusted EBITDA increased $6.5 million, or 6.5%, to $106.8 million for the three months ended September 30, 2021 from $100.3 million for the three months ended September 30, 2020. The increase was driven by higher leasing gross profit discussed above. SG&A, excluding discrete items, increased $7.6 million, or 12.9%, for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020. Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments decreased $2.4 million, or 7.0%, to $31.8 million for the three months ended September 30, 2021 from $34.2 million for the three months ended September 30, 2020. NA Storage Revenue: Total revenue increased $29.4 million, or 28.1%, to $133.9 million for the three months ended September 30, 2021 from $104.5 million for the three months ended September 30, 2020. Leasing revenues increased $24.2 million in the current quarter compared to the prior-year quarter. Modular space average units on rent decreased 0.4% and average modular space monthly rental rates increased 19.2% year-over-year driven primarily by increased pricing on new deliveries. Portable storage units on rent increased 30.3% driven by increased economic activity. NA Storage portable storage units on rent also increased as a result of the transitioning of the majority of the portable storage product business within the NA Modular segment to the NA Storage segment during the third quarter, which represented the transfer of approximately 12,000 units on rent. Combined, average portable storage units on rent for the NA Storage and NA Modular segments increased approximately 16,922 units, or 14.0%. Given the timing of acquisitions during the quarter, acquisition units did not have a material impact on average units on rent. Average portable storage monthly rental rates increased 6.9% year-over-year also as a result of increased pricing on new deliveries. Delivery and installation revenues increased $7.4 million year-over-year as delivery levels have increased as a result of economic recovery. Sales revenues decreased $2.2 million compared to the prior-year quarter. Gross Profit: Gross profit increased by $19.1 million, or 26.0%, to $92.5 million for the three months ended September 30, 2021 compared to $73.4 million for the three months ended September 30, 2020. Gross profit on leasing activity increased by $18.9 million year-over-year driven both by increased volume and pricing as described above. For delivery and installation, gross profit increased $1.3 million. Sales gross profit decreased by $0.2 million to $2.1 million. Adjusted EBITDA: Adjusted EBITDA increased $12.6 million, or 27.1%, to $59.1 million for the three months ended September 30, 2021 from $46.5 million for the three months ended September 30, 2020 and the margin contracted to 44.2% from 44.5% as a result of increased delivery activity. The increase in Adjusted EBITDA was driven primarily by increased leasing gross profit as described above, partially offset by increased SG&A. Excluding acquisition costs and stock-based compensation, SG&A increased $7.3 million in this segment. The increase was comprised of increased costs for personnel, including commissions and other variable compensation, travel, and computer costs. Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments of $11.9 million were $4.7 million higher than the prior-year quarter driven by increased fleet investments for specific products, largely portable storage units and ground level offices, to grow units on rent as demand has recovered to pre-COVID-19 levels. UK Storage Revenue: Total revenue increased $6.4 million, or 29.5%, to $28.1 million for the three months ended September 30, 2021 from $21.7 million for the three months ended September 30, 2020. In local currency total revenues increased 21.7%. Leasing revenues increased $6.3 million in the current quarter compared to the prior-year quarter. Modular space average units on rent increased 10.1%, while portable storage units on rent increased 10.7%. Average monthly rental rates for modular space units and portable storage units increased 27.5% and 20.0% year-over-year, respectively, including the impacts of currency fluctuations. Delivery and installation revenues increased $0.9 million year-over-year. Sales revenues decreased $0.7 million compared to the prior-year quarter. Gross Profit: Gross profit increased $6.2 million, or 49.2%, for the three months ended September 30, 2021 to $18.9 million from $12.7 million for the three months ended September 30, 2020. In local currency, gross profit increased 39.7%. This increase was driven by a significant increase in fleet utilization coupled with strong rental rate growth and strategic cost management. Adjusted EBITDA: Adjusted EBITDA increased $5.0 million, or 60.0%, to $13.3 million for three months ended September 30, 2021 from $8.3 million for the three months ended September 30, 2020 and the margin expanded to 47.2% from 38.4%. The increase results primarily from the favorable gross profit discussed above, partially offset by increased SG&A of $1.2 million driven by increased costs for personnel, including commissions and other variable compensation. Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments of $11.6 million were driving the $10.9 million increase compared to the prior-year quarter. These investments were made to fulfill increasing demand and to drive increased units on rent and utilization. 47 Tank & Pump Revenue: Total revenue increased $6.2 million, or 26.6%, to $29.5 million for the three months ended September 30, 2021 from $23.3 million for the three months ended September 30, 2020. These increases were driven by increased average original rental cost ("OEC") rental fleet utilization, which increased 1660 bps to 74.8% for the three months ended September 30, 2021 from 58.2% for the three months ended September 30, 2020. 2020 results beginning in the second quarter especially were significantly impacted by lower mid- and down-stream oil and gas activity, petrochemical refining activity and specifically the lower demand for jet fuel resulting from COVID-19. Gross Profit: Gross profit increased $2.9 million, or 25.4%, for the three months ended September 30, 2021 to $14.3 million from $11.4 million for the three months ended September 30, 2020. This increase was driven by increased gross profit for leasing activity, which increased $3.5 million driven by the increased revenue as discussed above. Adjusted EBITDA: Adjusted EBITDA increased $2.5 million, or 29.8%, to $11.0 million for the three months ended September 30, 2021 from $8.5 million for the three months ended September 30, 2020 and the margin expanded to 37.1% from 36.5%. The increase in Adjusted EBITDA was driven by the increased gross profit discussed above, partially offset by a $0.6 million increase in SG&A expense driven primarily by increased personnel costs. Capital Expenditures for Rental Equipment: Current quarter expenditures of $5.0 million were $4.6 million higher than the prior-year quarter as we began to increase investment in additional rental equipment to fund increasing fleet utilization. Comparison of the Nine Months Ended September 30, 2021 and 2020 Nine Months Ended September 30, 2021 (in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Tank and Pump Total Revenue $ 854,657 $ 357,439 $ 83,538 $ 81,343 $ 1,376,977 Gross profit $ 356,992 $ 240,836 $ 53,306 $ 38,605 $ 689,739 Adjusted EBITDA $ 307,741 $ 154,971 $ 36,647 $ 29,870 $ 529,229 Capital expenditures for rental equipment $ 120,288 $ 24,165 $ 22,645 $ 11,093 $ — $ 178,191 Average modular space units on rent 84,589 16,371 9,256 — 110,216 Average modular space utilization rate 67.6 % 78.5 % 83.8 % — % 70.2 % Average modular space monthly rental rate $ 790 $ 570 $ 428 $ — $ 727 Average portable storage units on rent 9,566 118,598 25,284 — 153,448 Average portable storage utilization rate 64.1 % 78.0 % 90.0 % — % 78.7 % Average portable storage monthly rental rate $ 129 $ 152 $ 86 $ — $ 140 Average tank and pump solutions rental fleet utilization based on original equipment cost — % — % — % 71.2 % 71.2 % Nine Months Ended September 30, 2020 (in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Tank and Pump Total Revenue $ 780,550 $ 104,493 $ 21,653 $ 23,302 $ 929,998 Gross profit $ 328,233 $ 73,384 $ 12,671 $ 11,430 $ 425,718 Adjusted EBITDA $ 287,345 $ 46,465 $ 8,306 $ 8,507 $ 350,623 Capital expenditures for rental equipment $ 113,931 $ 7,234 $ 677 $ 431 $ 122,273 Average modular space units on rent 87,161 5,461 2,815 — 95,437 Average modular space utilization rate 68.7 % 80.4 % 79.1 % — % 69.8 % Average modular space monthly rental rate $ 672 $ 505 $ 356 $ — $ 653 Average portable storage units on rent 15,896 35,074 7,715 — 58,685 Average portable storage utilization rate 62.6 % 73.4 % 83.2 % — % 71.3 % Average portable storage monthly rental rate $ 121 $ 145 $ 75 $ — $ 129 Average tank and pump solutions rental fleet utilization based on original equipment cost — % — % — % 58.2 % 58.2 % 48 NA Modular Revenue: Total revenue increased $74.1 million, or 9.5%, to $854.7 million for the nine months ended September 30, 2021 from $780.6 million for the nine months ended September 30, 2020. The increase was primarily the result of a $66.3 million, or 11.6%, increase in leasing revenue, a $6.6 million, or 4.3% increase in delivery and installation revenues, and a $6.7 million, or 31.0%, increase in rental unit sales revenue. The increases to leasing revenue and delivery and installation revenues were partially offset by declines in revenues for portable storage units as the result of transitioning the majority of the portable storage product business within the NA Modular segment to the NA Storage segment during the third quarter of 2021. Approximately 12,000 units were transferred during the third quarter to the NA Storage segment, reallocating approximately $5.0 million of revenue from NA Modular segment to the NA Storage segment relative to the first nine months of 2020. Average modular space monthly rental rates increased 17.6% for the nine months ended September 30, 2021 to $790 driven by the continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio. Improved pricing was partially offset by lower volumes as average modular space units on rent decreased by 2,572 units, or 3.0%, year over year. The decrease was driven primarily by lower deliveries, including reduced demand for new project deliveries as a result of the COVID-19 pandemic primarily in the second and third quarters of 2020. Gross Profit: Gross profit increased $28.8 million, or 8.8%, to $357.0 million for the nine months ended September 30, 2021 from $328.2 million for the nine months ended September 30, 2020. The increase in gross profit was driven by higher leasing gross profit, which increased $41.3 million, or 9.7%, driven from improved pricing including VAPS, and partly offset by the reallocation of $5.0 million of revenue and gross profit from NA Modular segment to NA Storage segment relative to the first nine months of 2020. The increase in gross profit from leasing for the nine months ended September 30, 2021 was further complemented by a $6.1 million increase in rental unit sales gross profit. These increases were partially offset by a $9.0 million decrease in delivery and installation gross profit driven by higher fleet relocation expenses, a $2.9 million decrease in new sales gross profit, and a $6.7 million increase in depreciation of rental equipment related to capital investments made in our existing rental equipment. Adjusted EBITDA: Adjusted EBITDA increased $20.4 million, or 7.1%, to $307.7 million for the nine months ended September 30, 2021 from $287.3 million for the nine months ended September 30, 2020. The increase was driven by higher leasing gross profit discussed above. SG&A, excluding discrete items, increased $11.5 million, or 6.4%, for the nine months ended September 30, 2021, as compared to the September 30, 2020 primarily driven by employee and occupancy costs. Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments increased $6.4 million, or 5.6%, to $120.3 million for the nine months ended September 30, 2021 from $113.9 million for the nine months ended September 30, 2020. Other Non-GAAP Financial Data and Reconciliations We use certain non-GAAP financial information that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends. We evaluate business segment performance on Adjusted EBITDA, a non-GAAP measure that excludes certain items as described in the reconciliation of our consolidated net income (loss) to Adjusted EBITDA reconciliation below. We believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic operating results of the Company. We also regularly evaluate gross profit by segment to assist in the assessment of the operational performance of each operating segment. We consider Adjusted EBITDA to be the more important metric because it more fully captures the business performance of the segments, inclusive of indirect costs. Adjusted EBITDA We define EBITDA as net income (loss) plus interest expense, income tax expense (benefit), depreciation and amortization. Our adjusted EBITDA ("Adjusted EBITDA") reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what we consider transactions or events not related to our core business operations: • Currency (gains) losses, net: on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency. Substantially all such currency gains (losses) are unrealized and attributable to financings due to and from affiliated companies. • Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and property, plant and equipment. • Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee and lease termination costs. • Transaction costs including legal and professional fees and other transaction specific related costs. 49 • Costs to integrate acquired companies, including outside professional fees, non-capitalized costs associated with system integrations, non-lease branch and fleet relocation expenses, employee training costs and other costs required to realize cost or revenue synergies. • Non-cash charges for stock compensation plans. • Gains and losses resulting from changes in fair value and extinguishment of common stock warrant liabilities. • Other expense includes consulting expenses related to certain one-time projects, financing costs not classified as interest expense and gains and losses on disposals of property, plant and equipment. Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing WillScot Mobile Mini’s results as reported under GAAP. Some of these limitations are: • Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs; • Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness; • Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes; • Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • Adjusted EBITDA does not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and • other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as measures of cash that will be available to meet our obligations. The following table provides an unaudited reconciliation of Net income (loss) to Adjusted EBITDA: Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2021 2020 2021 2020 Net income (loss) $ 61,103 $ (6,051) $ 85,921 $ 71,474 Income tax expense (benefit) 6,644 (66,675) 35,953 (66,170) Loss on extinguishment of debt — 42,401 5,999 42,401 Fair value loss (gain) on common stock warrant liabilities — 22,303 26,597 (46,063) Interest expense 29,201 33,034 88,377 89,810 Depreciation and amortization 75,276 71,704 233,813 169,103 Currency losses (gains), net 127 (371) 196 147 Restructuring costs, lease impairment expense and other related charges 2,457 4,798 14,286 8,542 Transaction costs 303 52,191 1,147 63,241 Integration costs 8,247 7,083 23,211 10,921 Stock compensation expense 6,259 2,944 14,480 6,958 Other 532 198 (751) 259 Adjusted EBITDA $ 190,149 $ 163,559 $ 529,229 $ 350,623 50 Net Income Excluding Gain/Loss from Warrants We define Net Income Excluding Gain/Loss from Warrants as net income plus or minus the impact of the change in the fair value of the common stock warrant liability. Management believes that our financial statements that include the impact of this mark-to-market expense or income may not be necessarily reflective of the actual operating performance of our business. The following table provides an unaudited reconciliation of Net income (loss) to Net Income (Loss) Excluding Gain/Loss from Warrants: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 Net income (loss) $ 61,103 $ (6,051) $ 85,921 $ 71,474 Fair value loss (gain) on common stock warrant liabilities — 22,303 26,597 (46,063) Net Income (Loss) Excluding Gain/Loss from Warrants $ 61,103 $ 16,252 $ 112,518 $ 25,411 Adjusted Gross Profit and Adjusted Gross Profit Percentage We define Adjusted Gross Profit as gross profit plus depreciation on rental equipment. Adjusted Gross Profit Percentage is defined as Adjusted Gross Profit divided by revenue. Adjusted Gross Profit and Adjusted Gross Profit Percentage are not measurements of our financial performance under GAAP and should not be considered as an alternative to gross profit, gross profit percentage, or other performance measures derived in accordance with GAAP. In addition, our measurement of Adjusted Gross Profit and Adjusted Gross Profit Percentage may not be comparable to similarly titled measures of other companies. Management believes that the presentation of Adjusted Gross Profit and Adjusted Gross Profit Percentage provides useful information to investors regarding our results of operations because it assists in analyzing the performance of our business. The following table provides an unaudited reconciliation of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage: Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2021 2020 2021 2020 Revenue (A) $ 490,552 $ 417,315 $ 1,376,977 $ 929,998 Gross profit (B) $ 253,549 $ 209,564 $ 689,739 $ 425,718 Depreciation of rental equipment 56,462 54,837 175,053 146,279 Adjusted Gross Profit (C) $ 310,011 $ 264,401 $ 864,792 $ 571,997 Gross Profit Percentage (B/A) 51.7 % 50.2 % 50.1 % 45.8 % Adjusted Gross Profit Percentage (C/A) 63.2 % 63.4 % 62.8 % 61.5 % Net CAPEX We define Net CAPEX as purchases of rental equipment and refurbishments and purchases of property, plant and equipment (collectively, "Total Capital Expenditures"), less proceeds from the sale of rental equipment and proceeds from the sale of property, plant and equipment (collectively, "Total Proceeds"), which are all included in cash flows from investing activities. Management believes that the presentation of Net CAPEX provides useful information to investors regarding the net capital invested into our rental fleet and plant, property and equipment each year to assist in analyzing the performance of our business. 51 The following table provides an unaudited reconciliation of Net CAPEX: Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2021 2020 2021 2020 Total purchases of rental equipment and refurbishments $ (60,374) $ (42,591) $ (178,191) $ (122,273) Total proceeds from sale of rental equipment 11,597 13,179 42,034 25,281 Net CAPEX for Rental Equipment (48,777) (29,412) (136,157) (96,992) Purchase of property, plant and equipment (3,386) (5,893) (20,836) (9,079) Proceeds from sale of property, plant and equipment 209 1,982 16,647 5,825 Net CAPEX $ (51,954) $ (33,323) $ (140,346) $ (100,246) Summary Business Segment Supplemental Pro Forma Financial Information As a result of the Merger and the significant financing transactions, we believe presenting supplemental pro forma financial information is beneficial to the readers of the financial statements. For the three months ended September 30, 2021 and 2020 there are no differences between pro forma results and actual results on a reported basis. Please see comparison of results for the three months ended September 30, 2021 and 2020 within "Business Segment Results" above. The following tables set forth key metrics for the nine months ended September 30, 2021 and 2020 used by management to run the business on a pro forma basis as if the Merger and financing transactions had occurred on January 1, 2019. Refer to the Supplemental Pro Forma Financial Information section below for the full reconciliation of the statements of operations. The Company operates in four reportable segments as follows: NA Modular, NA Storage, UK Storage and Tank and Pump. The NA Modular segment represents the activities of WillScot prior to the Merger. The NA Storage, UK Storage, and Tank and Pump segments align to the three segments reported by Mobile Mini prior to the Merger. These reporting segments are aligned with how we operate and analyze our business results. During the third quarter of 2021, the majority of the portable storage product business within the NA Modular segment was transitioned to the NA Storage segment, and associated revenues, expenses, and operating metrics beginning in the third quarter of 2021 were transferred to the NA Storage segment. Comparison of Nine Months Ended September 30, 2021 and 2020 Pro Forma Combined Nine Months Ended September 30, 2021 vs. 2020 (in thousands) 2021 2020 $ Change % Change Revenue $ 1,376,977 $ 1,214,238 $ 162,739 13.4 % Selling, general and administrative expenses $ 372,296 $ 337,439 $ 34,857 10.3 % Net income $ 85,921 $ 116,678 $ (30,757) (26.4) % Net income excluding gain/loss from warrants $ 112,518 $ 70,615 $ 27,025 8.0 % Adjusted EBITDA $ 529,229 $ 466,781 $ 62,448 13.4 % Other Financial Data: Adjusted EBITDA - NA Modular $ 307,741 $ 287,345 $ 20,396 7.1 % Adjusted EBITDA - NA Storage 154,971 131,229 23,742 18.1 % Adjusted EBITDA - UK Storage 36,647 21,564 15,083 69.9 % Adjusted EBITDA - Tank and Pump 29,870 26,643 3,227 12.1 % Consolidated Adjusted EBITDA (a) $ 529,229 $ 466,781 $ 62,448 13.4 % (a) We present Adjusted EBITDA, a measurement not calculated in accordance with GAAP, because it is a key metric used by management to assess financial performance. 52 NA Modular - Quarterly Results Pro Forma Quarterly Results for the Nine Months Ended September 30, 2021: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 266,224 $ 289,382 $ 299,051 $ 854,657 Gross profit $ 113,002 $ 115,136 $ 127,854 $ 356,992 Adjusted EBITDA $ 97,371 $ 103,545 $ 106,825 $ 307,741 Capital expenditures for rental equipment $ 39,135 $ 49,364 $ 31,789 $ 120,288 Average modular space units on rent 84,795 84,754 84,218 84,589 Average modular space utilization rate 67.6 % 67.7 % 67.6 % 67.6 % Average modular space monthly rental rate $ 737 $ 801 $ 834 $ 790 Average portable storage units on rent 14,903 13,301 493 9,566 Average portable storage utilization rate 60.3 % 69.8 % 48.0 % 64.1 % Average portable storage monthly rental rate $ 124 $ 133 $ 179 $ 129 Pro Forma Quarterly Results for the Nine Months Ended September 30, 2020: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 255,821 $ 256,862 $ 267,867 $ 780,550 Gross profit $ 106,190 $ 109,964 $ 112,079 $ 328,233 Adjusted EBITDA $ 89,544 $ 97,520 $ 100,281 $ 287,345 Capital expenditures for rental equipment $ 39,648 $ 40,034 $ 34,249 $ 113,931 Average modular space units on rent 87,988 87,096 86,400 87,161 Average modular space utilization rate 69.2 % 68.5 % 68.3 % 68.7 % Average modular space monthly rental rate $ 653 $ 669 $ 693 $ 672 Average portable storage units on rent 16,346 15,869 15,473 15,896 Average portable storage utilization rate 64.1 % 62.5 % 61.3 % 62.6 % Average portable storage monthly rental rate $ 119 $ 120 $ 124 $ 121 The NA Modular segment represents the activities of WillScot prior to the Merger. As a result, there are no differences between pro forma results and actual results on a reported basis. Please see comparison of results for the three months ended September 30, 2021 and 2020 and the nine months ended September 30, 2021 and 2020 within "Business Segment Results" above. 53 NA Storage - Quarterly Results Pro Forma Quarterly Results for the Nine Months Ended September 30, 2021: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 107,748 $ 115,794 $ 133,897 $ 357,439 Gross profit $ 72,619 $ 75,721 $ 92,496 $ 240,836 Adjusted EBITDA $ 46,322 $ 49,526 $ 59,123 $ 154,971 Capital expenditures for rental equipment $ 3,472 $ 8,773 $ 11,920 $ 24,165 Average modular space units on rent 16,439 16,360 16,316 16,371 Average modular space utilization rate 79.4 % 78.4 % 77.6 % 78.5 % Average modular space monthly rental rate $ 535 $ 573 $ 602 $ 570 Average portable storage units on rent 105,810 112,862 137,123 118,598 Average portable storage utilization rate 73.9 % 76.1 % 83.2 % 78.0 % Average portable storage monthly rental rate $ 148 $ 151 $ 155 $ 152 Pro Forma Quarterly Results for the Nine Months Ended September 30, 2020: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 103,495 $ 92,826 $ 104,493 $ 300,814 Gross profit $ 71,400 $ 66,639 $ 73,384 $ 211,423 Adjusted EBITDA $ 43,994 $ 40,770 $ 46,465 $ 131,229 Capital expenditures for rental equipment $ 5,200 $ 7,272 $ 7,234 $ 19,706 Average modular space units on rent 15,509 15,757 16,383 15,883 Average modular space utilization rate 77.8 % 78.6 % 80.4 % 78.9 % Average modular space monthly rental rate $ 497 $ 463 $ 505 $ 488 Average portable storage units on rent 105,441 101,463 105,221 104,042 Average portable storage utilization rate 73.1 % 70.6 % 73.4 % 72.4 % Average portable storage monthly rental rate $ 146 $ 143 $145 $145 Comparison of Nine Months Ended September 30, 2021 and 2020 NA Storage Revenue: Total revenue increased $56.6 million, or 18.8%, to $357.4 million for the nine months ended September 30, 2021 from $300.8 million for the nine months ended September 30, 2020. Leasing revenues increased $42.6 million compared to the prior year. Modular space average units on rent increased 3.1% and average modular space monthly rental rates increased 16.8% year-over-year driven primarily by increased pricing on new deliveries. Portable storage units on rent increased 14.0% and average portable storage monthly rental rates increased 4.8% year-over-year also driven primarily by increased pricing on new deliveries. Delivery and installation revenues increased $14.0 million year-over-year as delivery levels in the third quarter have increased as a result of increased demand. Sales revenues remained flat at $16.7 million, compared to prior-year. Gross Profit: Gross profit increased by $29.4 million, or 13.9%, to $240.8 million for the nine months ended September 30, 2021 compared to $211.4 million compared to the nine months ended September 30, 2020. Gross profit on leasing activity increased by $31.2 million year-over-year driven both by increased volume and pricing as described above. For delivery and installation, gross profit increased $1.3 million. Sales gross profit increased by $0.8 million to $6.9 million. Adjusted EBITDA: Adjusted EBITDA increased $23.7 million, or 18.1%, to $155.0 million for the nine months ended September 30, 2021 from $131.2 million for the nine months ended September 30, 2020 and the margin contracted to 43.4% from 43.6%. The increase in Adjusted EBITDA was driven primarily by increased leasing gross profit as described above, partially offset by increased SG&A. Excluding acquisition costs and stock-based compensation, SG&A increased $9.5 million in this segment. The increase was comprised of increased costs for personnel, including commissions and other variable compensation, insurance, computer costs, and bad debt expenses. Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments of $24.2 million for the nine months ended September 30, 2021 were $4.5 million lower than for the nine months ended September 30, 2020. 54 Rental fleet expenditures in the first quarter were significantly below 2020 levels in response to COVID-19-related demand reductions, but as economic activity has recovered, we have begun to invest to meet demand for specific products, largely portable storage units and ground level offices. UK Storage - Quarterly Results Pro Forma Quarterly Results for the Nine Months Ended September 30, 2021: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 27,007 $ 28,432 $ 28,099 $ 83,538 Gross profit $ 16,493 $ 17,937 $ 18,876 $ 53,306 Adjusted EBITDA $ 11,064 $ 12,328 $ 13,255 $ 36,647 Capital expenditures for rental equipment $ 6,770 $ 4,226 $ 11,649 $ 22,645 Average modular space units on rent 9,115 9,354 9,298 9,256 Average modular space utilization rate 83.8 % 84.3 % 83.4 % 83.8 % Average modular space monthly rental rate $ 404 $ 438 $ 454 $ 428 Average portable storage units on rent 24,647 25,573 25,632 25,284 Average portable storage utilization rate 89.2 % 91.8 % 89.1 % 90.0 % Average portable storage monthly rental rate $ 82 $ 88 $ 90 $ 86 Pro Forma Quarterly Results for the Nine Months Ended September 30, 2020: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 20,197 $ 17,154 $ 21,653 $ 59,004 Gross profit $ 11,372 $ 10,991 $ 12,671 $ 35,034 Adjusted EBITDA $ 6,405 $ 6,853 $ 8,306 $ 21,564 Capital expenditures for rental equipment $ 337 $ 522 $ 677 $ 1,536 Average modular space units on rent 7,850 7,912 8,444 8,069 Average modular space utilization rate 74.2 % 74.6 % 79.1 % 76.0 % Average modular space monthly rental rate $ 326 $ 313 $ 356 $ 332 Average portable storage units on rent 23,328 22,870 23,146 23,115 Average portable storage utilization rate 83.7 % 82.2 % 83.2 % 83.0 % Average portable storage monthly rental rate $ 73 $ 70 $ 75 $ 73 Comparison of Nine Months Ended September 30, 2021 and 2020 UK Storage Revenue: Total revenue increased $24.5 million, or 41.5%, to $83.5 million for the nine months ended September 30, 2021 from $59.0 million for the nine months ended September 30, 2020. In local currency total revenues increased 30.2%. Leasing revenues increased $18.9 million in the current quarter compared to the prior-year quarter. Modular space average units on rent increased 14.7%, while portable storage units on rent increased 9.4%. Monthly rental rates for modular space units and portable storage units increased 28.9% and 17.8% year-over-year, respectively, including the impacts of currency fluctuations. Gross Profit: Gross profit increased $18.3 million, or 52.3%, for the nine months ended September 30, 2021 to $53.3 million from $35.0 million for the nine months ended September 30, 2020. In local currency, gross profit increased 39.7%. This increase was driven by a significant increase in fleet utilization coupled with strong rental rate growth and strategic cost management. Adjusted EBITDA: Adjusted EBITDA increased $15.0 million, or 69.2%, to $36.6 million for nine months ended September 30, 2021 from $21.6 million for the nine months ended September 30, 2020 and the margin expanded to 43.9% from 36.5%. The increase results primarily from the favorable gross profit discussed above, partially offset by increased SG&A of $3.7 million driven by increased costs for personnel, including commissions and other variable compensation. 55 Capital Expenditures for Rental Equipment: Purchases of rental equipment and refurbishments of $22.6 million were driving the $21.1 million increase compared to the prior year. These investments were made to fulfill increasing demand and to drive increased units on rent and utilization. Tank and Pump - Quarterly Results Pro Forma Quarterly Results for the Nine Months Ended September 30, 2021: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 24,344 $ 27,494 $ 29,505 $ 81,343 Gross profit $ 11,266 $ 13,016 $ 14,323 $ 38,605 Adjusted EBITDA $ 8,828 $ 10,096 $ 10,946 $ 29,870 Capital expenditures for rental equipment $ 3,158 $ 2,919 $ 5,016 $ 11,093 Average tank and pump solutions rental fleet utilization based on original equipment cost 67.4 % 71.2 % 74.8 % 71.2 % Pro Forma Quarterly Results for the Nine Months Ended September 30, 2020: (in thousands, except for units on rent and monthly rental rate) Q1 Q2 Q3 Total Revenue $ 26,884 $ 23,684 $ 23,302 $ 73,870 Gross profit $ 13,279 $ 11,723 $ 11,430 $ 36,432 Adjusted EBITDA $ 9,477 $ 8,659 $ 8,507 $ 26,643 Capital expenditures for rental equipment $ 4,514 $ 941 $ 431 $ 5,886 Average tank and pump solutions rental fleet utilization based on original equipment cost 66.4 % 60.5 % 58.2 % 61.7 % Comparison of Nine Months Ended September 30, 2021 and 2020 Tank & Pump Revenue: Total revenue increased $7.4 million, or 10.0%, to $81.3 million for the nine months ended September 30, 2021 from $73.9 million for the nine months ended September 30, 2020. These increases were driven by increased average OEC rental fleet utilization, which increased 950 bps to 71.2% for the nine months ended September 30, 2021 from 61.7% for the nine months ended September 30, 2020. 2020 results beginning in the second quarter especially were significantly impacted by lower mid- and down-stream oil and gas activity, petrochemical refining activity and specifically the lower demand for jet fuel resulting from COVID-19. Gross Profit: Gross profit increased $2.2 million, or 6.0%, for the nine months ended September 30, 2021 to $38.6 million from $36.4 million for the nine months ended September 30, 2020. Gross profit for leasing activity increased by $3.5 million compared to the prior year, however gross profit for delivery and installation activity decreased $0.9 million and gross profit for sales activity decreased $0.4 million. Adjusted EBITDA: Adjusted EBITDA increased $3.3 million, or 12.4%, to $29.9 million for the nine months ended September 30, 2021 from $26.6 million for the nine months ended September 30, 2020 and the margin improved to 36.7% from 36.1%. The increase in Adjusted EBITDA was primarily driven from favorable gross profit discussed above and by a $1.0 million reduction in SG&A expense. Capital Expenditures for Rental Equipment: Year to date expenditures of $11.1 million were $5.2 million higher than the prior year as we began to increase investment in additional rental equipment to fund increasing fleet utilization. Liquidity and Capital Resources Overview WillScot Mobile Mini is a holding company that derives its operating cash flow from its operating subsidiaries. Our principal sources of liquidity include cash generated by operating activities from our subsidiaries, borrowings under the 2020 ABL Facility, and sales of equity and debt securities. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements over the next twelve months. We have been consistently engaged in both the debt and equity capital markets both opportunistically and as necessary to support the growth of our business, desired leverage levels, and other capital allocation priorities. Subsequent to 56 the Merger, we believe we have ample liquidity in the 2020 ABL Facility and are generating substantial free cash flow, which together support both organic operations and other capital allocation priorities as they arise. We continue to review available acquisition opportunities with the awareness that any such acquisition may require us to incur additional debt to finance the acquisition and/or to issue shares of our Common Stock or other equity securities as acquisition consideration or as part of an overall financing plan. In addition, we will continue to evaluate alternatives to optimize our capital structure, which could include the issuance or repurchase of additional unsecured and secured debt, equity securities and/or equity-linked securities. There can be no assurance as to the timing of any such issuance or repurchase. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. Availability of financing and the associated terms are inherently dependent on the debt and equity capital markets and subject to change. From time to time we may also seek to streamline our capital structure and improve our financial position through refinancing or restructuring our existing debt or retiring certain of our securities for cash or other consideration. On July 1, 2020, in connection with the completion of the Merger, Holdings, WSII, and certain of its subsidiaries, entered into a new asset-based credit agreement, that provides for revolving credit facilities in the aggregate principal amount of up to $2.4 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $2.0 billion (the “US Facility”), available to WSII and certain of its subsidiaries (collectively, the “US Borrowers”), and (ii) a $400.0 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility") together with the US Facility (collectively, the “2020 ABL Facility”), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros by the US Borrowers, and certain of WSII’s wholly-owned subsidiaries organized in Canada and in the United Kingdom. Borrowing availability under the 2020 ABL Facility is equal to the lesser of $2.4 billion and the applicable borrowing bases. The borrowing bases are a function of, among other things, the value of the assets in the relevant collateral pool. At September 30, 2021, we had $831.6 million of available borrowing capacity under the 2020 ABL Facility. COVID-19 Impact on Liquidity We continue to monitor the impact that the global pandemic is having on our financial operations and liquidity; however, to date this impact has been immaterial, and we see the adverse impacts of COVID-19 diminishing as the global economy recovers. We regularly manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, actively managing our cost structure, reducing or delaying capital spending, and developing new opportunities for growth. We believe that the actions we have taken in recent years to increase our scale and competitive position and strengthen our balance sheet positioned us well to manage through economic cycles and have positioned us well for the current recovery. Cash Flow Comparison of the Nine Months Ended September 30, 2021 and 2020 Significant factors driving our liquidity position include cash flows generated from operating activities and capital expenditures. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets. The following summarizes our change in cash and cash equivalents for the periods presented: Nine Months Ended September 30, (in thousands) 2021 2020 Net cash from operating activities $ 392,055 $ 175,095 Net cash from investing activities (196,590) (83,073) Net cash from financing activities (208,935) (75,612) Effect of exchange rate changes on cash and cash equivalents (150) 542 Net change in cash and cash equivalents $ (13,620) $ 16,952 Cash Flows from Operating Activities Cash provided by operating activities for the nine months ended September 30, 2021 was $392.1 million as compared to $175.1 million for the nine months ended September 30, 2020, an increase of $217.0 million. The increase was due to an increase of $213.0 million of net income, adjusted for non-cash items, and an increase of $4.0 million in the net movements of the operating assets and liabilities. Cash Flows from Investing Activities Cash used in investing activities for the nine months ended September 30, 2021 was $196.6 million as compared to $83.1 million for the nine months ended September 30, 2020, an increase of $113.5 million. The increase in cash used in investing activities was driven by a $73.4 million increase in cash used in the acquisition of businesses, net of cash acquired, a $55.9 million increase in cash used for the purchase of rental equipment and refurbishments, and a $11.7 million increase in cash used for the purchase of property, plant and equipment. These increases were partially offset by a $16.7 million increase 57 in proceeds from the sale of rental equipment and a $10.8 million increase in proceeds from sale of property, plant and equipment. Cash Flows from Financing Activities Cash used in financing activities for the nine months ended September 30, 2021 was $208.9 million as compared to $75.6 million for the nine months ended September 30, 2020, an increase of $133.3 million. The increase is primarily due to $320.6 million paid in 2021 to repurchase common stock and warrants as well as a decrease of $2,184.7 million in receipts from borrowing, partially offset by a decrease of $2,291.5 million in repayment of borrowings and a decrease of $64.6 million in payment of financing costs. Free Cash Flow Free Cash Flow is a non-GAAP measure. We define Free Cash Flow as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and property, plant and equipment, which are all included in cash flows from investing activities. Management believes that the presentation of Free Cash Flow provides useful additional information concerning cash flow available to fund our capital allocation alternatives. The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow. Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2021 2020 2021 2020 Net cash provided by operating activities $ 130,447 $ 61,368 $ 392,055 $ 175,095 Purchase of rental equipment and refurbishments (60,374) (42,591) (178,191) (122,273) Proceeds from sale of rental equipment 11,597 13,179 42,034 25,281 Purchase of property, plant and equipment (3,386) (5,893) (20,836) (9,079) Proceeds from the sale of property, plant and equipment 209 1,982 16,647 5,825 Free Cash Flow $ 78,493 $ 28,045 $ 251,709 $ 74,849 Free Cash Flow for the nine months ended September 30, 2021 was an inflow of $251.7 million as compared to an inflow of $74.8 million for the nine months ended September 30, 2020, an increase in Free Cash Flow of $176.9 million. Free Cash Flow increased year over year principally as a result of the $217.0 million increase in cash provided by operating activities and partially offset by the $55.9 million increase in cash used in the purchase of rental equipment and refurbishments. The $130.4 million in cash provided by operating activities for the three months ended September 30, 2021 was returned to shareholders through stock and warrant repurchases and cancellations and reinvested into the business to support the purchase of rental equipment, including VAPS, and refurbishments. Contractual Obligations The following table presents information relating to our contractual obligations and commercial commitments as of September 30, 2021: (in thousands) Total Less than 1 year Between 1 to 3 years Between 3 to 5 years More than 5 years Long-term indebtedness, including current portion and interest (a)(b) $ 3,068,439 $ 106,545 $ 203,826 $ 2,199,390 $ 558,678 Payroll tax withholding (c) 10,350 5,175 5,175 — — Operating lease liabilities 276,332 61,275 94,591 61,382 59,084 Total $ 3,355,121 $ 172,995 $ 303,592 $ 2,260,772 $ 617,762 (a) Long-term indebtedness includes borrowings and interest under the 2020 ABL Facility, the 2025 Senior Secured Notes, the 2028 Senior Secured Notes, and finance leases. (b) Includes the obligations under our interest rate swap agreement that effectively convert $400 million in aggregate notional amount of variable-rate debt under the Company’s ABL Facility into fixed-rate debt. The future obligations under the interest rate swaps was calculated using the 1-month LIBOR rate as of September 30, 2021. (c) Amounts relate to the opportunistic election to delay payment of employer payroll taxes on an interest-free basis in accordance with the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the ‘‘CARES Act’’). At September 30, 2021, in addition to the above contractual obligations, the Company has an estimated $2.7 million of potential long-term tax liabilities, including interest and penalties related to uncertain tax positions. Because of the high degree of uncertainty regarding the future cash flows associated with these potential long-term tax liabilities, the Company is unable to estimate the years in which settlement will occur with the respective taxing authorities. 58 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Supplemental Pro Forma Information The following pro forma financial information has been prepared for WillScot Mobile Mini for the nine months ended September 30, 2020. These pro forma condensed combined statements of operations present the historical consolidated statements of operations of WillScot Mobile Mini, giving effect to the following items as if they had occurred on January 1, 2019: (i) the Merger with Mobile Mini; (ii) borrowings under the Company’s 2025 Secured Notes and the 2020 ABL Facility; (iii) extinguishment of the Mobile Mini line of credit and senior notes assumed in the Merger and subsequently repaid; (iv) repayment of the 2017 ABL Facility and the 2022 Senior Notes repaid contemporaneously with the Merger; (v) the transaction costs incurred in connection with the Merger; and (vi) elimination of non-controlling interest in connection with the Sapphire Exchange as contemplated by the Merger. The adjustments presented on the pro forma financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company following the transactions and events described above. The pro forma financial information set forth below is based upon available information and assumptions that we believe are reasonable and is for illustrative purposes only. The financial results may have been different if the transactions described above had actually been completed sooner. You should not rely on the pro forma financial information as being indicative of the historical results that would have been achieved if these transactions and events had been completed as of January 1, 2019. The pro forma combined financial information below should be read in conjunction with the condensed consolidated financial statements and related notes of the Company included elsewhere in this Form 10-Q. All pro forma adjustments and their underlying assumptions are described more fully in the notes below. Accounting Policies During the preparation of these pro forma condensed combined financial statements, we assessed whether there were any material differences between the Company’s accounting policies and Mobile Mini’s accounting policies. The assessment performed did not identify any material differences and, as such, these pro forma condensed combined financial statements do not adjust for or assume any differences in accounting policies between WillScot and Mobile Mini. Pro forma Presentation The following pro forma condensed combined financial information and associated notes are based on the historical financial statements of WillScot and Mobile Mini as described below. In preparing the pro forma condensed combined statements of operations for the nine months ended September 30, 2020, certain historical financial information for Mobile Mini was reclassified to align to the reporting classifications of WillScot. The pro forma condensed combined statement of operations for the nine months ended September 30, 2020 are based on, derived from, and should be read in conjunction with, WillScot’s historical financial statements. The aforementioned pro forma financial statements are also based on, derived from, and should be read in conjunction with Mobile Mini’s historical financial statements. 59 Nine Months Ended September 30, 2020 (in thousands) Historical WillScot Historical Mobile Mini (as reclassified) Pro Forma Adjustments Pro Forma Condensed Combined Revenues: Leasing and services revenue: Leasing $ 678,577 $ 208,374 $ — $ 886,951 Delivery and installation 187,404 59,999 — 247,403 Sales revenue: New units 38,736 8,402 — 47,138 Rental units 25,281 7,465 — 32,746 Total revenues 929,998 284,240 — 1,214,238 Costs: Costs of leasing and services: Leasing 162,344 28,584 — 190,928 Delivery and installation 153,742 42,476 — 196,218 Costs of sales: New units 25,469 5,457 — 30,926 Rental units 16,446 4,625 — 21,071 Depreciation of rental equipment 146,279 15,360 2,334 163,973 (b) Gross profit 425,718 187,738 (2,334) 611,122 Expenses: Selling, general and administrative 304,510 112,969 (80,040) 337,439 (a) Other depreciation and amortization 22,824 19,695 11,397 53,916 (c) Lease impairment expense and other related charges 3,999 — — 3,999 Restructuring costs 4,543 — — 4,543 Currency losses, net 147 39 — 186 Other (income) expense, net (1,757) 186 — (1,571) Operating income 91,452 54,849 66,309 212,610 Interest expense 89,810 16,974 (9,808) 96,976 (d) Fair value gain on common stock warrant liabilities (46,063) — — (46,063) Loss on extinguishment of debt 42,401 — (19,682) 22,719 (e) Income before income tax 5,304 37,875 95,799 138,978 Income tax (benefit) expense (66,170) 12,330 76,140 22,300 (f) Net income 71,474 25,545 19,659 116,678 Net income attributable to non-controlling interest, net of tax 1,213 — (1,213) — (g) Net income attributable to WillScot Mobile Mini $ 70,261 $ 25,545 $ 20,872 $ 116,678 60 Notes to Pro Forma Statements (a) Represents the elimination of non-recurring transaction costs incurred as a result of the Mobile Mini Merger. (b) Represents the adjustment for depreciation of rental fleet relating to the estimated increase in fair value purchase accounting adjustments as a result of the Merger. (c) Represents the differential in other depreciation and amortization expense related to the fair value purchase accounting adjustments as a result of the Merger. (d) Reflects the adjustment for interest expense related to our debt structure after the Merger as though the following had occurred on January 1, 2019 (i) borrowings under the 2020 ABL Facility, (ii) borrowings under the 2025 Secured Notes, (iii) repayment of the 2017 ABL Facility, (iv) repayment of the 2022 Secured Notes and repayment of the Mobile Mini debt assumed at the Merger. (e) Represents the elimination of the one-time loss on extinguishment of debt in connection with the repayment of the 2022 Secured Notes and the 2017 ABL Facility. (f) Reflects the adjustment to recognize the income tax impacts of the unaudited pro forma adjustments for which a tax expense is recognized using a U.S. federal and state statutory tax rate of 25.5%. This rate may vary from the effective tax rates of the historical and combined businesses. In addition, the three and nine months ended September 30, 2020 included adjustments of $54.1 million and $56.8 million, respectively, to eliminate the reversal of valuation allowance as a result of reassessment of the realizability of deferred tax assets as a result of the Merger. (g) Reflects the adjustment for the extinguishment of non-controlling interest as a result of the Sapphire Exchange on June 30, 2020. The pro forma adjustment to interest expense consists of the following: Nine Months Ended September 30, 2020 (in thousands) ABL Facility interest $ (2,561) 2022 Secured Notes interest (10,631) 2025 Secured Notes interest 18,247 Mobile Mini debt interest (15,921) Deferred financing fee amortization 1,058 Net pro forma adjustment $ (9,808) Reconciliation of Pro Forma Adjusted EBITDA The following unaudited table provides a reconciliation of Net income to pro forma unaudited adjusted EBITDA: Nine Months Ended September 30, 2020 (in thousands) Net income $ 116,678 Income tax expense 22,300 Loss on extinguishment of debt 22,719 Fair value gain on common stock warrant liabilities (46,063) Interest expense 96,976 Depreciation and amortization 217,889 Currency losses, net 186 Restructuring costs, lease impairment expense, other related charges 8,542 Integration costs 10,921 Stock compensation expense 12,359 Other 4,274 Adjusted EBITDA $ 466,781 61 Reconciliation of Pro Forma Net Income Excluding Gain/Loss from Warrants The following unaudited table provides a reconciliation of Net income to pro forma unaudited net income excluding gain/loss from warrants: Nine Months Ended September 30, (in thousands) 2020 Net income $ 116,678 Fair value gain on common stock warrant liabilities (46,063) Net income excluding gain/loss from warrants $ 70,615 Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. GAAP requires that we make estimates and judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosure of contingent assets and liabilities. We base these estimates on historical experience and on various other assumptions that we consider reasonable under the circumstances, and reevaluate our estimates and judgments as appropriate. The actual results experienced by us may differ materially and adversely from our estimates. The US Securities and Exchange Commission (the “SEC”) suggests companies provide additional disclosure on those accounting policies considered most critical. The SEC considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgments and estimates on the part of management in its applicatio n. For a complete discussion of our significant critical accounting policies, see the “Critical Accounting Policies and Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K/A for the year ended December 31, 2020 (the "2020 Annual Report on Form 10-K/A"). There were no significant changes to our critical accounting policies during the nine months ended September 30, 2021. Recently Issued Accounting Standards Refer to Part I, Item 1, Note 1 of the notes to our financial statements included in this Quarterly Report on Form 10-Q for our assessment of recently issued and adopted accounting standards. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Act of 1934, as amended. The words “estimates,” “expects,” “anticipates,” “believes,” “forecasts,” “plans,” “intends,” “may,” “will,” “should,” “shall,” “outlook,” “guidance” and variations of these words and similar expressions identify forward-looking statements, which are generally not historical in nature and relate to expectations for future financial performance or business strategies or objectives. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other important factors, many of which are outside our control, which could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Although WillScot Mobile Mini believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance that any such forward-looking statement will materialize. Important factors that may affect actual results or outcomes include, among others: • our ability to successfully acquire and integrate new operations, including Mobile Mini and our conversion to its enterprise resource planning system, and to realize anticipated synergies from the Merger with Mobile Mini; • operational, economic, political and regulatory risks; • the effect of global or local economic conditions in the industries and markets in which the Company operates and any changes therein, including financial market conditions and levels of end market demand; • the impact of the global pandemic related to COVID-19, including the financial condition of the Company’s customers and suppliers and employee health and safety; • risks associated with cybersecurity and IT systems disruptions, including our ability to manage the business in the event a disaster shuts down our management information systems; • effective management of our rental equipment; • trade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences; • our ability to effectively compete in the modular space, portable storage and tank and pump industries; 62 • our ability to effectively manage our credit risk, collect on our accounts receivable, and recover our rental equipment; • our ability to effectively launch operations into new geographic markets and/or add other business unit operations in existing markets; • the effect of changes in state building codes on our ability to remarket our buildings; • foreign currency exchange rate exposure; • fluctuations in interest rates and commodity prices; • significant increases in raw material and labor costs; • fluctuations in fuel costs or oil prices, a reduction in fuel supplies, or a sustained decline in oil prices; • our reliance on third party manufacturers and suppliers; • risks associated with labor relations, labor costs and labor disruptions; • failure to retain key personnel; • impairment of our goodwill, intangible assets and indefinite-life intangible assets; • our ability to use our net operating loss carryforwards and other tax attributes; • our ability to recognize deferred tax assets such as those related to our tax loss carryforwards and, as a result, utilize future tax savings; • unanticipated changes in our tax obligations, the adoption of a new tax legislation, or exposure to additional income tax liabilities; • various laws and regulations, including those governing government contracts, corruption and the environment; • changes in the competitive environment of our customer base as a result of the global, national or local economic climate in which they operate and/or economic or financial disruptions to their industry; • risks associated with operational measures designed to increase revenue while continuing to control operating costs; • our ability to adequately protect our intellectual property and other proprietary rights that are material to our business; • natural disasters and other business disruptions such as pandemics, fires, floods, hurricanes, earthquakes and terrorism; • property, casualty or other losses not covered by our insurance; • our ability to redeploy our units effectively should a significant number of our leased units be returned during a short period of time; • our ability to close our unit sales transactions; • fluctuations in the fair value of common stock warrant liabilities; • our ability to maintain an effective system of internal controls and accurately report our financial results and remediate material weaknesses; • public company requirements that may strain our resources and divert management's attention; • our ability to manage growth and execute our business plan; • changes in the supply and price of new and used products we lease; • unanticipated threats including market entry by a new competitor; • rising costs adversely affecting our profitability; and • such other risks and uncertainties described in the periodic reports we file with the SEC from time to time (including our 2020 Annual Report on Form 10-K/A), which are available through the SEC’s EDGAR system at www.sec.gov and on our website. Any forward-looking statement speaks only at the date which it is made, and WillScot Mobile Mini undertakes no obligation, and disclaims any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 63