WillScot Holdings Corp 10-Q

ITEM 1. Financial Statements WillScot Mobile Mini Holdings Corp. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share data) September 30, 2022 December 31, 2021 Assets Cash and cash equivalents $ 15,442 $ 12,699 Trade receivables, net of allowances for credit losses of $ 56,127 and $ 46,160 , respectively 439,309 368,856 Inventories 44,873 32,092 Prepaid expenses and other current assets 39,691 36,539 Assets held for sale - current 951 32,854 Total current assets 540,266 483,040 Rental equipment, net 3,227,735 2,946,008 Property, plant and equipment, net 311,526 282,247 Operating lease assets 225,955 235,344 Goodwill 1,064,582 1,078,699 Intangible assets, net 431,291 451,928 Other non-current assets 8,909 10,797 Assets held for sale - non-current — 285,536 Total long-term assets 5,269,998 5,290,559 Total assets $ 5,810,264 $ 5,773,599 Liabilities and equity Accounts payable $ 160,262 $ 110,270 Accrued expenses 123,300 95,592 Accrued employee benefits 53,477 65,927 Deferred revenue and customer deposits 212,005 159,612 Operating lease liabilities - current 51,971 51,103 Current portion of long-term debt 13,497 11,968 Liabilities held for sale - current — 23,173 Total current liabilities 614,512 517,645 Long-term debt 2,935,800 2,676,985 Deferred tax liabilities 385,854 337,784 Operating lease liabilities - non-current 174,777 184,199 Other non-current liabilities 18,182 15,737 Liabilities held for sale - non-current — 44,486 Long-term liabilities 3,514,613 3,259,191 Total liabilities 4,129,125 3,776,836 Commitments and contingencies (see Note 17) Preferred Stock: $ 0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding — — Common Stock: $ 0.0001 par, 500,000,000 shares authorized and 211,243,820 and 223,939,527 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 22 22 Additional paid-in capital 3,112,076 3,616,902 Accumulated other comprehensive loss ( 93,009 ) ( 29,071 ) Accumulated deficit ( 1,337,950 ) ( 1,591,090 ) Total shareholders' equity 1,681,139 1,996,763 Total liabilities and shareholders' equity $ 5,810,264 $ 5,773,599 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 3 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2022 2021 2022 2021 Revenues: Leasing and services revenue: Leasing $ 447,535 $ 342,599 $ 1,226,206 $ 965,894 Delivery and installation 132,837 91,910 341,027 252,914 Sales revenue: New units 9,901 15,370 26,232 35,915 Rental units 13,900 11,168 38,874 40,911 Total revenues 604,173 461,047 1,632,339 1,295,634 Costs: Costs of leasing and services: Leasing 111,898 77,967 288,774 222,747 Delivery and installation 95,680 74,221 256,130 209,963 Costs of sales: New units 6,007 11,175 15,469 24,322 Rental units 7,097 5,468 21,123 22,441 Depreciation of rental equipment 69,159 52,990 192,228 165,027 Gross profit 314,332 239,226 858,615 651,134 Expenses: Selling, general and administrative 145,444 127,346 445,319 356,651 Other depreciation and amortization 17,066 16,459 50,895 51,793 Lease impairment expense and other related charges — 601 254 2,328 Restructuring costs — 1,856 ( 86 ) 11,956 Currency losses, net 236 127 247 196 Other (income) expense, net ( 2,526 ) 1,475 ( 7,642 ) 202 Operating income 154,112 91,362 369,628 228,008 Interest expense 38,165 29,006 102,362 87,793 Fair value loss on common stock warrant liabilities — — — 26,597 Loss on extinguishment of debt — — — 5,999 Income from continuing operations before income tax 115,947 62,356 267,266 107,619 Income tax expense from continuing operations 30,219 5,243 67,167 32,341 Income from continuing operations 85,728 57,113 200,099 75,278 Discontinued operations: Income from discontinued operations before income tax 10,802 5,391 24,488 14,255 Income tax expense from discontinued operations 1,986 1,401 5,496 3,612 Gain on sale of discontinued operations 34,049 — 34,049 — Income from discontinued operations 42,865 3,990 53,041 10,643 Net income $ 128,593 $ 61,103 $ 253,140 $ 85,921 4 Earnings per share from continuing operations: Basic $ 0.40 $ 0.25 $ 0.91 $ 0.33 Diluted $ 0.39 $ 0.24 $ 0.89 $ 0.32 Earnings per share from discontinued operations: Basic $ 0.20 $ 0.02 $ 0.24 $ 0.05 Diluted $ 0.20 $ 0.02 $ 0.24 $ 0.05 Earnings per share: Basic $ 0.60 $ 0.27 $ 1.15 $ 0.38 Diluted $ 0.59 $ 0.26 $ 1.13 $ 0.37 Weighted average shares: Basic 213,636,876 225,998,202 219,312,260 227,557,664 Diluted 217,927,725 231,868,397 223,933,319 234,084,800 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 5 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Net income $ 128,593 $ 61,103 $ 253,140 $ 85,921 Other comprehensive (loss) income: Foreign currency translation adjustment, net of income tax expense of $ 0 for both the three and nine months ended September 30, 2022 and $ 0 and $ 60 for the three and nine months ended September 30, 2021, respectively. ( 37,733 ) ( 11,162 ) ( 67,435 ) ( 3,035 ) Net change in derivatives, net of income tax expense of $ 676 for the three months ended September 30, 2021, and $ 1,171 and $ 1,999 for the nine months ended September 30, 2022 and 2021, respectively. — 2,206 3,497 6,529 Total other comprehensive (loss) income ( 37,733 ) ( 8,956 ) ( 63,938 ) 3,494 Total comprehensive income $ 90,860 $ 52,147 $ 189,202 $ 89,415 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 6 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Changes in Equity (Unaudited) Nine Months Ended September 30, 2022 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2021 223,940 $ 22 $ 3,616,902 $ ( 29,071 ) $ ( 1,591,090 ) $ 1,996,763 Net income — — — — 51,171 51,171 Other comprehensive loss — — — ( 1,753 ) — ( 1,753 ) Stock-based compensation and issuance of Common Stock from vesting 498 — 6,395 — — 6,395 Repurchase and cancellation of Common Stock and warrants ( 2,064 ) — ( 77,409 ) — — ( 77,409 ) Issuance of Common Stock from the exercise of options and warrants 800 — 3,313 — — 3,313 Withholding taxes on net share settlement of stock-based compensation — — ( 12,295 ) — — ( 12,295 ) Balance at March 31, 2022 223,174 22 3,536,906 ( 30,824 ) ( 1,539,919 ) 1,966,185 Net income — — — — 73,376 73,376 Other comprehensive loss — — — ( 24,452 ) — ( 24,452 ) Stock-based compensation and issuance of Common Stock from vesting 70 — 9,292 — — 9,292 Repurchase and cancellation of Common Stock and warrants ( 7,222 ) — ( 249,515 ) — — ( 249,515 ) Issuance of Common Stock from the exercise of options and warrants 69 — 139 — — 139 Withholding taxes on net share settlement of stock-based compensation — — ( 1,075 ) — — ( 1,075 ) Balance at June 30, 2022 216,091 22 3,295,747 ( 55,276 ) ( 1,466,543 ) 1,773,950 Net income — — — — 128,593 128,593 Other comprehensive loss — — — ( 37,733 ) — ( 37,733 ) Stock-based compensation and issuance of Common Stock from vesting 26 — 6,941 — — 6,941 Repurchase and cancellation of Common Stock ( 5,271 ) — ( 197,457 ) — — ( 197,457 ) Issuance of Common Stock from the exercise of options 398 — 7,363 — — 7,363 Withholding taxes on net share settlement of stock-based compensation — — ( 518 ) — — ( 518 ) Balance at September 30, 2022 211,244 $ 22 $ 3,112,076 $ ( 93,009 ) $ ( 1,337,950 ) $ 1,681,139 7 Nine Months Ended September 30, 2021 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2020 229,038 $ 23 $ 3,852,291 $ ( 37,207 ) $ ( 1,751,234 ) $ 2,063,873 Net income — — — — 4,447 4,447 Other comprehensive income — — — 7,211 — 7,211 Stock-based compensation and issuance of Common Stock from vesting 229 — 4,951 — — 4,951 Repurchase and cancellation of Common Stock and warrants ( 2,793 ) — ( 76,788 ) — — ( 76,788 ) Issuance of Common Stock from the exercise of options and warrants 341 — 5,414 — — 5,414 Withholding taxes on net share settlement of stock-based compensation — — ( 3,219 ) — — ( 3,219 ) Balance at March 31, 2021 226,815 23 3,782,649 ( 29,996 ) ( 1,746,787 ) 2,005,889 Net income — — — — 20,371 20,371 Other comprehensive income — — — 5,239 — 5,239 Stock-based compensation and issuance of Common Stock from vesting 60 — 9,038 — — 9,038 Repurchase and cancellation of Common Stock and warrants ( 4,100 ) — ( 35,508 ) — — ( 35,508 ) Issuance of Common Stock from the exercise of warrants 4,058 — 384 — — 384 Balance at June 30, 2021 226,833 23 3,756,563 ( 24,757 ) ( 1,726,416 ) 2,005,413 Net income — — — — 61,103 61,103 Other comprehensive income — — — ( 8,956 ) — ( 8,956 ) Stock-based compensation and issuance of Common Stock from vesting 192 — 7,686 — — 7,686 Repurchase and cancellation of Common Stock and warrants ( 3,752 ) — ( 106,264 ) — — ( 106,264 ) Issuance of Common Stock from the exercise of warrants 393 — 1,517 — — 1,517 Withholding taxes on net share settlement of stock-based compensation — — ( 3,915 ) — — ( 3,915 ) Balance at September 30, 2021 223,666 $ 23 $ 3,655,587 $ ( 33,713 ) $ ( 1,665,313 ) $ 1,956,584 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 8 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (in thousands) 2022 2021 Operating activities: Net income $ 253,140 $ 85,921 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 257,371 235,536 Provision for credit losses 26,018 26,661 Gain on sale of discontinued operations ( 34,049 ) — Gain on sale of rental equipment and other property, plant and equipment ( 21,698 ) ( 25,327 ) Amortization of debt discounts and debt issuance costs 9,795 10,554 Fair value loss on common stock warrant liabilities — 26,597 Loss on extinguishment of debt — 5,999 Stock-based compensation expense 22,628 21,674 Deferred income tax expense 56,812 28,140 Unrealized currency losses, net 171 34 Other 2,976 — Changes in operating assets and liabilities: Trade receivables ( 101,895 ) ( 93,592 ) Inventories ( 13,623 ) ( 7,311 ) Prepaid expenses and other assets ( 9,446 ) 3,118 Operating lease assets and liabilities 851 59 Accounts payable and other accrued expenses 43,565 48,336 Deferred revenue and customer deposits 51,622 25,656 Net cash provided by operating activities 544,238 392,055 Investing activities: Proceeds from sale of discontinued operation 319,543 — Acquisitions, net of cash acquired ( 208,663 ) ( 56,244 ) Proceeds from sale of rental equipment 52,263 42,034 Purchase of rental equipment and refurbishments ( 360,465 ) ( 178,191 ) Proceeds from sale of property, plant and equipment 1,645 16,647 Purchase of property, plant and equipment ( 30,253 ) ( 20,836 ) Net cash used in investing activities ( 225,930 ) ( 196,590 ) Financing activities: Receipts from issuance of Common Stock from the exercise of options 10,815 7,315 Repurchase and cancellation of Common Stock and warrants ( 515,684 ) ( 320,562 ) Receipts from borrowings 763,177 551,063 Repayment of borrowings ( 510,677 ) ( 423,591 ) Payment of financing costs ( 8,130 ) — Payment of debt extinguishment premium costs — ( 3,705 ) Principal payments on finance lease obligations ( 39,336 ) ( 12,321 ) Taxes paid on employee stock awards ( 13,888 ) ( 7,134 ) Net cash used in financing activities ( 313,723 ) ( 208,935 ) Effect of exchange rate changes on cash and cash equivalents ( 1,842 ) ( 150 ) Net change in cash and cash equivalents 2,743 ( 13,620 ) Cash and cash equivalents at the beginning of the period 12,699 24,937 Cash and cash equivalents at the end of the period $ 15,442 $ 11,317 Supplemental cash flow information: Interest paid 1 $ 88,231 $ 75,423 Income taxes paid, net $ 17,598 $ 6,124 Capital expenditures accrued or payable $ 40,385 $ 35,819 1 Includes $ 8,986 of payments related to the interest rate swap for the nine months ended September 30, 2021. See the accompanying notes which are an integral part of these condensed consolidated financial statements. 9 WillScot Mobile Mini Holdings Corp. Notes to the Condensed Consolidated Financial Statements (Unaudited) NOTE 1 - Summary of Significant Accounting Policies Organization and Nature of Operations WillScot Mobile Mini Holdings Corp. (“WillScot Mobile Mini” and, together with its subsidiaries, the “Company”) is a leading business services provider specializing in innovative flexible work space and portable storage solutions in the United States (“US”), Canada, Mexico and the United Kingdom ("UK"). The Company leases, sells, delivers and installs mobile solutions and storage products through an integrated network of branch locations that spans North America and the UK. Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by US Generally Accepted Accounting Principles ("GAAP") for complete financial statements. The accompanying unaudited condensed consolidated financial statements comprise the financial statements of WillScot Mobile Mini and its subsidiaries that it controls due to ownership of a majority voting interest and contain all adjustments, which are of a normal and recurring nature, considered necessary by management to present fairly the financial position, results of operations and cash flows for the interim periods presented. Subsidiaries are fully consolidated from the dat e of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Reclassifications Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Recently Issued Accounting Standards In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). ASU 2021-08 is effective for annual periods beginning after December 15, 2022, including interim periods therein, with early adoption permitted. The guidance will be applied prospectively to acquisitions occurring on or after the effective date. The Company will continue to evaluate the impact of this guidance, which will depend on the contract assets and liabilities acquired in future business combinations. NOTE 2 - Acquisitions On July 1, 2020, WillScot Corporation (“WillScot”), and Mobile Mini, Inc. (“Mobile Mini”) merged (the “Merger”). Immediately following the Merger, WillScot changed its name to “WillScot Mobile Mini Holdings Corp.” Asset Acquisitions During the third quarter of 2022, the Company acquired certain assets and liabilities of several smaller entities, which consisted primarily of approximately 7,600 storage units and 3,000 modular units, for $ 104.7 million in cash. During the first six months of 2022, the Company acquired certain assets and liabilities of several smaller entities, which consisted primarily of approximately 4,100 storage units and 1,400 modular units, for $ 103.9 million in cash. The accompanying consolidated financial statements include $ 202.3 million of rental equipment as a result of 2022 acquisitions. During the third quarter of 2021, the Company acquired certain assets and liabilities of several smaller entities, which consisted primarily of approximately 11,000 storage units and 400 modular units for $ 56.3 million in cash. As a result of these acquisitions, the Company recognized $ 53.0 million of rental equipment and $ 3.0 million of land in its consolidated balance sheet. Integration Costs The Company recorded $ 3.9 million and $ 8.2 million in integration costs related to acquisitions and the Merger within selling, general and administrative ("SG&A") expense during the three months ended September 30, 2022 and 2021, respectively, and $ 13.2 million and $ 23.2 million in integration costs related to acquisitions and the Merger during the nine months ended September 30, 2022 and 2021, respectively. 10 NOTE 3 - Divestiture On August 19, 2022, the Company entered into a stock purchase agreement to sell its Tank and Pump Solutions ("Tank and Pump") business for approximately $ 323 million. The sale transaction was completed on September 30, 2022. Exiting the Tank and Pump business represented the Company’s strategic shift to concentrate its operations on its core modular and storage businesses. In accordance with ASC 360, Property, Plant, and Equipment, the Company ceased recording depreciation and amortization for Tank and Pump rental fleet, property, plant and equipment, and operating lease assets during the third quarter of 2022 when the Tank and Pump business initially qualified as held for sale. In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations , the Company determined that the criteria for discontinued operations presentation were met during the third quarter of 2022. As part of the divestiture, the Company entered into a customary transition services agreement with the buyer to assist them in the transition of certain functions, including, but not limited to, information technology, accounting and human resources, for a period of six months with an option for the buyer to extend the agreement for a period of up to twelve months. There will be no significant continuing involvement with the Tank and Pump business after its disposal. The following tables present the results of Tank and Pump as reported in income from discontinued operations within the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 and the carrying value of the divested business' assets and liabilities as presented within assets and liabilities held for sale on the condensed consolidated balance sheet as of December 31, 2021. Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Revenues: Leasing and services revenue: Leasing $ 22,432 $ 20,797 $ 65,572 $ 56,343 Delivery and installation 10,121 7,789 27,665 21,969 Sales revenue: New units 842 490 2,202 1,908 Rental units 593 429 917 1,123 Total revenues 33,988 29,505 96,356 81,343 Costs: Costs of leasing and services: Leasing 4,913 4,481 13,828 12,628 Delivery and installation 8,634 6,770 23,285 18,317 Costs of sales: New units 633 324 1,636 1,338 Rental units 238 135 310 429 Depreciation of rental equipment 1,822 3,472 8,145 10,026 Gross profit 17,748 14,323 49,152 38,605 Expenses: Selling, general and administrative 5,544 6,381 18,045 16,792 Other depreciation and amortization 1,274 2,355 6,103 6,967 Other (expense) income, net ( 16 ) 1 4 7 Operating income 10,946 5,586 25,000 14,839 Interest expense 144 195 512 584 Income from discontinued operations before income tax 10,802 5,391 24,488 14,255 Income tax expense from discontinued operations 1,986 1,401 5,496 3,612 Income from discontinued operations $ 8,816 $ 3,990 $ 18,992 $ 10,643 Other selected data: Adjusted EBITDA $ 13,048 $ 10,946 $ 37,016 $ 29,870 11 (in thousands) December 31, 2021 Assets Trade receivables, net of allowances for doubtful accounts of $ 1,469 $ 31,031 Inventories 647 Prepaid expenses and other current assets 222 Rental Equipment, net 134,973 Property, plant and equipment, net 29,931 Operating lease assets 11,720 Goodwill 100,107 Intangible assets, net 8,750 Other non-current assets 55 Total assets held for sale $ 317,436 Liabilities Accounts payable $ 8,001 Accrued expenses 4,603 Accrued employee benefits 2,487 Deferred revenue and customer deposits 27 Deferred tax liabilities 17,095 Operating lease liabilities 11,959 Other non-current liabilities 23,487 Total liabilities held for sale $ 67,659 At December 31, 2021, assets held for sale of $ 1.0 million were not related to the Tank and Pump business and were excluded from the table above. For the nine months ended September 30, 2022 and 2021, significant operating and investing items related to the Tank and Pump business were as follows: Nine Months Ended September 30, (in thousands) 2022 2021 Operating activities of discontinued operations: Depreciation and amortization $ 14,248 $ 16,993 Investing activities of discontinued operations: Proceeds from sale of rental equipment $ 917 $ 1,123 Purchase of rental equipment and refurbishments $ ( 19,064 ) $ ( 11,093 ) Proceeds from sale of property, plant and equipment $ — $ 170 Purchase of property, plant and equipment $ ( 403 ) $ ( 1,220 ) 12 The following table presents reconciliations of Income from discontinued operations before income tax to Adjusted EBITDA from discontinued operations for the Tank and Pump business for the three and nine months ended September 30, 2022 and 2021, respectively. See Note 18 for further information regarding Adjusted EBITDA. Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Income from discontinued operations before income tax $ 10,802 $ 5,391 $ 24,488 $ 14,255 Interest expense 144 195 512 584 Depreciation and amortization 3,096 5,828 14,248 16,993 Restructuring costs, lease impairment expense and other related charges — — — 2 Integration costs — 5 — 5 Stock compensation expense ( 221 ) 102 18 175 Other ( 773 ) ( 575 ) ( 2,250 ) ( 2,144 ) Adjusted EBITDA from discontinued operations $ 13,048 $ 10,946 $ 37,016 $ 29,870 NOTE 4 - Revenue Revenue Disaggregation Geographic Areas The Company had total revenue in the following geographic areas for the three and nine months ended September 30, 2022 and 2021 as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 US $ 538,737 $ 399,590 $ 1,445,709 $ 1,121,627 Canada 34,815 29,692 92,989 79,493 Mexico 4,453 3,666 13,370 10,977 UK 26,168 28,099 80,271 83,537 Total revenues $ 604,173 $ 461,047 $ 1,632,339 $ 1,295,634 Major Product and Service Lines Equipment leasing is the Company's core business and the primary driver of the Company's revenue and cash flows. This includes modular space and portable storage units along with value-added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, security products, shelving systems and other items used by customers in connection with the Company's products. Leasing is complemented by new unit sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services and removal services at the end of lease transactions. 13 The Company’s revenue by major product and service line for the three and nine months ended September 30, 2022 and 2021 was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Modular space leasing revenue $ 226,261 $ 188,507 $ 638,273 $ 539,836 Portable storage leasing revenue 103,503 66,184 269,964 179,645 VAPS and third party leasing revenues (a) 96,220 72,293 261,964 203,493 Other leasing-related revenue (b) 21,551 15,615 56,005 42,920 Leasing revenue 447,535 342,599 1,226,206 965,894 Delivery and installation revenue 132,837 91,910 341,027 252,914 Total leasing and services revenue 580,372 434,509 1,567,233 1,218,808 New unit sales revenue 9,901 15,370 26,232 35,915 Rental unit sales revenue 13,900 11,168 38,874 40,911 Total revenues $ 604,173 $ 461,047 $ 1,632,339 $ 1,295,634 (a) Includes $ 8.8 million and $ 7.2 million of service revenue for the three months ended September 30, 2022 and 2021, respectively, and $ 23.1 million and $ 21.2 million of service revenue for the nine months ended September 30, 2022 and 2021, respectively. (b) Includes primarily damage billings, delinquent payment charges, and other processing fees. Leasing and Services Revenue The majority of revenue ( 73 % and 74 % for the three and nine months ended September 30, 2022, respectively, and 73 % for both the three and nine months ended September 30, 2021) was generated by rental income subject to the guidance of ASU 2018-11, Leases (Topic 842) ("ASC 842"). The remaining revenue was generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 606. Receivables and Credit Losses The Company is exposed to credit losses from trade receivables and manages credit risk at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues. Concentration of credit risk with respect to the Company's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets. The Company assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review that considers expected billing exposure, timing for payment and the customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for existing customers when the customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation. The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowance for credit losses reflects the estimate of the amount of receivables that the Company will be unable to collect based on historical collection experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. The Company's estimate reflects changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance. Activity in the allowance for credit losses was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Balance at beginning of period $ 50,720 $ 35,608 $ 46,160 $ 28,442 Provision for credit losses, net of recoveries 9,977 8,292 27,487 24,839 Write-offs ( 4,474 ) ( 4,541 ) ( 17,384 ) ( 14,411 ) Foreign currency translation and other ( 96 ) ( 126 ) ( 136 ) 363 Balance at end of period $ 56,127 $ 39,233 $ 56,127 $ 39,233 14 Contract Assets and Liabilities When customers are billed in advance for services, the Company defers recognition of revenue until the related services are performed, which generally occurs at the end of the contract. The balance sheet classification of deferred revenue is determined based on the contractual lease term. For contracts that continue beyond their initial contractual lease term, revenue continues to be deferred until the services are performed. During the three months ended September 30, 2022, deferred revenue relating to services billed in advance of $ 24.5 million was recognized as revenue. As of September 30, 2022 and December 31, 2021, the Company had approximately $ 107.9 million and $ 79.4 million , respectively, of deferred revenue related to these services. The Company does not have material contract assets, and the Company's uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future services revenues that are expected to be recognized within twelve months, the Company has elected to utilize the optional disclosure exemption made available regarding transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations. The transaction price for performance obligations that will be completed in greater than twelve months is variable based on the costs ultimately incurred to provide those services and therefore the Company is applying the optional expedient to omit disclosure of such amounts. The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one year; therefore, the commissions are expensed as incurred. NOTE 5 - Leases As of September 30, 2022, the undiscounted future lease payments for operating and finance lease liabilities were as follows: (in thousands) Operating Finance 2022 (remaining) $ 15,803 $ 3,501 2023 58,926 15,226 2024 49,583 13,523 2025 41,080 13,197 2026 30,330 12,809 Thereafter 69,011 22,052 Total lease payments 264,733 80,308 Less: interest ( 37,985 ) ( 7,460 ) Present value of lease liabilities $ 226,748 $ 72,848 Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets. 15 The Company’s lease activity during the nine months ended September 30, 2022 and 2021 was as follows: (in thousands) Nine Months Ended September 30, Financial Statement Line 2022 2021 Finance Lease Expense Amortization of finance lease assets $ 11,034 $ 9,538 Interest on obligations under finance leases 1,504 1,072 Total finance lease expense $ 12,538 $ 10,610 Operating Lease Expense Fixed lease expense Costs of leasing and services $ 2,242 $ 3,019 Selling, general and administrative 46,580 42,494 Lease impairment expense and other related charges 213 1,571 Short-term lease expense Costs of leasing and services 24,122 17,751 Selling, general and administrative 1,466 615 Variable lease expense Costs of leasing and services 3,989 5,442 Selling, general and administrative 5,951 5,332 Lease impairment expense and other related charges 40 402 Total operating lease expense $ 84,603 $ 76,626 Lease impairment expense and other related charges relate to closed locations that are no longer used in operations as a result of consolidation activities within the Company. During the nine months ended September 30, 2022, the Company recorded $ 0.3 million in lease impairment expense and other related charges which is comprised of closed location rent expense. During the nine months ended September 30, 2021, the Company recorded $ 2.3 million in lease impairment expense and other related charges which is comprised of $ 2.0 million in closed location rent expense and $ 0.3 million loss on lease exit and impairment charges. Supplemental cash flow information related to leases for the nine months ended September 30, 2022 and 2021 was as follows: (in thousands) Nine Months Ended September 30, Supplemental Cash Flow Information 2022 2021 Cash paid for the amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 48,309 $ 46,509 Operating cash outflows from finance leases $ 1,502 $ 1,067 Financing cash outflows from finance leases $ 12,868 $ 9,011 Right of use assets obtained in exchange for lease obligations $ 37,771 $ 41,209 Assets obtained in exchange for finance leases $ 22,414 $ 17,184 Weighted-average remaining operating lease terms and the weighted average discount rates as of September 30, 2022 and December 31, 2021 were as follows: Lease Terms and Discount Rates September 30, 2022 December 31, 2021 Weighted-average remaining lease term - operating leases 5.9 years 6.1 years Weighted-average discount rate - operating leases 5.1 % 5.0 % Weighted-average remaining lease term - finance leases 5.1 years 4.9 years Weighted-average discount rate - finance leases 3.2 % 2.8 % 16 NOTE 6 - Inventories Inventories at the respective balance sheet dates consisted of the following: (in thousands) September 30, 2022 December 31, 2021 Raw materials $ 38,720 $ 26,340 Finished units 6,153 5,752 Inventories $ 44,873 $ 32,092 NOTE 7 - Rental Equipment, net Rental equipment, net at the respective balance sheet dates consisted of the following: (in thousands) September 30, 2022 December 31, 2021 Modular space units $ 3,254,022 $ 3,005,195 Portable storage units 898,275 758,619 Value added products 198,494 168,358 Total rental equipment 4,350,791 3,932,172 Less: accumulated depreciation ( 1,123,056 ) ( 986,164 ) Rental equipment, net $ 3,227,735 $ 2,946,008 NOTE 8 - Goodwill Changes in the carrying amount of goodwill were as follows: (in thousands) NA Modular NA Storage UK Storage Total Balance at December 31, 2020 $ 235,828 $ 726,529 $ 65,600 $ 1,027,957 Changes to Mobile Mini purchase accounting 285,000 ( 233,666 ) — 51,334 Effects of movements in foreign exchange rates 221 ( 311 ) ( 502 ) ( 592 ) Balance at December 31, 2021 521,049 492,552 65,098 1,078,699 Effects of movements in foreign exchange rates ( 2,766 ) — ( 11,351 ) ( 14,117 ) Balance at September 30, 2022 $ 518,283 $ 492,552 $ 53,747 $ 1,064,582 The Company had no goodwill impairment during the nine months ended September 30, 2022 or the year ended December 31, 2021. NOTE 9 - Intangibles Intangible assets other than goodwill at the respective balance sheet dates consisted of the following: September 30, 2022 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Mobile Mini customer relationships 5.7 $ 199,000 $ ( 57,646 ) $ 141,354 Technology 3.8 1,500 ( 563 ) 937 Indefinite-lived intangible assets: Trade name - Mobile Mini 164,000 — 164,000 Trade name - WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 489,500 $ ( 58,209 ) $ 431,291 17 December 31, 2021 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Mobile Mini customer relationships 6.6 $ 199,000 $ ( 37,197 ) $ 161,803 Technology 4.5 1,500 ( 375 ) 1,125 Indefinite-lived intangible assets: Trade name - Mobile Mini 164,000 — 164,000 Trade name - WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 489,500 $ ( 37,572 ) $ 451,928 Amortization expense related to intangible assets was $ 6.0 million and $ 6.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 19.2 million and $ 20.0 million for the nine months ended September 30, 2022 and 2021, respectively. Based on the carrying value at September 30, 2022, future amortization of intangible assets is expected to be as follows for the years ended December 31: (in thousands) 2022 (remaining) $ 6,583 2023 25,583 2024 25,583 2025 25,583 2026 23,897 Thereafter 35,062 Total $ 142,291 NOTE 10 - Debt The carrying value of debt outstanding at the respective balance sheet dates consisted of the following: (in thousands, except rates) Interest rate Year of maturity September 30, 2022 December 31, 2021 2025 Secured Notes 6.125 % 2025 $ 519,778 $ 518,117 ABL Facility (a) Varies 2027 1,863,451 1,612,783 2028 Secured Notes 4.625 % 2028 493,220 492,490 Finance Leases Varies Varies 72,848 65,563 Total debt 2,949,297 2,688,953 Less: current portion of long-term debt 13,497 11,968 Total long-term debt $ 2,935,800 $ 2,676,985 (a) As of both September 30, 2022 and December 31, 2021, the Company had no outstanding principal borrowings on the multicurrency revolving credit facility and $ 4.4 million and $ 6.2 million, respectively, of related debt issuance costs. No related debt issuance costs were recorded as a direct offset against the principal borrowings on the Multicurrency Facility, and the $ 4.4 million and $ 6.2 million in excess of principal was included in other non-current assets on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. Asset Backed Lending Facility On July 1, 2020, certain subsidiaries of the Company entered into an asset-based credit agreement (the "ABL Facility") that initially provided 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 and (ii) a $ 400.0 million senior secured asset-based multicurrency revolving credit facility available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros. The ABL Facility was initially scheduled to mature on July 1, 2025. 18 Borrowings under ABL Facility bear interest at a base rate plus an applicable margin determined quarterly by reference to the Company's excess availability for the most recently completed quarter. Effective January 7, 2022, borrowings were subject to the highest applicable margin and bore interest at (i) in the case of US Dollars, at the borrower's option, either an adjusted LIBOR rate plus 2.125 % or an alternative base rate plus 1.125 %, (ii) in the case of Canadian Dollars, at the borrower's option, either a Canadian BA rate plus 2.125 % or Canadian prime rate plus 1.125 %, (iii) in the case of Euros, the EURIBOR rate plus 2.125 %, and (iv) in the case of British Pounds Sterling, the SONIA rate plus 2.125 %. On June 30, 2022, certain subsidiaries of the Company entered into an amendment to the ABL Facility to, among other things, extend the expiration date until June 30, 2027 and increase the aggregate principal amount of the revolving credit facilities to $ 3.7 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $ 3.3 billion (the “US Facility”) and (ii) a $ 400.0 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility"), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros. The amendment also converted the interest rate for borrowings denominated in US dollars from a LIBOR-based rate to a Term SOFR-based rate with an interest period of one month and adjusted the applicable margins. The applicable margin for Canadian BA rate, Term SOFR, British Pounds Sterling and Euros loans is 1.50 %. The applicable margin for base rate and Canadian Prime Rate loans is 0.50 %. The applicable margins are subject to one step down of 0.25 % based on excess availability or one step up of 0.25 % based on the Company's leverage ratio. The ABL Facility requires the payment of an annual commitment fee on the unused available borrowings of 0.20 % annually. At September 30, 2022, the weighted average interest rate for borrowings under the ABL Facility was 4.46 %. Borrowing availability under the US Facility and the Multicurrency Facility is equal to the lesser of (i) the aggregate Revolver Commitments and (ii) the Line Cap. At September 30, 2022, the Company had $ 1.9 billion outstanding principal under the ABL Facility, the Line Cap was $ 3.0 billion, and the Company had $ 1.1 billion of available borrowing capacity under the ABL Facility, including $ 821.3 million under the US Facility and $ 292.1 million under the Multicurrency Facility. At September 30, 2022, borrowing capacity under the ABL Facility allowed for up to $ 204.9 million of letters of credit and up to $ 220.0 million of swingline loans. The Company had issued $ 15.1 million of standby letters of credit under the ABL Facility at September 30, 2022. At September 30, 2022, letters of credit and bank guarantees carried fees of 1.625 % annually. Debt issuance costs of $ 33.6 million were included in the carrying value of the ABL Facility at September 30, 2022. Finance Leases The Company maintains finance leases primarily related to transportation equipment. At September 30, 2022 and December 31, 2021, obligations under finance leases for transportation related equipment were $ 72.8 million and $ 65.6 million, respectively. Refer to Note 5 for further information. The Company is in compliance with all debt covenants and restrictions for the aforementioned debt instruments as of September 30, 2022. NOTE 11 – Equity Common Stock In connection with the stock compensation vesting events and stock option exercises described in Note 15, and the warrant exercises described in Note 12, the Company issued 1,860,778 shares of Common Stock during the nine months ended September 30, 2022. Stock Repurchase Program In July 2022, the Company's Board of Directors approved an increase to the share repurchase program that authorizes the Company to repurchase up to $ 1.0 billion of its outstanding shares of Common Stock and equivalents. The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing and conditions, business, legal, accounting, and other considerations. During the nine months ended September 30, 2022, t he Company repurchased 14,575,160 shares of Common Stock and stock equivalents for $ 524.4 million. As of September 30, 2022, $ 863.3 million of the approved repurchase amount remained available. 19 Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive income (loss) ("AOCI"), net of tax, for the nine months ended September 30, 2022 and 2021 were as follows: Nine Months Ended September 30, 2022 (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2021 $ ( 25,574 ) $ ( 3,497 ) $ ( 29,071 ) Other comprehensive loss before reclassifications ( 4,074 ) ( 569 ) ( 4,643 ) Reclassifications from AOCI to income — 2,890 2,890 Balance at March 31, 2022 ( 29,648 ) ( 1,176 ) ( 30,824 ) Other comprehensive loss before reclassifications ( 25,628 ) ( 464 ) ( 26,092 ) Reclassifications from AOCI to income — 1,640 1,640 Balance at June 30, 2022 ( 55,276 ) — ( 55,276 ) Other comprehensive loss ( 37,733 ) — ( 37,733 ) Balance at September 30, 2022 $ ( 93,009 ) $ — $ ( 93,009 ) Nine Months Ended September 30, 2021 (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2020 $ ( 24,694 ) $ ( 12,513 ) $ ( 37,207 ) Other comprehensive income (loss) before reclassifications 5,034 ( 760 ) 4,274 Reclassifications from AOCI to income — 2,937 2,937 Balance at March 31, 2021 ( 19,660 ) ( 10,336 ) ( 29,996 ) Other comprehensive income (loss) before reclassifications 3,093 ( 848 ) 2,245 Reclassifications from AOCI to income — 2,994 2,994 Balance at June 30, 2021 ( 16,567 ) ( 8,190 ) ( 24,757 ) Other comprehensive income before reclassifications ( 11,162 ) ( 830 ) ( 11,992 ) Reclassifications from AOCI to income — 3,036 3,036 Balance at September 30, 2021 $ ( 27,729 ) $ ( 5,984 ) $ ( 33,713 ) For the nine months ended September 30, 2022 and 2021, $ 4.5 million and $ 9.0 million, respectively, was reclassified from AOCI into interest expense in the condensed consolidated statements of operations related to the interest rate swap discussed in Note 16. Associated with these reclassifications, the Company recorded tax expense of $ 0.7 million for the three months ended September 30, 2021, and $ 1.1 million and $ 2.0 million for the nine months ended September 30, 2022 and 2021, respectively. The interest rate swap terminated on May 29, 2022. NOTE 12 – Warrants 2015 Warrants WillScot was incorporated under the name Double Eagle Acquisition Corporation ("DEAC") on June 26, 2015. DEAC issued warrants to purchase its Common Stock in a private placement concurrently with its initial public offering (the “2015 Private Warrants”) each of which entitled the holder to purchase one-half of one share of Common Stock. During the six months ended June 30, 2021, 3,055,000 of the 2015 Private Warrants were repurchased for $ 25.5 million and cancelled. In addition, during the six months ended June 30, 2021, 9,655,000 warrants were exercised on a cashless basis, resulting in the issuance of 2,939,898 shares of Common Stock. As of June 30, 2021, no 2015 Private Warrants remained outstanding. 20 2018 Warrants In connection with the Modular Space Holdings acquisition in 2018, WillScot issued warrants to purchase approximately 10.0 million shares of Common Stock (the "2018 Warrants") to former shareholders. Each 2018 Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $ 15.50 per share, subject to adjustment. The 2018 Warrants expire on November 29, 2022. During the nine months ended September 30, 2022, 33,965 of the 2018 Warrants were repurchased for $ 0.6 million and cancelled. In addition, during the nine months ended September 30, 2022, 1,037,379 of the 2018 Warrants were exercised on a cashless basis, resulting in the issuance of 631,863 shares of common stock. At September 30, 2022, 3,006,829 of the 2018 Warrants were outstanding. The Company accounted for its warrants in the following ways: (i) the 2015 Private Warrants as liabilities through their final repurchase or exercise in May 2021, and (ii) the 2018 Warrants as liabilities until June 30, 2020 after which they are accounted for as equity instruments. Warrants classified as liabilities were subject to remeasurement at each balance sheet date and transaction date with changes in the estimated fair values of the common stock warrant liabilities and gains and losses on extinguishment of common stock warrant liabilities reported in the consolidated statements of operations. NOTE 13 – Income Taxes The Company recorded $ 30.2 million and $ 67.2 million of income tax expense for the three and nine months ended September 30, 2022, respectively, and $ 5.2 million and $ 32.4 million of income tax expense for the three and nine months ended September 30, 2021, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2022 was 26.1 % and 25.1 %, respectively. The Company's effective tax rate for the three and nine months ended September 30, 2021 was 8.4 % and 30.1 %, respectively. The effective tax rate for the three and nine months ended September 30, 2022 differed from the US federal statutory rate of 21% primarily due to state and provincial taxes offset by a discrete tax benefit related to employee stock vesting. The effective tax rate for the three months ended September 30, 2021 differs from the U.S federal statutory rate of 21% primarily due to the reversal of approximately of $ 12.8 million in reserves for uncertain tax positions ("UTP") due to the expiration of relevant statutes of limitation. The effective tax rate for the nine months ended September 30, 2021 differs from the US federal statutory rate of 21% primarily due to the permanent add-backs related to fair value accounting on the Company's warrants and executive compensation with an offset related to the discrete tax benefit from the reversal of reserves for UTP. NOTE 14 - Fair Value Measures The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company utilizes the suggested accounting guidance for the three levels of inputs that may be used to measure fair value: Level 1 - Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 - Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and Level 3 - Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions The Company has assessed that the fair value of cash and cash equivalents, trade receivables, trade payables, and other current liabilities approximate their carrying amounts. Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair values of finance leases at September 30, 2022 approximate their respective book values. The following table shows the carrying amounts and fair values of financial liabilities which are disclosed, but not measured, at fair value, including their levels in the fair values hierarchy: September 30, 2022 December 31, 2021 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 ABL Facility $ 1,863,451 $ — $ 1,897,000 $ — $ 1,612,783 $ — $ 1,644,500 $ — 2025 Secured Notes 519,778 — 513,932 — 518,117 — 551,835 — 2028 Secured Notes 493,220 — 435,320 — 492,490 — 515,635 — Total $ 2,876,449 $ — $ 2,846,252 $ — $ 2,623,390 $ — $ 2,711,970 $ — As of September 30, 2022, the carrying values of the ABL Facility, the 2025 Secured Notes, and the 2028 Secured Notes included $ 33.6 million, $ 6.7 million, and $ 6.8 million, respectively, of unamortized debt issuance costs, which were presented as a direct reduction of the corresponding liability. As of December 31, 2021, the carrying value of the ABL Facility, 21 the 2025 Secured Notes, and the 2028 Secured Notes included $ 31.7 million, $ 8.4 million, and $ 7.5 million, respectively, of unamortized debt issuance costs, which were presented as a direct reduction of the corresponding liability. The carrying value of the ABL Facility, excluding debt issuance costs, approximates fair value as the interest rates are variable and reflective of current market rates. The fair value of the 2025 Secured Notes and the 2028 Secured Notes is based on their last trading price at the end of each period obtained from a third party. The classification and the fair value of derivative assets and liabilities designated as hedges in the condensed consolidated balance sheets are disclosed in Note 16. Level 3 Disclosures During the periods the 2015 Private Warrants were classified as liabilities, the Company utilized a Black Scholes option-pricing model to value the warrants at each reporting period and transaction date, with changes in fair value recognized in the statements of operations. The estimated fair value of the common stock warrant liability was determined using Level 3 inputs. Inherent in the pricing model were assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The volatility assumption was based on a blend of peer group volatility and Company trading history that matched the expected remaining life of the warrants as the Company did not have a sufficient trading history as a stand-alone public company to rely exclusively on its own trading history. The risk-free interest rate was based on the US Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the historical rate, which the Company anticipated to remain at zero. The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2021: (in thousands) 2015 Private Warrants Balance - December 31, 2020 $ 77,404 Exercise or conversion ( 78,495 ) Measurement adjustment 25,486 Repurchases ( 24,395 ) Balance- September 30, 2021 $ — NOTE 15 - Stock-Based Compensation Stock-based compensation expense includes grants of stock options, time-based restricted stock units ("Time-Based RSUs") and performance-based restricted stock units ("Performance-Based RSUs," together with Time-Based RSUs, the "RSUs"). In addition, stock-based payments to non-executive directors include grants of restricted stock awards ("RSAs"). Time-Based RSUs and RSAs are valued based on the intrinsic value of the difference between the exercise price, if any, of the award and the fair market value of WillScot Mobile Mini's Common Stock on the grant date. Performance-Based RSUs are valued based on a Monte Carlo simulation model to reflect the impact of the Performance-Based RSUs market condition. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for Performance-Based RSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided. Restricted Stock Awards The following table summarizes the Company's RSA activity : 2022 2021 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Balance December 31, 36,176 $ 29.30 57,448 $ 11.75 Granted 35,244 $ 37.17 44,708 $ 29.30 Forfeited — $ — ( 8,532 ) $ 29.30 Vested ( 36,176 ) $ 29.30 ( 57,448 ) $ 11.75 Balance September 30, 35,244 $ 37.17 36,176 $ 29.30 Compensation expense for RSAs recognized in SG&A expense on the condensed consolidated statements of operations was $ 0.3 million for both the three months ended September 30, 2022 and 2021. Compensation expense for RSAs recognized in SG&A expense on the condensed consolidated statements of operations was $ 0.9 million and $ 0.6 million for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, there was $ 0.9 million of unrecognized compensation cost related to RSAs that is expected to be recognized over the remaining weighted average vesting period of 0.7 years. 22 Time-Based RSUs The following table summarizes the Company's Time-Based RSU activity : 2022 2021 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Balance December 31, 997,451 $ 18.54 1,325,862 $ 13.46 Granted 377,804 $ 35.40 415,737 $ 27.25 Forfeited ( 94,841 ) $ 31.08 ( 65,153 ) $ 16.74 Vested ( 478,906 ) $ 16.42 ( 667,151 ) $ 13.98 Balance September 30, 801,508 $ 26.27 1,009,295 $ 18.59 Compensation expense for Time-Based RSUs recognized in SG&A expense on the condensed consolidated statements of operations was $ 1.7 million and $ 3.2 million for the three months ended September 30, 2022 and 2021, respectively. Compensation expense for RSUs recognized in SG&A expense on the condensed consolidated statements of operations was $ 6.4 million and $ 7.5 million for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, unrecognized compensation cost related to Time-Based RSUs totaled $ 15.9 million and is expected to be recognized over the remaining weighted average vesting period of 2.4 years. Performance-Based RSUs The following table summarizes the Company's Performance-Based RSU award activity : 2022 2021 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Balance December 31, 1,536,394 $ 26.34 593,388 $ 14.88 Granted 745,079 $ 42.34 977,645 $ 33.21 Forfeited ( 61,678 ) $ 41.62 ( 20,077 ) $ 25.87 Vested ( 313,152 ) $ 16.45 — $ — Balance September 30, 1,906,643 $ 33.72 1,550,956 $ 26.29 Compensation expense for Performance-Based RSUs recognized in SG&A expense on the condensed consolidated statements of operations was $ 4.9 million and $ 2.7 million for the three months ended September 30, 2022 and 2021, respectively. Compensation expense for Performance-Based RSUs recognized in SG&A expense on the condensed consolidated statements of operations was $ 15.2 million and $ 5.8 million for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, unrecognized compensation cost related to Performance-Based RSUs totaled $ 41.4 million and is expected to be recognized over the remaining vesting period of 2.3 years. Certain Performance-Based RSUs cliff vest based on achievement of the relative total stockholder return ("TSR") of the Company's Common Stock as compared to the TSR of the constituents in an index at the grant date over the performance period of three years. For 2022 grants, the TSR of the Company's Common Stock is compared to the TSR of the constituents in the S&P MidCap 400 Index. The target number of RSUs may be adjusted from 0 % to 200 % based on the TSR attainment levels defined by the Company's Compensation Committee. The 100 % target payout is tied to performance at the 50 % percentile, with a payout curve ranging from 0 % (for performance less than the 25 % percentile) to 200 % (for performance above the 85 % percentile). 23 Stock Options The following tables summarize the Company's stock option activity : WillScot Options Weighted-Average Exercise Price per Share Converted Mobile Mini Options Weighted-Average Exercise Price per Share Balance December 31, 2021 534,188 $ 13.60 1,527,643 $ 14.66 Exercised — $ — ( 635,318 ) $ 17.02 Balance September 30, 2022 534,188 $ 13.60 892,325 $ 12.97 Fully vested and exercisable options, September 30, 2022 534,188 $ 13.60 892,325 $ 12.97 WillScot Options Weighted-Average Exercise Price per Share Converted Mobile Mini Options Weighted-Average Exercise Price per Share Balance December 31, 2020 534,188 $ 13.60 2,031,455 $ 14.78 Forfeited — $ — ( 6,240 ) $ 12.19 Exercised — $ — ( 484,986 ) $ 15.26 Balance September 30, 2021 534,188 $ 13.60 1,540,229 $ 14.65 Fully vested and exercisable options, September 30, 2021 400,641 $ 13.60 1,540,229 $ 14.65 WillScot Options Compensation expense for stock option awards, recognized in SG&A expense on the condensed consolidated statements of operations, was $ 0.2 million for the three months ended September 30, 2021. Compensation expense for stock option awards, recognized in SG&A expense on the condensed consolidated statements of operations, was $ 0.2 million and $ 0.6 million for the nine months ended September 30, 2022 and 2021, respectively. NOTE 16 - Derivatives In 2018, the Company entered into an interest rate swap agreement (the “Swap Agreement”) with a financial counterparty that effectively converted $ 400.0 million in aggregate notional amount of variable-rate debt under the Company’s ABL facility into fixed-rate debt. The Swap Agreement terminated on May 29, 2022. Under the terms of the Swap Agreement, the Company received a floating rate equal to one-month LIBOR and made payments based on a fixed rate of 3.06 % on the notional amount. The receive rate under the terms of the Swap Agreement was 0.11 % at December 31, 2021. The Swap Agreement was designated and qualified as a hedge of the Company’s exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the ABL facility. The location and the fair value of derivative instruments designated as hedges, at the balance sheet date, was as follows: (in thousands) Balance Sheet Account December 31, 2021 Interest rate swap Accrued expenses $ 5,259 The fair value of the interest rate swap was based on dealer quotes of market forward rates, a Level 2 input on the fair value hierarchy, and reflected the amount that the Company would receive or pay for contracts involving the same attributes and maturity dates. 24 The following table discloses the impact of the interest rate swap, excluding the impact of income taxes, on other comprehensive income (“OCI”), AOCI and the Company’s combined consolidated statements of operations for the nine months ended September 30,: (in thousands) 2022 2021 Gain recognized in OCI $ 4,669 $ 8,528 Location of gain recognized in income Interest expense, net Interest expense, net Loss reclassified from AOCI into income (effective portion) $ ( 4,530 ) $ ( 8,967 ) NOTE 17 - Commitments and Contingencies The Company is involved in various lawsuits, claims and legal proceedings that arise in the ordinary course of business. The Company assesses these matters on a case-by-case basis as they arise and establishes reserves as required. As of September 30, 2022, with respect to these outstanding matters, the Company believes that the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on the consolidated financial position, results of operations, or cash flows of the Company. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. NOTE 18 - Segment Reporting The Company operates in three reportable segments as follows: North America Modular Solutions ("NA Modular"), North America Storage Solutions ("NA Storage") and United Kingdom Storage Solutions ("UK Storage"). Total assets for each reportable segment are not available because the Company utilizes a centralized approach to working capital management. Transactions between reportable segments are not significant. The Company defines EBITDA as net income (loss) plus interest (income) expense, income tax (benefit) expense, depreciation and amortization. The Company reflects further adjustments to EBITDA (“Adjusted EBITDA”) to exclude certain non-cash items and the effect of what the Company considers transactions or events not related to its core and ongoing business operations. In addition, the Chief Operating Decision Maker ("CODM") evaluates business segment performance utilizing Adjusted EBITDA as shown in the reconciliation of the Company’s consolidated income from continuing operations to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic and ongoing operating results of the Company. The Company also regularly evaluates gross profit by segment to assist in the assessment of its operational performance. The Company considers Adjusted EBITDA to be an important metric because it reflects the business performance of the segments, inclusive of indirect costs. 25 Reportable Segments The following tables set forth certain information regarding each of the Company’s reportable segments fo r the three and nine months ended September 30, 2022 and 2021, respectively. Three Months Ended September 30, 2022 (in thousands) NA Modular NA Storage UK Storage Unallocated Costs 1 Total Revenues: Leasing and services revenue: Leasing $ 271,271 $ 156,572 $ 19,692 $ 447,535 Delivery and installation 84,373 42,643 5,821 132,837 Sales revenue: New units 7,893 1,714 294 9,901 Rental units 11,827 1,716 357 13,900 Total revenues 375,364 202,645 26,164 604,173 Costs: Cost of leasing and services: Leasing 81,385 26,334 4,179 111,898 Delivery and installation 66,464 25,281 3,935 95,680 Cost of sales: New units 4,796 1,002 209 6,007 Rental units 5,639 1,207 251 7,097 Depreciation of rental equipment 60,228 7,786 1,145 69,159 Gross profit $ 156,852 $ 141,035 $ 16,445 $ 314,332 Other selected data: Adjusted EBITDA $ 140,673 $ 98,695 $ 11,971 $ — $ 251,339 Selling, general and administrative expense $ 79,345 $ 49,799 $ 5,622 $ 10,678 $ 145,444 Purchases of rental equipment and refurbishments $ 81,052 $ 41,246 $ 4,605 $ — $ 126,903 1 Unallocated SG&A expense includes non-cash charges for stock compensation plans and costs to integrate acquired companies. 26 Three Months Ended September 30, 2021 (in thousands) NA Modular NA Storage UK Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 219,736 $ 101,172 $ 21,691 $ 342,599 Delivery and installation 58,017 28,330 5,563 91,910 Sales revenue: New units 13,483 1,307 580 15,370 Rental units 7,815 3,088 265 11,168 Total revenues 299,051 133,897 28,099 461,047 Costs: Cost of leasing and services: Leasing 59,260 14,393 4,314 77,967 Delivery and installation 51,655 19,328 3,238 74,221 Cost of sales: New units 10,080 727 368 11,175 Rental units 3,636 1,587 245 5,468 Depreciation of rental equipment 46,566 5,366 1,058 52,990 Gross profit $ 127,854 $ 92,496 $ 18,876 $ 239,226 Other selected data: Adjusted EBITDA $ 106,825 $ 59,123 $ 13,255 $ — $ 179,203 Selling, general and administrative expense $ 66,529 $ 39,314 $ 6,680 $ 14,823 $ 127,346 Purchases of rental equipment and refurbishments $ 31,789 $ 11,920 $ 11,649 $ — $ 55,358 27 Nine Months Ended September 30, 2022 (in thousands) NA Modular NA Storage UK Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 756,294 $ 409,491 $ 60,421 $ 1,226,206 Delivery and installation 213,686 109,710 17,631 341,027 Sales revenue: New units 21,258 4,064 910 26,232 Rental units 31,482 6,082 1,310 38,874 Total revenues 1,022,720 529,347 80,272 1,632,339 Costs: Cost of leasing and services: Leasing 213,675 62,489 12,610 288,774 Delivery and installation 174,498 70,364 11,268 256,130 Cost of sales: New units 12,297 2,578 594 15,469 Rental units 16,125 4,090 908 21,123 Depreciation of rental equipment 166,552 22,241 3,435 192,228 Gross profit $ 439,573 $ 367,585 $ 51,457 $ 858,615 Other selected data: Adjusted EBITDA $ 372,502 $ 243,282 $ 36,745 $ — $ 652,529 Selling, general and administrative expense $ 242,268 $ 146,189 $ 18,147 $ 38,715 $ 445,319 Purchases of rental equipment and refurbishments $ 221,111 $ 95,699 $ 21,824 $ — $ 338,634 28 Nine Months Ended September 30, 2021 (in thousands) NA Modular NA Storage UK Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 636,979 $ 267,489 $ 61,426 $ 965,894 Delivery and installation 161,548 73,214 18,152 252,914 Sales revenue: New units 27,814 5,355 2,746 35,915 Rental units 28,316 11,381 1,214 40,911 Total revenues 854,657 357,439 83,538 1,295,634 Costs: Cost of leasing and services: Leasing 172,108 37,300 13,339 222,747 Delivery and installation 147,514 51,811 10,638 209,963 Cost of sales: New units 19,330 3,190 1,802 24,322 Rental units 14,611 6,667 1,163 22,441 Depreciation of rental equipment 144,102 17,635 3,290 165,027 Gross profit $ 356,992 $ 240,836 $ 53,306 $ 651,134 Other selected data: Adjusted EBITDA $ 307,741 $ 154,971 $ 36,647 $ — $ 499,359 Selling, general and administrative expense $ 192,285 $ 105,577 $ 19,949 $ 38,840 $ 356,651 Purchases of rental equipment and refurbishments $ 120,288 $ 24,165 $ 22,645 $ — $ 167,098 29 The following table presents reconciliations of the Company’s Income from continuing operations to Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021, respectively: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Income from continuing operations $ 85,728 $ 57,113 $ 200,099 $ 75,278 Income tax expense from continuing operations 30,219 5,243 67,167 32,341 Loss on extinguishment of debt — — — 5,999 Fair value loss on common stock warrant liabilities — — — 26,597 Interest expense 38,165 29,006 102,362 87,793 Depreciation and amortization 86,225 69,449 243,123 216,820 Currency losses, net 236 127 247 196 Restructuring costs, lease impairment expense and other related charges — 2,457 168 14,284 Transaction costs — 303 35 1,147 Integration costs 3,902 8,242 13,182 23,206 Stock compensation expense 7,180 6,157 22,628 14,305 Other ( 316 ) 1,106 3,518 1,393 Adjusted EBITDA $ 251,339 $ 179,203 $ 652,529 $ 499,359 Included in restructuring costs for the three and nine months ended September 30, 2021 was expense of approximately $ 1.4 million and $ 7.2 million, respectively, recognized as a result of the modification of certain equity awards associated with the Transition, Separation and Release Agreement entered into on February 25, 2021 with the Company's former President and Chief Operating Officer. 30 NOTE 19 - Earnings Per Share The following table reconciles the weighted average shares outstanding for the basic calculation to the weighted average shares outstanding for the diluted calculation: Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2022 2021 2022 2021 Numerator: Income from continuing operations $ 85,728 $ 57,113 $ 200,099 $ 75,278 Income from discontinued operations 42,865 3,990 53,041 10,643 Net income $ 128,593 $ 61,103 $ 253,140 $ 85,921 Denominator: Weighted average Common Shares outstanding - basic 213,637 225,998 219,312 227,558 Dilutive effect of shares outstanding Warrants 1,812 3,722 1,816 4,112 RSAs 8 4 17 25 Time-based RSUs 355 476 382 573 Performance-based RSUs 1,067 618 1,279 751 Stock Options 1,049 1,050 1,127 1,066 Weighted average Common Shares outstanding - dilutive 217,928 231,868 223,933 234,085 For the three and nine months ended September 30, 2022, 555,790 and 788,183 shares of Performance-Based RSUs, respectively, were excluded from the computation of diluted EPS because their effect would have been anti-dilutive. For the three and nine months ended September 30, 2021, no warrants, shares or options were excluded from the computation of diluted EPS. 31