WillScot Holdings Corp 10-Q

ITEM 1. Financial Statements WillScot Mobile Mini Holdings Corp. Condensed Consolidated Balance Sheets (in thousands, except share data) June 30, 2023 (unaudited) December 31, 2022 Assets Cash and cash equivalents $ 7,660 $ 7,390 Trade receivables, net of allowances for credit losses at June 30, 2023 and December 31, 2022 of $ 68,096 and $ 57,048 , respectively 441,643 409,766 Inventories 44,360 41,030 Prepaid expenses and other current assets 42,868 31,635 Assets held for sale - current 8,924 31,220 Total current assets 545,455 521,041 Rental equipment, net 3,196,518 3,077,287 Property, plant and equipment, net 315,444 304,659 Operating lease assets 234,468 219,405 Goodwill 1,012,135 1,011,429 Intangible assets, net 407,250 419,125 Other non-current assets 7,230 6,683 Assets held for sale - non-current — 268,022 Total long-term assets 5,173,045 5,306,610 Total assets $ 5,718,500 $ 5,827,651 Liabilities and equity Accounts payable $ 91,783 $ 109,349 Accrued expenses 120,301 109,542 Accrued employee benefits 43,647 56,340 Deferred revenue and customer deposits 209,726 203,793 Operating lease liabilities - current 54,110 50,499 Current portion of long-term debt 13,952 13,324 Liabilities held for sale - current — 19,095 Total current liabilities 533,519 561,942 Long-term debt 3,035,521 3,063,042 Deferred tax liabilities 506,425 401,453 Operating lease liabilities - non-current 181,319 169,618 Other non-current liabilities 23,171 18,537 Liabilities held for sale - non-current — 47,759 Long-term liabilities 3,746,436 3,700,409 Total liabilities 4,279,955 4,262,351 Preferred Stock: $ 0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at June 30, 2023 and December 31, 2022 — — Common Stock: $ 0.0001 par, 500,000,000 shares authorized and 198,375,893 and 207,951,682 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively 20 21 Additional paid-in-capital 2,435,571 2,886,951 Accumulated other comprehensive loss ( 44,109 ) ( 70,122 ) Accumulated deficit ( 952,937 ) ( 1,251,550 ) Total shareholders' equity 1,438,545 1,565,300 Total liabilities and shareholders' equity $ 5,718,500 $ 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 June 30, Six Months Ended June 30, (in thousands, except share and per share data) 2023 2022 2023 2022 Revenues: Leasing and services revenue: Leasing $ 449,320 $ 386,386 $ 889,271 $ 737,945 Delivery and installation 112,754 110,841 219,384 196,380 Sales revenue: New units 9,004 9,927 19,661 15,714 Rental units 11,011 15,736 19,241 24,022 Total revenues 582,089 522,890 1,147,557 974,061 Costs: Costs of leasing and services: Leasing 98,556 88,111 196,071 168,445 Delivery and installation 81,349 82,537 156,356 153,117 Costs of sales: New units 4,795 5,321 11,003 9,077 Rental units 5,067 8,478 9,521 13,370 Depreciation of rental equipment 64,450 63,230 123,606 120,778 Gross profit 327,872 275,213 651,000 509,274 Expenses: Selling, general and administrative 146,810 150,129 297,702 288,273 Other depreciation and amortization 17,346 14,951 34,519 30,313 Currency losses (gains), net 14 ( 173 ) 6,789 ( 36 ) Other income, net ( 2,838 ) ( 3,794 ) ( 6,197 ) ( 5,077 ) Operating income 166,540 114,100 318,187 195,801 Interest expense 47,246 33,153 92,112 63,723 Income from continuing operations before income tax 119,294 80,947 226,075 132,078 Income tax expense from continuing operations 31,565 20,848 62,075 32,931 Income from continuing operations 87,729 60,099 164,000 99,147 Discontinued operations: Income from discontinued operations before income tax — 17,140 4,003 32,927 Gain on sale of discontinued operations — — 176,078 — Income tax expense from discontinued operations — 3,863 45,468 7,527 Income from discontinued operations — 13,277 134,613 25,400 Net income $ 87,729 $ 73,376 $ 298,613 $ 124,547 Earnings per share from continuing operations attributable to WillScot Mobile Mini common shareholders: Basic $ 0.44 $ 0.27 $ 0.80 $ 0.45 Diluted $ 0.43 $ 0.26 $ 0.78 $ 0.44 Earnings per share from discontinued operations attributable to WillScot Mobile Mini common shareholders: Basic $ — $ 0.06 $ 0.66 $ 0.11 Diluted $ — $ 0.06 $ 0.65 $ 0.11 Earnings per share attributable to WillScot Mobile Mini common shareholders: Basic $ 0.44 $ 0.33 $ 1.46 $ 0.56 Diluted $ 0.43 $ 0.32 $ 1.43 $ 0.55 Weighted average shares: Basic 200,946,619 223,376,276 204,635,764 222,196,986 Diluted 204,326,162 227,484,012 208,233,141 226,983,150 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 June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Net income $ 87,729 $ 73,376 $ 298,613 $ 124,547 Other comprehensive income (loss): Foreign currency translation adjustment, net of income tax expense of $ 0 for both the three and six months ended June 30, 2023 and 2022 5,915 ( 25,628 ) 13,849 ( 29,702 ) Net gain on derivatives, net of income tax expense of $ 4,268 and $ 394 for the three months ended June 30, 2023 and 2022, respectively, and $ 4,046 and $ 1,171 for the six months ended June 30, 2023 and 2022, respectively. 12,831 1,176 12,164 3,497 Total other comprehensive income (loss) 18,746 ( 24,452 ) 26,013 ( 26,205 ) Total comprehensive income $ 106,475 $ 48,924 $ 324,626 $ 98,342 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) Six Months Ended June 30, 2023 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive 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 Net income — — — — 87,729 87,729 Other comprehensive income — — — 18,746 — 18,746 Stock-based compensation and issuance of Common Stock from vesting 35 — 9,348 — — 9,348 Repurchase and cancellation of Common Stock ( 5,406 ) ( 1 ) ( 241,545 ) — — ( 241,546 ) Issuance of Common Stock from the exercise of options 24 — 344 — — 344 Balance at June 30, 2023 198,376 $ 20 $ 2,435,571 $ ( 44,109 ) $ ( 952,937 ) $ 1,438,545 6 Six Months Ended June 30, 2022 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2021 223,940 $ 22 $ 3,616,902 $ ( 29,071 ) $ ( 1,591,090 ) $ 1,996,763 Net income — — — — 51,171 51,171 Other comprehensive loss — — — ( 1,753 ) — ( 1,753 ) 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 Net income — — — — 73,376 73,376 Other comprehensive loss — — — ( 24,452 ) — ( 24,452 ) Withholding taxes on net share settlement of stock-based compensation — — ( 1,075 ) — — ( 1,075 ) Stock-based compensation and issuance of Common Stock from vesting 70 — 9,292 — — 9,292 Repurchase and cancellation of Common Stock and warrants ( 7,222 ) — ( 249,515 ) — — ( 249,515 ) Issuance of Common Stock from the exercise of options and warrants 69 — 139 — — 139 Balance at June 30, 2022 216,091 $ 22 $ 3,295,747 $ ( 55,276 ) $ ( 1,466,543 ) $ 1,773,950 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 7 WillScot Mobile Mini Holdings Corp. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, (in thousands) 2023 2022 Operating activities: Net income $ 298,613 $ 124,547 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 158,125 168,050 Provision for credit losses 22,193 18,865 Gain on sale of discontinued operations ( 176,078 ) — Gain on sale of rental equipment and other property, plant and equipment ( 11,691 ) ( 14,195 ) Amortization of debt discounts and debt issuance costs 5,501 6,975 Stock-based compensation expense 17,498 15,687 Deferred income tax expense 90,675 31,072 Loss on foreign currency forward contract 7,715 — Unrealized currency losses, net ( 1,030 ) ( 71 ) Other 2,176 1,916 Changes in operating assets and liabilities: Trade receivables ( 48,641 ) ( 60,737 ) Inventories ( 2,273 ) ( 9,293 ) Prepaid expenses and other assets ( 2,211 ) ( 13,907 ) Operating lease assets and liabilities 37 936 Accounts payable and other accrued expenses ( 19,705 ) 34,756 Deferred revenue and customer deposits 10,016 29,252 Net cash provided by operating activities 350,920 333,853 Investing activities: Proceeds from sale of discontinued operations 403,992 — Acquisitions, net of cash acquired ( 149,421 ) ( 103,927 ) Proceeds from sale of rental equipment 25,254 35,080 Purchase of rental equipment and refurbishments ( 102,709 ) ( 225,389 ) Payment for settlement of foreign currency forward contract ( 7,715 ) — Proceeds from the sale of property, plant and equipment 265 751 Purchase of property, plant and equipment ( 11,189 ) ( 20,253 ) Net cash provided by (used in) investing activities 158,477 ( 313,738 ) Financing activities: Receipts from issuance of Common Stock from the exercise of options 412 3,452 Repurchase and cancellation of Common Stock and warrants ( 456,297 ) ( 319,225 ) Receipts from borrowings 628,538 454,322 Payment of financing costs — ( 8,021 ) Repayment of borrowings ( 674,719 ) ( 127,607 ) Principal payments on finance lease obligations ( 8,133 ) ( 10,353 ) Taxes paid on employee stock awards ( 10,058 ) ( 13,370 ) Net cash used in financing activities ( 520,257 ) ( 20,802 ) Effect of exchange rate changes on cash and cash equivalents 746 ( 306 ) Net change in cash and cash equivalents ( 10,114 ) ( 993 ) Cash and cash equivalents at the beginning of the period 17,774 12,699 Cash and cash equivalents at the end of the period $ 7,660 $ 11,706 Supplemental cash flow information: Interest paid, net $ 86,123 $ 59,980 Income taxes paid, net $ 15,055 $ 10,608 Assets acquired under capital leases $ 24,379 $ 17,065 Capital expenditures accrued or payable $ 18,740 $ 39,949 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 8 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 and six months ended June 30, 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, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with 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 six months ended June 30, 2023, the Company 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 of June 30, 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 $ 2.2 million and $ 5.2 million in integration costs related to asset acquisitions and the Merger within selling, general and administrative expense ("SG&A") during the three months ended June 30, 2023 and 2022, respectively, and $ 6.1 million and $ 9.3 million in integration costs related to acquisitions and the Merger during the six months ended June 30, 2023 and 2022, respectively. 9 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. Six Months Ended June 30, 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 six months ended June 30, 2023 . 10 Three Months Ended June 30, 2022 (in thousands) Tank and Pump UK Storage Solutions Total Revenues: Leasing and services revenue: Leasing $ 22,078 $ 20,156 $ 42,234 Delivery and installation 9,219 5,342 14,561 Sales revenue: New units 678 489 1,167 Rental units 110 679 789 Total revenues 32,085 26,666 58,751 Costs: Costs of leasing and services: Leasing 4,608 4,193 8,801 Delivery and installation 7,640 3,410 11,050 Costs of sales: New units 496 322 818 Rental units ( 23 ) 500 477 Depreciation of rental equipment 2,793 1,154 3,947 Gross profit 16,571 17,087 33,658 Expenses: Selling, general and administrative 6,289 5,652 11,941 Other depreciation and amortization 2,413 1,690 4,103 Currency losses, net — 46 46 Other expense, net 1 5 6 Operating income 7,868 9,694 17,562 Interest expense 190 232 422 Income from discontinued operations before income tax 7,678 9,462 17,140 Income tax expense from discontinued operations 1,997 1,866 3,863 Income from discontinued operations $ 5,681 $ 7,596 $ 13,277 Other selected data: Adjusted EBITDA from discontinued operations $ 12,462 $ 12,230 $ 24,692 11 Six Months Ended June 30, 2022 (in thousands) Tank and Pump UK Storage Solutions Total Revenues: Leasing and services revenue: Leasing $ 43,140 $ 40,727 $ 83,867 Delivery and installation 17,544 11,809 29,353 Sales revenue: — New units 1,360 617 1,977 Rental units 324 953 1,277 Total revenues 62,368 54,106 116,474 Costs: Costs of leasing and services: Leasing 8,915 8,430 17,345 Delivery and installation 14,651 7,334 21,985 Costs of sales: New units 1,003 385 1,388 Rental units 72 657 729 Depreciation of rental equipment 6,323 2,292 8,615 Gross profit 31,404 35,008 66,412 Expenses: Selling, general and administrative 12,501 11,769 24,270 Other depreciation and amortization 4,829 3,515 8,344 Currency losses, net — 47 47 Other expense (income), net 20 ( 40 ) ( 20 ) Operating income 14,054 19,717 33,771 Interest expense 368 476 844 Income from discontinued operations before income tax 13,686 19,241 32,927 Income tax expense from discontinued operations 3,510 4,017 7,527 Income from discontinued operations $ 10,176 $ 15,224 $ 25,400 Other selected data: Adjusted EBITDA from discontinued operations $ 23,968 $ 24,774 $ 48,742 12 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 six months ended June 30, 2022 , significant operating and investing items related to the former Tank and Pump segment were as follows: (in thousands) Six Months Ended June 30, 2022 Operating activities of discontinued operations: Depreciation and amortization $ 11,152 Investing activities of discontinued operations: Proceeds from sale of rental equipment $ 325 Purchases of rental equipment and refurbishments $ ( 13,658 ) Purchases of property, plant and equipment $ ( 170 ) 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 and six months ended June 30, 2022. See Note 16 for further information regarding Adjusted EBITDA. (in thousands) Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 Income from discontinued operations $ 5,681 $ 10,176 Income tax expense from discontinued operations 1,997 3,510 Income from discontinued operations before income tax 7,678 13,686 Interest expense 190 368 Depreciation and amortization 5,206 11,152 Stock compensation expense 135 239 Other ( 747 ) ( 1,477 ) Adjusted EBITDA from discontinued operations $ 12,462 $ 23,968 13 For the six months ended June 30, 2023 and 2022 , significant operating and investing items related to the former UK Storage Solutions segment were as follows: Six Months Ended June 30, (in thousands) 2023 2022 Operating activities of discontinued operations: Depreciation and amortization $ — $ 5,807 Investing activities of discontinued operations: Proceeds from sale of rental equipment $ 514 $ 953 Purchases of rental equipment and refurbishments $ ( 371 ) $ ( 17,219 ) Proceeds from sale of property, plant and equipment $ 8 $ 502 Purchases of property, plant and equipment $ ( 64 ) $ ( 3,188 ) 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 and six months ended June 30, 2023 and 2022, respectively. See Note 16 for further information regarding Adjusted EBITDA. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Income from discontinued operations $ — $ 7,596 $ 134,243 $ 15,224 Gain on sale of discontinued operations — — 175,708 — Income tax expense from discontinued operations — 1,866 45,468 4,017 Income from discontinued operations before income tax and gain on sale — 9,462 4,003 19,241 Interest expense — 232 56 476 Depreciation and amortization — 2,844 — 5,807 Currency losses, net — 46 — 47 Stock compensation expense 29 ( 196 ) 47 Other ( 383 ) 261 ( 844 ) Adjusted EBITDA from discontinued operations $ — $ 12,230 $ 4,124 $ 24,774 NOTE 4 - Revenue Revenue Disaggregation Geographic Areas The Company had total revenue in the following geographic areas for the three and six months ended June 30, 2023 and 2022 as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 US $ 545,333 $ 485,286 $ 1,078,507 $ 906,970 Canada 30,839 32,901 57,780 58,174 Mexico 5,917 4,703 11,270 8,917 Total revenues $ 582,089 $ 522,890 $ 1,147,557 $ 974,061 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. 14 The Company’s revenue by major product and service line for the three and six months ended June 30, 2023 and 2022 was as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Modular space leasing revenue $ 236,625 $ 204,667 $ 461,095 $ 395,056 Portable storage leasing revenue 93,462 81,186 190,777 151,890 VAPS and third party leasing revenues (a) 97,698 81,855 191,825 157,160 Other leasing-related revenue (b) 21,535 18,678 45,574 33,839 Leasing revenue 449,320 386,386 889,271 737,945 Delivery and installation revenue 112,754 110,841 219,384 196,380 Total leasing and services revenue 562,074 497,227 1,108,655 934,325 New unit sales revenue 9,004 9,927 19,661 15,714 Rental unit sales revenue 11,011 15,736 19,241 24,022 Total revenues $ 582,089 $ 522,890 $ 1,147,557 $ 974,061 (a) Includes $ 6.1 million and $ 5.6 million of service revenue for the three months ended June 30, 2023 and 2022, respectively, and $ 11.7 million and $ 11.5 million of service revenue for the six months ended June 30, 2023 and 2022, respectively. (b) Includes primarily damage billings, delinquent payment charges, and other processing fees. Leasing and Services Revenue The majority of revenue ( 76 % for both the three and six months ended June 30, 2023, and 73 % and 75 % for the three and six months ended June 30, 2022, respectively) was generated by rental income subject to the guidance of ASU 2018-11, Leases (Topic 842 ) ("ASC 842"). The remaining revenue was generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 606. Receivables and Credit Losses The Company is exposed to credit losses from trade receivables and manages credit risk at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues. Concentration of credit risk with respect to the Company's receivables is limited because of a large number of geographically diverse customers who operate in a variety of end user markets. The Company assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review that considers expected billing exposure, timing for payment and the customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for existing customers when the customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation. The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates 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 June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Balance at beginning of period $ 61,402 $ 47,124 $ 57,048 $ 45,773 Provision for credit losses, net of recoveries 13,390 9,593 22,193 17,904 Write-offs ( 6,969 ) ( 5,385 ) ( 11,506 ) ( 12,395 ) Foreign currency translation and other 273 ( 48 ) 361 2 Balance at end of period $ 68,096 $ 51,284 $ 68,096 $ 51,284 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 15 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 June 30, 2023, deferred revenue relating to services billed in advance of $ 26.2 million was recognized as revenue. As of June 30, 2023 and December 31, 2022, the Company had approximately $ 104.8 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 June 30, 2023, the undiscounted future lease payments for operating and finance lease liabilities were as follows: (in thousands) Operating Finance 2023 (remaining) $ 33,230 $ 8,905 2024 60,869 17,994 2025 51,326 17,667 2026 39,676 17,351 2027 29,208 14,099 Thereafter 62,057 26,651 Total lease payments 276,366 102,667 Less: interest ( 40,937 ) ( 11,939 ) Present value of lease liabilities $ 235,429 $ 90,728 Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets. 16 The Company’s lease activity during the six months ended June 30, 2023 and 2022 was as follows: (in thousands) Six Months Ended June 30, Financial Statement Line 2023 2022 Finance Lease Expense Amortization of finance lease assets $ 7,580 $ 6,820 Interest on obligations under finance leases 1,566 839 Total finance lease expense $ 9,146 $ 7,659 Operating Lease Expense Fixed lease expense Cost of leasing and services $ 723 $ 1,574 Selling, general and administrative 32,006 29,709 Short-term lease expense Cost of leasing and services 12,404 16,739 Selling, general and administrative 905 986 Variable lease expense Cost of leasing and services 1,675 2,822 Selling, general and administrative 4,847 3,419 Total operating lease expense $ 52,560 $ 55,249 Supplemental cash flow information related to leases for the six months ended June 30, 2023 and 2022 was as follows: (in thousands) Six Months Ended June 30, Supplemental Cash Flow Information 2023 2022 Cash paid for the amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 33,501 $ 30,918 Operating cash outflows from finance leases $ 1,515 $ 837 Financing cash outflows from finance leases $ 8,087 $ 7,506 Right of use assets obtained in exchange for lease obligations $ 36,604 $ 19,030 Assets obtained in exchange for finance leases $ 24,382 $ 14,576 Weighted average remaining operating lease terms and the weighted average discount rates as of June 30, 2023 and December 31, 2022 were as follows: Lease Terms and Discount Rates June 30, 2023 December 31, 2022 Weighted average remaining lease term - operating leases 5.6 years 5.8 years Weighted average discount rate - operating leases 5.6 % 5.0 % Weighted average remaining lease term - finance leases 5.1 years 4.9 years Weighted average discount rate - finance leases 4.1 % 3.1 % 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) June 30, 2023 December 31, 2022 Raw materials $ 40,971 $ 38,611 Finished units 3,389 2,419 Inventories $ 44,360 $ 41,030 17 NOTE 7 - Rental Equipment, net Rental equipment, net at the respective balance sheet dates consisted of the following: (in thousands) June 30, 2023 December 31, 2022 Modular space units $ 3,406,542 $ 3,197,779 Portable storage units 851,818 849,193 Value added products 204,665 203,444 Total rental equipment 4,463,025 4,250,416 Less: accumulated depreciation ( 1,266,507 ) ( 1,173,129 ) Rental equipment, net $ 3,196,518 $ 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 706 — 706 Balance at June 30, 2023 $ 519,583 $ 492,552 $ 1,012,135 The Company had no goodwill impairment during the six months ended June 30, 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: June 30, 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 5.0 $ 188,000 $ ( 70,500 ) $ 117,500 Technology 3.0 1,500 ( 750 ) 750 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 $ ( 71,250 ) $ 407,250 18 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 $ 6.0 million and $ 5.9 million for the three months ended June 30, 2023 and 2022, respectively, and $ 11.9 million and $ 11.8 million for the six months ended June 30, 2023 and 2022, respectively. Based on the carrying value at June 30, 2023, future amortization of intangible assets is expected to be as follows for the years ended December 31: (in thousands) 2023 (remaining) $ 11,875 2024 23,750 2025 23,750 2026 23,625 2027 23,500 Thereafter 11,750 Total $ 118,250 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 June 30, 2023 December 31, 2022 2025 Secured Notes 6.125 % 2025 $ 521,523 $ 520,350 ABL Facility (a) Varies 2027 1,943,243 1,988,176 2028 Secured Notes 4.625 % 2028 493,979 493,470 Finance Leases Varies Varies 90,728 74,370 Total debt 3,049,473 3,076,366 Less: current portion of long-term debt 13,952 13,324 Total long-term debt $ 3,035,521 $ 3,063,042 (a) As of June 30, 2023, the Company had $ 28.3 million of outstanding principal borrowings on the Multicurrency Facility and $ 2.3 million of related debt issuance costs recorded as a direct offset against the principal borrowings on the Multicurrency Facility. As of December 31, 2022, the Company had no outstanding principal borrowings on the Multicurrency Facility and $ 2.5 million of related debt issuance costs, which were recorded in other non-current assets on the condensed consolidated balance sheets. 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 19 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 June 30, 2023, as adjusted for the effects of the interest rate swap agreements, was 6.11 %. 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 June 30, 2023, the Line Cap was $ 3.0 billion and the Borrowers had $ 1.0 billion of available borrowing capacity under the ABL Facility, including $ 829.4 million under the US Facility and $ 209.6 million under the Multicurrency Facility. Borrowing capacity under the ABL Facility is made available for up to $ 220.0 million letters of credit and $ 220.0 million of swingline loans. At June 30, 2023, the available capacity was $ 205.6 million of letters of credit and $ 212.0 million of swingline loans. At June 30, 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 June 30, 2023. The Company had approximately $ 2.0 billion outstanding principal under the ABL Facility at June 30, 2023. Debt issuance costs of $ 30.6 million were included in the carrying value of the ABL Facility at June 30, 2023. Finance Leases The Company maintains finance leases primarily related to transportation equipment. At June 30, 2023 and December 31, 2022, obligations under finance leases for certain real property and transportation related equipment were $ 90.7 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 June 30, 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 419,530 shares of Common Stock during the six months ended June 30, 2023 . Stock Repurchase Program In May 2023, 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. 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 six months ended June 30, 2023 , the Company repurchased 9,995,319 shares of Common Stock for $ 454.9 million, excluding excise tax. As of June 30, 2023, $ 854.1 million of the approved share repurchase pool remained available. 20 Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive income (loss) ("AOCI"), net of tax, for the six months ended June 30, 2023 and 2022 were as follows: Six Months Ended June 30, 2023 (in thousands) Foreign currency translation Unrealized gains on hedging activities Total Balance at December 31, 2022 $ ( 70,122 ) $ — $ ( 70,122 ) Other comprehensive income 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 ) Other comprehensive income before reclassifications 5,915 15,761 21,676 Reclassifications from AOCI to income — ( 2,930 ) ( 2,930 ) Balance at June 30, 2023 $ ( 56,273 ) $ 12,164 $ ( 44,109 ) Six Months Ended June 30, 2022 (in thousands) Foreign currency translation Unrealized losses on hedging activities Total Balance at December 31, 2021 $ ( 25,574 ) $ ( 3,497 ) $ ( 29,071 ) Other comprehensive loss before reclassifications ( 4,074 ) ( 569 ) ( 4,643 ) Reclassifications from AOCI to income — 2,890 2,890 Balance at March 31, 2022 ( 29,648 ) ( 1,176 ) ( 30,824 ) Other comprehensive loss before reclassifications ( 25,628 ) ( 464 ) ( 26,092 ) Reclassifications from AOCI to income — 1,640 1,640 Balance at June 30, 2022 $ ( 55,276 ) $ — $ ( 55,276 ) For the three months ended June 30, 2023 and 2022, a gain of $ 2.9 million and a loss of $ 1.6 million , respectively, were reclassified from AOCI into the condensed consolidated statements of operations within interest expense related to the interest rate swaps. For the six months ended June 30, 2023 and 2022 , a gain of $ 4.5 million an d a loss of $ 4.5 million , respectively, were reclassified from AOCI into the condensed consolidated statements of operations within interest expense related to the interest rate swaps. The interest rate swaps are discussed in Note 12. Associated with these reclassifications, t he Company recorded tax expense of $ 0.7 million and a tax benefit of $ 0.4 million for the three months ended June 30, 2023 and 2022 , respectively, and tax expense of $ 1.1 million and a tax benefit of $ 1.1 million for the six months ended June 30, 2023 and 2022, respectively. NOTE 11 – Income Taxes The Company recorded $ 31.6 million and $ 62.1 million of income tax expense for the three and six months ended June 30, 2023, respectively, and $ 20.8 million and $ 32.9 million of income tax benefit for the three and six months ended June 30, 2022, respectively. The Company’s effective tax rate for the three and six months ended June 30, 2023 was 26.5 % and 27.5 %, respectively. The Company's effective tax rate for the three and six months ended June 30, 2022 was 25.8 % and 24.9 %, respectively. The effective tax rate for the three and six months ended June 30, 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 and six months ended June 30, 2022 differed from the US federal statutory rate of 21% primarily due to state and provincial taxes offset by a discrete tax benefit related to employee stock vesting. 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. 21 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 5.08 % at June 30, 2023. The location and the fair value of derivative instruments designated as hedges were as follows: (in thousands) Balance Sheet Location June 30, 2023 Cash Flow Hedges: Interest rate swap Prepaid expenses and other current assets $ 13,215 Interest rate swap Other non-current assets $ 3,134 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 June 30, 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 six months ended June 30, 2023 and 2022 : (in thousands) 2023 2022 Gain recognized in OCI $ 20,666 $ 4,669 Location of gain (loss) recognized in income Interest expense, net Interest expense, net (Gain) loss reclassified from AOCI into income $ ( 4,456 ) $ 4,530 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 six months ended June 30, 2023 was as follows : (in thousands) Income Statement Location Six Months Ended June 30, 2023 Loss recognized in income Currency losses, net $ 7,715 22 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 June 30, 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: June 30, 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 $ 1,943,243 $ — $ 1,973,819 $ — $ 1,988,176 $ — $ 2,020,000 $ — 2025 Secured Notes 521,523 — 524,989 — 520,350 — 526,800 — 2028 Secured Notes 493,979 — 459,790 — 493,470 — 450,135 — Total $ 2,958,745 $ — $ 2,958,598 $ — $ 3,001,996 $ — $ 2,996,935 $ — As of June 30, 2023, the carrying values of the ABL Facility, the 2025 Secured Notes, and the 2028 Secured Notes included $ 30.6 million, $ 5.0 million, and $ 6.0 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. 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 six months ended June 30, 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 Granted 25,483 $ 44.59 35,244 $ 37.17 Vested ( 35,244 ) $ 37.17 ( 36,176 ) $ 29.30 Outstanding at end of period 25,483 $ 44.59 35,244 $ 37.17 23 Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 0.3 million and $ 0.3 million for the three months ended June 30, 2023 and 2022, respectively. Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 0.6 million and $ 0.6 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023, there was $ 1.0 million of unrecognized compensation cost related to RSAs that is expected to be recognized over the remaining weighted average vesting period of 0.9 years. Time-Based RSUs The following table summarizes the Company's Time-Based RSU activity for the six months ended June 30, 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 ( 43,486 ) $ 34.67 ( 31,712 ) $ 30.45 Vested ( 281,153 ) $ 22.40 ( 437,571 ) $ 16.61 Outstanding at end of period 678,528 $ 34.91 885,807 $ 25.93 Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 2.2 million and $ 2.5 million for the three months ended June 30, 2023 and 2022, respectively. Compensation expense for RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 4.0 million and $ 4.7 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023, unrecognized compensation cost related to Time-Based RSUs totaled $ 19.0 million and is expected to be recognized over the remaining weighted average vesting period of 2.5 years. Performance-Based RSUs The following table summarizes the Company's Performance-Based RSU award activity for the six months ended June 30, 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 $ 69.52 745,079 $ 42.34 Forfeited ( 985 ) $ 69.52 ( 30,712 ) $ 41.81 Vested ( 181,319 ) $ 16.82 ( 313,152 ) $ 16.45 Outstanding at end of period 2,088,772 $ 41.54 1,937,609 $ 33.84 Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 6.9 million and $ 6.5 million for the three months ended June 30, 2023 and 2022, respectively. Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of o perations was $ 12.7 million and $ 10.3 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023, unrecognized compensation cost related to Performance-Based RSUs totaled $ 49.2 million and is expected to be recognized over the remaining vesting period of 1.9 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). 24 Stock Options The following table summarizes the Company's stock option activity for the six months ended June 30, 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 — $ — ( 29,335 ) $ 14.06 Outstanding at end of period 534,188 $ 13.60 834,941 $ 12.87 Fully vested and exercisable options, June 30, 2023 534,188 $ 13.60 834,941 $ 12.87 The following table summarizes the Company's stock option activity for the six months ended June 30, 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 — $ — ( 237,819 ) $ 14.51 Outstanding at end of period 534,188 $ 13.60 1,289,824 $ 14.68 Fully vested and exercisable options, June 30, 2022 534,188 $ 13.60 1,289,824 $ 14.68 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 six months ended June 30, 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 June 30, 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 June 30, 2022, this resulted in approximately $ 12.4 million of revenue and $ 7.2 million of gross profit being transferred from the Modular segment to the Storage segment. For the six months ended June 30, 2022, $ 23.6 million of revenue and $ 13.5 million of gross profit were transferred from the Modular segment to the Storage segment. 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. 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. 25 Reportable Segments The following tables set forth certain information regarding each of the Company’s reportable segments fo r the three and six months ended June 30, 2023 and 2022, respectively. Three Months Ended June 30, 2023 (in thousands) Modular Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 281,095 $ 168,225 $ 449,320 Delivery and installation 75,168 37,586 112,754 Sales revenue: New units 7,171 1,833 9,004 Rental units 7,241 3,770 11,011 Total revenues 370,675 211,414 582,089 Costs: Cost of leasing and services: Leasing 77,342 21,214 98,556 Delivery and installation 58,543 22,806 81,349 Cost of sales: New units 3,855 940 4,795 Rental units 3,191 1,876 5,067 Depreciation of rental equipment 55,004 9,446 64,450 Gross profit $ 172,740 $ 155,132 $ 327,872 Other selected data: Adjusted EBITDA from continuing operations $ 151,443 $ 109,898 $ — $ 261,341 Selling, general and administrative expense $ 79,397 $ 54,710 $ 12,703 $ 146,810 Purchases of rental equipment and refurbishments $ 50,371 $ 5,210 $ — $ 55,581 26 Three Months Ended June 30, 2022 (in thousands) Modular Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 241,525 $ 144,861 $ 386,386 Delivery and installation 71,988 38,853 110,841 Sales revenue: New units 8,450 1,477 9,927 Rental units 13,291 2,445 15,736 Total revenues 335,254 187,636 522,890 Costs: Cost of leasing and services: Leasing 65,446 22,665 88,111 Delivery and installation 57,615 24,922 82,537 Cost of sales: New units 4,209 1,112 5,321 Rental units 6,878 1,600 8,478 Depreciation of rental equipment 54,495 8,735 63,230 Gross profit $ 146,611 $ 128,602 $ 275,213 Other selected data: Adjusted EBITDA from continuing operations $ 122,824 $ 85,819 $ — $ 208,643 Selling, general and administrative expense $ 82,366 $ 52,492 $ 15,271 $ 150,129 Purchases of rental equipment and refurbishments $ 82,482 $ 34,282 $ — $ 116,764 27 Six Months Ended June 30, 2023 (in thousands) Modular Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 550,366 $ 338,905 $ 889,271 Delivery and installation 139,989 79,395 219,384 Sales revenue: New units 16,092 3,569 19,661 Rental units 13,898 5,343 19,241 Total revenues 720,345 427,212 1,147,557 Costs: Cost of leasing and services: Leasing 150,924 45,147 196,071 Delivery and installation 110,046 46,310 156,356 Cost of sales: New units 9,520 1,483 11,003 Rental units 6,561 2,960 9,521 Depreciation of rental equipment 105,219 18,387 123,606 Gross profit $ 338,075 $ 312,925 $ 651,000 Other selected data: Adjusted EBITDA from continuing operations $ 288,407 $ 219,776 $ — $ 508,183 Selling, general and administrative expense $ 161,213 $ 112,385 $ 24,104 $ 297,702 Purchases of rental equipment and refurbishments $ 89,783 $ 12,555 $ — $ 102,338 28 Six Months Ended June 30, 2022 (in thousands) Modular Storage Unallocated Costs Total Revenues: Leasing and services revenue: Leasing $ 464,823 $ 273,122 $ 737,945 Delivery and installation 126,320 70,060 196,380 Sales revenue: New units 13,294 2,420 15,714 Rental units 19,364 4,658 24,022 Total revenues 623,801 350,260 974,061 Costs: Cost of leasing and services: Leasing 126,776 41,669 168,445 Delivery and installation 105,521 47,596 153,117 Cost of sales: New units 7,465 1,612 9,077 Rental units 10,327 3,043 13,370 Depreciation of rental equipment 104,503 16,275 120,778 Gross profit $ 269,209 $ 240,065 $ 509,274 Other selected data: Adjusted EBITDA from continuing operations $ 222,410 $ 154,006 $ — $ 376,416 Selling, general and administrative expense $ 157,004 $ 104,354 $ 26,915 $ 288,273 Purchases of rental equipment and refurbishments $ 140,059 $ 54,453 $ — $ 194,512 The following table presents reconciliations of the Company’s income from continuing operations to Adjusted EBITDA for the three and six months ended June 30, 2023 and 2022, respectively: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Income from continuing operations $ 87,729 $ 60,099 $ 164,000 $ 99,147 Income tax expense from continuing operations 31,565 20,848 62,075 32,931 Interest expense 47,246 33,153 92,112 63,723 Depreciation and amortization 81,796 78,181 158,125 151,091 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 Integration costs 2,247 5,193 6,120 9,280 Stock compensation expense 9,348 9,128 17,498 15,401 Other 1,396 2,287 1,442 4,676 Adjusted EBITDA from continuing operations $ 261,341 $ 208,643 $ 508,183 $ 376,416 29 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 Six Months Ended June 30 June 30 (in thousands) 2023 2022 2023 2022 Numerator: Income from continuing operations $ 87,729 $ 60,099 $ 164,000 $ 99,147 Income from discontinued operations — 13,277 134,613 25,400 Net income $ 87,729 $ 73,376 $ 298,613 $ 124,547 Denominator: Weighted average Common Shares outstanding – basic 200,947 223,376 204,636 222,197 Dilutive effect of shares outstanding Warrants — 1,746 — 1,818 RSAs 16 18 21 22 Time-based RSUs 242 307 309 395 Performance-based RSUs 2,148 952 2,274 1,385 Stock Options 973 1,085 993 1,166 Weighted average Common Shares outstanding – dilutive 204,326 227,484 208,233 226,983 The following amounts of common shares that the Company may be obligated to issue were excluded from the computation of dilutive EPS because their effect would have been anti-dilutive: Three Months Ended Six Months Ended June 30 June 30 (in thousands) 2023 2022 2023 2022 Time-based RSUs 210 — 211 — Performance-based RSUs 373 1,253 187 904 Total anti-dilutive shares 583 1,253 398 904 30