What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-04-27 · 298 added, 139 removed, 309 unchanged (59% 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 months ended March 31, 2023 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 and six months ended June 30, 2023 or prior periods.

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

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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.

As of June 30, 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 155,000 modular space units and over 211,000 portable storage units in our fleet.

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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.

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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.

During the six months ended June 30, 2023, we acquired certain assets and liabilities of five regional and local storage and modular companies, which consisted primarily of approximately 1,800 storage units and 700 modular units, for $149.4 million in cash, net of cash acquired.

The accompanying consolidated financial statements include $147.9 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.

During the six months ended June 30, 2023 , we repurchased 9,995,319 shares of Common Stock for $454.9 million.

As of June 30, 2023, $854.1 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.

Similar to many other organizations, we have faced inflationary pressures over the past several years across most of our input costs such as building materials, labor, transportation and fuel.

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

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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:

Second Quarter Highlights

For the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 unless otherwise noted, key drivers of our financial performance included:

• Total revenues increased $59.2 million, or 11.3%.

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%.

Leasing revenue increased $62.9 million, or 16.3%, delivery and installation revenue increased $1.9 million, or 1.7%, rental unit sales decreased $4.7 million, or 29.9%, and new unit sales revenue decreased $0.9 million, or 9.1%.

Key leasing revenue drivers included:

• 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 portable storage units on rent decreased 10,301 units, or 6.3%, and average modular space units on rent decreased 3,529 units, or 3.4%.

• Average modular space monthly rental rate increased $169, or 19.2%, to $1,051 driven by strong pricing performance across both segments.

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Average utilization for modular space units decreased 360 basis points ("bps") to 65.1%.

• 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 segment revenue, which represented 63.7% of consolidated revenue for the three months ended June 30, 2023, increased $35.4 million, or 10.6%, to $370.7 million.

The increase was driven by our core leasing revenue, which increased $39.6 million, or 16.4%, due to continued growth of pricing and VAPS, and by delivery and installation revenues, which increased $3.2 million, or 4.4%, driven by increased pricing.

Rental unit sales decreased $6.2 million, or 46.3%, and new unit sales decreased $1.3 million, or 15.3%.

Modular revenue drivers for the three months ended June 30, 2023 included:

• Modular space average monthly rental rate of $1,102 increased 17.4% 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%.

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

• Average modular space units on rent decreased 497, or 0.6%, year over year.

• Average modular space monthly utilization decreased 190 bps to 65.8% for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

• Storage segment revenue, which represented 36.3% of consolidated revenue for the three months ended June 30, 2023, increased $23.7 million, or 12.6%, to $211.4 million.

The increase was driven by our core leasing revenue, which grew $23.3 million, or 16.1%, due to increased pricing, and was partially offset by lower units on rent volumes

and lower delivery and installation revenues, which decreased $1.3 million, or 3.3%.

Rental unit sales increased $1.4 million, or 58.3%, and new unit sales increased $0.3 million, or 20.0%.

Storage revenue drivers for the three months ended June 30, 2023 included:

• Portable storage average monthly rental rate of $226 increased 27.0% 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 $835 increased 25.0% 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 portable storage units on rent decreased 10,282, or 6.3%, year over year driven by lower demand during 2023 versus the high growth achieved in 2022.

Average modular space units on rent decreased 3,032, or 13.6%, 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.

• Average portable storage monthly utilization decreased 12.9% to 73.2% for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

Average modular space monthly utilization decreased 10.4% to 62.3% for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

• Generated income from continuing operations of $87.7 million for the three months ended June 30, 2023.

Discrete costs in the period included $2.2 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.

• Generated Adjusted EBITDA from continuing operations of $261.3 million for the three months ended June 30, 2023, representing an increase of $52.7 million, or 25.3%, 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;

• Adjusted EBITDA margin from continuing operations was 44.9% in the second quarter of 2023 and increased 500 bps versus prior year driven by continued expansion of all margin lines.

Most significantly, delivery and installation margins increased 230 bps versus prior year and leasing margins increased 90 bps versus prior year both driven primarily by increased pricing.

Additionally, selling, general, and administrative expenses included in Adjusted EBITDA decreased as a percentage of revenue by 260 bps versus 2022 driving the majority of the remaining margin expansion.

• Net cash provided by operating activities increased $13.8 million to $202.2 million for the three months ended June 30, 2023 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, decreased by $76.3 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 $159.6 million for the three months ended June 30, 2023 representing an increase of $90.2 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 a contingent foreign currency forward contract to sell £330.0 million upon the closing of the sale, were deployed to:

• Acquire three regional and local storage and modular portfolios of approximately 1,500 storage units and 200 modular units for $69.8 million;

• Return $239.2 million to shareholders through stock repurchases, reducing outstanding Common Stock by 5,406,011 shares.

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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.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Our condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022 are presented below.

Three Months Ended June 30, 2023 vs.

(in thousands)

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Other depreciation and amortization 17,346 14,951 2,395

Currency losses, net 6,775 137 6,638

Currency losses (gains), net 14 (173) 187

Other income, net (2,838) (3,794) 956

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Income from discontinued operations before income tax — 17,140 (17,140)

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

Income tax expense from discontinued operations — 3,863 (3,863)

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Net income $ 87,729 $ 73,376 $ 14,353

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.

Comparison of Three Months Ended June 30, 2023 and 2022

Total revenue increased $59.2 million, or 11.3%, to $582.1 million for the three months ended June 30, 2023 from $522.9 million for the three months ended June 30, 2022.

Leasing revenue increased $62.9 million, or 16.3%, as compared to the same period in 2022 driven by improved pricing and value added products penetration, partially offset by a decrease of 13,830 average total units on rent.

Delivery and installation revenues increased $1.9 million, or 1.7%, 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.

Rental unit sales decreased $4.7 million, or 29.9%, and new unit sales decreased $0.9 million, or 9.1%.

Total average units on rent for the three months ended June 30, 2023 and 2022 were 254,554 and 268,384, respectively, representing a decrease of 13,830, or 5.2%.

Portable storage average units on rent decreased by 10,301 units, or 6.3%, for the three months ended June 30, 2023 driven by lower demand in 2023 as compared to strong delivery and unit on rent growth in 2022.

The average portable storage unit utilization rate during the three months ended June 30, 2023 was 73.1% as compared to 86.0% during the same period in 2022.

Modular space average units on rent decreased 3,529 units, or 3.4%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

The average modular space unit utilization rate during the three months ended June 30, 2023 was 65.1% as compared to 68.7% during the same period in 2022.

Modular space average monthly rental rates increased 19.2% to $1,051 for the three months ended June 30, 2023.

Average modular space monthly rental rates increased by $163, or 17.4%, to $1,102 in the Modular segment and by $167, or 25.0%, in 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.

Average portable storage monthly rental rates increased 27.0% to $226 for the three months ended June 30, 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:

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.

Gross profit increased $52.7 million, or 19.1%, to $327.9 million for the three months ended June 30, 2023 from $275.2 million for the three months ended June 30, 2022.

The increase in gross profit was a result of a $52.4 million increase in leasing gross profit and increased delivery and installation gross profit of $3.1 million, partially offset by decreased new and rental unit sales gross profit of $1.7 million.

Cost of leasing and services increased by $9.3 million, or 5.4%, for the three months ended June 30, 2023 versus the three months ended June 30, 2022, driven by a $7.6 million, or 13.4%, increase in labor costs, a $2.8 million, or 11.6%, increase in material costs, and a $1.4 million, or 6.0%, increase in vehicle, equipment and other costs, partially offset by a $2.6 million, or 3.9%, decrease in subcontractor costs.

Cost of sales decreased by $3.9 million, or 28.5%, which is in line with decreased sales revenues of 22.9% for the three months ended June 30, 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.

Increases in gross profit were offset partially by increased depreciation of $1.2 million, or 1.9%, as a result of capital investments made over the past twelve months in rental equipment including acquired fleet.

Our resulting gross profit percentage was 56.3% and 52.6% for the three months ended June 30, 2023 and 2022, respectively.

Our gross profit percentage, excluding the effects of depreciation, was 67.4% and 64.7% for the three months ended June 30, 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.

Selling, general and administrative expense ("SG&A") decreased $3.3 million, or 2.2%, to $146.8 million for the three months ended June 30, 2023, compared to $150.1 million for the three months ended June 30, 2022.

Integration expenses declined $3.0 million, or 56.8%, during the period and service agreements and professional fees decreased $1.5 million, or 6.8%.

Employee SG&A excluding stock compensation decreased $5.9 million, or 8.6%, primarily as a result of reduced variable compensation.

Real estate costs increased $2.1 million, or 11.6%, and non-income business taxes increased $1.0 million, or 53.0%, partially offsetting these declines.

Other Depreciation and Amortization:

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.

Other depreciation and amortization increased $2.3 million to $17.3 million for the three months ended June 30, 2023 compared to $15.0 million for the three months ended June 30, 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.

Currency losses, net increased by $0.2 million for the three months ended June 30, 2023.

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, Net:

Other income, net was $2.8 million for the three months ended June 30, 2023 compared to $3.8 million for the three months ended June 30, 2022.

The decrease in other income, net was related to a decrease in insurance recoveries during 2023 as compared to 2022 related to hurricanes in the Gulf Coast and Florida areas of the United States.

Interest Expense:

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.

Interest expense increased $14.0 million, or 42.2%, to $47.2 million for the three months ended June 30, 2023 from $33.2 million for the three months ended June 30, 2022.

The increase in interest expense was a result of higher overall weighted average interest rates as a result of increased benchmark rates and higher outstanding debt balances.

See Note 9 to the condensed consolidated financial statements for further discussion of our debt.

Income Tax Expense:

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 tax expense increased $10.8 million to $31.6 million for the three months ended June 30, 2023 compared to $20.8 million for the three months ended June 30, 2022.

The increase in expense was driven by an

increase in income from continuing operations before income tax for the three months ended June 30, 2023 as compared to the three months ended June 30, 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.

Income from discontinued operations was related to the former UK Storage Solutions and Tank and Pump segments, which were sold in prior periods.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Our condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 are presented below.

Six Months Ended June 30, 2023 vs.

2022 $ Change

(in thousands)

Leasing and services revenue:

Leasing $ 889,271 $ 737,945 $ 151,326

Delivery and installation 219,384 196,380 23,004

Sales revenue:

New units 19,661 15,714 3,947

Rental units 19,241 24,022 (4,781)

Total revenues 1,147,557 974,061 173,496

Costs of leasing and services:

Leasing 196,071 168,445 27,626

Delivery and installation 156,356 153,117 3,239

Costs of sales:

New units 11,003 9,077 1,926

Rental units 9,521 13,370 (3,849)

Depreciation of rental equipment 123,606 120,778 2,828

Gross profit 651,000 509,274 141,726

Selling, general and administrative 297,702 288,273 9,429

Other depreciation and amortization 34,519 30,313 4,206

Currency losses (gains), net 6,789 (36) 6,825

Other income, net (6,197) (5,077) (1,120)

Operating income 318,187 195,801 122,386

Interest expense 92,112 63,723 28,389

Income from continuing operations before income tax 226,075 132,078 93,997

Income tax expense from continuing operations 62,075 32,931 29,144

Income from continuing operations 164,000 99,147 64,853

Discontinued operations:

Income from discontinued operations before income tax 4,003 32,927 (28,924)

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

Income tax expense from discontinued operations 45,468 7,527 37,941

Income from discontinued operations 134,613 25,400 109,213

Net income $ 298,613 $ 124,547 $ 174,066

Comparison of Six Months Ended June 30, 2023 and 2022

Total revenue increased $173.5 million, or 17.8%, to $1,147.6 million for the six months ended June 30, 2023 from $974.1 million for the six months ended June 30, 2022.

Leasing revenue increased $151.3 million, or 20.5%, as compared to the same period in 2022 driven by improved pricing and value added products penetration, partially offset by a decrease of 1,478 average modular space and portable storage units on rent.

Delivery and installation revenues increased $23.0 million, or 11.7%, due to increased pricing across both of our segments.

Rental unit sales decreased $4.8 million, or 19.9%, and new unit sales increased $3.9 million, or 25.1%.

Total average units on rent for the six months ended June 30, 2023 and 2022 were 260,891 and 262,369, respectively.

Modular space average units on rent decreased 2,480 units, or 2.4%, and portable storage average units on rent increased by 1,002 units, or 0.6%, for the six months ended June 30, 2023.

The average modular space unit utilization rate during the six months ended June 30, 2023 was 65.6% as compared to 68.6% during the same period in 2022.

The average portable storage unit utilization rate during the six months ended June 30, 2023 was 75.9%, as compared to 84.5% during the same period in 2022.

Modular space average monthly rental rates increased 19.4% to $1,020 for the six months ended June 30, 2023.

Average portable storage monthly rental rates increased 27.7% to $221 for the six months ended June 30, 2023.

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 and from 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:

Gross profit increased $141.7 million, or 27.8%, to $651.0 million for the six months ended June 30, 2023 from $509.3 million for the six months ended June 30, 2022.

The increase in gross profit is a result of a $123.7 million increase in leasing gross profit, increased delivery and installation gross profit of $19.8 million, and increased new and rental unit sale margins of $1.1 million.

Cost of leasing and services increased by $30.9 million, or 9.6%, for the six months ended June 30, 2023 versus the six months ended June 30, 2022, driven by a $15.0 million, or 13.6%, increase in labor costs, an $8.5 million, or 19.1%, increase in material costs, a $4.0 million, or 3.3%, increase in subcontractor costs, and a $3.4 million, or 7.5%, increase in vehicle, equipment and other costs.

Cost of sales decreased by $1.9 million, or 8.6%, which is in line with decreased sales revenues of 2.3% for the six months ended June 30, 2023, resulting in improved sales gross profit margins.

Depreciation increased to $123.6 million as a result of capital investments made over the past twelve months in rental equipment including acquired fleet.

Our gross profit percentage was 56.7% and 52.3% for the six months ended June 30, 2023 and 2022, respectively.

Our gross profit percentage, excluding the effects of depreciation, was 67.5% and 64.7% for the six months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative expense ("SG&A") increased $9.4 million, or 3.3%, to $297.7 million for the six months ended June 30, 2023, compared to $288.3 million for the six months ended June 30, 2022.

Real estate costs increased $4.2 million, or 11.4%, travel expenses increased $4.2 million, or 42.4%, due to increased travel and training, non-income business taxes increased $2.2 million, or 53.2%, and our provision for credit losses increased $3.2 million, or 48.8%.

Stock compensation expense increased $2.1 million to $17.5 million for the six months ended June 30, 2023, compared to $15.4 million for the six months ended June 30, 2022.

Partially offsetting these increases, integration expenses declined $3.2 million, or 34.1%, during the period and service agreements and professional fees decreased $2.7 million, or 6.7%.

Employee SG&A excluding stock compensation decreased $2.0 million, or 1.5%, primarily as a result of reduced variable compensation.

Other Depreciation and Amortization:

Other depreciation and amortization increased $4.2 million to $34.5 million for the six months ended June 30, 2023 compared to $30.3 million for the six months ended June 30, 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 (Gains) Losses, Net:

Currency losses, net increased by $6.8 million to a $6.8 million loss for the six months ended June 30, 2023.

This change was primarily attributable to a loss on the settlement of the contingent foreign currency forward contract relating to the sale of the former UK Storage Solutions segment.

Other Income, Net:

Other income, net was $6.2 million for the six months ended June 30, 2023 compared to $5.1 million for the six months ended June 30, 2022.

The increase in other income, net was related to an increase in insurance recoveries during the six months ended 2023 as compared to the six months ended 2022 related to hurricanes in the Gulf Coast and Florida areas of the United States.

Interest Expense:

Interest expense increased $28.4 million to $92.1 million for the six months ended June 30, 2023 from $63.7 million for the six months ended June 30, 2022.

The increase in interest expense was a result of higher overall weighted average interest rates as a result of increased benchmark rates and higher outstanding debt balances.

See Note 9 to the condensed consolidated financial statements for further discussion of our debt.

Income Tax Expense:

Income tax expense increased $29.1 million to expense of $62.1 million for the six months ended June 30, 2023 compared to $32.9 million for the six months ended June 30, 2022.

The increase in expense was driven by an increase in income from continuing operations before income tax for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Income from Discontinued Operations:

Income from discontinued operations increased $109.2 million to $134.6 million for the six months ended June 30, 2023 compared to $25.4 million for the six months ended June 30, 2022.

Business Segment Results

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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

As part of the transfer of the ground level offices to Storage, we also adjusted the 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 six months ended June 30, 2023 and 2022.

Comparison of Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30, 2023

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

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Gross profit $ 172,740 $ 155,132 $ 327,872

Adjusted EBITDA $ 136,964 $ 109,878 $ 246,842

Adjusted EBITDA from continuing operations $ 151,443 $ 109,898 $ 261,341

Capital expenditures for rental equipment $ 50,371 $ 5,210 $ 55,581

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Average portable storage monthly rental rate $ 238 $ 226 $ 226

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

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Gross profit $ 146,611 $ 128,602 $ 275,213

Adjusted EBITDA $ 99,586 $ 68,187 $ 167,773

Adjusted EBITDA from continuing operations $ 122,824 $ 85,819 $ 208,643

Capital expenditures for rental equipment $ 82,482 $ 34,282 $ 116,764

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Average portable storage monthly rental rate $ 211 $ 178 $ 178

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.

Total revenue increased $35.4 million, or 10.6%, to $370.7 million for the three months ended June 30, 2023 from $335.3 million for the three months ended June 30, 2022.

The increase was primarily the result of a $39.6 million, or 16.4%, increase in leasing revenue and a $3.2 million, or 4.4%, increase in delivery and installation revenue driven by improved pricing, partially offset by a decrease of $6.2 million, or 46.3%, in rental unit sales revenue and a $1.3 million, or 15.3%, decrease in new unit sales.

Average modular space monthly rental rates increased 17.4% for the three months ended June 30, 2023 to $1,102 driven by the continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio.

Average modular space units on rent decreased by 497 units, or 0.6%, year over year.

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.

Gross profit increased $26.1 million, or 17.8%, to $172.7 million for the three months ended June 30, 2023 from $146.6 million for the three months ended June 30, 2022.

The increase in gross profit was driven by higher leasing gross profit, which increased $27.7 million, or 15.7%, driven by improved pricing including VAPS.

The increase in gross profit from leasing for the three months ended June 30, 2023 was further complemented by a $2.3 million increase in delivery and installation gross profit driven by increased pricing ahead of inflationary cost increases, and partially offset by a $2.4 million decrease in rental unit sales gross profit and a $1.0 million decrease in new unit sales gross profit.

Cost of leasing and services increased by $12.8 million, or 10.4%, for the three months ended June 30, 2023 versus the three months ended June 30, 2022, driven by a $4.4 million, or 25.2%, increase in material costs, a $5.9 million, or 14.9%, increase in labor costs, a $1.6 million, or 3.1%, increase in subcontractor costs, and a $0.9 million, or 6.6%, increase in vehicle, equipment and other costs.

Cost of sales decreased by $4.0 million, or 36.5%, which is in line with expected costs to deliver decreased sales revenues of 34.2% for three months ended June 30, 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.

Increases in gross profit were offset partially by increased depreciation of $0.5 million, or 0.9%, as a result of capital investments made over the past twelve months in rental equipment including acquired fleet.

Adjusted EBITDA:

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.

Adjusted EBITDA increased $28.6 million, or 23.3%, to $151.4 million for the three months ended June 30, 2023 from $122.8 million for the three months ended June 30, 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%.

SG&A, excluding discrete items, decreased $3.0 million, or 3.6%, for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 driven primarily by decreased variable compensation costs.

Capital Expenditures for Rental Equipment:

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.

Purchases of rental equipment and refurbishments decreased $32.1 million, or 38.9%, to $50.4 million for the three months ended June 30, 2023 from $82.5 million for the three months ended June 30, 2022 driven by successful efforts to reduce our refurbishment costs through better unit selection and work scope during 2023.

Total revenue increased $23.8 million, or 12.7%, to $211.4 million for the three months ended June 30, 2023 from $187.6 million for the three months ended June 30, 2022.

The increase was primarily the result of a $23.3 million, or 16.1%, increase in leasing revenue.

Sales revenues increased $1.7 million, or 43.6%.

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.

These increases were partially offset by a $1.3 million, or 3.3%, decrease in delivery and installation revenue driven by lower volumes during the period.

Average portable storage monthly rental rates increased 27.0% for the three months ended June 30, 2023 to $226 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 portable storage units on rent decreased by 10,282 units, or 6.3%, year over year driven by lower demand in 2023 versus very strong demand in 2022.

Average modular space monthly rental rates increased 25.0% year-over-year driven primarily by increased pricing on new deliveries;

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Gross Profit:

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.

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

Gross profit increased by $26.5 million, or 20.6%, to $155.1 million for the three months ended June 30, 2023 compared to $128.6 million for the three months ended June 30, 2022.

Gross profit on leasing activity increased by $24.8 million year over year driven by increased pricing as described above.

Delivery and installation gross profit increased $0.8 million, or 6.1%, driven by increased pricing ahead of inflationary cost increases.

Sales gross profit increased by $1.6 million to $2.8 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.

Cost of leasing and services decreased by $3.6 million, or 7.5%, for the three months ended June 30, 2023 versus the three months ended June 30, 2022, driven by a $4.2 million, or 30.9%, decrease in subcontractor costs and a $1.6 million, or 25.2%, decrease in material costs, partially offset by a $1.7 million, or 9.9%, increase in labor costs and a $0.5 million, or 5.3%, increase in vehicle, equipment and other costs.

Net reductions were largely driven by lower volumes during the period.

Cost of sales increased by $0.1 million, or 3.8%, driven by improved sales gross profit margins on increased sales revenues of 43.6% for three months ended June 30, 2023.

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

These increases were offset partially by increased depreciation of $0.7 million, or 8.1%, as a result of capital investments made over the past twelve months in rental equipment including acquired fleet.

Adjusted EBITDA:

Adjusted EBITDA increased $24.1 million, or 28.1%, to $109.9 million for the three months ended June 30, 2023 from $85.8 million for the three months ended June 30, 2022 and the margin expanded to 52.0% from 45.7% as a result of 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.

SG&A, excluding discrete items, increased $2.2 million, or 4.2%, for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022 driven primarily by an increase to the provision for credit losses and higher real estate costs.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments of $5.2 million for the three months ended June 30, 2023 were $29.1 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.

Comparison of the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, 2023

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

Modular Storage Total

Revenue $ 720,345 $ 427,212 $ 1,147,557

Gross profit $ 338,075 $ 312,925 $ 651,000

Adjusted EBITDA from continuing operations $ 288,407 $ 219,776 $ 508,183

Capital expenditures for rental equipment $ 89,783 $ 12,555 $ 102,338

Average modular space units on rent 81,894 19,717 101,611

Average modular space utilization rate 66.0 % 63.8 % 65.6 %

Average modular space monthly rental rate $ 1,074 $ 796 $ 1,020

Average portable storage units on rent 479 158,801 159,280

Average portable storage utilization rate 60.1 % 76.0 % 75.9 %

Average portable storage monthly rental rate $ 227 $ 221 $ 221

Six Months Ended June 30, 2022

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

Revenue $ 623,801 $ 350,260 $ 974,061

Gross profit $ 269,209 $ 240,065 $ 509,274

Adjusted EBITDA from continuing operations $ 222,410 $ 154,006 $ 376,416

Capital expenditures for rental equipment $ 140,059 $ 54,453 $ 194,512

Average modular space units on rent 81,533 22,558 104,091

Average modular space utilization rate 67.3 % 73.8 % 68.6 %

Average modular space monthly rental rate $ 917 $ 626 $ 854

Average portable storage units on rent 469 157,809 158,278

Average portable storage utilization rate 53.1 % 84.7 % 84.5 %

Average portable storage monthly rental rate $ 186 $ 173 $ 173

Total revenue increased $96.6 million, or 15.5%, to $720.4 million for the six months ended June 30, 2023 from $623.8 million for the six months ended June 30, 2022.

The increase was primarily the result of a $85.6 million, or 18.4%, increase in leasing revenue and a $13.7 million, or 10.8%, increase in delivery and installation revenue.

Average portable storage monthly rental rates increased 22.0% for the six months ended June 30, 2023 to $227 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 monthly rental rates increased 17.1% year-over-year to $1,074 driven primarily by increased pricing on new deliveries.

Average units on rent also increased 361 units, or 0.4%.

Gross Profit:

Gross profit increased $68.9 million, or 25.6%, to $338.1 million for the six months ended June 30, 2023 from $269.2 million for the six months ended June 30, 2022.

The increase in gross profit was driven by higher leasing gross profit, which increased $61.5 million, or 18.2%, driven by improved pricing including VAPS, and a $9.2 million increase in delivery and installation gross profit.

These increases in gross profit from leasing for the six months ended June 30, 2023 were further complemented by a $0.8 million increase in new unit sales gross profit, and slightly offset by a $1.8 million decrease in rental unit sales gross profit.

Cost of leasing and services increased by $28.7 million, or 12.3%, for the six months ended June 30, 2023 versus the six months ended June 30, 2022, driven by a $9.9 million, or 29.9%, increase in material costs, a $11.1 million, or 14.7%, increase in labor costs, a $5.7 million, or 5.8%, increase in subcontractor costs, and a $1.9 million, or 7.4%,

increase in vehicle, equipment and other costs.

Cost of sales decreased by $1.7 million, or 9.6%, which is in line with expected costs to deliver decreased sales revenues of 8.3% for six months ended June 30, 2023, resulting in improved sales gross profit margins.

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.

Increases in gross profit were offset partially by a $0.7 million increase in depreciation of rental equipment related to capital investments made in our existing rental equipment including acquired fleet.

Adjusted EBITDA:

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.

Adjusted EBITDA increased $66.0 million, or 29.7%, to $288.4 million for the six months ended June 30, 2023 from $222.4 million for the six months ended June 30, 2022.

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

SG&A, excluding discrete items, increased $4.2 million, or 2.7%, for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022 driven primarily by increased travel and training costs, higher real estate costs, and increased salaries, partially offset by lower variable compensation.

Capital Expenditures for Rental Equipment:

Purchases of rental equipment and refurbishments decreased $50.3 million, or 35.9%, to $89.8 million for the six months ended June 30, 2023 from $140.1 million for the six months ended June 30, 2022.

Total revenue increased $76.9 million, or 22.0%, to $427.2 million for the six months ended June 30, 2023 from $350.3 million for the six months ended June 30, 2022.

The increase was primarily the result of a $65.8 million, or 24.1%, increase in leasing revenue and a $9.3 million, or 13.3%, increase in delivery and installation revenue.

Sales revenues increased $1.8 million, or 25.4%.

Average portable storage monthly rental rates increased 27.7% year-over-year for the six months ended June 30, 2023 to $221 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 portable storage units on rent increased by 992 units, or 0.6%, year over year driven by unit growth in 2022.

Average modular space monthly rental rates increased 27.2% year-over-year for the six months ended June 30, 2023 to $796 driven primarily by increased pricing on new deliveries;

however, average units on rent decreased 12.6% driven by lower demand.

Gross Profit:

Gross profit increased by $72.8 million, or 30.3%, to $312.9 million for the six months ended June 30, 2023 compared to $240.1 million for the six months ended June 30, 2022.

Gross profit on leasing activity increased by $62.4 million year over year, or 27.0%, driven by increased pricing as described above.

Delivery and installation gross profit increased $10.6 million, or 47.1%, driven by increased pricing ahead of inflationary cost increases.

Sales gross profit decreased by $0.4 million to $2.1 million.

Cost of leasing and services increased by $2.2 million, or 2.5%, for the six months ended June 30, 2023 versus the six months ended June 30, 2022, driven by a $3.8 million, or 11.3%, increase in labor costs and a $1.5 million, or 7.6%, increase in vehicle, equipment and other costs, partially offset by a $1.4 million, or 12.5%, decrease in material costs and a $1.7 million, or 6.7%, decrease in subcontractor costs.

Cost of sales decreased by $0.2 million, or 4.6%, even as sales revenues increased $1.8 million, or 25.9%, driven by improved sales gross profit margins for six months ended June 30, 2023.

These increases were offset partially by increased depreciation of $2.1 million, or 12.9%, as a result of capital investments made over the past twelve months in rental equipment including acquired fleet.

Adjusted EBITDA:

Adjusted EBITDA increased $65.8 million, or 42.7%, to $219.8 million for the six months ended June 30, 2023 from $154.0 million for the six months ended June 30, 2022.

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

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%.

SG&A, excluding discrete items, increased $8.0 million, or 7.7%, for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022 driven primarily by increased travel and training costs, higher real estate costs, increased salaries, and an increase to the provision for credit losses, partially offset by lower variable compensation.

Capital Expenditures for Rental Equipment:

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.

Purchases of rental equipment and refurbishments of $12.6 million for the six months ended June 30, 2023 were $41.9 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

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

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Depreciation and amortization 81,796 78,181 158,125 151,091

Currency losses, net 6,775 137

Restructuring costs, lease impairment expense and other related charges 22 263

Currency losses (gains), net 14 (173) 6,789 (36)

Restructuring costs, lease impairment expense and other related charges (income) — (95) 22 168

Transaction costs — 22 — 35

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

4 unchanged sentences

Income from Continuing Operations Margin (C/B) 15.1 % 11.5 % 14.3 % 10.2 %

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

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

Revenue (A) $ 582,089 $ 522,890 $ 1,147,557 $ 974,061

Gross profit (B) $ 327,872 $ 275,213 $ 651,000 $ 509,274

Depreciation of rental equipment 64,450 63,230 123,606 120,778

Adjusted Gross Profit (C) $ 392,322 $ 338,443 $ 774,606 $ 630,052

Gross Profit Percentage (B/A) 56.3 % 52.6 % 56.7 % 52.3 %

Adjusted Gross Profit Percentage (C/A) 67.4 % 64.7 % 67.5 % 64.7 %

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.

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

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(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.

Borrowing availability under the ABL Facility is equal to the lesser of $3.7 billion an d the applicable borrowing bases.

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

At June 30, 2023, we had $1.0 billion of available borrowing capacity under the ABL Facility.

Cash Flow Comparison of the Six Months Ended June 30, 2023 and 2022

Significant factors driving our liquidity include cash flows generated from operating activities and capital expenditures.

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

Three Months Ended

Six Months Ended

(in thousands)

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Net cash provided by (used in) investing activities 158,477 (313,738)

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

Net cash used in financing activities (520,257) (20,802)

Effect of exchange rate changes on cash and cash equivalents

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Cash Flows from Operating Activities

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 provided by operating activities for the six months ended June 30, 2023 was $350.9 million as compared to $333.9 million for the six months ended June 30, 2022, an increase of $17.1 million.

The increase was due to an increase of $60.9 million of net income, adjusted for non-cash items, partially offset by a decrease of $43.8 million in the net movements of the operating assets and liabilities.

Cash Flows from Investing Activities

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.

Cash provided by investing activities for the six months ended June 30, 2023 was $158.5 million as compared to cash used in investing activities of $313.7 million for the six months ended June 30, 2022, an increase of $472.2 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 $122.7 million decrease in cash used for the purchase of rental equipment and refurbishments, and a $9.1 million decrease in cash used for the purchase of property, plant and equipment.

The increase was partially offset by a $45.5 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 $9.8 million decrease in proceeds from the sale of rental equipment.

Cash Flows from Financing Activities

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.

Cash used in financing activities for the six months ended June 30, 2023 was $520.3 million as compared to $20.8 million for the six months ended June 30, 2022, a change of $499.5 million.

The change was primarily due to a $547.1 million increase in repayments of borrowings and a $137.1 million increase in the repurchase of common stock partially offset by a $174.2 million increase in receipts from borrowings.

Free Cash Flow

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

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Free Cash Flow $ 159,601 $ 69,418 $ 262,541 $ 124,042

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 for the six months ended June 30, 2023 was $262.5 million as compared to $124.0 million for the six months ended June 30, 2022, an increase of $138.5 million.

Free Cash Flow increased year over year principally as a result of the $17.1 million increase in cash provided by operating activities and the $122.7 million decrease in cash used in the purchase of rental equipment and refurbishments, partially offset by the $9.8 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.

The $350.9 million in cash provided by operating activities for the three months ended June 30, 2023 was returned to shareholders through repurchases and cancellations of $456.3 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, 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.

The Company has outstanding debt related to its ABL Facility, 2025 Secured Notes, 2028 Secured Notes and finance leases, including interest, totaling $3.0 billion as of June 30, 2023, $14.0 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 March 31, 2023, the Company had lease obligations of $260.0 million, with $60.0 million payable within the next twelve months.

As of June 30, 2023, the Company had lease obligations of $276.4 million, with $63.7 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.

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

As of June 30, 2023, $854.1 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.

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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 three months ended March 31, 2023.

There were no significant changes to our critical accounting policies during the six months ended June 30, 2023.

Recently Issued Accounting Standards

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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