WillScot Holdings Corp 10-Q

ITEM 1. Financial Statements WillScot Mobile Mini Holdings Corp. Condensed Consolidated Balance Sheets (in thousands, except share data) March 31, 2023 (unaudited) December 31, 2022 Assets Cash and cash equivalents $ 15,918 $ 7,390 Trade receivables, net of allowances for credit losses at March 31, 2023 and December 31, 2022 of $ 61,402 and $ 57,048 , respectively 415,344 409,766 Inventories 42,007 41,030 Prepaid expenses and other current assets 42,684 31,635 Assets held for sale - current 8,924 31,220 Total current assets 524,877 521,041 Rental equipment, net 3,128,061 3,077,287 Property, plant and equipment, net 305,608 304,659 Operating lease assets 219,926 219,405 Goodwill 1,011,513 1,011,429 Intangible assets, net 413,188 419,125 Other non-current assets 6,578 6,683 Assets held for sale - non-current — 268,022 Total long-term assets 5,084,874 5,306,610 Total assets $ 5,609,751 $ 5,827,651 Liabilities and equity Accounts payable $ 92,057 $ 108,071 Accrued expenses 120,838 110,820 Accrued employee benefits 28,803 56,340 Deferred revenue and customer deposits 199,274 203,793 Operating lease liabilities - current 51,076 50,499 Current portion of long-term debt 13,514 13,324 Liabilities held for sale - current — 19,095 Total current liabilities 505,562 561,942 Long-term debt 2,876,453 3,063,042 Deferred tax liabilities 464,798 401,453 Operating lease liabilities - non-current 169,914 169,618 Other non-current liabilities 29,100 18,537 Liabilities held for sale - non-current — 47,759 Long-term liabilities 3,540,265 3,700,409 Total liabilities 4,045,827 4,262,351 Preferred Stock: $ 0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at March 31, 2023 and December 31, 2022 — — Common Stock: $ 0.0001 par, 500,000,000 shares authorized and 203,723,099 and 207,951,682 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively 21 21 Additional paid-in-capital 2,667,424 2,886,951 Accumulated other comprehensive loss ( 62,855 ) ( 70,122 ) Accumulated deficit ( 1,040,666 ) ( 1,251,550 ) Total shareholders' equity 1,563,924 1,565,300 Total liabilities and shareholders' equity $ 5,609,751 $ 5,827,651 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 3 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, (in thousands, except share and per share data) 2023 2022 Revenues: Leasing and services revenue: Leasing $ 439,951 $ 351,559 Delivery and installation 106,630 85,539 Sales revenue: New units 10,657 5,787 Rental units 8,230 8,286 Total revenues 565,468 451,171 Costs: Costs of leasing and services: Leasing 97,515 80,334 Delivery and installation 75,007 70,580 Costs of sales: New units 6,208 3,756 Rental units 4,454 4,892 Depreciation of rental equipment 59,156 57,548 Gross profit 323,128 234,061 Expenses: Selling, general and administrative 150,892 138,144 Other depreciation and amortization 17,173 15,362 Currency losses, net 6,775 137 Other income, net ( 3,359 ) ( 1,283 ) Operating income 151,647 81,701 Interest expense 44,866 30,570 Income from continuing operations before income tax 106,781 51,131 Income tax expense from continuing operations 30,510 12,083 Income from continuing operations 76,271 39,048 Discontinued operations: Income from discontinued operations before income tax 4,003 15,787 Gain on sale of discontinued operations 176,078 — Income tax expense from discontinued operations 45,468 3,664 Income from discontinued operations 134,613 12,123 Net income $ 210,884 $ 51,171 Earnings per share from continuing operations attributable to WillScot Mobile Mini common shareholders: Basic $ 0.37 $ 0.17 Diluted $ 0.36 $ 0.17 Earnings per share from discontinued operations attributable to WillScot Mobile Mini common shareholders: Basic $ 0.65 $ 0.06 Diluted $ 0.64 $ 0.05 Earnings per share attributable to WillScot Mobile Mini common shareholders: Basic $ 1.02 $ 0.23 Diluted $ 1.00 $ 0.22 Weighted average shares: Basic 206,092,169 223,490,912 Diluted 209,663,985 228,955,504 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 4 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, (in thousands) 2023 2022 Net income $ 210,884 $ 51,171 Other comprehensive income (loss): Foreign currency translation adjustment, net of income tax expense of $ 0 for each of the three months ended March 31, 2023 and 2022 7,934 ( 4,074 ) Net (loss) gain on derivatives, net of income tax (benefit) expense of $( 222 ) and $ 777 for the three months ended March 31, 2023 and 2022, respectively ( 667 ) 2,321 Total other comprehensive income (loss) 7,267 ( 1,753 ) Total comprehensive income $ 218,151 $ 49,418 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 5 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Changes in Equity (Unaudited) Three Months Ended March 31, 2023 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2022 207,952 $ 21 $ 2,886,951 $ ( 70,122 ) $ ( 1,251,550 ) $ 1,565,300 Net income — — — — 210,884 210,884 Other comprehensive income — — — 7,267 — 7,267 Withholding taxes on net share settlement of stock-based compensation — — ( 10,058 ) — — ( 10,058 ) Stock-based compensation and issuance of Common Stock from vesting 355 — 8,150 — — 8,150 Repurchase and cancellation of Common Stock ( 4,589 ) — ( 217,687 ) — — ( 217,687 ) Issuance of Common Stock from the exercise of options 6 — 68 — — 68 Balance at March 31, 2023 203,723 $ 21 $ 2,667,424 $ ( 62,855 ) $ ( 1,040,666 ) $ 1,563,924 Three Months Ended March 31, 2022 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2021 223,940 $ 22 $ 3,616,902 $ ( 29,071 ) $ ( 1,591,090 ) $ 1,996,763 Net income — — — — 51,171 51,171 Other comprehensive loss — — — ( 1,753 ) — ( 1,753 ) Withholding taxes on net share settlement of stock-based compensation — — ( 12,295 ) — — ( 12,295 ) Stock-based compensation and issuance of Common Stock from vesting 498 — 6,395 — — 6,395 Repurchase and cancellation of Common Stock and warrants ( 2,064 ) — ( 77,409 ) — — ( 77,409 ) Issuance of Common Stock from the exercise of options and warrants 800 — 3,313 — — 3,313 Balance at March 31, 2022 223,174 $ 22 $ 3,536,906 $ ( 30,824 ) $ ( 1,539,919 ) $ 1,966,185 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 6 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (in thousands) 2023 2022 Operating activities: Net income $ 210,884 $ 51,171 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 76,329 81,820 Provision for credit losses 8,803 8,601 Gain on sale of discontinued operations ( 176,078 ) — Gain on sale of rental equipment and other property, plant and equipment ( 3,396 ) ( 3,232 ) Amortization of debt discounts and debt issuance costs 2,743 3,489 Stock-based compensation expense 8,150 6,395 Deferred income tax expense 63,699 12,362 Loss on foreign currency forward contract 7,715 — Unrealized currency losses, net ( 1,042 ) 86 Other 1,087 914 Changes in operating assets and liabilities: Trade receivables ( 10,954 ) ( 12,064 ) Inventories ( 350 ) ( 7,122 ) Prepaid expenses and other assets ( 3,049 ) ( 9,042 ) Operating lease assets and liabilities 345 268 Accounts payable and other accrued expenses ( 32,694 ) ( 1,239 ) Deferred revenue and customer deposits ( 3,427 ) 13,120 Net cash provided by operating activities 148,765 145,527 Investing activities: Proceeds from sale of discontinued operations 403,992 — Acquisitions, net of cash acquired ( 78,503 ) ( 57,457 ) Proceeds from sale of rental equipment 7,781 14,554 Purchase of rental equipment and refurbishments ( 47,128 ) ( 95,236 ) Payment for settlement of foreign currency forward contract ( 7,715 ) — Proceeds from the sale of property, plant and equipment 258 260 Purchase of property, plant and equipment ( 6,736 ) ( 10,481 ) Net cash provided by (used in) investing activities 271,949 ( 148,360 ) Financing activities: Receipts from issuance of Common Stock from the exercise of options 68 3,313 Repurchase and cancellation of Common Stock and warrants ( 215,098 ) ( 77,708 ) Receipts from borrowings 363,800 152,500 Repayment of borrowings ( 558,300 ) ( 59,000 ) Principal payments on finance lease obligations ( 3,499 ) ( 5,224 ) Taxes paid on employee stock awards ( 10,058 ) ( 12,295 ) Net cash (used in) provided by financing activities ( 423,087 ) 1,586 Effect of exchange rate changes on cash and cash equivalents 517 ( 131 ) Net change in cash and cash equivalents ( 1,856 ) ( 1,378 ) Cash and cash equivalents at the beginning of the period 17,774 12,699 Cash and cash equivalents at the end of the period $ 15,918 $ 11,321 Supplemental cash flow information: Interest paid, net $ 39,570 $ 22,197 Income taxes paid, net $ 5,653 $ 2,606 Assets acquired under capital leases $ 8,907 $ 7,011 Capital expenditures accrued or payable $ 17,786 $ 28,433 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 7 WillScot Mobile Mini Holdings Corp. Notes to the Condensed Consolidated Financial Statements (Unaudited) NOTE 1 - Summary of Significant Accounting Policies Organization and Nature of Operations WillScot Mobile Mini Holdings Corp. (“WillScot Mobile Mini” and, together with its subsidiaries, the “Company”) is a leading business services provider specializing in innovative flexible work space and portable storage solutions in the United States (“US”), Canada, and Mexico. The Company leases, sells, delivers and installs modular space solutions and portable storage products through an integrated network of branch locations that spans North America. Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by US Generally Accepted Accounting Principles ("GAAP") for complete financial statements. The accompanying unaudited condensed consolidated financial statements comprise the financial statements of WillScot Mobile Mini and its subsidiaries that it controls due to ownership of a majority voting interest and contain all adjustments, which are of a normal and recurring nature, considered necessary by management to present fairly the financial position, results of operations and cash flows for the interim periods presented. Subsidiaries are fully consolidated from the dat e of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Reclassifications Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Recently Issued and Adopted Accounting Standards In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2021-08, B usiness Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with FASB Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). The Company adopted ASU 2021-08 on January 1, 2023 on a prospective basis. The adoption of this ASU did not have a material impact on the Company's financial statements or related disclosures. NOTE 2 - Acquisitions WillScot Mobile Mini is the holding company for the Williams Scotsman and Mobile Mini family of companies, which resulted from the combination of WillScot Corporation (“WillScot”) and Mobile Mini, Inc. (“Mobile Mini”) through a merger that occurred on July 1, 2020 (the "Merger"). Asset Acquisitions During the first quarter of 2023, the Company 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 of March 31, 2023 as a result of these acquisitions. A sale of the acquired land is expected to close before the end of the year. Integration Costs The Company recorded $ 3.9 million and $ 4.1 million in integration costs related to asset acquisitions and the Merger within selling, general and administrative ("SG&A") expense during the three months ended March 31, 2023 and 2022, respectively. 8 NOTE 3 - Discontinued Operations Tank and Pump Divestiture On September 30, 2022, the Company sold its former Tank and Pump segment for $ 321.9 million. Exiting the former Tank and Pump segment represented the Company’s strategic shift to concentrate its operations on its core modular and storage businesses. The criteria for discontinued operations presentation were met during the third quarter of 2022 and results for the former Tank and Pump segment are reported in income from discontinued operations within the consolidated statements of operations for periods presented prior to September 30, 2022. UK Storage Solutions Divestiture On December 12, 2022, the Company entered into a stock purchase agreement to sell its former UK Storage Solutions segment. The sale transaction was completed on January 31, 2023. Total cash consideration for the transaction was $ 418.1 million. Exiting the former UK Storage Solutions segment represented the Company’s strategic shift to concentrate its operations on its core modular and storage businesses in North America. The criteria for discontinued operations presentation were met during the fourth quarter of 2022 and results for the former UK Storage Solutions segment are reported in income from discontinued operations within the consolidated statements of operations for all periods presented. The carrying value of the former UK Storage Solutions segment's assets and liabilities are presented within assets and liabilities held for sale on the consolidated balance sheet as of December 31, 2022. The following tables present the results of the former Tank and Pump segment and the former UK Storage Solutions segment as reported in income from discontinued operations within the consolidated statements of operations, and the carrying value of the former UK Storage Solutions segment's assets and liabilities as presented within assets and liabilities held for sale on the consolidated balance sheet. Three Months Ended March 31, 2023 (in thousands) UK Storage Solutions Revenues: Leasing and services revenue: Leasing $ 6,389 Delivery and installation 1,802 Sales revenue: New units 54 Rental units 449 Total revenues 8,694 Costs: Costs of leasing and services: Leasing 1,407 Delivery and installation 1,213 Costs of sales: New units 38 Rental units 492 Gross profit 5,544 Expenses: Selling, general and administrative 1,486 Other income, net ( 1 ) Operating income 4,059 Interest expense 56 Income from discontinued operations before income tax 4,003 Gain on sale of discontinued operations 175,708 Income tax expense from discontinued operations 45,468 Income from discontinued operations $ 134,243 Other selected data: Adjusted EBITDA from discontinued operations $ 4,124 In January 2023, a $ 0.4 million adjustment was made to the gain on sale of the former Tank and Pump segment due to the final contractual working capital adjustment. Including this adjustment, the total gain on sale of discontinued operations was $ 176.1 million for the three months ended March 31, 2023. 9 Three Months Ended March 31, 2022 (in thousands) Tank and Pump UK Storage Solutions Total Revenues: Leasing and services revenue: Leasing $ 21,062 $ 20,571 $ 41,633 Delivery and installation 8,325 6,467 14,792 Sales revenue: New units 682 128 810 Rental units 214 274 488 Total revenues 30,283 27,440 57,723 Costs: Costs of leasing and services: Leasing 4,307 4,237 8,544 Delivery and installation 7,011 3,924 10,935 Costs of sales: New units 507 63 570 Rental units 95 157 252 Depreciation of rental equipment 3,530 1,138 4,668 Gross profit 14,833 17,921 32,754 Expenses: Selling, general and administrative 6,212 6,117 12,329 Other depreciation and amortization 2,416 1,825 4,241 Currency losses, net — 1 1 Other expense (income), net 19 ( 45 ) ( 26 ) Operating income 6,186 10,023 16,209 Interest expense 178 244 422 Income from discontinued operations before income tax 6,008 9,779 15,787 Income tax expense from discontinued operations 1,513 2,151 3,664 Income from discontinued operations $ 4,495 $ 7,628 $ 12,123 Other selected data: Adjusted EBITDA from discontinued operations $ 11,506 $ 12,544 $ 24,050 10 December 31, 2022 (in thousands) UK Storage Solutions Assets Cash and cash equivalents $ 10,384 Trade receivables, net of allowances for doubtful accounts of $ 300 15,991 Inventories 3,058 Prepaid expenses and other current assets 1,787 Rental equipment, net 165,853 Property, plant and equipment, net 20,645 Operating lease assets 15,134 Goodwill 58,144 Intangible assets, net 6,414 Other non-current assets 1,832 Total assets held for sale $ 299,242 Liabilities Accounts payable $ 4,515 Accrued expenses 3,273 Accrued employee benefits 1,009 Deferred revenue and customer deposits 6,850 Deferred tax liabilities 29,737 Operating lease liabilities 15,192 Other non-current liabilities 6,278 Total liabilities held for sale $ 66,854 For the three months ended March 31, 2022 , significant operating and investing items related to the former Tank and Pump segment were as follows: Three Months Ended March 31, (in thousands) 2022 Operating activities of discontinued operations: Depreciation and amortization $ 5,946 Investing activities of discontinued operations: Proceeds from sale of rental equipment $ 214 Purchases of rental equipment and refurbishments $ ( 7,873 ) Purchases of property, plant and equipment $ ( 82 ) 11 The following table presents a reconciliation of Income from discontinued operations before income tax to Adjusted EBITDA from discontinued operations for the former Tank and Pump segment for the three months ended March 31, 2022. See Note 16 for further information regarding Adjusted EBITDA. Three Months Ended March 31, (in thousands) 2022 Income from discontinued operations $ 4,495 Income tax expense from discontinued operations 1,513 Income from discontinued operations before income tax 6,008 Interest expense 178 Depreciation and amortization 5,946 Stock compensation expense 104 Other ( 730 ) Adjusted EBITDA from discontinued operations $ 11,506 For the three months ended March 31, 2023 and 2022 , significant operating and investing items related to the former UK Storage Solutions segment were as follows: Three Months Ended March 31, (in thousands) 2023 2022 Operating activities of discontinued operations: Depreciation and amortization $ — $ 2,963 Investing activities of discontinued operations: Proceeds from sale of rental equipment $ 514 $ 274 Purchases of rental equipment and refurbishments $ ( 371 ) $ ( 9,615 ) Proceeds from sale of property, plant and equipment $ 8 $ 255 Purchases of property, plant and equipment $ ( 64 ) $ ( 2,265 ) The following table presents reconciliations of Income from discontinued operations before income tax to Adjusted EBITDA from discontinued operations for the former UK Storage Solutions segment for the three months ended March 31, 2023 and 2022, respectively. See Note 16 for further information regarding Adjusted EBITDA. Three Months Ended March 31, (in thousands) 2023 2022 Income from discontinued operations $ 134,243 $ 7,628 Gain on sale of discontinued operations 175,708 — Income tax expense from discontinued operations 45,468 2,151 Income from discontinued operations before income tax and gain on sale 4,003 9,779 Interest expense 56 244 Depreciation and amortization — 2,963 Currency losses, net — 1 Stock compensation expense ( 196 ) 18 Other 261 ( 461 ) Adjusted EBITDA from discontinued operations $ 4,124 $ 12,544 12 NOTE 4 - Revenue Revenue Disaggregation Geographic Areas The Company had total revenue in the following geographic areas for the three months ended March 31, as follows: Three Months Ended March 31, (in thousands) 2023 2022 US $ 533,174 $ 421,684 Canada 26,941 25,273 Mexico 5,353 4,214 Total revenues $ 565,468 $ 451,171 Major Product and Service Lines Equipment leasing is the Company's core business and the primary driver of the Company's revenue and cash flows. This includes modular space and portable storage units along with value-added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, integral tool racking, heavy duty capacity shelving, workstations, electrical and lighting products and other items used by customers in connection with the Company's products. The Company also offers its lease customers a damage waiver program that protects them in case the leased unit is damaged. Leasing is complemented by new unit sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services and removal services at the end of lease transactions. The Company’s revenue by major product and service line for the three months ended March 31, was as follows: Three Months Ended March 31, (in thousands) 2023 2022 Modular space leasing revenue $ 224,470 $ 190,390 Portable storage leasing revenue 97,315 70,703 VAPS and third party leasing revenues (a) 94,126 75,305 Other leasing-related revenue (b) 24,040 15,161 Leasing revenue 439,951 351,559 Delivery and installation revenue 106,630 85,539 Total leasing and services revenue 546,581 437,098 New unit sales revenue 10,657 5,787 Rental unit sales revenue 8,230 8,286 Total revenues $ 565,468 $ 451,171 (a) Includes $ 5.6 million and $ 5.9 million of service revenue for the three months ended March 31, 2023 and 2022, respectively. (b) Includes primarily damage billings, delinquent payment charges, and other processing fees. Leasing and Services Revenue The majority of r evenue ( 77 % for the both the three months ended March 31, 2023 and March 31, 2022 ) was generated by rental income subject to the guidance of ASU 2018-11, Leases (Topic 842) ("ASC 842"). The remaining revenue was generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 606. Receivables and Credit Losses The Company is exposed to credit losses from trade receivables and manages credit risk at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues. Concentration of credit risk with respect to the Company's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets. The Company assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review that considers expected billing exposure, timing for payment and the customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for existing customers when the 13 customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation. The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates and may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowance for credit losses reflects the estimate of the amount of receivables that the Company will be unable to collect based on historical collection experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. The Company's estimate reflects changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance. Activity in the allowance for credit losses was as follows: Three Months Ended March 31, (in thousands) 2023 2022 Balance at beginning of period $ 57,048 $ 45,773 Provision for credit losses, net of recoveries 8,803 8,311 Write-offs ( 4,537 ) ( 7,010 ) Foreign currency translation and other 88 50 Balance at end of period $ 61,402 $ 47,124 Contract Assets and Liabilities When customers are billed in advance for services, the Company defers recognition of revenue until the related services are performed, which generally occurs at the end of the contract. The balance sheet classification of deferred revenue is determined based on the contractual lease term. For contracts that continue beyond their initial contractual lease term, revenue continues to be deferred until the services are performed. During the three months ended March 31, 2023, deferred revenue relating to services billed in advance of $ 27.7 million was recognized as revenue. As of March 31, 2023 and December 31, 2022, the Company had approximately $ 99.0 million and $ 102.2 million , respectively, of deferred revenue related to these services. The Company does not have material contract assets, and the Company's uncompleted contracts with customers have unsatisfied (or partially satisfied) performance obligations. For the future services revenues that are expected to be recognized within twelve months, the Compa ny has elected to utilize the optional disclosure exemption made available regarding transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations. The transaction price for performance obligations that will be completed in greater than twelve months is variable based on the market rate in place at the time those services are provided, and therefore, the Company is applying the optional expedient to omit disclosure of such amounts. The primary costs to obtain contracts fo r new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions on the sale of new and rental units. For new and rental unit sales, the period benefited by each commission is less than one year; therefore, the commissions are expensed as incurred. NOTE 5 - Leases As of March 31, 2023, the undiscounted future lease payments for operating and finance lease liabilities were as follows: (in thousands) Operating Finance 2023 (remaining) $ 46,323 $ 12,694 2024 54,591 15,259 2025 45,588 14,932 2026 33,680 14,618 2027 22,750 11,372 Thereafter 57,028 20,080 Total lease payments 259,960 88,955 Less: interest ( 38,970 ) ( 9,090 ) Present value of lease liabilities $ 220,990 $ 79,865 Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets. 14 The Company’s lease activity during the three months ended March 31, 2023 and 2022 was as follows: (in thousands) Three Months Ended March 31, Financial Statement Line 2023 2022 Finance Lease Expense Amortization of finance lease assets $ 3,761 $ 3,333 Interest on obligations under finance leases 759 429 Total finance lease expense $ 4,520 $ 3,762 Operating Lease Expense Fixed lease expense Cost of leasing and services $ 420 $ 825 Selling, general and administrative 15,717 14,930 Short-term lease expense Cost of leasing and services 6,654 8,862 Selling, general and administrative 462 668 Variable lease expense Cost of leasing and services 1,026 1,287 Selling, general and administrative 2,474 1,767 Total operating lease expense $ 26,753 $ 28,339 Supplemental cash flow information related to leases for the three months ended March 31, 2023 and 2022 was as follows: (in thousands) Three Months Ended March 31, Supplemental Cash Flow Information 2023 2022 Cash paid for the amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 16,693 $ 15,753 Operating cash outflows from finance leases $ 728 $ 412 Financing cash outflows from finance leases $ 3,446 $ 3,848 Right of use assets obtained in exchange for lease obligations $ 8,741 $ 8,794 Assets obtained in exchange for finance leases $ 8,913 $ 5,411 Weighted average remaining operating lease terms and the weighted average discount rates as of March 31, 2023 and December 31, 2022 were as follows: Lease Terms and Discount Rates March 31, 2023 December 31, 2022 Weighted average remaining lease term - operating leases 5.7 years 5.8 years Weighted average discount rate - operating leases 5.5 % 5.4 % Weighted average remaining lease term - finance leases 5.0 years 5.1 years Weighted average discount rate - finance leases 3.5 % 3.4 % The Company presents information related to leasing revenues in Note 4. NOTE 6 - Inventories Inventories at the respective balance sheet dates consisted of the following: (in thousands) March 31, 2023 December 31, 2022 Raw materials $ 38,827 $ 38,611 Finished units 3,180 2,419 Inventories $ 42,007 $ 41,030 15 NOTE 7 - Rental Equipment, net Rental equipment, net at the respective balance sheet dates consisted of the following: (in thousands) March 31, 2023 December 31, 2022 Modular space units $ 3,292,264 $ 3,197,779 Portable storage units 848,982 849,193 Value added products 202,358 203,444 Total rental equipment 4,343,604 4,250,416 Less: accumulated depreciation ( 1,215,543 ) ( 1,173,129 ) Rental equipment, net $ 3,128,061 $ 3,077,287 NOTE 8 - Goodwill and Intangibles Goodwill Changes in the carrying amount of goodwill were as follows: (in thousands) Modular Storage Total Balance at December 31, 2021 $ 521,049 $ 492,552 $ 1,013,601 Effects of movements in foreign exchange rates ( 2,172 ) — ( 2,172 ) Balance at December 31, 2022 518,877 492,552 1,011,429 Effects of movements in foreign exchange rates 84 — 84 Balance at March 31, 2023 $ 518,961 $ 492,552 $ 1,011,513 The Company had no goodwill impairment during the three months ended March 31, 2023 or the year ended December 31, 2022. Intangible Assets Intangible assets other than goodwill at the respective balance sheet dates consisted of the following: March 31, 2023 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Mobile Mini customer relationships 5.3 $ 188,000 $ ( 64,625 ) $ 123,375 Technology 3.3 1,500 ( 687 ) 813 Indefinite-lived intangible assets: Trade name - Mobile Mini 164,000 — 164,000 Trade name - WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 478,500 $ ( 65,312 ) $ 413,188 16 December 31, 2022 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Mobile Mini customer relationships 5.5 $ 188,000 $ ( 58,750 ) $ 129,250 Technology 3.5 1,500 ( 625 ) 875 Indefinite-lived intangible assets: Trade name - Mobile Mini 164,000 — 164,000 Trade name - WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 478,500 $ ( 59,375 ) $ 419,125 Amortization expense related to intangible assets was $ 5.9 million for the each of the three months ended March 31, 2023 and 2022. Based on the carrying value at March 31, 2023, future amortization of intangible assets is expected to be as follows for the years ended December 31: (in thousands) 2023 (remaining) $ 17,813 2024 23,750 2025 23,750 2026 23,625 2027 23,500 Thereafter 11,750 Total $ 124,188 NOTE 9 - Debt The carrying value of debt outstanding at the respective balance sheet dates consisted of the following: (in thousands, except rates) Interest rate Year of maturity March 31, 2023 December 31, 2022 2025 Secured Notes 6.125 % 2025 $ 520,931 $ 520,350 ABL Facility (a) Varies 2027 1,795,448 1,988,176 2028 Secured Notes 4.625 % 2028 493,723 493,470 Finance Leases Varies Varies 79,865 74,370 Total debt 2,889,967 3,076,366 Less: current portion of long-term debt 13,514 13,324 Total long-term debt $ 2,876,453 $ 3,063,042 (a) As of both March 31, 2023 and December 31, 2022, the Company had no outstanding principal borrowings on the Multicurrency Facility and $ 2.4 million and $ 2.5 million , respectively, of related debt issuance costs. No related debt issuance costs were recorded as a direct offset against the principal borrowings on the Multicurrency Facility, and the $ 2.4 million and $ 2.5 million in excess of principal was included in other non-current assets on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively. Asset Backed Lending Facility On July 1, 2020, certain subsidiaries of the Company entered into an asset-based credit agreement (the "ABL Facility") that initially provided for revolving credit facilities in the aggregate principal amount of up to $ 2.4 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $ 2.0 billion and (ii) a $ 400.0 million senior secured asset-based multicurrency revolving credit facility available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros. The ABL Facility was initially scheduled to mature on July 1, 2025. On June 30, 2022, certain subsidiaries of the Company entered into an amendment to the ABL Facility to, among other things, extend the expiration date until June 30, 2027 and increase the aggregate principal amount of the revolving credit facilities to $ 3.7 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $ 3.3 billion (the “US Facility”) and (ii) a $ 400.0 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility"), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or 17 Euros. The amendment also converted the interest rate for borrowings denominated in US Dollars from a LIBOR-based rate to a Term-SOFR-based rate with an interest period of one month and adjusted the applicable margins. The applicable margin for Canadian BA rate, Term SOFR, British Pounds Sterling and Euros loans is 1.50 %. The facility includes a credit spread adjustment of 0.10 % in addition to the applicable margin. The applicable margin for base rate and Canadian Prime Rate loans is 0.50 %. The applicable margins are subject to one step down of 0.25 % based on excess availability or one step up of 0.25 % based on the Company's leverage ratio. The ABL Facility requires the payment of a commitment fee on the unused available borrowings of 0.20 % annually. The weighted average interest rate on the balance outstanding as of March 31, 2023, as adjusted for the effects of the interest rate swap agreements, was 6.52 %. Refer to Note 12 for a more detailed discussion on interest rate management. Borrowing availability under the US Facility and the Multicurrency Facility is equal to the lesser of (i) the aggregate Revolver Commitments and (ii) the Borrowing Base ("Line Cap"). At March 31, 2023, the Line Cap was $ 3.0 billion and the Borrowers had $ 1.1 billion of available borrowing capacity under the ABL Facility, including $ 972.5 million under the US Facility and $ 162.0 million under the Multicurrency Facility. Borrowing capacity under the ABL Facility is made available for up to $ 205.6 million of letters of credit and up to $ 200.5 million of swingline loans. At March 31, 2023, letters of credit and bank guarantees carried fees of 1.625 %. The Company had issued $ 14.4 million of standby letters of credit under the ABL Facility at March 31, 2023. The Company had approximately $ 1.8 billion outstanding principal under the ABL Facility at March 31, 2023. Debt issuance costs of $ 30.1 million were included in the carrying value of the ABL Facility at March 31, 2023. Finance Leases The Company maintains finance leases primarily related to transportation equipment. At March 31, 2023 and December 31, 2022, obligations under finance leases for certain real property and transportation related equipment were $ 79.9 million and $ 74.4 million, respectively. Refer to Note 5 for further information. The Company was in compliance with all debt covenants and restrictions associated with its debt instruments as of March 31, 2023. NOTE 10 – Equity Common Stock In connection with the stock compensation vesting events and stock option exercises described in Note 14, the Company issued 360,725 shares of Common Stock during the three months ended March 31, 2023 . Stock Repurchase Program In July 2022, the Board of Directors approved an increase to the share repurchase program authorizing the Company to repurchase up to $ 1.0 billion of its outstanding shares of Common Stock and equivalents. The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing, business, legal, accounting, and other considerations. In August 2022, the Inflation Reduction Act of 2022 was enacted into law and imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. In the first quarter of 2023, the Company reflected the applicable excise tax in equity as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued expenses on the consolidated balance sheet. During the three months ended March 31, 2023 , the Company repurchased 4,589,308 shares of Common Stock for $ 215.7 million, excluding excise tax. As of March 31, 2023, $ 415.1 million of the approved share repurchase pool remained available. Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive income (loss) ("AOCI"), net of tax, for the three months ended March 31, 2023 and 2022 were as follows: Three Months Ended March 31, 2023 (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2022 $ ( 70,122 ) $ — $ ( 70,122 ) Other comprehensive income (loss) before reclassifications 7,934 859 8,793 Reclassifications from AOCI to income — ( 1,526 ) ( 1,526 ) Balance at March 31, 2023 $ ( 62,188 ) $ ( 667 ) $ ( 62,855 ) 18 Three Months Ended March 31, 2022 (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2021 $ ( 25,574 ) $ ( 3,497 ) $ ( 29,071 ) Other comprehensive loss before reclassifications ( 4,074 ) ( 569 ) ( 4,643 ) Reclassifications from AOCI to income — 2,890 2,890 Balance at March 31, 2022 $ ( 29,648 ) $ ( 1,176 ) $ ( 30,824 ) For the three months ended March 31, 2023 and 2022 , a gain of $ 1.5 million an d a loss of $ 2.9 million , respectively, were reclassified from AOCI into the condensed consolidated statements of operations within interest expense related to the interest rate swaps discussed in Note 12. T he Company recorded tax benefit of $ 0.4 million and tax expense $ 0.7 million for the three months ended March 31, 2023 and 2022 , respectively, associated with these reclassifications. NOTE 11 – Income Taxes The Company recorded $ 30.5 million and $ 12.1 million of income tax expense from continuing operations for the three months ended March 31, 2023 and 2022, respectively. The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 28.6 % and 23.7 %, respectively. The effective tax rate for the three months ended March 31, 2023 differs from the US federal statutory rate of 21% primarily due to state and provincial taxes and an add-back for non-deductible executive compensation. The effective tax rate for the three months ended March 31, 2022 differs from the US statutory rate of 21% primarily due to state and provincial taxes offset by a discrete tax benefit related to employee stock vesting. NOTE 12 - Derivatives In 2018, the Company entered into an interest rate swap agreement with a financial counterparty that effectively converted $ 400.0 million in aggregate notional amount of variable-rate debt under the Company’s former asset backed lending facility into fixed-rate debt. Under the terms of the agreement, the Company received a floating rate equal to one-month LIBOR and made payments based on a fixed rate of 3.06 % on the notional amount. The swap agreement was designated and qualified as a hedge of the Company’s exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the former asset backed lending facility and terminated on May 29, 2022. In January 2023, the Company entered into two interest rate swap agreements with financial counterparties relating to $ 750.0 million in aggregate notional amount of variable-rate debt under the Company’s ABL Facility. Under the terms of the agreements, the Company receives a floating rate equal to one-month term SOFR and makes 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 the Company’s 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. The floating rate that the Company receives under the terms of these swap agreements was 4.79 % at March 31, 2023. The location and the fair value of derivative instruments designated as hedges were as follows: (in thousands) Balance Sheet Location March 31, 2023 Cash Flow Hedges: Interest rate swap Prepaid expenses and other current assets $ 8,646 Interest rate swap Other non-current liabilities $ ( 9,394 ) The fair values of the interest rate swaps are based on dealer quotes of market forward rates, Level 2 inputs on the fair value hierarchy, and reflect the amounts that the Company would receive or pay as of March 31, 2023 for contracts involving the same attributes and maturity dates. The following table discloses the impact of the interest rate swaps, excluding the impact of income taxes, on other comprehensive income (“OCI”), AOCI and the Company’s statements of operations for the three months ended March 31,: (in thousands) 2023 2022 (Loss) gain recognized in OCI $ ( 641 ) $ 3,098 Location of gain (loss) recognized in income Interest expense, net Interest expense, net (Gain) loss reclassified from AOCI into income $ ( 1,526 ) $ 2,890 19 Foreign Currency Contract In December 2022, the Company executed a contingent forward contract to sell £ 330.0 million upon the closing of the sale of the former UK Storage Solutions segment at a price ranging from 1.20550 to 1.20440 US Dollars (USD) to British Pounds Sterling. The price was dependent upon the date of the closing of the sale. This contract, which was to expire on September 11, 2023, mitigated the foreign currency risk of the USD relative to the British Pound Sterling prior to the closing of the sale of the former UK Storage Solutions segment. This contract did not qualify for hedge accounting and was revalued at fair value at the reporting period with unrealized gains and losses reflected in the Company's results of operations. Upon the closing of the sale of the former UK Storage Solutions segment on January 31, 2023, the Company settled the contingent foreign currency forward contract and received cash at an exchange rate of 1.205 USD to British Pounds Sterling. The location and the fair value of the foreign currency contract was as follows: (in thousands) Balance Sheet Location December 31, 2022 Foreign currency contract Accrued liabilities $ 930 The fair value of the foreign currency contract was based on dealer quotes of market forward rates, a Level 2 input on the fair value hierarchy, and reflected the amount that the Company would receive or pay for contracts involving the same attributes and maturity dates. The location and the impact of the foreign currency contract, excluding the impact of income taxes, on the Company’s statement of operations for the three months ended March 31, 2023 was as follows : (in thousands) Income Statement Location Three Months Ended March 31, 2023 Loss recognized in income Currency losses, net $ 7,715 NOTE 13 - Fair Value Measures The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company utilizes the suggested accounting guidance for the three levels of inputs that may be used to measure fair value: Level 1 - Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 - Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and Level 3 - Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions The Company has assessed that the fair value of cash and cash equivalents, trade receivables, trade payables, and other current liabilities approximate their carrying amounts. Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair value of finance leases at March 31, 2023 approximate their respective book values. The following table shows the carrying amounts and fair values of financial liabilities which are disclosed, but not measured, at fair value, including their levels in the fair value hierarchy: March 31, 2023 December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 ABL Facility $ 1,795,448 $ — $ 1,825,500 $ — $ 1,988,176 $ — $ 2,020,000 $ — 2025 Secured Notes 520,931 — 526,300 — 520,350 — 526,800 — 2028 Secured Notes 493,723 — 458,205 — 493,470 — 450,135 — Total $ 2,810,102 $ — $ 2,810,005 $ — $ 3,001,996 $ — $ 2,996,935 $ — As of March 31, 2023, the carrying values of the ABL Facility, the 2025 Secured Notes, and the 2028 Secured Notes included $ 30.1 million, $ 5.6 million, and $ 6.3 million, respectively, of unamortized debt issuance costs, which were presented as a direct reduction of the corresponding liability. As of December 31, 2022, the carrying value of the ABL Facility, the 2025 Secured Notes, and the 2028 Secured Notes included $ 31.8 million, $ 6.2 million, and $ 6.5 million, respectively, of unamortized debt issuance costs, which were presented as a direct reduction of the corresponding liability. The carrying value of the ABL Facility, excluding debt issuance costs, approximates fair value as the interest rates are variable and reflective of current market rates. The fair value of the 2025 Secured Notes and the 2028 Secured Notes is based on their last trading price at the end of each period obtained from a third party. The classification and the fair value of derivative assets and liabilities are disclosed in Note 12. 20 NOTE 14 - Stock-Based Compensation Stock-based compensation expense includes grants of stock options, time-based restricted stock units ("Time-Based RSUs") and performance-based restricted stock units ("Performance-Based RSUs," together with Time-Based RSUs, the "RSUs"). In addition, stock-based payments to non-executive directors includes grants of restricted stock awards ("RSAs"). Time-Based RSUs and RSAs are valued based on the intrinsic value of the difference between the exercise price, if any, of the award and the fair market value of WillScot Mobile Mini's Common Stock on the grant date. Performance-Based RSUs are valued based on a Monte Carlo simulation model to reflect the impact of the Performance-Based RSU's market condition. The probability of satisfying a market condition is considered in the estimation of the grant-date fair value for Performance-Based RSUs and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided. Restricted Stock Awards The following table summarizes the Company's RSA activity for the three months ended March 31, 2023 and 2022 : 2023 2022 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 35,244 $ 37.17 36,176 $ 29.30 Outstanding at end of period 35,244 $ 37.17 36,176 $ 29.30 Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 0.3 million for each of the three months ended March 31, 2023 and 2022. At March 31, 2023, there was $ 0.2 million of unrecognized compensation cost related to RSAs that is expected to be recognized over the remaining weighted average vesting period of 0.2 years. Time-Based RSUs The following table summarizes the Company's Time-Based RSU activity for the three months ended March 31, 2023 and 2022 : 2023 2022 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 789,779 $ 26.16 997,451 $ 18.54 Granted 213,388 $ 50.74 357,639 $ 35.53 Forfeited ( 31,681 ) $ 33.67 ( 9,299 ) $ 27.20 Vested ( 281,153 ) $ 22.40 ( 420,184 ) $ 16.21 Outstanding at end of period 690,333 $ 34.95 925,607 $ 26.08 Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 1.8 million and $ 2.2 million for the three months ended March 31, 2023 and 2022, respectively. At March 31, 2023, unrecognized compensation cost related to Time-Based RSUs totaled $ 21.6 million and is expected to be recognized over the remaining weighted average vesting period of 2.7 years. Performance-Based RSUs The following table summarizes the Company's Performance-Based RSU award activity for the three months ended March 31, 2023 and 2022 : 2023 2022 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 1,894,250 $ 33.67 1,536,394 $ 26.34 Granted 376,826 $ 69.32 745,079 $ 42.34 Forfeited — $ — ( 5,046 ) $ 39.10 Vested ( 181,319 ) $ 16.82 ( 267,964 ) $ 13.22 Outstanding at end of period 2,089,757 $ 41.56 2,008,463 $ 33.99 21 Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 5.8 million and $ 3.8 million for the three months ended March 31, 2023 and 2022, respectively. At March 31, 2023, unrecognized compensation cost related to Performance-Based RSUs totaled $ 56.2 million and is expected to be recognized over the remaining vesting period of 2.1 years. Certain Performance-Based RSUs cliff vest based on achievement of the relative total stockholder return ("TSR") of the Company's Common Stock as compared to the TSR of the constituents in an index at the grant date over the performance period of three years. For 2023 grants, the TSR of the Company's Common Stock is compared to the TSR of the constituents in the S&P 400 Index. The target number of RSUs may be adjusted from 0 % to 200 % based on the TSR attainment levels defined by the Company's Compensation Committee. The 100 % target payout is tied to performance at the 50 % percentile, with a payout curve ranging from 0 % (for performance less than the 25 % percentile) to 200 % (for performance above the 85 % percentile). Stock Options The following table summarizes the Company's stock option activity for the three months ended March 31, 2023 : WillScot Options Weighted-Average Exercise Price per Share Converted Mobile Mini Options Weighted-Average Exercise Price per Share Outstanding at beginning of period 534,188 $ 13.60 864,276 $ 12.91 Exercised — — ( 5,774 ) 11.79 Outstanding at end of period 534,188 $ 13.60 858,502 $ 12.92 Fully vested and exercisable options, March 31, 2023 534,188 $ 13.60 858,502 $ 12.92 The following table summarizes the Company's stock option activity for the three months ended March 31, 2022: WillScot Options Weighted-Average Exercise Price per Share Converted Mobile Mini Options Weighted-Average Exercise Price per Share Outstanding at beginning of period 534,188 $ 13.60 1,527,643 $ 14.66 Exercised — — ( 227,258 ) 14.58 Outstanding at end of period 534,188 $ 13.60 1,300,385 $ 14.67 Fully vested and exercisable options, March 31, 2022 534,188 $ 13.60 1,300,385 $ 14.67 WillScot Options Compensation expense for stock option awards, recognized in SG&A on the condensed consolidated statements of operations, was $ 0.2 million for the three months ended March 31, 2022. NOTE 15 - Commitments and Contingencies The Company is involved in various lawsuits, claims and legal proceedings that arise in the ordinary course of business. The Company assesses these matters on a case-by-case basis as they arise and establishes reserves as required. As of March 31, 2023, with respect to these outstanding matters, the Company believes that the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on the consolidated financial position, results of operations, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties. NOTE 16 - Segment Reporting The Company operates in two reportable segments as follows: Modular Solutions ("Modular") and Storage Solutions ("Storage"). Total assets for each reportable segment are not available because the Company utilizes a centralized approach to working capital management. Transactions between reportable segments are not significant. 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 change within the Modular and Storage segments. For the three months ended March 31, 2022, this resulted in approximately $ 11.1 million of revenue and $ 6.3 million of gross profit being transferred from the Modular segment to the Storage segment. 22 The Company defines EBITDA as net income (loss) plus interest (income) expense, income tax (benefit) expense, depreciation and amortization. The Company reflects further adjustments to EBITDA (“Adjusted EBITDA”) to exclude certain non-cash items and the effect of what the Company considers transactions or events not related to its core and ongoing business operations. In addition, the Chief Operating Decision Maker ("CODM") evaluates business segment performance utilizing Adjusted EBITDA as shown in the reconciliation of the Company’s consolidated income from continuing operations to Adjusted EBITDA below. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to the intrinsic and ongoing operating results of the Company. The Company considers Adjusted EBITDA to be an important metric because it reflects the business performance of the segments, inclusive of indirect costs. The Company also regularly evaluates gross profit by segment to assist in the assessment of its operational performance. Reportable Segments The following tables set forth certain information regarding each of the Company’s reportable segments fo r the three months ended March 31, 2023 and 2022, respectively. Three Months Ended March 31, 2023 (in thousands) Modular Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 269,271 $ 170,680 $ 439,951 Delivery and installation 64,821 41,809 106,630 Sales revenue: New units 8,921 1,736 10,657 Rental units 6,657 1,573 8,230 Total revenues 349,670 215,798 565,468 Costs: Cost of leasing and services: Leasing 73,582 23,933 97,515 Delivery and installation 51,503 23,504 75,007 Cost of sales: New units 5,665 543 6,208 Rental units 3,370 1,084 4,454 Depreciation of rental equipment 50,215 8,941 59,156 Gross profit $ 165,335 $ 157,793 $ 323,128 Other selected data: Adjusted EBITDA $ 136,964 $ 109,878 $ — $ 246,842 Selling, general and administrative expense $ 81,816 $ 57,675 $ 11,401 $ 150,892 Purchases of rental equipment and refurbishments $ 39,412 $ 7,345 $ — $ 46,757 23 Three Months Ended March 31, 2022 (in thousands) Modular Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 223,298 $ 128,261 $ 351,559 Delivery and installation 54,332 31,207 85,539 Sales revenue: New units 4,844 943 5,787 Rental units 6,073 2,213 8,286 Total revenues 288,547 162,624 451,171 Costs: Cost of leasing and services: Leasing 61,330 19,004 80,334 Delivery and installation 47,906 22,674 70,580 Cost of sales: New units 3,256 500 3,756 Rental units 3,449 1,443 4,892 Depreciation of rental equipment 50,008 7,540 57,548 Gross profit $ 122,598 $ 111,463 $ 234,061 Other selected data: Adjusted EBITDA $ 99,586 $ 68,187 $ — $ 167,773 Selling, general and administrative expense $ 74,638 $ 51,862 $ 11,644 $ 138,144 Purchases of rental equipment and refurbishments $ 57,577 $ 20,171 $ — $ 77,748 The following table presents reconciliations of the Company’s income from continuing operations to Adjusted EBITDA for the three months ended March 31, 2023 and 2022, respectively: Three Months Ended March 31, (in thousands) 2023 2022 Income from continuing operations $ 76,271 $ 39,048 Income tax expense from continuing operations 30,510 12,083 Interest expense 44,866 30,570 Depreciation and amortization 76,329 72,910 Currency losses, net 6,775 137 Restructuring costs, lease impairment expense and other related charges 22 263 Transaction costs — 13 Integration costs 3,873 4,087 Stock compensation expense 8,150 6,273 Other 46 2,389 Adjusted EBITDA $ 246,842 $ 167,773 24 NOTE 17 - Earnings Per Share The following table reconciles the weighted average shares outstanding for the basic calculation to the weighted average shares outstanding for the diluted calculation: Three Months Ended March 31 (in thousands) 2023 2022 Numerator: Income from continuing operations $ 76,271 $ 39,048 Income from discontinued operations 134,613 12,123 Net income $ 210,884 $ 51,171 Denominator: Weighted average Common Shares outstanding – basic 206,092 223,491 Dilutive effect of shares outstanding Warrants — 1,889 RSAs 27 27 Time-based RSUs 326 483 Performance-based RSUs 2,206 1,819 Stock Options 1,013 1,246 Weighted average Common Shares outstanding – dilutive 209,664 228,956 For the three months ended March 31, 2022, 555,790 shares of Performance-Based RSUs were excluded from the computation of diluted EPS because their effect would have been anti-dilutive. 25