What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-27 compared with 2022-11-03 · 246 added, 478 removed, 202 unchanged (78% of the section changed)

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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, 2022 or prior periods.

The discussion of results of operations in this MD&A is presented on a historical basis, as of or for the three months ended March 31, 2023 or prior periods.

On September 30, 2022, the Company completed the sale of its former Tank and Pump Solutions ("Tank and Pump") segment.

On January 31, 2023, the Company completed the sale of its former United Kingdom ("UK") Storage Solutions segment.

This MD&A presents the historical financial results of the former Tank and Pump segment and the former UK Storage Solutions segment as discontinued operations for all periods presented.

The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US (“GAAP”).

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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").

As of September 30, 2022, our branch network included approximately 260 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 167,000 modular space units and over 239,000 portable storage units in our fleet, representing over 130 million square feet of relocatable space.

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.

We service diverse end markets across all sectors of the economy throughout the United States ("US"), Canada, and Mexico.

As of March 31, 2023, our branch network included approximately 240 branch locations and additional drop lots to service our over 85,000 customers.

We offer our customers an extensive selection of “Ready to Work” modular space and portable storage solutions with over 154,000 modular space units and over 210,000 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 reoccurring 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.

Furthermore, 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 modular space and portable storage lease portfolio, excluding seasonal portable storage units, is approximately 30 months.

Our lease revenue is highly predictable due to its reoccurring nature and the underlying stability and diversification of our lease portfolio.

Furthermore, 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 approximately 33 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, energy and natural resources, education, government and institutions and healthcare.

Core to our operating model is the ability to redeploy standardized assets across end markets, as we did in 2020 and 2021 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 to predict demand, including those related to our two largest end markets, the commercial and industrial segment and the construction segment, which collectively accounted for approximately 47% and 41% of our revenues, respectively, for the three months ended September 30, 2022.

We remain focused on our core priorities of growing leasing revenues by increasing units on rent, both organically and through mergers and acquisitions, delivering “Ready to Work” solutions to our customers with value added products and services ("VAPS"), and on continually improving the overall customer experience.

Core to our operating model is the ability to redeploy standardized assets across end markets.

We track several market leading indicators to predict demand, including those related to our two largest end markets, the commercial and industrial sector and the construction sector, which collectively accounted for approximately 88% of our revenues in the three months ended March 31, 2023.

We remain focused on our core priorities of growing leasing revenues by increasing units on rent, both organically and through our acquisition strategy, delivering “Ready to Work” solutions to our customers with value added products and services ("VAPS"), and on continually improving the overall customer experience.

Significant Developments

On September 30, 2022, we sold our Tank and Pump Solutions ("Tank and Pump") business for $319.5 million.

Proceeds from the sale will be used to support ongoing reinvestment in our core Modular and Storage operating segments and other capital allocation priorities.

In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations , we determined that the criteria for discontinued operations presentation were met during the third quarter of 2022 and results for the three and nine months ended September 30, 2022 and 2021 for Tank and Pump are reported in income from discontinued operations within the condensed consolidated statements of operations and the carrying value of the divested business' assets and liabilities are presented within assets and liabilities held for sale on the condensed consolidated balance sheet as of December 31, 2021.

See Note 3 to the Condensed Consolidated Financial Statements for further information.

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.

Customer Relationship Management ("CRM") System

On February 6, 2023, we successfully completed the harmonization of our separate Modular and Storage CRM systems onto a single unified system.

With this enhanced platform, we have a combined view of our customers and projects across the entire sales team.

Going forward, we will focus on productivity management and building a more targeted and predictive approach to anticipate- and service- customer demand, with continued improvement in engagement and outreach underpinned by our data warehouse.

On January 31, 2023, we completed the sale of our former UK Storage Solutions segment for total cash consideration of $418.1 million.

Proceeds from the sale were used to support ongoing reinvestment in our Modular and Storage operating segments in North America and other capital allocation priorities.

Reportable Segments

Following the divestitures of the UK Storage Solutions and Tank and Pump segments, we operate in two reporting segments:

Modular Solutions ("Modular") and Storage Solutions ("Storage").

The reporting segments are aligned with how we operate and analyze our business results.

During the first quarter of 2023, the ground level office business within the Modular segment was transferred to the Storage segment, and associated revenues, expenses, and operating metrics were transferred to the Storage segment.

All periods presented have been retrospectively revised to reflect this adjustment within the Modular and Storage segments.

For the twelve months ended December 31, 2022, this resulted in approximately $49.8 million of revenue and $28.5 million of gross profit being transferred from the Modular segment to the Storage segment.

Asset Acquisitions

During the first quarter of 2023, we acquired certain assets and liabilities of two regional and local storage and modular companies, which consisted primarily of approximately 300 storage units and 500 modular units for $79.6 million in cash.

The accompanying consolidated financial statements include $70.4 million of rental equipment and $4.5 million of land held for sale as a result of these acquisitions.

Interest Rate Swap Agreements

In January 2023, we entered into two interest rate swap agreements with financial counterparties relating to $750.0 million in aggregate notional amount of variable-rate debt under our ABL Facility (as defined below).

Under the terms of the agreements, we receive a floating rate equal to one-month term SOFR and will make payments based on a weighted average fixed interest rate of 3.44% on the notional amount.

The swap agreements were designated and qualified as hedges of our exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the ABL Facility.

The swap agreements terminate on June 30, 2027.

Share Repurchases

During the three months ended March 31, 2023 , we repurchased 4,589,308 shares of Common Stock for $215.7 million.

As of March 31, 2023, $415.1 million of the approved share repurchase pool remained available.

Given the predictability of our free cash flow, we believe that repurchases will be a reoccurring capital allocation priority.

Inflation and Supply Chain Issues

Similar to many other organizations, we face inflationary pressures across most of our input costs such as building materials, labor, transportation and fuel.

Inflation has contributed to increased capital costs for both new units as well as for refurbishment of our existing units.

Inflation has contributed to increased capital costs both for new units as well as for refurbishment of our existing units.

However, given our scale and our strong rate performance, we believe we have been able to navigate the inflationary environment well and have consistently driven margin improvements during this period of rising costs.

Additionally, given the majority of our revenue is derived from leasing our existing lease fleet units to customers and our material purchases to maintain these units consists primarily of general building materials, we have not experienced significant supply chain issues to date.

Asset Acquisitions

During the third quarter of 2022, we acquired certain assets and liabilities of several entities, which consisted primarily of approximately 7,600 storage units and 3,000 modular units for $104.7 million in cash.

When combined with other recent acquisitions over the past four quarters, we have acquired assets and liabilities from 13 regional and local storage and modular companies, consisting primarily of 16,800 storage units and 9,700 modular units.

Share and Warrant Repurchases

During the nine months ended September 30, 2022, we repurchased and cancelled 33,965 of the 2018 Warrants for $0.6 million.

In addition, for 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.

During the nine months ended September 30, 2022, we repurchased a total of 14,575,160 shares of Common Stock and stock equivalents for $524.4 million , including the repurchased warrants.

As of September 30, 2022, we had $863.3 million remaining of a $1.0 billion share repurchase authorization under our stock repurchase program.

Given our growth strategy and the predictability of our free cash flow, we believe that repurchases will be a reoccurring capital allocation priority.

Third Quarter Highlights

For the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, unless otherwise noted, key drivers of our financial performance included:

• Total revenues from continuing operations increased by $143.2 million, or 31.1%, attributable to organic revenue growth levers in the business and due to the impact of acquisitions.

Leasing revenue increased $104.9 million, or 30.6%, and delivery and installation revenue increased $40.9 million, or 44.5%.

Additionally, rental unit sales increased $2.7 million, or 24.1%, and new unit sales revenue decreased $5.5 million, or 35.7%.

We estimate that recent acquisitions completed over the past four quarters contributed approximately $22.4 million to total revenues for the three months ended September 30, 2022.

Additionally, because we derive the majority of our revenue from leasing our existing lease fleet units to customers and our material purchases to maintain these units consist primarily of general building materials, we have not experienced significant supply chain issues to date.

First Quarter Highlights

For the three months ended March 31, 2023, key drivers of our financial performance included:

• Total revenues increased $114.3 million, or 25.3%.

Leasing revenue increased $88.4 million, or 25.1%, delivery and installation revenue increased $21.1 million, or 24.7%, rental unit sales decreased $0.1 million, or 1.2%, and new sales revenue increased $4.9 million, or 84.5%.

Key leasing revenue drivers included:

– Average portable storage units on rent increased 41,048 units, or 25.1%, and average modular space units on rent increased 4,153 units, or 3.8%, across all segments.

Approximately 53% of the increase in total average units on rent was driven by units on rent added through recent acquisitions and the other 47% was driven by increases in organic delivery activity and lower return activity during 2021 and 2022.

– Average modular space monthly rental rate increased $140, or 18.3%, to $907 driven by strong pricing performance across the NA Modular and NA Storage segments.

Average modular space monthly rental rates increased by $157, or 18.8%, in the NA Modular segment and by $144, or 23.9%, in the NA Storage segment.

Average modular space monthly rental rates decreased by $63, or 13.9%, in the UK Storage segment due to the weakening of the British Pound and were up £1, or 0.3%, in local currency.

– Average portable storage monthly rental rate increased $37, or 25.5%, to $182 driven by increased pricing as a result of our price management tools and processes, further supported by high utilization, and by an acceleration earlier into the third quarter of our seasonal retail business.

– Average utilization for portable storage units increased 500 basis points ("bps") to 88.9% as compared to the same period in 2021 driven by increased demand in 2022 including the acceleration earlier into the third quarter of our seasonal retail business as compared to the same period in 2021.

Average utilization for modular space units decreased 120 bps to 68.9%.

• NA Modular segment revenue, which represented 62.1% of consolidated revenue for the three months ended September 30, 2022, increased $76.3 million, or 25.5%, to $375.4 million.

The increase was driven by our core

leasing revenue, which grew $51.6 million, or 23.5%, due to continued growth of pricing and value added products.

Delivery and installation revenues increased $26.4 million, or 45.5%, driven by increased pricing on new deliveries and returns and increased delivery volumes as compared to 2021.

Rental unit sales increased $4.0 million, or 51.3%, and new unit sales decreased $5.6 million, or 41.5%.

NA Modular segment revenue drivers for the three months ended September 30, 2022 included:

– Modular space average monthly rental rate of $991 increased 18.8% year over year representing a continuation of our long-term price optimization initiative and VAPS penetration opportunities across our portfolio.

– Average modular space units on rent increased 3,146, or 3.7%, year over year driven primarily by units on rent added through recent acquisitions.

– Average modular space monthly utilization increased 20 bps to 67.8% for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

• NA Storage segment revenue, which represented 33.5% of consolidated revenue for the three months ended September 30, 2022, increased $68.7 million, or 51.3%, to $202.6 million.

The increase was driven by our core leasing revenue, which grew $55.4 million, or 54.7%, due to increased units on rent driven by significant increases in delivery activity during 2021 and 2022 as economic activity rebounded versus 2020, recent acquisition activity, and increased pricing and value added products.

Delivery and installation revenues increased $14.3 million, or 50.5%, driven by increased demand for new project deliveries, and by increased pricing on new deliveries and returns as compared to 2021.

• Average portable storage units on rent increased 12,304 units, or 8.1%, and average modular space units on rent decreased 1,430 units, or 1.4%.

• Average modular space monthly rental rate increased $163, or 19.7%, to $989 driven by strong pricing performance across both segments.

Average modular space monthly rental rates increased by $152, or 17.0%, in the Modular segment and by $174, or 29.7%, in the Storage segment.

• Average portable storage monthly rental rate increased $50, or 30.1%, to $216 driven by increased pricing as a result of our price management tools and processes.

• Average utilization for portable storage units decreased to 78.7% from 83.1% for the same period in 2022 driven by decreased demand in 2023 as compared to the same period in 2022.

Average utilization for modular space units decreased 250 basis points ("bps") to 66.0%.

• Modular segment revenue, which represents 61.8% of consolidated revenue for the three months ended March 31, 2023, increased $61.1 million, or 21.2%, to $349.7 million.

The increase was driven by our core leasing revenue, which grew $46.0 million, or 20.6%, due to continued growth of pricing and VAPS, and by delivery and installation revenues, which increased $10.5 million, or 19.3%, driven by increased pricing.

Rental unit sales increased $0.5 million, or 8.1%, and new unit sales increased $4.1 million, or 85.4%.

Modular revenue drivers for the three months ended March 31, 2023 included:

• Modular space average monthly rental rate of $1,046, increased 17.0% 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 increased 1,219, or 1.5%, year over year.

• Average modular space monthly utilization decreased 70 bps to 66.2% for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

• Storage segment revenue, which represents 38.2% of consolidated revenue for the three months ended March 31, 2023, increased $53.2 million, or 32.7%, to $215.8 million.

The increase was driven by our core leasing revenue, which grew $42.4 million, or 33.0%, due to increased units on rent and increased pricing, and by delivery and installation revenues, which increased $10.6 million, or 34.0%, driven by increased pricing.

Rental unit sales decreased $0.6 million, or 27.3%, and new unit sales increased $0.8 million, or 88.9%.

NA Storage segment revenue drivers for the three months ended September 30, 2022 included:

• Portable storage average monthly rental rate of $197 increased 27.1% year over year as a result of our price management tools and processes, further supported by high utilization, and by an acceleration earlier into the third quarter of our seasonal retail business.

Modular space average monthly rental rate of $746 increased 23.9% year over year as a result of price optimization and early benefits from increased VAPS penetration opportunities.

• Average portable storage units on rent increased 38,823, or 28.3%, year over year.

Increases in organic activity drove an increase in average portable storage units on rent of approximately 14%, or 19,000 units on rent, including an acceleration earlier into the third quarter of our seasonal retail business.

The remaining increase of approximately 20,000 units on rent was driven by units added in recent acquisitions.

Average modular space units on rent increased 1,736, or 10.6%, year over year driven by increases in organic delivery activity as well as due to approximately 600 acquired units on rent.

• Average portable storage monthly utilization increased 560 bps to 88.8% for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

Average modular space monthly utilization decreased 390 bps to 73.7% for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

• UK Storage segment revenue, which represented 4.3% of consolidated revenue for the three months ended September 30, 2022, decreased $1.9 million, or 6.8%, to $26.2 million and Adjusted EBITDA decreased $1.3 million, or 9.8%, to $12.0 million driven entirely by the weakening of the British Pound relative to the US Dollar.

Unfavorable currency fluctuations reduced Adjusted EBITDA by $2.0 million in GBP.

In local currency, revenue increased 9.1% year-over-year, driven by a 13.6% increase in portable storage average monthly rental rates and a 8.4% increase in average portable storage units on rent, and Adjusted EBITDA increased by 5.7% year-over-year.

• Generated income from continuing operations of $85.7 million for the three months ended September 30, 2022 representing an increase of $28.6 million, or 46.8%, versus the three months ended September 30, 2021.

Net income including income from discontinued operations was $128.6 million for the three months ended September 30, 2022.

• Generated Adjusted EBITDA from continuing operations of $251.3 million for the three months ended September 30, 2022, representing an increase of $72.1 million, or 40.2%, as compared to the same period in 2021.

This increase was driven primarily by increased leasing gross profit.

Including results from discontinued operations representing the divestiture of the Tank and Pump segment, Adjusted EBITDA was $264 million.

▪ Consolidated Adjusted EBITDA Margin was 41.6% in the third quarter of 2022 and increased 270 bps versus prior year driven by increased leasing and delivery and installation margins as a result of increased volumes and pricing, partially offset by increased selling, general and administrative expense.

• Generated Free Cash Flow of $83.4 million for the three months ended September 30, 2022 representing an increase of $4.9 million as compared to the same period in 2021.

Net cash provided by operating activities increased $80.0 million to $210.4 million.

Net cash used in investing activities excluding acquisitions and sale of discontinued

operations increased by $38.6 million to $127.0 million to support increases in delivery activity during 2022 as economic activity rebounded versus 2021, and the related unit on rent growth.

• Returned $197.5 million to shareholders by repurchasing 5.3 million shares of Common Stock and stock equivalents during the three months ended September 30, 2022 and closed four acquisitions totaling approximately 7,600 storage units and 3,000 modular units for $104.7 million.

We believe 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.

Consolidated Results of Continuing Operations

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Our condensed consolidated statements of operations for the three months ended September 30, 2022 and 2021 are presented below.

Three Months Ended September 30, 2022 vs.

2021 $ Change

Storage revenue drivers for the three months ended March 31, 2023 included:

• Portable storage average monthly rental rate of $216 increased 30.1% year over year as a result of our price management tools and processes and early benefits from increased VAPS penetration opportunities.

Modular space average monthly rental rate of $760 increased 29.7% year over year as a result of price optimization and increased VAPS penetration.

• Average portable storage units on rent increased 12,265, or 8.1%, year over year driven by growth achieved in 2022.

Average modular space units on rent decreased 2,649, or 11.6%, year over year.

• Average portable storage monthly utilization decreased 450 bps to 78.7% for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Average modular space monthly utilization decreased 960 bps to 65.3% for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

• Generated income from continuing operations of $76.3 million for the three months ended March 31, 2023.

Discrete costs in the period included $3.9 million of integration costs.

• Generated Adjusted EBITDA from continuing operations of $246.8 million for the three months ended March 31, 2023, representing an increase of $79.0 million, or 47.1%, as compared to the same period in 2022.

This increase was driven primarily by increased leasing and delivery and installation gross profit.

• Adjusted EBITDA margin from continuing operations was 43.7% in the first quarter of 2023 and increased 650 bps versus prior year driven by continued expansion of all margin lines.

Most significantly, delivery and installation margins increased 1,220 bps versus prior year driven primarily by increased pricing.

• Net cash provided by operating activities increased $3.2 million to $148.8 million despite the divestitures of the Tank and Pump and UK Storage Segments.

Net cash used in investing activities, excluding cash used as part of acquisitions and proceeds from the sale of discontinued operations including the settlement of the contingent foreign currency forward contract that we executed relating to the sale of the former UK Storage Solutions segment, decreased by $45.1 million as a result of reduced refurbishment spending and decreased purchases of new fleet as a result of lower utilization.

• Generated Free Cash Flow of $102.9 million for the three months ended March 31, 2023 representing an increase of $48.3 million as compared to the same period in 2022.

This Free Cash Flow along with additional net borrowings under the ABL Facility (defined as receipts from borrowings, less repayment of borrowings from the condensed consolidated statement of cash flows) and proceeds of $404.3 million related to the sale of the former UK Storage Solutions segment, net of the settlement of the contingent foreign currency forward contract, were deployed to:

• Acquire two regional and local storage and modular portfolios of approximately 300 storage units and 500 modular units for $79.6 million;

• Return $215.7 million to shareholders through stock repurchases, reducing outstanding Common Stock by 4,589,308 shares.

• We believe 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, maintaining leverage in our stated range, opportunistically executing accretive acquisitions, and returning capital to shareholders.

Consolidated Results of Operations

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Our condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 are presented below.

Three Months Ended March 31, 2023 vs.

(in thousands)

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Other depreciation and amortization 17,173 15,362 1,811

Lease impairment expense and other related charges — 601 (601)

Restructuring costs — 1,856 (1,856)

Currency losses, net 6,775 137 6,638

Other (income) expense, net (2,526) 1,475 (4,001)

Other income, net (3,359) (1,283) (2,076)

Operating income 151,647 81,701 69,946

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Income from continuing operations $ 76,271 $ 39,048 $ 37,223

Comparison of Three Months Ended September 30, 2022 and 2021

Total revenue increased $143.2 million, or 31.1%, to $604.2 million for the three months ended September 30, 2022 from $461.0 million for the three months ended September 30, 2021.

Leasing revenue increased $104.9 million, or 30.6%, as compared to the same period in 2021 driven by improved pricing and value added products, and an increase of 41,048 average portable storage units on rent driven by significant increases in delivery activity during 2021 and into 2022 as economic activity rebounded versus 2020 and recent acquisition activity.

Delivery and installation revenues increased $40.9 million, or 44.5%, due to increased overall activity and increased pricing due to our ability to pass through increasing fuel costs and general price increases.

Rental unit sales increased $2.7 million, or 24.1%, and new unit sales decreased $5.5 million, or 35.7%.

We estimate that recent acquisitions completed over the past four quarters contributed approximately $22.4 million to total revenues for three months ended September 30, 2022.

Total average units on rent for the three months ended September 30, 2022 and 2021 were 318,281 and 273,080, respectively, representing an increase of 45,201, or 16.6%.

Of this increase, approximately 20,000 portable storage units and 4,000 modular space units on rent were added through recent acquisitions.

Portable storage average units on rent increased by 41,048 units, or 25.1%, for the three months ended September 30, 2022 driven by strong demand and acquisitions.

The average portable storage unit utilization rate during the three months ended September 30, 2022 was 88.9%, as compared to

83.9% during the same period in 2021.

Modular space average units on rent increased 4,153 units, or 3.8%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 driven primarily by acquisitions.

The average modular space unit utilization rate during the three months ended September 30, 2022 was 68.9%, as compared to 70.1% during the same period in 2021.

Modular space average monthly rental rates increased 18.3% to $907 for the three months ended September 30, 2022.

Improved pricing was achieved across all relevant segments.

Average modular space monthly rental rates increased by $157, or 18.8%, to $991 in the NA Modular segment and by $144, or 23.9%, in the NA Storage segment.

Increases were driven by a continuation of our long-term price optimization initiative 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 segment.

The NA Storage segment also continued to see early benefits from increased VAPS penetration opportunities.

Average portable storage monthly rental rates increased 25.5% to $182 for the three months ended September 30, 2022 driven by our price management tools and processes, further supported by high utilization and by an acceleration earlier into the third quarter of our seasonal retail business at increased rates.

Gross Profit:

Our gross profit percentage was 52.0% and 51.9% for the three months ended September 30, 2022 and 2021, respectively.

Our adjusted gross profit percentage, which excludes the effects of depreciation, was 63.5% and 63.4% for the three months ended September 30, 2022 and 2021, respectively.

Gross profit increased $75.1 million, or 31.4%, to $314.3 million for the three months ended September 30, 2022 from $239.2 million for the three months ended September 30, 2021.

The increase in gross profit was a result of a $71.0 million increase in leasing gross profit, increased delivery and installation gross profit of $19.4 million and increased new and rental unit sale margins of $0.8 million.

These increases were primarily a result of increased revenues due to favorable average monthly rental rates across both portable storage and modular space units, increased pricing on delivery and installation, as well as due to higher units on rent and increased activity levels driving higher delivery and installation revenues, partially offset by increased variable costs during the period as a result of higher activity levels in the current quarter and inflationary pressures across many of our cost categories.

Depreciation increased $16.2 million as a result of capital investments made in our rental equipment, including the impact of recent acquisitions.

Selling, general and administrative expense ("SG&A") increased $18.1 million, or 14.2%, to $145.4 million for the three months ended September 30, 2022, compared to $127.3 million for the three months ended September 30, 2021.

Employee costs excluding stock compensation increased $12.2 million, or 20.6%, driven by a 12% increase in SG&A headcount to support both organic and inorganic growth, wage increases, and increased variable compensation as a result of the growth achieved.

Stock compensation expense increased $1.0 million to $7.2 million for the three months ended September 30, 2022, compared to $6.2 million for the three months ended September 30, 2021.

Integration costs decreased $4.3 million to $3.9 million for the three months ended September 30, 2022, compared to $8.2 million for the three months ended September 30, 2021.

The remaining increases were primarily driven by increased economic activity and inflationary increases, including increased occupancy and office costs, legal and professional fees, insurance, travel expenses, and marketing cost increases.

Other Depreciation and Amortization:

Other depreciation and amortization increased $0.6 million to $17.1 million for the three months ended September 30, 2022 compared to $16.5 million for the three months ended September 30, 2021.

The increase was driven by an increase in depreciation of vehicles, buildings and equipment.

Lease Impairment Expense and Other Related Charges:

Lease impairment expense and other related charges were $0 for the three months ended September 30, 2022 as compared to $0.6 million for the three months ended September 30, 2021.

The decrease resulted from fewer closed locations during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Restructuring Costs:

Restructuring costs were $1.9 million for the three months ended September 30, 2021 primarily driven by employee termination costs resulting from the elimination of positions due to the merger.

Currency Losses, net:

Currency losses, net changed by $0.1 million to $0.2 million for the three months ended September 30, 2022 from $0.1 million for the three months ended September 30, 2021.

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 (Income) Expense, net:

Other (income) expense, net was $2.5 million of income for the three months ended September 30, 2022 compared to $1.5 million of expense for the three months ended September 30, 2021.

Other income, net of $2.5 million for the three months ended September 30, 2022 was primarily related to insurance recoveries in the quarter related to Hurricane Ida in the Gulf Coast area of the United States in 2021.

Interest Expense:

Interest expense increased $9.2 million, or 31.7%, to $38.2 million for the three months ended September 30, 2022 from $29.0 million for the three months ended September 30, 2021 due to both an increase in outstanding borrowings and an increase in the weighted average interest rate for borrowings under the ABL Facility due to increased benchmark interest rates, partially offset by a favorable margin reduction as a result of the June 30, 2022

amendment to the credit facility.

See Note 10 to the condensed consolidated financial statements for further discussion of our debt.

Income Tax Expense:

Income tax expense increased $25.0 million to $30.2 million for the three months ended September 30, 2022 compared to $5.2 million for the three months ended September 30, 2021.

The increase in expense was driven by the pre-tax income increase for the three months ended September 30, 2022.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Our condensed consolidated statements of operations for the nine months ended September 30, 2022 and 2021 are presented below.

Nine Months Ended September 30, 2022 vs.

2021 $ Change

(in thousands)

Leasing and services revenue:

Leasing $ 1,226,206 $ 965,894 $ 260,312

Delivery and installation 341,027 252,914 88,113

Sales revenue:

New units 26,232 35,915 (9,683)

Rental units 38,874 40,911 (2,037)

Total revenues 1,632,339 1,295,634 336,705

Costs of leasing and services:

Leasing 288,774 222,747 66,027

Delivery and installation 256,130 209,963 46,167

Costs of sales:

New units 15,469 24,322 (8,853)

Rental units 21,123 22,441 (1,318)

Depreciation of rental equipment 192,228 165,027 27,201

Gross profit 858,615 651,134 207,481

Selling, general and administrative 445,319 356,651 88,668

Other depreciation and amortization 50,895 51,793 (898)

Lease impairment expense and other related charges 254 2,328 (2,074)

Restructuring costs (86) 11,956 (12,042)

Currency losses, net 247 196 51

Other (income) expense, net (7,642) 202 (7,844)

Operating income 369,628 228,008 141,620

Interest expense 102,362 87,793 14,569

Fair value loss on common stock warrant liabilities — 26,597 (26,597)

Loss on extinguishment of debt — 5,999 (5,999)

Income from continuing operations before income tax 267,266 107,619 159,647

Income tax expense 67,167 32,341 34,826

Income from continuing operations $ 200,099 $ 75,278 $ 124,821

Comparison of Nine Months Ended September 30, 2022 and 2021

Total revenue increased $336.7 million, or 26.0%, to $1,632.3 million for the nine months ended September 30, 2022 from $1,295.6 million for the nine months ended September 30, 2021.

Leasing revenue increased $260.3 million, or 26.9%, as compared to the same period in 2021 driven by an increase of 38,780 average modular space and portable storage units on rent as a result of increased economic activity and acquisitions, and improved pricing and value added products.

Delivery and installation revenues increased $88.1 million, or 34.8%, due to increased overall activity and increased pricing due to our ability to pass through increasing fuel costs and general price increases.

Rental unit sales decreased $2.0 million, or 4.9%, and new unit sales decreased $9.7 million, or 27.0%.

Total average units on rent for the nine months ended September 30, 2022 and 2021 were 302,444 and 263,664, respectively.

Modular space average units on rent increased 2,787 units, or 2.5%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Modular space average monthly rental rates increased 17.3% to $853 for the nine months ended September 30, 2022.

Portable storage average units on rent increased by 35,993 units, or 23.5%, for the nine months ended September 30, 2022.

Average portable storage monthly rental rates increased 22.1% to $171 for the nine months ended September 30, 2022.

The average modular space unit utilization rate during the nine months ended September 30, 2022 was 68.9%, as compared to 70.2% during the same period in 2021.

The average portable storage unit utilization rate during the nine months ended September 30, 2022 was 86.4%, as compared to 78.7% during the same period in 2021.

Discontinued operations:

Income from discontinued operations before income tax 4,003 15,787 (11,784)

Gain on sale of discontinued operations 176,078 — 176,078

Income tax expense from discontinued operations 45,468 3,664 41,804

Income from discontinued operations 134,613 12,123 122,490

Net income $ 210,884 $ 51,171 $ 159,713

Comparison of Three Months Ended March 31, 2023 and 2022

Total revenue increased $114.3 million, or 25.3%, to $565.5 million for the three months ended March 31, 2023 from $451.2 million for the three months ended March 31, 2022.

Leasing revenue increased $88.4 million, or 25.1%, as compared to the same period in 2022 driven by improved pricing and value added products penetration and an increase of 12,304 average portable storage units on rent.

Delivery and installation revenues increased $21.1 million, or 24.7%, due to increased pricing across both of our segments.

Rental unit sales decreased $0.1 million, or 1.2%, and new unit sales increased $4.9 million, or 84.5% driven by increased sale opportunities in our Modular segment.

Total average units on rent for the three months ended March 31, 2023 and 2022 were 267,230 and 256,356, respectively, representing an increase of 10,874, or 4.2%.

Portable storage average units on rent increased by 12,304 units, or 8.1%, for the three months ended March 31, 2023 driven by strong delivery and unit on rent growth in 2022.

The average portable storage unit utilization rate during the three months ended March 31, 2023 was 78.7%, as compared to 83.1% during the same period in 2022.

Modular space average units on rent decreased 1,430 units, or 1.4%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

The average modular space unit utilization rate during the three months ended March 31, 2023 was 66.0% as compared to 68.5% during the same period in 2022.

Modular space average monthly rental rates increased 19.7% to $989 for the three months ended March 31, 2023.

Average modular space monthly rental rates increased by $152, or 17.0%, to $1,046 in the Modular segment and by $174, or 29.7%, in the Storage segment.

Increases were driven by a continuation of the long-term price optimization and VAPS penetration opportunities across our Modular segment as well as by application of these same price management tools and processes across the Storage segment.

Average portable storage monthly rental rates increased 30.1% to $216 for the three months ended March 31, 2023 driven by our price management tools and processes and early benefits from increased VAPS penetration opportunities on our basic VAPS offerings in the Storage segment, which began in the second quarter of 2022.

Gross Profit:

Our gross profit percentage was 52.6% and 50.3% for the nine months ended September 30, 2022 and 2021, respectively.

Our adjusted gross profit percentage, which excludes the effects of depreciation, was 64.4% and 63.0% for the nine months ended September 30, 2022 and 2021, respectively.

Gross profit increased $207.5 million, or 31.9%, to $858.6 million for the nine months ended September 30, 2022 from $651.1 million for the nine months ended September 30, 2021.

The increase in gross profit was a result of a $194.2 million increase in leasing gross profit and increased delivery and installation gross profit of $42.0 million, partially offset by decreased new and rental unit sale margins of $1.6 million.

The increases in leasing gross profit and delivery and installation gross profit were driven by favorable average monthly rental rates on modular space and portable storage units, increased pricing on delivery and installation, as well as due to higher units on rent and increased activity levels driving higher delivery and installation revenues.

Depreciation increased to $192.2 million as a result of fleet acquired through acquisitions and capital investments made in our rental equipment.

SG&A increased $88.6 million, or 24.8%, to $445.3 million for the nine months ended September 30, 2022, compared to $356.7 million for the nine months ended September 30, 2021.

Employee costs excluding stock compensation increased $45.3 million, or 27.2%, driven by a 13% increase in SG&A headcount to support both organic and inorganic growth, wage increases, and increased variable compensation as a result of the growth achieved.

Stock compensation expense increased $8.3 million to $22.6 million for the nine months ended September 30, 2022, compared to $14.3 million for the nine months ended September 30, 2021.

Integration costs decreased $10.0 million to $13.2 million for the nine months ended September 30, 2022, compared to $23.2 million for the nine months ended September 30, 2021.

Gross profit increased $89.1 million, or 38.1%, to $323.1 million for the three months ended March 31, 2023 from $234.1 million for the three months ended March 31, 2022.

The increase in gross profit was a result of a $71.2 million increase in leasing gross profit, increased delivery and installation gross profit of $16.7 million and increased new and rental unit sales gross profit of $2.8 million.

Increases were primarily a result of increased revenues due to favorable average monthly rental rates and delivery and installation pricing across both portable storage and modular space units, as well as due to increased portable storage units on rent.

Cost of leasing and services increased by $21.6 million, or 14.3%, for the three months ended March 31, 2023 versus the three months ended March 31, 2022, driven by a $5.7 million, or 27.6%, increase in material costs, a $7.4 million, or 13.9%, increase in labor costs, a $6.6 million, or 11.8%, increase in subcontractor costs, and a $1.9 million, or 9.1%, increase in vehicle, equipment and other costs.

Cost of sales increased by $2.0 million, or 23.3%, which is in line with expected costs to deliver increased sales revenues of 35.0% for the three months ended March 31, 2023, resulting in improved sales gross profit margins.

The year over year changes in each of these cost components was consistent with historical trends and management's expectations given the respective change in sales volume and inflationary pressures impacting our business.

Increase in gross profit were offset partially by increased depreciation of $1.6 million, or 2.8%, as a result of capital investments made over the past twelve months in rental equipment.

Our resulting gross profit percentage was 57.1% and 51.9% for the three months ended March 31, 2023 and 2022, respectively.

Our gross profit percentage, excluding the effects of depreciation, was 67.6% and 64.6% for the three months ended March 31, 2023 and 2022, respectively.

These increases were driven primarily by continued price optimization within leasing, delivery, and installation revenues and execution of VAPS penetration opportunities that have outpaced increases in cost of leasing and services.

Selling, general and administrative ("SG&A") increased $12.7 million, or 9.2%, to $150.9 million for the three months ended March 31, 2023, compared to $138.1 million for the three months ended March 31, 2022.

Employee Costs excluding stock compensation increased $2.5 million, or 3.8%, as a result of an increase in indirect labor headcount and annual wage increases.

Travel expenses increased $3.5 million, or 66.3%, due to increased travel and training, and real estate costs increased $2.1 million, or 11.2%.

Additionally, stock compensation expense increased $1.9 million to $8.2 million for the three months ended March 31, 2023, compared to $6.3 million for the three months ended March 31, 2022.

Other Depreciation and Amortization:

Other depreciation and amortization decreased $0.9 million to $50.9 million for the nine months ended September 30, 2022 compared to $51.8 million for the nine months ended September 30, 2021.

Lease Impairment Expense and Other Related Charges:

Lease impairment expense and other related charges was $0.3 million for the nine months ended September 30, 2022 as compared to $2.3 million for the nine months ended September 30, 2021.

Restructuring Costs:

In the nine months ended September 30, 2021, the Company recorded $12.0 million of restructuring costs primarily as a result of employee termination costs from the elimination of positions due to the Merger.

Employee termination costs of $7.2 million were settled in stock, which is non-cash, non-recurring and not included in stock compensation expense.

Currency Losses, Net:

Currency losses, net of $0.2 million remained flat for the nine months ended September 30, 2022 when compared to the nine months ended September 30, 2021.

Other Income, Net:

Other income, net was $7.6 million of income for the nine months ended September 30, 2022 compared to $0.2 million of expense for the nine months ended September 30, 2021.

The increase was primarily attributable to insurance recoveries in the current period related to Hurricane Ida in the Gulf Coast area of the United States in 2021.

Other depreciation and amortization increased $1.8 million to $17.2 million for the three months ended March 31, 2023 compared to $15.4 million for the three months ended March 31, 2022.

The increase was driven by increased depreciation as a result of our recent investments in our CRM system and other infrastructure improvements across our branch network.

Currency Losses (Gains), net:

Currency losses, net increased by $6.7 million to $6.8 million for the three months ended March 31, 2023 from $0.1 million for the three months ended March 31, 2022.

This change was primarily attributable to a loss on the settlement of the contingent foreign currency forward contract to sell £330.0 million upon the closing of the sale of the former UK Storage Solutions segment.

Other Expense (Income), Net:

Other income, net was $3.4 million for the three months ended March 31, 2023 compared to $1.3 million for the three months ended March 31, 2022.

The increase in other income, net was related to an increase in insurance recoveries during 2023 related to Hurricanes in the Gulf Coast area of the United States.

Interest Expense:

Interest expense increased $14.6 million to $102.4 million for the nine months ended September 30, 2022 from $87.8 million for the nine months ended September 30, 2021 due to both an increase in outstanding borrowings and an increase in the weighted average interest rate for borrowings under the ABL Facility due to increased benchmark interest rates, partially offset by a favorable margin reduction as a result of the June 30, 2022 amendment to the credit facility.

Interest expense increased $14.3 million, or 46.7%, to $44.9 million for the three months ended March 31, 2023 from $30.6 million for the three months ended March 31, 2022.

The increase in interest expense was a result of higher 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 $26.6 million for the nine months ended September 30, 2021, primarily due to the change in estimated fair value of common stock warrant liabilities.

Subsequent to May 2021, no 2015 Private Warrants were outstanding.

Loss on Extinguishment of Debt:

During the nine months ended September 30, 2021, the Company redeemed $123.5 million of the outstanding principal of its 2025 Secured Notes and recorded a loss on extinguishment of debt of $6.0 million.

There was no similar transaction in the nine months ended September 30, 2022.

Income Tax Expense:

Income tax expense increased $34.9 million to $67.2 million for the nine months ended September 30, 2022 compared to $32.3 million for the nine months ended September 30, 2021.

The increase in expense was driven by the pre-tax income increase for the nine months ended September 30, 2022.

Income tax expense increased $18.4 million to $30.5 million for the three months ended March 31, 2023 compared to $12.1 million for the three months ended March 31, 2022.

The increase in expense was driven by

an increase in income from continuing operations before income tax for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

Income from Discontinued Operations:

Income from discontinued operations increased $122.5 million to $134.6 million for the three months ended March 31, 2023 compared to $12.1 million for the three months ended March 31, 2022.

The increase in income from discontinued operations was driven by the gain on sale of the former UK Storage Solutions segment of $176.1 million, partially offset by an increase in income tax expense from discontinued operations.

Business Segment Results

Following the divestiture of the Tank and Pump segment, the Company operates in three reportable segments as follows:

NA Modular, NA Storage and UK Storage.

NA Modular represents the activities of the North American modular business.

NA Storage represents the activities of the North American portable storage business.

UK Storage represents the results of all modular and portable storage operations in the UK.

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, 2022 and 2021.

Comparison of Three Months Ended September 30, 2022 and 2021

Three Months Ended September 30, 2022

The Company operates in two reportable segments as follows:

Modular and Storage.

Modular represents the activities of the North American modular business, excluding ground level offices, which were transferred to the Storage segment during the first quarter of 2023.

Storage represents the activities of the North American portable storage and ground level office business.

As part of the transfer of the ground level offices to Storage, we also adjusted average modular space monthly rental rate in the Storage segment to only include VAPS specifically applicable to ground level offices, which has also been reflected in the total average modular space monthly rental rate.

The following tables and discussion summarize our reportable segment financial information for the three months ended March 31, 2023 and 2022.

Comparison of Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, 2023

(in thousands, except for units on rent and rates)

NA Modular NA Storage UK Storage Total

Modular Storage Total

Revenue $ 349,670 $ 215,798 $ 565,468

8 unchanged sentences

Average portable storage monthly rental rate $ 217 $ 216 $ 216

Three Months Ended September 30, 2021

(in thousands, except for units on rent and rates) NA Modular NA Storage UK Storage Total

Three Months Ended March 31, 2022

(in thousands, except for units on rent and rates) Modular Storage Total

Revenue $ 288,547 $ 162,624 $ 451,171

8 unchanged sentences

Average portable storage monthly rental rate $ 160 $ 166 $ 166

Total revenue increased $76.3 million, or 25.5%, to $375.4 million for the three months ended September 30, 2022 from $299.1 million for the three months ended September 30, 2021.

The increase was primarily the result of a $51.6 million, or 23.5%, increase in leasing revenue, a $26.4 million, or 45.5%, increase in modular delivery and installation revenue, a $4.0 million, or 51.3%, increase in rental unit sales revenue.

These were partially offset by a $5.6 million, or 41.5%, decrease in new unit sales.

Average modular space monthly rental rates increased 18.8% for the three months ended September 30, 2022 to $991 driven by the continuation of our long-term price optimization initiative and VAPS penetration opportunities

across our portfolio.

Average modular space units on rent increased by 3,146 units, or 3.7%, year over year primarily due to acquisitions.

Total revenue increased $61.1 million, or 21.2%, to $349.7 million for the three months ended March 31, 2023 from $288.6 million for the three months ended March 31, 2022.

The increase was primarily the result of a $46.0 million, or 20.6%, increase in leasing revenue, a $10.5 million, or 19.3%, increase in delivery and installation revenue driven by improved pricing, an increase of $0.5 million, or 8.1%, in rental unit sales revenue and a $4.1 million, or 85.4%, increase in new unit sales.

Average modular space monthly rental rates increased 17.0% for the three months ended March 31, 2023 to

$1,046 driven by the continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio.

Average modular space units on rent increased by 1,219 units, or 1.5%, year over year.

Gross Profit:

Gross profit increased $29.0 million, or 22.7%, to $156.9 million for the three months ended September 30, 2022 from $127.9 million for the three months ended September 30, 2021.

Gross profit percentage contracted 100 bps to 41.8%.

The increase in gross profit was driven by higher leasing gross profit, which increased $29.5 million, or 18.4%, driven by improved pricing including VAPS.

The increase in gross profit from leasing for the three months ended September 30, 2022 was further complemented by an $11.6 million increase in delivery and installation gross profit, and a $2.0 million increase in rental unit sales gross profit.

These increases were partially offset by a $13.6 million increase in depreciation of rental equipment related to capital investments made in our rental equipment and due to fleet acquired as part of acquisitions, and a $0.3 million decrease in new unit sales gross profit.

Gross profit increased $42.7 million, or 34.8%, to $165.3 million for the three months ended March 31, 2023 from $122.6 million for the three months ended March 31, 2022.

The increase in gross profit was driven by higher leasing gross profit, which increased $33.7 million, or 20.8%, driven from improved pricing including VAPS.

The increase in gross profit from leasing for the three months ended March 31, 2023 was further complemented by a $6.9 million increase in delivery and installation gross profit driven by increased pricing ahead of inflationary costs, a $0.6 million increase in rental unit sales gross profit, and a $1.7 million increase in new sales gross profit, partially offset by a $0.2 million increase in depreciation of rental equipment.

Cost of leasing and services increased by $15.8 million, or 14.5%, for the three months ended March 31, 2023 versus the three months ended March 31, 2022, driven by a $5.5 million, or 35.0%, increase in material costs, a $5.3 million, or 14.4%, increase in labor costs, a $4.0 million, or 9.0%, increase in subcontractor costs, and a $1.0 million, or 8.2%, increase in vehicle, equipment and other costs.

Cost of sales increased by $2.3 million, or 34.7%, which is in line with expected costs to deliver increased sales revenues of 43.1% for three months ended March 31, 2023, resulting in improved sales gross profit margins.

Increases in gross profit were offset partially by increased depreciation of $0.2 million, or 0.4%, as a result of capital investments made over the past twelve months in rental equipment.

Adjusted EBITDA:

Adjusted EBITDA increased $33.9 million, or 31.8%, to $140.7 million for the three months ended September 30, 2022 from $106.8 million for the three months ended September 30, 2021.

Adjusted EBITDA margin percentage increased 176 bps to 37.5%.

The increase was driven by higher leasing and delivery and installation gross profits discussed above.

SG&A, excluding discrete items, increased $12.8 million, or 19.2%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021 to support higher staffing levels for both organic and inorganic growth, wage increases, and increased variable compensation as a result of the growth achieved, increased office and occupancy costs, increased travel expenses, and increased subscription, legal and professional fees.

Adjusted EBITDA increased $37.3 million, or 37.4%, to $136.9 million for the three months ended March 31, 2023 from $99.6 million for the three months ended March 31, 2022.

The increase was primarily driven by higher leasing and delivery and installation gross profit discussed above.

SG&A, excluding discrete items, increased $7.2 million, or 9.7%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Employee Costs increased $3.3 million, or 9.7%, as a result of an increase in indirect labor headcount and annual wage increases.

Travel expenses increased $1.7 million, or 52.8% due to increased travel and training, and real estate costs increased $1.1 million, or 8.6%.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments increased $49.3 million, or 155.0%, to $81.1 million for the three months ended September 30, 2022 from $31.8 million for the three months ended September 30, 2021.

Net Fleet CAPEX increased $45.3 million, or 188.8%, to $69.2 million.

These increases were driven by increased refurbishments, and increased new fleet and VAPS purchase volumes, further increased by inflationary pressures.

Total revenue increased $68.7 million, or 51.3%, to $202.6 million for the three months ended September 30, 2022 from $133.9 million for the three months ended September 30, 2021.

Leasing revenues increased $55.4 million in the current quarter compared to the prior-year quarter.

Modular space average units on rent increased 10.6% and average modular space monthly rental rates increased 23.9% year-over-year driven primarily by increased pricing on new deliveries.

Portable storage units on rent increased 38,823, or 28.3%.

Increases in organic activity drove an increase in average portable storage units on rent of approximately 14.0% or 19,000 units on rent, including an acceleration earlier into the third quarter of our seasonal retail business.

The remaining increase of approximately 20,000 units on rent was driven by units added in recent acquisitions.

Average portable storage monthly rental rates increased 27.1% year-over-year as a result of our price management tools and processes, further supported by high utilization, and by an acceleration earlier into the third quarter of our seasonal retail business.

Delivery and installation revenues increased $14.3 million year-over-year driven by increased demand for new project deliveries, and by increased pricing on new deliveries and returns as compared to 2021.

Sales revenues decreased $1.0 million compared to the prior-year quarter.

Purchases of rental equipment and refurbishments decreased $18.2 million, or 31.6%, to $39.4 million for the three months ended March 31, 2023 from $57.6 million for the three months ended March 31, 2022 driven by successful efforts to reduce our refurbishment costs through better unit selection and work scope during 2023.

Total revenue increased $53.2 million, or 32.7%, to $215.8 million for the three months ended March 31, 2023 from $162.6 million for the three months ended March 31, 2022.

The increase was primarily the result of a $42.4 million, or 33.0%, increase in leasing revenue and a $10.6 million, or 34.0%, increase in delivery and installation revenue driven by improved pricing.

Sales revenues increased $0.2 million, or 6.5%.

Average portable storage monthly rental rates increased 30.1% for the three months ended March 31, 2023 to $216 driven by our price management tools and processes and early benefits from increased VAPS penetration opportunities on our basic VAPS offerings, which began in the second quarter of 2022.

Average modular space units on rent increased by 12,265 units, or 8.1%, year over year driven by strong delivery and unit on rent growth in 2022.

Average modular space monthly rental rates increased 29.7% year-over-year driven primarily by increased pricing on new deliveries;

however, average units on rent decreased 11.6% driven by lower demand.

Gross Profit:

Gross profit increased by $48.5 million, or 52.4%, to $141.0 million for the three months ended September 30, 2022 compared to $92.5 million for the three months ended September 30, 2021.

Gross profit percentage increased 50 bps to 69.6%.

Gross profit increased by $46.3 million, or 41.5%, to $157.8 million for the three months ended March 31, 2023 compared to $111.5 million for the three months ended March 31, 2022.

Gross profit on leasing activity increased by $37.5 million year over year driven by both increased volume and increased pricing as described above.

For delivery and installation, gross profit increased $8.4 million.

Sales gross profit decreased by $0.9 million to $1.2 million.

Delivery and installation gross profit increased $9.8 million, or 114.5%, driven by increased pricing ahead of inflationary cost.

Sales gross profit increased by $0.5 million to $1.7 million.

Increases in gross profit were partially offset by a $1.4 million increase in depreciation of rental equipment.

Cost of leasing and services increased by $5.8 million, or 13.9%, for the three months ended March 31, 2023 versus the three months ended March 31, 2022, driven by a $0.2 million, or 4.1%, increase in material costs, a $2.1 million, or 12.8%, increase in labor costs, a $2.5 million, or 22.9%, increase in subcontractor costs, and a $0.9 million, or 10.2%, increase in vehicle, equipment and other costs.

Cost of sales decreased by $0.3 million, or 16.1%, driven by improved sales gross profit margins on increased sales revenues of 6.5% for three months ended March 31, 2023.

These increases were offset partially by increased depreciation of $1.4 million, or 18.6%, as a result of capital investments made over the past twelve months in rental equipment.

Adjusted EBITDA:

Adjusted EBITDA increased $39.6 million, or 66.9%, to $98.7 million for the three months ended September 30, 2022 from $59.1 million for the three months ended September 30, 2021.

Adjusted EBITDA margin percentage increased 455 bps to 48.7%.

Adjusted EBITDA increased $41.7 million, or 61.1%, to $109.9 million for the three months ended March 31, 2023 from $68.2 million for the three months ended March 31, 2022 and the margin expanded to 50.9% from 41.9% as a result of increased units on rent, favorable pricing on units and on delivery and installation, and increased VAPS penetration.

The increase in Adjusted EBITDA was driven primarily by increased leasing gross profit as described above, partially offset by increased SG&A.

Excluding acquisition-related costs and stock-based compensation, SG&A increased $10.5 million in this segment.

The increase was comprised of increased costs for personnel, including commissions and other variable compensation to support increased commercial activity, increased travel expenses, and increased subscription and professional fees.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments increased $29.3 million, or 246.2%, to $41.2 million for the three months ended September 30, 2022 from $11.9 million for the three months ended September 30, 2021.

Net Fleet CAPEX increased $30.7 million, or 347.6%, to $39.5 million.

The increase in purchases of rental equipment and refurbishments was driven primarily by increased purchases of portable storage containers during the period to support organic growth.

Total revenue decreased $1.9 million, or 6.8%, to $26.2 million for the three months ended September 30, 2022 from $28.1 million for the three months ended September 30, 2021 due to the strengthening of the U.S.

In local currency, total revenues increased £1.8 million to £22.2 million.

Leasing revenues decreased $2.0 million in the current quarter compared to the prior-year quarter.

In local currency, leasing revenues increased £1.0 million to £16.7 million.

Modular space

average units on rent decreased 7.8%, while portable storage units on rent increased 8.4%.

Average monthly rental rates for modular space units decreased 13.9% and average monthly rental rates for portable storage units decreased 2.2% year-over-year, including the impacts of currency fluctuations.

In local currency, average monthly rental rates for modular space units increased 0.3% and average monthly rental rates for portable storage increased 13.6% year-over-year.

Delivery and installation revenues increased $0.2 million year-over-year.

In local currency, delivery and installation revenues increased £0.9 million to £5.0 million.

Sales revenues decreased $0.1 million compared to the prior-year quarter.

In local currency, sales revenues decreased £0.1 million to £0.6 million.

Gross Profit:

Gross profit decreased $2.5 million, or 13.2%, for the three months ended September 30, 2022 to $16.4 million from $18.9 million for the three months ended September 30, 2021 due to the strengthening of the U.S.

In local currency, gross profit increased £0.3 million, or 2.0%.

Adjusted EBITDA:

Adjusted EBITDA decreased $1.3 million, or 9.8%, to $12.0 million for three months ended September 30, 2022 from $13.3 million for the three months ended September 30, 2021 and the Adjusted EBITDA margin percentage contracted to 45.8% from 47.2%.

The decrease resulted from the unfavorable gross profit discussed above driven by unfavorable currency fluctuations, partially offset by decreased SG&A of $1.1 million.

In local currency, Adjusted EBITDA increased £0.6 million, or 5.7%.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments decreased $7.0 million, or 60.3%, to $4.6 million for the three months ended September 30, 2022 from $11.6 million for the three months ended September 30, 2021.

Net Fleet CAPEX decreased $7.1 million, or 62.7%, to $4.2 million.

The decrease in purchases of rental equipment and refurbishments was driven primarily by decreased purchases of portable storage containers as compared to the prior year.

Comparison of Nine Months Ended September 30, 2022 and 2021

Nine Months Ended September 30, 2022

(in thousands, except for units on rent and rates)

NA Modular NA Storage UK Storage Total

Revenue $ 1,022,720 $ 529,347 $ 80,272 $ 1,632,339

Gross profit $ 439,573 $ 367,585 $ 51,457 $ 858,615

Adjusted EBITDA $ 372,502 $ 243,282 $ 36,745 $ 652,529

Capital expenditures for rental equipment $ 221,111 $ 95,699 $ 21,824 $ 338,634

Average modular space units on rent 86,310 18,223 8,470 113,003

Average modular space utilization rate 67.5 % 74.7 % 72.0 % 68.9 %

Average modular space monthly rental rate $ 936 $ 673 $ 409 $ 853

Average portable storage units on rent 498 161,331 27,612 189,441

Average portable storage utilization rate 56.5 % 86.0 % 89.8 % 86.4 %

Average portable storage monthly rental rate $ 201 $ 184 $ 92 $ 171

Nine Months Ended September 30, 2021

(in thousands, except for units on rent and rates)

NA Modular NA Storage UK Storage Total

Revenue $ 854,657 $ 357,439 $ 83,538 $ 1,295,634

Gross profit $ 356,992 $ 240,836 $ 53,306 $ 651,134

Adjusted EBITDA $ 307,741 $ 154,971 $ 36,647 $ 499,359

Capital expenditures for rental equipment $ 120,288 $ 24,165 $ 22,645 $ 167,098

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

Total revenue increased $168.1 million, or 19.7%, to $1,022.8 million for the nine months ended September 30, 2022 from $854.7 million for the nine months ended September 30, 2021.

The increase was primarily the result of a $119.3 million, or 18.7%, increase in leasing revenue, a $52.2 million, or 32.3%, increase in delivery and installation revenues and a $3.2 million, or 11.3%, 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 in the first and second quarters of 2022 as a 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 of 2021 to the NA Storage segment, reallocating approximately $10.0 million of revenue from NA Modular segment to the NA Storage segment in the first six months of 2022 relative to the first six months of 2021.

Average modular space monthly rental rates increased 18.5% for the nine months ended September 30, 2022 to $936 driven by the continuation of our long-term price optimization initiative and VAPS penetration opportunities across our portfolio.

In addition to improved pricing, average modular space units on rent increased by 1,721 units, or 2.0%, year over year driven primarily by acquisitions.

Gross Profit:

Gross profit increased $82.6 million, or 23.1%, to $439.6 million for the nine months ended September 30, 2022 from $357.0 million for the nine months ended September 30, 2021.

The increase in gross profit was driven by higher leasing gross profit, which increased $77.7 million, or 16.7%, driven by improved pricing including VAPS and increased modular unit on rent volumes, partially offset by the transfer of portable storage units to the NA Storage segment discussed above, and a $25.2 million increase in delivery and installation gross profit driven by volumes and improved pricing.

These increases were further complemented by a $0.5 million increase in new sales gross profit and $1.7 million increase in rental unit sales gross profit.

These increases were partially offset by a $22.5 million increase in depreciation of rental equipment related to capital investments made in our rental equipment and due to fleet acquired as part of acquisitions.

Adjusted EBITDA:

Adjusted EBITDA increased $64.8 million, or 21.0%, to $372.5 million for the nine months ended September 30, 2022 from $307.7 million for the nine months ended September 30, 2021.

The increase was driven by higher leasing gross profit discussed above.

SG&A, excluding discrete items, increased $50.0 million, or 26.0%, for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021 to support higher staffing levels for both organic and inorganic growth, wage increases, and increased variable compensation as a result of the growth achieved, increased office and occupancy costs, increased travel expenses, and increased subscription, legal and professional fees.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments increased $100.8 million, or 83.8%, to $221.1 million for the nine months ended September 30, 2022 from $120.3 million for the nine months ended September 30, 2021.

These increases were driven by increased refurbishments, and increased new fleet and VAPS purchase volumes, further increased by inflationary pressures.

Total revenue increased $171.9 million, or 48.1%, to $529.4 million for the nine months ended September 30, 2022 from $357.5 million for the nine months ended September 30, 2021.

The increase was primarily the result of a $142.0 million, or 53.1%, increase in leasing revenue, and a $36.5 million, or 49.9%, increase in delivery and installation revenues.

These increases were partially offset by a decrease in rental unit sales revenue of $5.3 million, or 46.5%.

Average portable storage monthly rental rates increased 21.1% for the nine months ended September 30, 2022 to $184 as a result of our price management tools and processes, further supported by high utilization, and by an acceleration earlier into the third quarter of our seasonal retail business.

Average portable storage units on rent increased by 42,733 units, or 36.0%, year over year, driven by increased organic economic activity of approximately 17,500 average units on rent, approximately 17,000 average units on rent acquired from acquisitions, and due to the transfer of approximately 12,000 portable storage units on rent from the NA Modular segment, which occurred in the third quarter of 2021 (8,000 average units on rent impact).

Average modular space monthly rental rates increased 18.1% for the nine months ended September 30, 2022 to $673 driven by the continuation of our long-term price optimization initiative and VAPS penetration opportunities across our portfolio.

Average modular space units on rent increased by 1,852 units, or 11.3%, year over year, of which approximately 30% was acquisition driven.

Gross Profit:

Gross profit increased $126.8 million, or 52.7%, to $367.6 million for the nine months ended September 30, 2022 from $240.8 million for the nine months ended September 30, 2021.

Gross profit on leasing activity increased by $116.8 million year-over-year driven by both increased volume and increased pricing as described above.

For delivery and installation, gross profit increased $17.9 million.

Sales gross profit decreased by $3.5 million to $3.5 million.

Adjusted EBITDA:

Adjusted EBITDA increased $88.3 million, or 57.0%, to $243.3 million for the nine months ended September 30, 2022 from $155.0 million for the nine months ended September 30, 2021.

The increase was driven by higher leasing gross profit discussed above.

SG&A, excluding discrete items, increased $40.6 million, or 38.4%, for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021 to support higher staffing levels for both organic and inorganic growth, wage increases, and increased variable compensation as a result of the growth achieved, increased office and occupancy costs, increased travel expenses, and increased subscription, legal and professional fees.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments increased $71.5 million, or 295.5%, to $95.7 million for the nine months ended September 30, 2022 from $24.2 million for the nine months

ended September 30, 2021.

The increase in purchases of rental equipment and refurbishments was driven primarily by increased purchases of portable storage containers during the period to support organic growth.

Total revenue decreased $3.2 million, or 3.9%, to $80.3 million for the nine months ended September 30, 2022 from $83.5 million for the nine months ended September 30, 2021 due to the strengthening of the U.S.

The decrease was primarily the result of a $1.8 million, or 66.7%, decrease in new unit sales revenue and a $0.6 million, or 3.3%, decrease in delivery and installation revenues.

In local currency, total revenue increased £3.6 million, driven by a £3.8 million increase in leasing revenue, and a £0.9 million increase in delivery and installation revenue, partially offset by a £1.1 million decrease in sales revenue.

Average portable storage monthly rental rates increased 7.0% for the nine months ended September 30, 2022 to $92.

Average portable storage units on rent increased by 2,328 units, or 9.2%, year over year.

Average modular space monthly rental rates decreased 4.4% for the nine months ended September 30, 2022 to $409.

Average modular space units on rent decreased by 786 units, or 8.5%, year over year.

In local currency, average portable storage monthly rental rates decreased 5.2% for the nine months ended September 30, 2022 to £73, and average modular space monthly rental rates decreased 13.3% for the nine months ended September 30, 2022 to £325.

Gross Profit:

Gross profit decreased $1.8 million, or 3.4%, to $51.5 million for the nine months ended September 30, 2022 from $53.3 million for the nine months ended September 30, 2021 due to the strengthening of the U.S.

Gross profit on leasing activity decreased by $0.3 million year-over-year.

For delivery and installation, gross profit decreased $1.2 million.

Sales gross profit decreased by $0.2 million to $0.7 million.

In local currency, gross profit increased £2.4 million, or 6.4% for the nine months ended September 30, 2022 from £38.5 million.

Gross profit on leasing activity increased by £3.3 million.

For delivery and installation, gross profit decreased £0.4 million.

Sales gross profit decreased by £0.1 million to £0.6 million.

Adjusted EBITDA:

Adjusted EBITDA increased $0.1 million, or 0.3%, to $36.7 million for the nine months ended September 30, 2022 from $36.6 million for the nine months ended September 30, 2021.

The increase was driven by higher leasing gross profit discussed above.

SG&A, excluding discrete items, decreased $1.8 million, or 9.0%, for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

In local currency, Adjusted EBITDA increased £2.8 million, or 10.6%.

SG&A, excluding discrete items, increased $5.8 million, or 11.2%, for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Employee Costs decreased $0.8 million, or

2.6%, due to reduced variable compensation that offset annual wage increases.

Travel expenses increased $1.8 million, or 87.4% due to increased travel and training, and real estate costs increased $1.0 million, or 17.0%.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments decreased $0.8 million, or 3.5%, to $21.8 million for the nine months ended September 30, 2022 from $22.6 million for the nine months ended September 30, 2021.

Reconciliation of Non-GAAP Financial Measures

Purchases of rental equipment and refurbishments of $7.3 million were $12.9 million lower than the prior-year quarter driven by a reduction in new container purchases during 2023 given current utilization and the significant investments made in 2022.

Other Non-GAAP Financial Data and Reconciliations

In addition to using GAAP financial measurements, we use certain non-GAAP financial measures to evaluate our operating results.

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Adjusted EBITDA

We define EBITDA as net income (loss) plus net interest (income) expense, income tax expense (benefit), depreciation and amortization.

We define EBITDA as net income (loss) plus interest (income) 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.

• Currency (gains) losses, net on monetary assets and liabilities denominated in foreign currencies other than the subsidiaries’ functional currency.

• 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.

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• 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, including 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.

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• 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 unaudited reconciliations of Income from continuing operations to Adjusted EBITDA:

Three Months Ended Nine Months Ended

September 30, September 30,

Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to reinvest in the growth of our business or as a measure of cash that will be available to meet our obligations.

The following tables provide unaudited reconciliations of Income from continuing operations to Adjusted EBITDA:

Three Months Ended

(in thousands) 2023 2022

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Income tax expense from continuing operations 30,510 12,083

Loss on extinguishment of debt — — — 5,999

Fair value loss on common stock warrant liabilities — — — 26,597

Interest expense 44,866 30,570

6 unchanged sentences

Other 46 2,389

Adjusted EBITDA $ 251,339 $ 179,203 $ 652,529 $ 499,359

Income From Continuing Operations Excluding Gain/Loss from Warrants

We define Income from Continuing Operations Excluding Gain/Loss from Warrants as income from continuing operations plus or minus the impact of the change in the fair value of the common stock warrant liability.

Management believes that the presentation of our financial statements excluding the impact of the mark-to-market adjustment provides useful information regarding our results of operations and assists in the review of our actual operating performance.

The following table provides unaudited reconciliations of Income from Continuing Operations to Income from Continuing Operations Excluding Gain/Loss from Warrants:

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

Fair value loss on common stock warrant liabilities — — — 26,597

Income from Continuing Operations Excluding Gain/Loss from Warrants $ 85,728 $ 57,113 $ 200,099 $ 101,875

Adjusted EBITDA from continuing operations $ 246,842 $ 167,773

Adjusted EBITDA Margin

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.

Income from Continuing Operations Margin is defined as Income from continuing operations divided by revenue.

Management believes that the presentation of Adjusted EBITDA Margin and Income from Continuing Operations Margin provides useful information to investors regarding the performance of our business.

The following table provides unaudited reconciliations of Adjusted EBITDA Margin and Income from Continuing Operations Margin:

Three Months Ended September 30, Nine Months Ended September 30,

Management believes that the presentation of Adjusted EBITDA Margin provides useful information to investors regarding the performance of our business.

The following table provides unaudited reconciliations of Adjusted EBITDA Margin:

Three Months Ended

(in thousands) 2023 2022

Adjusted EBITDA (A) $ 251,339 $ 179,203 $ 652,529 $ 499,359

Adjusted EBITDA from continuing operations (A) $ 246,842 $ 167,773

Revenue (B) $ 565,468 $ 451,171

Adjusted EBITDA Margin (A/B) 41.6 % 38.9 % 40.0 % 38.5 %

Adjusted EBITDA Margin from Continuing Operations (A/B) 43.7 % 37.2 %

Income from continuing operations (C) $ 76,271 $ 39,048

Income from Continuing Operations Margin (C/B) 13.5 % 8.7 %

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 and assists in analyzing the performance of our business.

The following table provides unaudited reconciliations of gross profit to Adjusted Gross Profit and Adjusted Gross Profit Percentage:

Three Months Ended Nine Months Ended

September 30, September 30,

(in thousands) 2022 2021 2022 2021

Revenue (A) $ 604,173 $ 461,047 $ 1,632,339 $ 1,295,634

Gross profit (B) $ 314,332 $ 239,226 $ 858,615 $ 651,134

Depreciation of rental equipment 69,159 52,990 192,228 165,027

Adjusted Gross Profit (C) $ 383,491 $ 292,216 $ 1,050,843 $ 816,161

Gross Profit Percentage (B/A) 52.0 % 51.9 % 52.6 % 50.3 %

Adjusted Gross Profit Percentage (C/A) 63.5 % 63.4 % 64.4 % 63.0 %

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.

The following table provides unaudited reconciliations of Net CAPEX:

Three Months Ended Nine Months Ended

September 30, September 30,

We define N et 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 regarding the net capital invested in our rental fleet and property, plant and equipment each year to assist in analyzing the performance of our business.

As presented below, Net CAPEX includes amounts for the former Tank and Pump segment through September 30, 2022 and the former UK Storage Solutions segment through January 31, 2023.

The following tables provide unaudited reconciliations of Net CAPEX:

Three Months Ended

(in thousands) 2023 2022

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Net CAPEX for Rental Equipment (39,347) (80,682)

Purchases of property, plant and equipment (10,000) (3,386) (30,253) (20,836)

Purchase of property, plant and equipment (6,736) (10,481)

Proceeds from sale of property, plant and equipment 258 260

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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 ABL Facility (as defined below), and sales of equity and debt securities.

Our principal sources of liquidity include cash generated by operating activities from our subsidiaries, borrowings under our 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.

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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.

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.

Our revolving credit facility provides an aggregate principal amount of up 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") together with the US Facility (collectively, the “ABL Facility”), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros.

(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," and together with the US Facility, the “ABL Facility”).

Borrowing availability under the ABL Facility is equal to the lesser of $3.7 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, 2022, we had $1.9 billion outstanding principal and $1.1 billion of available borrowing capacity under the ABL Facility.

Cash Flow Comparison for the Nine Months Ended September 30, 2022 and 2021

The borrowing bases are a function of, among other things, the value of the assets in the relevant collateral pool, of which our rental equipment represents the largest component.

At March 31, 2023, we had $1.1 billion of available borrowing capacity under the ABL Facility.

Cash Flow Comparison of the Three Months Ended March 31, 2023 and 2022

Significant factors driving our liquidity 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 consolidated statements of cash flows include amounts for the former Tank and Pump segment through September 30, 2022 and the former UK Storage Solutions segment through January 31, 2023.

See Note 3 to the financial statements for disclosure of significant operating and investing items related to the former Tank and Pump and former UK Storage Solutions segments.

The following summarizes our change in cash and cash equivalents for the periods presented:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

Net cash from operating activities

$ 544,238 $ 392,055

Net cash from investing activities

(225,930) (196,590)

Net cash from financing activities

(313,723) (208,935)

Net cash provided by operating activities $ 148,765 $ 145,527

Net cash provided by (used in) investing activities 271,949 (148,360)

Net cash (used in) provided by financing activities (423,087) 1,586

Effect of exchange rate changes on cash and cash equivalents

(1,842) (150)

Net change in cash and cash equivalents

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Cash Flows from Operating Activities

Cash provided by operating activities for the nine months ended September 30, 2022 was $544.2 million as compared to $392.1 million for the nine months ended September 30, 2021, an increase of $152.2 million, or 38.8%.

The increase was due to an increase of $157.5 million of net income, adjusted for non-cash items, partially offset by a decrease of $5.2 million in net changes in operating assets and liabilities.

Cash provided by operating activities for the three months ended March 31, 2023 was $148.8 million as compared to $145.5 million for the three months ended March 31, 2022, an increase of $3.2 million.

The increase was due to an increase of $37.3 million of net income, adjusted for non-cash items, and a decrease of $34.1 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, 2022 was $225.9 million as compared to $196.6 million for the nine months ended September 30, 2021, an increase of $29.3 million.

The increase in cash used in investing activities was driven by a $182.3 million increase in cash used for the purchase of rental equipment and refurbishments, a $152.4 million increase in cash used in acquisitions, net of cash acquired, a $15.0 million decrease in proceeds from sale of property, plant and equipment, and a $9.5 million increase in cash used for the purchase of property, plant and equipment, partially offset by a $319.5 million increase in proceeds from sale of Tank and Pump business and a $10.3 million increase in proceeds from the sale of rental equipment.

Cash provided by investing activities for the three months ended March 31, 2023 was $271.9 million as compared to cash used in investing activities of $148.4 million for the three months ended March 31, 2022, an increase of $420.3 million in cash provided by investing activities.

The increase in cash provided by investing activities was driven by proceeds of $404.0

million from the sale of discontinued operations, a $48.1 million decrease in cash used for the purchase of rental equipment and refurbishments, and a $3.7 million decrease in cash used for the purchase of property, plant and equipment.

The increase was partially offset by a $21.0 million increase in cash used in acquisitions, net of cash acquired, a cash payment of $7.7 million for the settlement of the contingent foreign currency forward contract, and a $6.8 million decrease in proceeds from the sale of rental equipment.

Cash Flows from Financing Activities

Cash used in financing activities for the nine months ended September 30, 2022 was $313.7 million as compared to $208.9 million for the nine months ended September 30, 2021, an increase of $104.8 million.

The increase was primarily due to a $195.1 million increase in the repurchase and cancellation of common stock and warrants, an $87.1 million increase in repayment of borrowings, and a $27.0 million increase in principal payments on finance lease obligations, partially offset by a $212.1 million increase in receipts from borrowings.

Cash used in financing activities for the three months ended March 31, 2023 was $423.1 million as compared to cash provided by financing activities of $1.6 million for the three months ended March 31, 2022, a change of $424.7 million.

The change was primarily due to a $499.3 million increase in repayments of borrowings and a $137.4 million increase in the repurchase of common stock offset by a $211.3 million increase in receipts from borrowings.

Free Cash Flow

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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 reconciliations of net cash provided by operating activities to Free Cash Flow.

Three Months Ended September 30, Nine Months Ended September 30,

The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow.

Three Months Ended

(in thousands) 2023 2022

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Proceeds from sale of rental equipment 7,781 14,554

Purchases of property, plant and equipment (10,000) (3,386) (30,253) (20,836)

Purchase of property, plant and equipment (6,736) (10,481)

Proceeds from the sale of property, plant and equipment 258 260

Free Cash Flow $ 102,940 $ 54,624

Cash flow from operations increased by $152.2 million or 38.8% for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Cash used in investing activities excluding acquisitions and sale of discontinued operations increased by $196.4 million to support unit on rent and VAPS growth with leasing revenues up 27.0% year-over-year.

Cash flow from operations increased by $79.8 million, or 61.1% for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

This increase was supported by the 30.6% increase in leasing revenue year-over-year.

Free cash flow of $207.4 million for the nine months ended September 30, 2022 was down $44.3 million as compared to the nine months ended September 30, 2021 which is consistent with the counter cyclicality of free cash flow in our business.

Free Cash Flow for the three months ended March 31, 2023 was $102.9 million as compared to $54.6 million for the three months ended March 31, 2022, an increase of $48.3 million.

Free Cash Flow increased year over year principally as a result of the $3.2 million increase in cash provided by operating activities and the $48.1 million decrease in cash used in the purchase of rental equipment and refurbishments, partially offset by the $6.8 million decrease in proceeds from the sale of rental equipment.

The $148.8 million in cash provided by operating activities for the three months ended March 31, 2023 was returned to shareholders through repurchases and cancellations of $215.1 million of stock and reinvested into the business to support the purchase of rental equipment, including VAPS, and refurbishments.

Material cash requirements

The Company’s material cash requirements include the following contractual and other obligations:

The Company has outstanding debt related to its ABL Facility, 2025 Secured Notes, 2028 Secured Notes, and finance leases, totaling $3.0 billion as of September 30, 2022, $13.5 million of which is obligated to be repaid within the next twelve months.

The Company has outstanding debt related to its ABL Facility, 2025 Secured Notes, 2028 Secured Notes and finance leases, including interest, totaling $2.9 billion as of March 31, 2023, $13.5 million of which is obligated to be repaid within the next twelve months.

Refer to Note 9 for further information regarding outstanding debt.

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The Company has commitments for future minimum rental payments relating to operating leases, which are primarily for equipment and office space.

As of September 30, 2022, the Company had lease obligations of $264.7 million, with $60.0 million payable within the next twelve months.

In addition to the aforementioned cash requirements, the Company has a Share Repurchase Program authorized by the Board of Directors which allows the Company to repurchase up to $1.0 billion of outstanding shares of Common Stock and equivalents.

As of March 31, 2023, the Company had lease obligations of $260.0 million, with $60.0 million payable within the next twelve months.

In addition to the cash requirements described above, the Company has a share repurchase program authorized by the Board of Directors, which allows the Company to repurchase up to $1.0 billion of outstanding shares of Common Stock and equivalents.

This program does not obligate the Company to repurchase any specific amount of shares.

The Company believes its cash, cash flows generated from ongoing operations, continued access to its revolving credit facility, as well as access to debt markets, are sufficient to satisfy its currently anticipated cash requirements for the foreseeable future.

As of March 31, 2023, $415.1 million of the approved share repurchase pool remained available.

The Company believes its cash, cash flows generated from ongoing operations, and continued access to its revolving credit facility as well as access to debt markets are sufficient to satisfy its currently anticipated cash requirements over the next twelve months.

Critical Accounting Policies and Estimates

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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 for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").

There were no significant changes to our critical accounting policies during the nine months ended September 30, 2022.

There were no significant changes to our critical accounting policies during the three months ended March 31, 2023.

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 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

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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 we believe that these forward-looking statements are based on reasonable assumptions, we can give no assurance that any such forward-looking statement will materialize.

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:

• various laws and regulations and recent pronouncements related to laws and regulations governing antitrust, climate related disclosures, cybersecurity, privacy, government contracts, anti-corruption and the environment;

• our ability to successfully acquire and integrate new operations;

• 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;

• operational, economic, political and regulatory risks;

• the impact of public health crises, such as 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;

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• our ability to effectively manage our credit risk, collect on our accounts receivable, or recover our rental equipment;

• 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 the costs and restrictions on the availability of raw materials and labor;

• 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;

• impairment of our goodwill, intangible assets and indefinite-life intangible assets;

• 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;

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• our ability to achieve our environmental, social and governance goals;

• operational, economic, political and regulatory risks;

• effective management of our rental equipment;

• the effect of changes in state building codes on our ability to remarket our buildings;

• foreign currency exchange rate exposure;

• significant increases in the costs and restrictions on the availability of raw materials and labor;

• fluctuations in fuel costs or a reduction in fuel supplies;

• our reliance on third party manufacturers and suppliers;

• impairment of our goodwill, intangible assets and indefinite-life intangible assets;

• our ability to use our net operating loss carryforwards and other tax attributes;

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• covenants that limit our operating and financial flexibility;

• uncertainty regarding the phase-out of LIBOR;

• our stock price volatility;

• such other risks and uncertainties described in the periodic reports we file with the SEC from time to time (including our 2022 Annual Report on Form 10-K), 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 we undertake 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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis