What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-08-01 · 217 added, 200 removed, 334 unchanged (56% of the section changed)

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MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto, contained in Part I, Item 1 of this report.

The discussion of results of operations in this MD&A is presented on a historical basis, as of or for the three and six months ended June 30, 2024 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 nine months ended September 30, 2024 or prior periods.

On January 31, 2023, the Company completed the sale of its former United Kingdom ("UK") Storage Solutions 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 June 30, 2024, our branch network included approximately 260 branch locations and additional drop lots to service our over 85,000 customers.

We offer our customers an extensive selection of “Ready to Work” temporary space solutions with over 152,000 modular space units and over 206,000 portable storage units in our fleet.

As of September 30, 2024, our branch network included approximately 260 branch locations and additional drop lots to service our over 85,000 customers.

We offer our customers an extensive selection of “Ready to Work” temporary space solutions with over 152,000 modular space units and over 210,000 portable storage and cold storage units in our fleet.

We primarily lease, rather than sell, our modular and portable storage units to customers, which results in a highly diversified and predictable recurring revenue stream.

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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 86% of our revenues for the six months ended June 30, 2024.

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 85% of our revenues for the nine months ended September 30, 2024.

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” turnkey solutions to our customers with value added products and services ("VAPS"), and continually improving the overall customer experience.

Significant Developments

Entry into an Agreement to Acquire McGrath RentCorp

Termination of Agreement to Acquire McGrath RentCorp

On January 28, 2024, we entered into an agreement and plan of merger (the “Merger Agreement”) with McGrath RentCorp ("McGrath").

Upon consummation of the merger, each outstanding share of McGrath common stock shall be converted into the right to receive either (i) $123.00 in cash or (ii) 2.8211 shares of the Company’s common stock.

Under the terms of the Merger Agreement, we expect McGrath’s shareholders will own approximately 12.6% of the Company following the McGrath acquisition.

The McGrath acquisition has been approved by the Company's and McGrath’s respective boards of directors and McGrath's shareholders.

The McGrath acquisition is subject to the satisfaction or waiver of certain customary closing conditions, including receipt of regulatory approval, and is expected to close in 2024.

In connection with the Merger Agreement, we entered into a commitment letter dated January 28, 2024, which was amended and restated on June 13, 2024 and modified by a Notice of Reduction of Bridge Commitments on June 28, 2024 (the "Commitment Letter"), pursuant to which certain financial institutions have committed to make available, in accordance with the terms of the Commitment Letter, (i) a $500 million eight-year senior secured bridge credit facility and (ii) an upsize to the existing $3.7 billion ABL Facility (as defined below) of Williams Scotsman, Inc., a subsidiary of the Company ("WSI"), by $750 million to $4.5 billion to repay McGrath's existing unsecured revolving lines of credit and notes, fund the cash portion of the consideration, and pay the fees, costs and expenses incurred in connection with the McGrath acquisition and the related transactions.

We recorded $22.9 million and $35.2 million in legal and professional fees primarily related to the acquisition of McGrath within selling, general and administrative expense ("SG&A") during the three and six months ended June 30, 2024, respectively.

On September 17, 2024, the Company and McGrath mutually agreed to terminate the Merger Agreement.

In accordance with the terms of the Merger Agreement, during the three months ended September 30, 2024, we paid McGrath a $180.0 million termination fee, which was treated as an operating expense in the quarter.

During the three and nine months ended September 30, 2024, we recorded $8.8 million and $41.3 million respectively, in legal and professional fees primarily related to the McGrath transaction within selling, general and administrative expense ("SG&A").

In connection with the proposed acquisition of McGrath, we entered into a commitment letter dated January 28, 2024, which was amended and restated on June 13, 2024 and modified by a Notice of Reduction of Bridge Commitments on June 28, 2024 (the "Commitment Letter"), pursuant to which certain financial institutions committed to make available, in accordance with the terms of the Commitment Letter, (i) a senior secured bridge credit facility and (ii) an upsize to the existing ABL Facility (as defined below).

As a result of the termination of the Merger Agreement, the Commitment Letter was terminated.

Restructuring

In June 2024, the Company implemented a cost-reduction plan to be completed by the end of 2024.

During the three and nine months ended September 30, 2024, r estructuring costs incurred under this plan i ncluded employee termination costs of $2.3 million and $8.5 million, respectively.

Financing Activities

On June 28, 2024, WSI completed a private offering of $500.0 million in aggregate principal amount of 6.625% senior secured notes due 2029 (the "2029 Secur ed Notes") to qualified institutional buyers pursuant to Rule 144A .

On June 28, 2024, Williams Scotsman, Inc.

("WSI") completed a private offering of $500.0 million in aggregate principal amount of 6.625% senior secured notes due 2029 (the "2029 Secur ed Notes") to qualified institutional buyers pursuant to Rule 144A .

P roceeds were used to repay approximately $495.0 million of outstanding indebtedness under the ABL Facility and certain fees and expenses.

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This non-cash charge was recorded to impairment loss on intangible asset on the consolidated statement of operations.

As of June 30, 2024, t he remaining net book value of the Mobile Mini trade name was $31.5 million, which will be amortized over a remaining useful life of approximately 3.1 years.

Asset Acquisitions

During the six months ended June 30, 2024, we acquired certain assets and assumed certain liabilities of three local storage and modular companies, which consisted primarily of approximately 600 storage units and 800 modular units, for $70.6 million.

After the impairment charge , t he remaining net book value of the Mobile Mini trade name was $31.5 million, which is being amortized over a remaining useful life.

During the nine months ended September 30, 2024, we acquired certain assets and assumed certain liabilities of three local storage and modular companies, which consisted primarily of approximately 600 storage units and 800 modular units, and one national provider of premium large clearspan structures for $84.5 million.

As of the acquisition dates, the fair value of rental equipment acquired was $80.7 million.

Share Repurchases

During the six months ended June 30, 2024, we repurchased 2,035,513 shares of Common Stock for $78.7 million, excluding excise tax.

As of June 30, 2024, $419.5 million of the authorization for future repurchases of the Common Stock remained available.

Given that we believe our free cash flow is predictable, we believe that repurchases will be a recurring capital allocation priority.

During the nine months ended September 30, 2024, we repurchased 3,623,298 shares of Common Stock for $140.4 million, excluding excise tax.

As of September 30, 2024, $951.9 million of the authorization for future repurchases of the Common Stock remained available.

Given that we believe our free cash flow is predictable (with the exception of isolated events), we believe that repurchases will be a recurring capital allocation priority.

Interest Rate Swap Agreements

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In connection with this change in operating model, we realigned the composition of our operating and reportable segments.

As a result, we concluded that our two operating segments (US and Other North America) are aggregated into one reportable segment.

Second Quarter Highlights

Three Months Ended June 30, 2024 vs.

As a result, we concluded we have two operating segments (US and Other North America) that aggregate into one reportable segment.

Third Quarter Highlights

Three Months Ended September 30, 2024 vs.

(in thousands, except for units on rent and monthly rental rate) 1

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Average portable storage monthly rental rate $ 265 $ 242 $ 23

1 Effective for the three months ended June 30, 2024, we reclassified approximately 2,000 units that were previously reported as modular space units on rent to portable storage units on rent as these units are generally used in a dry storage application.

1 In 2024, we reclassified approximately 2,000 units that were previously reported as modular space units on rent to portable storage units on rent as these units are generally used in a dry storage application.

Additionally, based on our segment realignment, we have conformed our VAPS presentation to include all VAPS not specific to portable storage orders as modular space VAPS and recalculated average monthly rental rates.

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All historical product operating key performance indicators have been recast to be presented on a comparable basis for all periods.

For the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, results and key drivers of our financial performance included:

• Total revenues increased $22.5 million, or 3.9%.

Leasing revenue increased $9.3 million, or 2.1%, new unit sales revenue increased $12.4 million, or 137.4%, and rental unit sales increased $5.5 million, or 49.6%.

These increases were partially offset by a decrease in delivery and installation revenue of $4.6 million, or 4.1%.

• Modular product revenue, which represented 77.8% of consolidated revenue for the three months ended June 30, 2024, increased $32.6 million, or 7.5%, to $470.4 million.

The increase was driven by our core leasing revenue, which increased $12.3 million, or 3.6%, due to continued growth of pricing and VAPS, as well as increased delivery and installation revenue, which increased $2.0 million, or 2.4%.

Rental unit sales increased $5.4 million, or 64.8%, and new unit sales increased $12.9 million, or 170.2%.

Modular revenue drivers for the three months ended June 30, 2024 included:

For the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, results and key drivers of our financial performance included:

• Total revenues decreased $3.4 million, or 0.6%.

Leasing revenue decreased $11.2 million, or 2.4%, and delivery and installation revenue decreased $0.8 million, or 0.7%.

These decreases were partially offset by an increase in new unit sales revenue of $7.7 million, or 75.8%, and an increase in rental unit sales revenue of $0.9 million, or 7.5%.

• Modular product revenue, which represented 77.8% of consolidated revenue for the three months ended September 30, 2024, increased $17.3 million, or 3.8%, to $467.8 million.

The increase was driven by delivery and installation revenue, which increased $7.2 million, or 8.6%, new unit sales revenue, which increased $8.2 million, or 92.5%, and rental unit sales revenue, which increased $1.2 million, or 12.3%.

Core leasing revenue increased $0.7 million, or 0.2%.

Modular revenue drivers for the three months ended September 30, 2024 included:

• Modular space average monthly rental rate increased $69, or 6.1%, year over year to $1,199 representing a continuation of the long-term price optimization and VAPS penetration opportunities across our portfolio.

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• Average modular space monthly utilization decreased 180 basis points ("bps") to 62.1%.

• Storage product revenue, which represented 22.2% of consolidated revenue for the three months ended June 30, 2024, decreased $10.1 million, or 7.0%, to $134.1 million.

The decrease was driven by delivery and installation revenue, which decreased $6.6 million, or 22.1%, driven reduced delivery volumes, as well as a decrease in core leasing revenue of $3.0 million, or 2.8%, driven by reduced portable storage container volumes, partially offset by increased rates on portable storage containers and increased revenue from acquired climate-controlled containers and refrigerated storage units.

Rental unit sales remained flat at $2.7 million, and new unit sales decreased $0.5 million, or 37.8%.

Storage revenue drivers for the three months ended June 30, 2024 included:

• Storage product revenue, which represented 22.2% of consolidated revenue for the three months ended September 30, 2024, decreased $20.7 million, or 13.4%, to $133.6 million.

The decrease was driven by a decrease in core leasing revenue of $11.9 million, or 10.1%, driven by reduced portable storage container volumes, partially offset by increased rates on portable storage containers and increased revenue from acquired climate-controlled containers and refrigerated storage units.

Delivery and installation revenue also decreased $8.0 million, or 25.0%, driven by reduced delivery volumes and decreased pricing.

Rental unit sales revenue decreased $0.3 million, or 9.1%, and new unit sales decreased $0.5 million, or 40.6%.

Storage revenue drivers for the three months ended September 30, 2024 included:

• Portable storage average monthly rental rate increased $23, or 9.5%, year over year to $265 as a result of our price management tools, processes and benefits from increased VAPS penetration opportunities, as well as higher rates on the climate-controlled containers and refrigerated storage units acquired in 2023 and 2024.

• Average portable storage units on rent decreased 30,872, or 19.8%, year over year driven by lower demand for the three months ended June 30, 2024.

The lower demand was driven largely by decreased new construction project starts over the past year as compared to higher activity levels experienced during 2021 and 2022 and less demand in the retail and wholesale trade customer segment.

• Average portable storage monthly utilization decreased 14.1% to 59.2% for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

• Generated a loss from continuing operations of $46.9 million for the three months ended June 30, 2024, which included discrete costs in the period of $165.5 million, including a $132.5 million impairment loss on intangible asset, $22.9 million of legal and professional fees primarily related to the acquisition of McGrath, $3.1 million of integration costs, and $6.2 million of lease impairment expense, restructuring, and other related charges primarily related to employee termination costs as a result of a cost-reduction plan implemented in June 2024.

Gross profit margin for the three months ended June 30, 2024 was 54.1%.

• Generated Adjusted EBITDA from continuing operations of $263.6 million for the three months ended June 30, 2024, representing an increase of $2.2 million, or 1%, as compared to the same period in 2023.

• Adjusted EBITDA margin from continuing operations was 43.6% for the three months ended June 30, 2024 and decreased 130 bps versus prior year.

• Average portable storage units on rent decreased 27,551, or 18.3%, year over year driven by lower demand for the three months ended September 30, 2024.

The lower demand was driven largely by decreased new construction project starts over the past two years as compared to higher activity levels experienced during 2021 and 2022 and less demand in the retail and wholesale trade customer segment.

• Average portable storage monthly utilization decreased 12.1% to 58.1% for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

• Generated loss from continuing operations of $70.5 million for the three months ended September 30, 2024, which included the $180.0 million termination fee paid to McGrath and other discrete costs in the period of $13.4 million, including $8.8 million of legal and professional fees related to the proposed acquisition of McGrath, $1.7 million of integration costs, and $2.5 million of restructuring, lease impairment expense, and other related charges primarily related to employee termination costs as a result of a cost-reduction plan implemented in June 2024.

Gross profit margin for the three months ended September 30, 2024 was 53.5%.

• Generated Adjusted EBITDA from continuing operations of $266.9 million for the three months ended September 30, 2024, representing an increase of $1.4 million, or 0.5%, as compared to the same period in 2023.

• Adjusted EBITDA margin from continuing operations was 44.4% for the three months ended September 30, 2024 and increased 50 bps versus prior year.

Leasing margins increased 127 bps versus prior year and delivery and installation margins decreased 896 bps versus prior year.

• Net cash provided by operating activities decreased $26.5 million to $175.6 million for the three months ended June 30, 2024.

• Net cash (used in) provided by operating activities decreased $192.6 million to $1.6 million net cash used in operating activities for the three months ended September 30, 2024 from $191.0 million net cash provided by operating activities for the three months ended September, 30, 2023.

Net cash used in investing activities, excluding cash used for acquisitions, increased by $18.2 million.

Capital expenditures for rental equipment increased $9.6 million for the three months ended June 30, 2024 as a result of increased new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units.

Purchases of property, plant, and equipment increased $1.8 million for the three months ended June 30, 2024.

Proceeds from the sale of rental equipment decreased $1.0 million.

Net CAPEX increased $12.1 million for the three months ended June 30, 2024.

• Generated Free Cash Flow of $120.9 million for the three months ended June 30, 2024, representing a decrease of $38.7 million as compared to the same period in 2023.

We deployed this Free Cash Flow to acquire two local providers of storage and modular space solutions with portfolios of approximately 500 storage units and 30 modular units for $29.6 million.

We returned $78.7 million to shareholders through stock repurchases, reducing outstanding Common Stock by 2,035,513 shares.

• We believe the predictability of our Free Cash Flow allows us to pursue multiple capital allocation priorities opportunistically, including investing in organic opportunities we see in the market, maintaining leverage in our stated range, opportunistically executing accretive acquisitions, and returning capital to shareholders.

In addition to using GAAP financial measurements, we use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, Adjusted Gross Profit Margin, Net CAPEX and Free Cash Flow, which are non-GAAP financial measures, to evaluate our operating results.

Capital expenditures for rental equipment increased $6.0 million for the three months ended September 30, 2024 as a result of increased new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units.

Purchases of property, plant, and equipment decreased $2.2 million for the three months ended September 30, 2024.

Proceeds from the sale of rental equipment increased $0.5 million.

Proceeds from the sale of property, plant, and equipment decreased $12.1 million.

Net CAPEX increased $15.3 million for the three months ended September 30, 2024.

• Generated a Free Cash Flow deficit of $60.1 million for the three months ended September 30, 2024, representing a decrease of $207.9 million as compared to the same period in 2023, which was driven by the $180.0 million termination fee paid to McGrath and related transaction costs.

Excluding one-time, nonrecurring payments of $180.0 million for the McGrath termination fee and $23.3 million for transaction costs from terminated acquisitions, Adjusted Free Cash Flow was $143.1 million for the three months ended September 30, 2024 as compared to $147.8 million for the three months ended September 30, 2023.

During the three months ended September 30, 2024, we acquired a national provider of premium large clearspan structures for $13.9 million.

We also returned $61.7 million to shareholders through stock repurchases, reducing outstanding Common Stock by 1,587,785 shares.

• With the exception of isolated events, we believe the predictability of our Free Cash Flow allows us to pursue multiple capital allocation priorities opportunistically, including investing in organic opportunities we see in the market, maintaining leverage in our stated range, opportunistically executing accretive acquisitions, and returning capital to shareholders.

In addition to using GAAP financial measurements, we use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, Adjusted Gross Profit Percentage, Net CAPEX and Free Cash Flow, which are non-GAAP financial measures, to evaluate our operating results.

As such, we include in this Form 10-Q reconciliations to their most directly comparable GAAP financial measures.

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Consolidated Results of Operations

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Our condensed consolidated statements of operations for the three months ended June 30, 2024 and 2023 are presented below.

Three Months Ended June 30, 2024 vs.

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Our condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023 are presented below.

Three Months Ended September 30, 2024 vs.

(in thousands)

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Other depreciation and amortization 23,108 17,852 5,256

Impairment loss on intangible asset 132,540 — 132,540

Lease impairment expense and other related charges, net (23) — (23)

Termination fee 180,000 — 180,000

Restructuring costs 2,334 — 2,334

Lease impairment expense and other related charges, net 144 — 144

Currency (gains) losses, net (129) 96 (225)

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(Loss) income from continuing operations $ (70,475) $ 91,516 $ (161,991)

Comparison of Three Months Ended June 30, 2024 and 2023

Total revenue increased $22.5 million, or 3.9%, to $604.6 million for the three months ended June 30, 2024 from $582.1 million for the three months ended June 30, 2023.

Leasing revenue increased $9.3 million, or 2.1%, as compared to the same period in 2023, driven by improved pricing and value added products penetration, partially offset by a decrease of 34,140 average total units on rent, which was primarily driven by a decrease in portable storage containers on rent.

Comparison of Three Months Ended September 30, 2024 and 2023

Total revenue decreased $3.4 million, or 0.6%, to $601.4 million for the three months ended September 30, 2024 from $604.8 million for the three months ended September 30, 2023.

Leasing revenue decreased $11.2 million, or 2.4%, as compared to the same period in 2023, driven by a decrease of 30,821 total average units on rent, which was primarily driven by a decrease in portable storage units on rent.

Delivery and installation revenues decreased $0.8 million, or 0.7%, due to decreased deliveries and returns.

Rental unit sales increased $5.5 million, or 49.6%, primarily driven by a single large project in the quarter, and new unit sales increased $12.4 million, or 137.4%, primarily related to sales activity from a company we acquired in the third quarter of 2023.

Total average units on rent for the three months ended June 30, 2024 and 2023 were 220,414 and 254,554, respectively, representing a decrease of 34,140 units, or 13.4%.

Portable storage average units on rent decreased by 30,872 units, or 19.8%, for the three months ended June 30, 2024 driven by lower demand in 2024.

The average portable storage

unit utilization rate during the three months ended June 30, 2024 was 59.2% as compared to 73.3% during the same period in 2023.

Modular space average units on rent decreased 3,268 units, or 3.3%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was also driven largely by decreased new construction project starts over the past year as compared to higher activity levels experienced during 2021 and 2022.

The average modular space unit utilization rate during the three months ended June 30, 2024 was 62.5% as compared to 64.8% during the same period in 2023.

Modular space average monthly rental rates increased 7.8% year over year to $1,176 for the three months ended June 30, 2024.

Rental unit sales increased $0.9 million, or 7.5%, and new unit sales increased $7.7 million, or 75.8%, primarily related to sales activity from a company we acquired in the middle of the third quarter of 2023.

Total average units on rent for the three months ended September 30, 2024 and 2023 were 217,629 and 248,450, respectively, representing a decrease of 30,821 units, or 12.4%.

Portable storage average units on rent decreased by 27,551 units, or 18.3%, for the three months ended September 30, 2024 driven by lower demand in 2024.

The average portable storage unit utilization rate during the three months ended September 30, 2024 was 58.1% as compared to 70.2%

during the same period in 2023.

Modular space average units on rent decreased 3,270 units, or 3.3%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, which was also largely driven by decreased new construction project starts over the past two years as compared to higher activity levels experienced during 2021 and 2022.

The average modular space utilization rate during the three months ended September 30, 2024 was 62.1% as compared to 63.9% during the same period in 2023.

Modular space average monthly rental rates increased 6.1% year over year to $1,199 for the three months ended September 30, 2024.

Increases were driven by a continuation of the long-term price optimization and VAPS penetration opportunities.

Average portable storage monthly rental rates increased 17.9% year over year to $263 for the three months ended June 30, 2024 as a result of our price management tools, processes and benefits from increased VAPS penetration opportunities, as well as higher rates on the climate-controlled containers and refrigerated storage units acquired in 2023 and 2024.

Average portable storage monthly rental rates increased 9.5% year over year to $265 for the three months ended September 30, 2024 as a result of our price management tools, processes and benefits from increased VAPS penetration opportunities, as well as higher rates on the climate-controlled containers and refrigerated storage units acquired in 2023 and 2024.

Total VAPS revenues, which are included in leasing revenues, increased $0.3 million, or 0.3%, to $100.2 million for the three months ended September 30, 2024 from $99.9 million for the three months ended September 30, 2023.

Gross profit:

Gross profit decreased $0.8 million, or 0.2%, to $327.1 million for the three months ended June 30, 2024 from $327.9 million for the three months ended June 30, 2023.

The decrease in gross profit was a result of decreased delivery and installation gross profit of $4.4 million and increased depreciation expense of $11.2 million, and was partially offset by a $9.6 million increase in leasing gross profit and a $5.3 million increase in new and rental unit sales gross profit.

The increase in leasing gross profit was primarily a result of increased revenues due to favorable average monthly rental rates including VAPS across both portable storage and modular space units, which offset lower unit on rent volumes.

Cost of leasing and services decreased by $0.5 million, or 0.3%, for the three months ended June 30, 2024 versus the three months ended June 30, 2023, driven by a decrease in subcontractors costs of $4.8 million, or 7.5%, and a decrease in materials costs of $2.6 million, or 9.8%.

These decreased costs were partially offset by an increase in labor costs of $5.8 million, or 9.0%.

Cost of sales increased by $12.6 million, or 127.6%, which is directionally in line with increased sales revenues of 89.1% for the three months ended June 30, 2024.

Our resulting gross profit percentage was 54.1% and 56.3% for the three months ended June 30, 2024 and 2023, respectively.

Our adjusted gross profit percentage, excluding the effects of depreciation, was 66.6% and 67.4% for the three months ended June 30, 2024 and 2023, respectively.

Gross profit decreased $18.2 million, or 5.4%, to $321.5 million for the three months ended September 30, 2024 from $339.7 million for the three months ended September 30, 2023.

The decrease in gross profit was a result of decreased delivery and installation gross profit of $10.5 million, increased depreciation expense of $9.3 million, and a $2.9 million decrease in leasing gross profit.

The decrease was partially offset by a $4.5 million increase in new and rental unit sales gross profit.

The decrease in leasing gross profit was primarily driven by lower demand in 2024.

Cost of leasing and services increased by $1.4 million, or 0.8%, for the three months ended September 30, 2024 versus the three months ended September 30, 2023, driven by an increase in subcontractors costs of $7.7 million, or 11.5%, and an increase in labor costs of $0.8 million, or 1.1%.

These increased costs were partially offset by a decrease in materials costs of $6.1 million, or 21.5%.

Cost of sales increased by $4.1 million, or 35.1%, which is directionally in line with the 38.4% increase in sales revenues for the three months ended September 30, 2024.

Our resulting gross profit percentage was 53.5% and 56.2% for the three months ended September 30, 2024 and 2023, respectively.

Our Adjusted Gross Profit Percentage, excluding the effects of depreciation of rental equipment, was 66.1% and 67.2% for the three months ended September 30, 2024 and 2023, respectively.

The decreases, as referenced above, were mainly driven by lower utilization rates, specifically on portable storage products.

Selling, general and administrative expense ("SG&A") increased $27.8 million, or 18.9%, to $174.6 million for the three months ended June 30, 2024, compared to $146.8 million for the three months ended June 30, 2023.

Discrete expenses for certain one-time projects, primarily legal and professional fees related to the acquisition of McGrath, increased $21.8 million.

Real estate and occupancy costs increased $4.7 million, or 22.8%.

Employee SG&A excluding stock compensation increased $4.9 million, or 7.8%, primarily as a result of increased salaries and wages.

Stock based compensation increased $0.3 million, or 2.8%.

These increased costs were partially offset by a $2.1 million decrease in service agreements and professional fees.

SG&A decreased $1.1 million, or 0.7%, to $150.9 million for the three months ended September 30, 2024, as compared to $152.0 million for the three months ended September 30, 2023.

Employee SG&A excluding stock compensation decreased $9.7 million, or 15.4%, primarily as a result of decreased variable compensation expense, including management incentives, and lower employee headcount as a result of the cost-reduction plan implemented in June 2024.

Service agreements and professional fees, excluding discrete expenses for certain one-time projects, decreased $5.6 million, or 24.4%, and our provision for credit losses, net of write offs, decreased $1.1 million, or 10.6%.

These decreased costs were partially offset by a $8.0 million increase in discrete expenses for certain one-time projects, primarily legal and professional fees related to the proposed acquisition of McGrath, a $3.2 million increase in real estate and occupancy costs, a $1.1 million increase in marketing and advertising expense, and a $1.0 million increase in travel costs.

Adjusted EBITDA:

Adjusted EBITDA increased $2.2 million, or 1%, to $263.6 million for the three months ended June 30, 2024 from $261.3 million for the three months ended June 30, 2023.

The increase was driven by a $9.6 million increase in leasing gross profit and a $5.3 million increase in new and used sales gross profit as discussed above, partially offset by decreased delivery and installation gross profit of $4.4 million and increased SG&A, excluding discrete costs, of $4.9 million, or 3.6%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Adjusted EBITDA increased $1.4 million, or 1%, to $266.9 million for the three months ended September 30, 2024 from $265.5 million for the three months ended September 30, 2023.

The increase was driven by a $4.5 million increase in new and used sales gross profit and decreased SG&A, excluding discrete costs, of $10.2 million, or 7.2%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

The increase was partially offset by a $2.9 million decrease in leasing gross profit and decreased delivery and installation gross profit of $10.5 million.

Other depreciation and amortization:

Other depreciation and amortization increased $0.8 million to $18.1 million for the three months ended June 30, 2024 compared to $17.3 million for the three months ended June 30, 2023.

Impairment loss on intangible asset:

Impairment loss on intangible asset was $132.5 million for the three months ended June 30, 2024 related to the impairment of the Mobile Mini trade name due to our plan to rebrand under a single WillScot brand name and discontinue the use of the Mobile Mini trade name.

Other depreciation and amortization increased $5.3 million to $23.1 million for the three months ended September 30, 2024 as compared to $17.9 million for the three months ended September 30, 2023, primarily related to the amortization of the Mobile Mini tradename in 2024.

Termination fee:

We paid the termination fee of $180.0 million to McGrath related to the termination of the Merger Agreement during the three months ended September 30, 2024, which was treated as an operating expense.

Restructuring costs:

Restructuring costs of $6.2 million for the three months ended June 30, 2024 were primarily due to employee termination costs as a result of a cost-reduction plan implemented in June 2024.

Restructuring costs of $2.3 million for the three months ended September 30, 2024 were due to employee termination costs as a result of a cost-reduction plan implemented in June 2024.

Currency (gains) losses, net:

Currency (gains) losses, net decreased by $0.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Currency (gains) losses, net decreased by $0.2 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Other expense (income), net:

Other expense, net was $0.9 million for the three months ended June 30, 2024 compared to other income, net of $2.8 million for the three months ended June 30, 2023.

This change was primarily attributable to insurance recoveries received in 2023 related to Hurricane Ian in the Gulf Coast area of the United States in 2022.

Other expense, net was $0.4 million for the three months ended September 30, 2024 as compared to other income, net of $8.3 million for the three months ended September 30, 2023.

This change was primarily attributable to a gain on sale of fixed assets related to a real estate sale transaction during the three months ended September 30, 2023.

Interest expense, net:

Interest expense increased $8.3 million, or 17.6%, to $55.5 million for the three months ended June 30, 2024 from $47.2 million for the three months ended June 30, 2023.

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.

Interest expense, net increased $2.0 million, or 3.8%, to $55.8 million for the three months ended September 30, 2024 from $53.8 million for the three months ended September 30, 2023.

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 (benefit) expense:

Income tax benefit was $13.9 million for the three months ended June 30, 2024 compared to income tax expense of $31.6 million for the three months ended June 30, 2023, a change of $45.5 million.

The change was primarily driven by a decrease in income from continuing operations before income tax for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Income tax benefit was $20.6 million for the three months ended September 30, 2024 compared to income tax expense of $32.8 million for the three months ended September 30, 2023, a change of $53.3 million.

The change was primarily driven by a decrease in income from continuing operations before income tax for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Capital expenditures for rental equipment:

Capital expenditures for rental equipment increased $9.6 million, or 17.3%, to $65.2 million for the three months ended June 30, 2024 from $55.6 million for the three months ended June 30, 2023 as a result of increased refurbishment spending and new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units.

Net CAPEX increased $12.1 million, or 28.4%, to $54.7 million for the three months ended June 30, 2024 from $42.6 million for the three months ended June 30, 2023 driven by the increase in capital expenditures for rental equipment as described above, as well as by a $1.8 million increase in purchases of property, plant and equipment, and a $1.0 million decrease in proceeds from the sale of rental equipment for the three months ended June 30, 2024.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Our condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 are presented below.

Six Months Ended June 30, 2024 vs.

Capital expenditures for rental equipment increased $6.0 million, or 9%, to $69.4 million for the three months ended September 30, 2024 from $63.4 million for the three months ended September 30, 2023 as a result of increased refurbishment spending and new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units.

Net CAPEX increased $15.3 million, or 35%, to $58.6 million for the three months ended September 30, 2024 from $43.2 million for the three months ended September 30, 2023 driven by the increase in capital expenditures for rental equipment as described above and a $12.1 million decrease in proceeds from the sale of property, plant, and equipment, partially offset by a $2.2 million decrease in purchases of property, plant and equipment, and a $0.5 million increase in proceeds from the sale of rental equipment.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Our condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023 are presented below.

Nine Months Ended September 30, 2024 vs.

2023 $ Change

18 unchanged sentences

Other depreciation and amortization 59,163 52,371 6,792

Termination fee 180,000 — 180,000

Impairment loss on intangible asset 132,540 — 132,540

Lease impairment expense and other related charges, net 723 22 701

Restructuring costs 8,540 — 8,540

Currency losses, net 35 6,789 (6,754)

Lease impairment expense and other related charges, net 867 22 845

Currency (gains) losses, net (94) 6,885 (6,979)

Other expense (income), net 1,935 (14,533) 16,468

1 unchanged sentence

Interest expense, net 167,959 145,915 22,044

Income from continuing operations before income tax 12,578 226,075 (213,497)

Income tax expense from continuing operations 3,189 62,075 (58,886)

Income from continuing operations 9,389 164,000 (154,611)

(Loss) income from continuing operations before income tax (78,463) 350,371 (428,834)

Income tax (benefit) expense from continuing operations (17,377) 94,855 (112,232)

(Loss) income from continuing operations (61,086) 255,516 (316,602)

Discontinued operations:

3 unchanged sentences

Income from discontinued operations — 134,613 (134,613)

Net income $ 9,389 $ 298,613 $ (289,224)

The following table and discussion summarizes our financial performance for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

Six Months Ended June 30, 2024 vs.

Net (loss) income $ (61,086) $ 390,129 $ (451,215)

The following table and discussion summarizes our financial performance for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Nine Months Ended September 30, 2024 vs.

(in thousands, except for units on rent and monthly rental rate) 1

Revenue $ 1,793,203 $ 1,752,391 $ 40,812

Income from continuing operations $ 9,389 $ 164,000 $ (154,611)

(Loss) income from continuing operations $ (61,086) $ 255,516 $ (316,602)

Adjusted EBITDA from continuing operations $ 778,448 $ 773,663 $ 4,785

7 unchanged sentences

Average portable storage monthly rental rate $ 263 $ 226 $ 37

1 Effective for the six months ended June 30, 2024, we reclassified approximately 2,000 units that were previously reported as modular space units on rent to portable storage units on rent as these units are generally used in a dry storage application.

1 unchanged sentence

All historical product operating key performance indicators have been recast to be presented on a comparable basis for all periods.

Comparison of Six Months Ended June 30, 2024 and 2023

Total revenue increased $44.2 million, or 3.9%, to $1,191.8 million for the six months ended June 30, 2024 from $1,147.6 million for the six months ended June 30, 2023.

Leasing revenue increased $29.9 million, or 3.4%, as compared to the same period in 2023 driven by improved pricing and value added products penetration, partially offset by a decrease of 37,053 average total units on rent.

Comparison of Nine Months Ended September 30, 2024 and 2023

Total revenue increased $40.8 million, or 2.3%, to $1,793.2 million for the nine months ended September 30, 2024 from $1,752.4 million for the nine months ended September 30, 2023.

Leasing revenue increased $18.7 million, or 1.4%, as compared to the same period in 2023 driven by improved pricing and value added products penetration, partially offset by a decrease of 35,125 total average units on rent.

Delivery and installation revenues decreased $11.7 million, or 3.5%, due to decreased deliveries and returns.

Rental unit sales increased $10.0 million, or 51.7%, primarily driven by a single large project in the second quarter and increased overall rental unit sales activity, and new unit sales increased $15.2 million, or 77.4%, primarily related to sales activity from a company we acquired in the third quarter of 2023.

Total average units on rent for the six months ended June 30, 2024 and 2023 were 223,766 and 260,819, respectively.

Modular space average units on rent decreased 3,550 units, or 3.6%, and portable storage average units on rent decreased by 33,503 units, or 20.7%, for the six months ended June 30, 2024.

The average modular space unit utilization rate during the six months ended June 30, 2024 was 62.5% as compared to 65.3% during the same period in 2023.

The average portable storage unit utilization rate during the six months ended June 30, 2024 was 60.7%, as compared to 77.1% during the same period in 2023.

Modular space average monthly rental rates increased 9.5% to $1,163 for the six months ended June 30, 2024.

Rental unit sales increased $10.9 million, or 34.5%, primarily driven by a single large project in the second quarter and increased overall rental unit sales activity, and new unit sales increased $22.9 million, or 76.8%, primarily related to sales activity from a company we acquired in the middle of the third quarter of 2023.

Total average units on rent for the nine months ended September 30, 2024 and 2023 were 221,619 and 256,744, respectively.

Modular space average units on rent decreased 3,522 units, or 3.6%, and portable storage average units on rent decreased by 31,603 units, or 20.0%, for the nine months ended September 30, 2024.

The average modular space utilization rate during the nine months ended September 30, 2024 was 62.3% as compared to 64.8% during the same period in 2023.

The average portable storage utilization rate during the nine months ended September 30, 2024 was 59.8% as compared to 74.1% during the same period in 2023.

Modular space average monthly rental rates increased 8.4% to $1,175 for the nine months ended September 30, 2024.

Increases were driven by a continuation of the long-term price optimization and VAPS penetration opportunities.

Average portable storage monthly rental rates increased 20.2% to $262 for the six months ended June 30, 2024 as a result of our price management tools, processes and benefits from increased VAPS penetration opportunities, as well as higher rates on the climate-controlled containers and refrigerated storage units acquired in 2023 and 2024.

Average portable storage monthly rental rates increased 16.4% to $263 for the nine months ended September 30, 2024 as a result of our price management tools, processes and benefits from increased VAPS penetration opportunities, as well as higher rates on the climate-controlled containers and refrigerated storage units acquired in 2023 and 2024.

Total VAPS revenues, which are included in leasing revenues, increased $4.9 million, or 1.7%, to $296.6 million for the nine months ended September 30, 2024 from $291.7 million for the nine months ended September 30, 2023.

Gross profit:

Gross profit decreased $7.0 million, or 1.1%, to $644.0 million for the six months ended June 30, 2024 from $651.0 million for the six months ended June 30, 2023.

Gross profit decreased $25.2 million, or 2.5%, to $965.5 million for the nine months ended September 30, 2024 from $990.7 million for the nine months ended September 30, 2023.

The decrease in gross profit was a result of a $36.2 million increase in depreciation of rental equipment and decreased delivery and installation gross profit of $24.1 million.

These decreases in gross profit were partially offset by a $25.4 million increase in leasing gross profit and increased new and rental unit sale gross profits of $8.1 million.

These decreases in gross profit were partially offset by a $22.4 million increase in leasing gross profit and increased new and rental unit sale gross profit of $12.6 million.

Cost of leasing and services increased by $7.2 million, or 2.0%, for the six months ended June 30, 2024 versus the six months ended June 30, 2023, driven by a $18.4 million, or 14.7%, increase in labor cost and a $4.4 million, or 9.1%, increase in vehicle, equipment and other costs partially offset by a $11.0 million, or 8.7%, decrease in subcontractor costs and a $4.6 million, or 8.7%, decrease in material costs.

Cost of sales increased by $17.1 million, or 83.2%, which is directionally in line with increased sales revenues of 64.7% for the six months ended June 30, 2024.

Our gross profit percentage was 54.0% and 56.7% for the six months ended June 30, 2024 and 2023, respectively.

Our gross profit percentage, excluding the effects of depreciation, was 66.7% and 67.5% for the six months ended June 30,

2024 and 2023, respectively.

Cost of leasing and services increased by $8.6 million, or 1.6%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, driven by a $19.2 million, or 10.0%, increase in labor cost and a $3.5 million, or 4.7%, increase in vehicle, equipment and other costs partially offset by a $10.7 million, or 13.1%, decrease in material costs and a $3.3 million, or 1.7%, decrease in subcontractor costs.

Cost of sales increased by $21.2 million, or 65.6%, which is directionally in line with increased sales revenues of 55.1% for the nine months ended September 30, 2024.

Our gross profit percentage was 53.8% and 56.5% for the nine months ended September 30, 2024 and 2023, respectively.

Our Adjusted Gross Profit Percentage, excluding the effects of depreciation of rental equipment, was 66.5% and 67.4% for the nine months ended September 30, 2024 and 2023, respectively.

The decreases, as referenced above, were mainly driven by lower utilization rates, specifically on portable storage products.

SG&A increased $44.5 million, or 14.9%, to $342.2 million for the six months ended June 30, 2024, compared to $297.7 million for the six months ended June 30, 2023.

Discrete expenses for certain one-time projects, primarily legal and professional fees related to the acquisition of McGrath, increased $34.7 million.

Real estate and occupancy costs increased $8.5 million, or 20.6%, and employee SG&A excluding stock compensation increased $6.7 million, or 5.1%, primarily as a result of increased salaries and wages.

Stock compensation expense increased $1.2 million to $18.7 million for the six months ended June 30, 2024, compared to $17.5 million for the six months ended June 30, 2023.

These increases were partially offset by a $3.3 million, or 23.3%, decrease in travel costs and a $2.7 million, or 28.1%, decrease in our provision for credit losses.

SG&A increased $43.4 million, or 9.6%, to $493.0 million for the nine months ended September 30, 2024, as compared to $449.7 million for the nine months ended September 30, 2023.

Discrete expenses for certain one-time projects, primarily legal and professional fees related to the proposed acquisition of McGrath, increased $42.7 million.

Real estate and occupancy costs increased $11.8 million, or 18.7%, and stock compensation expense increased $2.1 million to $28.2 million for the nine months ended September 30, 2024, as compared to $26.1 million for the nine months ended September 30, 2023.

These increases were partially offset by a $5.6 million, or 9.4%, decrease in service agreements and professional fees, a $2.9 million, or 1.5%, decrease in employee costs, a $2.3 million, or 12.5%, decrease in travel costs and a $3.8 million, or 19.0%, decrease in the provision for credit losses, net of write offs.

Adjusted EBITDA:

Adjusted EBITDA increased $3.4 million, or 1%, to $511.6 million for the six months ended June 30, 2024 from $508.2 million for the six months ended June 30, 2023.

The increase was driven by a $25.4 million increase in leasing gross profit as discussed above, partially offset by decreased delivery and installation gross profit of $13.5 million and increased SG&A, excluding discrete costs, of $8.8 million, or 3.2%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Adjusted EBITDA increased $4.8 million, or 1%, to $778.4 million for the nine months ended September 30, 2024 from $773.7 million for the nine months ended September 30, 2023.

The increase was driven by a $22.4 million increase in leasing gross profit, a $12.6 million increase in new and used sales gross profit, and decreased SG&A, excluding discrete costs, of $1.3 million, or 0.3%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

The increase was partially offset by decreased delivery and installation gross profit of $24.1 million and decreased other expense (income), net of $16.5 million.

Other depreciation and amortization:

Other depreciation and amortization increased $1.5 million to $36.1 million for the six months ended June 30, 2024 compared to $34.5 million for the six months ended June 30, 2023.

Other depreciation and amortization increased $6.8 million to $59.2 million for the nine months ended September 30, 2024 as compared to $52.4 million for the nine months ended September 30, 2023, primarily related to the amortization of the Mobile Mini tradename in 2024.

Termination fee:

We paid the termination fee of $180.0 million to McGrath related to the termination of the Merger Agreement during the nine months ended September 30, 2024, which was treated as an operating expense.

Impairment loss on intangible asset:

Impairment loss on intangible asset was $132.5 million for the six months ended June 30, 2024 related to the impairment of the Mobile Mini trade name based on the Company's plan to rebrand under a single WillScot brand name and discontinue the use of the Mobile Mini trade name.

Impairment loss on intangible asset was $132.5 million for the nine months ended September 30, 2024 related to the impairment of the Mobile Mini trade name based on the Company's plan to rebrand under a single WillScot brand name and discontinue the use of the Mobile Mini trade name.

Lease impairment expense and other related charges:

Lease impairment expense and other related charges increased to $0.7 million for the six months ended June 30, 2024.

Lease impairment expense and other related charges increased to $0.9 million for the nine months ended September 30, 2024.

These charges were related to the exit of an office property.

Restructuring costs:

Restructuring costs of $6.2 million for the six months ended June 30, 2024 were primarily due to employee termination costs as a result of a cost-reduction plan implemented in June 2024.

Currency losses, net:

Currency losses, net decreased by $6.8 million for the six months ended June 30, 2024.

Restructuring costs of $8.5 million for the nine months ended September 30, 2024 were primarily due to employee termination costs as a result of a cost-reduction plan implemented in June 2024.

Currency (gains) losses, net:

Currency gains, net decreased by $7.0 million for the nine months ended September 30, 2024.

This change was primarily attributable to a $7.7 million loss in 2023 on the settlement of the contingent foreign currency forward contract relating to the sale of the former UK Storage Solutions segment in January 2023.

Other expense (income), net:

Other expense, net was $1.6 million for the six months ended June 30, 2024 compared to other income, net of $6.2 million for the six months ended June 30, 2023.

This change was primarily attributable to insurance recoveries received in 2023 related to Hurricane Ian in the Gulf Coast area of the United States in 2022.

Other expense, net was $1.9 million for the nine months ended September 30, 2024 as compared to other income, net of $14.5 million for the nine months ended September 30, 2023.

This change was primarily attributable to a gain on sale of fixed assets related to a real estate sale transaction during the nine months ended September 30, 2023 and insurance recoveries received in 2023 related to Hurricane Ian in the Gulf Coast area of the United States in 2022.

Interest expense, net:

Interest expense increased $20.0 million to $112.1 million for the six months ended June 30, 2024 from $92.1 million for the six months ended June 30, 2023.

Interest expense increased $22.0 million to $168.0 million for the nine months ended September 30, 2024 from $145.9 million for the nine months ended September 30, 2023.

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 decreased $58.9 million to $3.2 million for the six months ended June 30, 2024 compared to $62.1 million for the six months ended June 30, 2023.

The decrease in expense was driven by a decrease in income from continuing operations before income tax for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Income tax (benefit) expense:

Income tax (benefit) expense decreased $112.2 million to a benefit of $17.4 million for the nine months ended September 30, 2024 as compared to expense of $94.9 million for the nine months ended September 30, 2023.

The decrease in expense was driven by a decrease in income from continuing operations before income tax for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Income from discontinued operations:

Income from discontinued operations for the six months ended June 30, 2023 was related to the former UK Storage Solutions segment, which was sold January 2023.

Income from discontinued operations for the nine months ended September 30, 2023 was related to the former UK Storage Solutions segment, which was sold January 2023.

Capital expenditures for rental equipment:

Capital expenditures for rental equipment increased $34.9 million, or 34.0%, to $137.6 million for the six months ended June 30, 2024 from $102.7 million for the six months ended June 30, 2023 as a result of increased refurbishment spending and new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units.

Net CAPEX increased $31.1 million, or 35.2%, to $119.5 million for the six months ended June 30, 2024 from $88.4 million for the six months ended June 30, 2023 driven by the increase in capital expenditures for rental equipment as described above.

This increase was partially offset by a $5.4 million increase in proceeds from the sale of rental equipment for the six months ended June 30, 2024.

Capital expenditures for rental equipment increased $40.9 million, or 25%, to $207.0 million for the nine months ended September 30, 2024 from $166.1 million for the nine months ended September 30, 2023 as a result of increased refurbishment spending and new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units.

Net CAPEX increased $46.5 million, or 35%, to $178.1 million for the nine months ended September 30, 2024 from $131.6 million for the nine months ended September 30, 2023 driven by the increase in capital expenditures for rental equipment as described above and a $12.1 million decrease in proceeds from the sale of property, plant, and equipment.

This increase was partially offset by a $5.9 million increase in proceeds from the sale of rental equipment for the nine months ended September 30, 2024.

Reconciliation of Non-GAAP Financial Measures

7 unchanged sentences

Our adjusted EBITDA ("Adjusted EBITDA") reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what we consider transactions or events not related to our core business operations:

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

• Goodwill and other impairment charges related to non-cash costs associated with impairment charges to goodwill, other intangibles, rental fleet and property, plant and equipment.

• Restructuring costs, lease impairment expense, and other related charges associated with restructuring plans designed to streamline operations and reduce costs including employee and lease termination costs.

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

• Transaction costs including legal and professional fees and other transaction specific related costs.

4 unchanged sentences

Management believes that evaluating performance excluding such items is meaningful because it provides insight with respect to the intrinsic and ongoing operating results of the Company and captures the business performance inclusive of indirect costs.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income (loss), cash flow from operations or other methods of analyzing WillScot’s results as reported under GAAP.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider the measure in isolation or as a substitute for net income, cash flow from operations or other methods of analyzing WillScot’s results as reported under GAAP.

Some of these limitations are:

7 unchanged sentences

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

The following table provides unaudited reconciliations of (Loss) income from continuing operations to Adjusted EBITDA from continuing operations:

The following table provides reconciliations of (Loss) income from continuing operations to Adjusted EBITDA from continuing operations:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

Income tax (benefit) expense from continuing operations (20,566) 32,780 (17,377) 94,855

Interest expense 55,548 47,246 112,136 92,112

Depreciation and amortization 99,320 84,802 285,894 242,927

Currency (gains) losses, net (42) 14 35 6,789

Restructuring costs, lease impairment expense and other related charges, net 6,183 — 6,929 22

Interest expense, net 55,823 53,803 167,959 145,915

Impairment loss on intangible asset — — 132,540 —

Restructuring costs, lease impairment expense and other related charges, net 2,478 — 9,407 22

Currency (gains) losses, net (129) 96 (94) 6,885

Transaction costs 235 787 275 787

1 unchanged sentence

Stock compensation expense 9,534 8,636 28,247 26,134

Termination fee 180,000 — 180,000 —

Other 9,186 (7,720) 45,283 (6,278)

3 unchanged sentences

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

The following table provides unaudited reconciliations of Adjusted EBITDA Margin:

The following table provides reconciliations of Adjusted EBITDA Margin:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

10 unchanged sentences

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 gross profit percentage to Adjusted Gross Profit Percentage:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

8 unchanged sentences

As presented below, Net CAPEX includes amounts for the former UK Storage Solutions segment through January 31, 2023.

The following table provides unaudited reconciliations of Net CAPEX:

The following table provides reconciliations of Net CAPEX:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

22 unchanged sentences

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 June 30, 2024, we had $1.8 billion of available borrowing capacity under the ABL Facility.

Cash Flow Comparison of the Six Months Ended June 30, 2024 and 2023

At September 30, 2024, we had $1.7 billion of available borrowing capacity under the ABL Facility.

Cash Flow Comparison of the Nine Months Ended September 30, 2024 and 2023

The consolidated statements of cash flows include amounts for the former UK Storage Solutions segment through January 31, 2023.

1 unchanged sentence

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

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

Net cash provided by operating activities $ 382,725 $ 541,918

Net cash (used in) provided by investing activities (193,329) 158,477

Net cash used in investing activities (268,668) (217,522)

Net cash used in financing activities (113,234) (337,082)

3 unchanged sentences

Cash Flows from Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2024 was $384.3 million as compared to $350.9 million for the six months ended June 30, 2023, an increase of $33.4 million.

The increase was due to a change of $104.2 million in the net movements of the operating assets and liabilities, partially offset by a decrease of $70.8 million of net income, adjusted for non-cash items.

Net cash provided by operating activities for the nine months ended September 30, 2024 was $382.7 million as compared to $541.9 million for the nine months ended September 30, 2023, a decrease of $159.2 million.

The decrease in net cash provided by operating activities was primarily due to the payment of $212.5 million for the McGrath termination fee and transaction costs from terminated acquisitions during the nine months ended September 30, 2024.

Cash Flows from Investing Activities

Net cash used in investing activities for the six months ended June 30, 2024 was $193.3 million as compared to $158.5 million of net cash provided by investing activities for the six months ended June 30, 2023, a $351.8 million increase in net cash used in investing activities.

The increase in net cash used in investing activities resulted from $404.0 million in proceeds from the sale of the former UK Storage Solutions in the six months ended June 30, 2023 and a $34.9 million increase in refurbishment spending and new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units, during the six months ended June 30, 2024.

Net cash used in investing activities for the nine months ended September 30, 2024 was $268.7 million as compared to $217.5 million for the nine months ended September 30, 2023, a $51.1 million increase in net cash used in investing activities.

The increase in net cash used in investing activities resulted from $404.0 million in proceeds from the sale of the former UK Storage Solutions in the nine months ended September 30, 2023 and a $40.9 million increase in refurbishment spending and new fleet purchases, including additional investment in climate-controlled containers and refrigerated storage units, during the nine months ended September 30, 2024.

The increase in net cash used in investing activities was partially offset by a $397.7 million decrease in cash used in acquisitions, net of cash acquired, a $5.9 million increase in proceeds from the sale of rental equipment and a $7.7 million decrease in cash used for the settlement of a contingent foreign currency forward contract upon the closing of the sale of the former UK Storage Solutions segment in January 2023.

Cash Flows from Financing Activities

Net cash used in financing activities for the six months ended June 30, 2024 was $195.7 million as compared to $520.3 million for the six months ended June 30, 2023, a decrease of $324.6 million.

The decrease was primarily due to a $377.6 million decrease in cash used for the repurchase of common stock in the six months ended June 30, 2024.

Net cash used in financing activities for the nine months ended September 30, 2024 was $113.2 million as compared to $337.1 million for the nine months ended September 30, 2023, a decrease of $223.8 million.

The decrease was primarily due to a $547.8 million decrease in cash used for the repurchase of common stock in the nine months ended September 30, 2024.

We paused share repurchases in the fourth quarter of 2023 as acquisition discussions advanced with McGrath and resumed repurchasing shares of our Common Stock in April 2024.

The decrease was partially offset by a $41.6 million increase in repayments of borrowings, net of receipts from borrowings, a $4.5 million increase in cash used for taxes paid on employee stock awards, a $5.2 million increase in cash used for payments for financing costs, and a $1.4 million increase in cash used for payments on finance lease obligations.

Free Cash Flow

Free Cash Flow is a non-GAAP measure.

The decrease was partially offset by a $319.0 million increase in repayments of borrowings, net of receipts from borrowings.

Free Cash Flow and Adjusted Free Cash Flow

Free Cash Flow and Adjusted Free Cash Flow are non-GAAP measures.

We define Free Cash Flow as net cash provided by operating activities, less purchases of, and proceeds from, rental equipment and refurbishments and property, plant and equipment, which are all included in cash flows from investing activities.

Management believes that the presentation of Free Cash Flow provides useful additional information concerning cash flow available to fund our capital allocation alternatives.

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

We define Adjusted Free Cash Flow as Free Cash Flow excluding one-time, nonrecurring payments for the McGrath termination fee and transaction costs from terminated acquisitions.

Management believes that the presentation of Free Cash Flow and Adjusted Free Cash Flow provides useful additional information concerning cash flow available to fund our capital allocation alternatives.

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

Net cash provided by operating activities $ 175,611 $ 202,155 $ 384,287 $ 350,920

Net cash (used in) provided by operating activities $ (1,562) $ 190,998 $ 382,725 $ 541,918

Purchase of rental equipment and refurbishments (69,398) (63,388) (206,989) (166,097)

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Free Cash Flow $ (60,122) $ 147,768 $ 204,656 $ 410,309

Free Cash Flow for the six months ended June 30, 2024 was $264.8 million as compared to $262.5 million for the six months ended June 30, 2023, an increase of $2.2 million.

Free Cash Flow increased principally as a result of the $33.4 million increase in cash provided by operating activities and the $5.4 million increase in proceeds from the sale of rental equipment.

The increase was partially offset by the $34.9 million increase in cash used in the purchase of rental equipment and refurbishments.

The $384.3 million in cash provided by operating activities for the six months ended June 30, 2024 was returned to shareholders through repurchases and cancellations of common stock of $78.7 million and reinvested into the business to support the purchase of rental equipment, including VAPS, and refurbishments, acquire three local storage and modular companies for $70.6 million, and fund repayment of borrowings under our ABL Facility.

Cash paid for termination fee 180,000 — 180,000 —

Cash paid for transaction costs from terminated acquisitions

23,266 — 32,451 —

Adjusted Free Cash Flow $ 143,144 $ 147,768 $ 417,107 $ 410,309

Free Cash Flow for the nine months ended September 30, 2024 was $204.7 million as compared to $410.3 million for the nine months ended September 30, 2023, a decrease of $205.7 million.

Free Cash Flow decreased principally as a result of the $159.2 million decrease in cash provided by operating activities, a $40.9 million increase in cash used in the purchase of rental equipment and refurbishments, and a $12.1 million decrease in proceeds from the sale of property, plant, and equipment.

The $159.2 million decrease in cash provided by operating activities was driven by $212.5 million of cash paid for the McGrath termination fee and transaction costs from terminated acquisitions.

The $205.7 million decrease in Free Cash Flow was partially offset by a $5.9 million increase in proceeds from the sale of rental equipment.

Adjusted Free Cash for the nine months ended September 30, 2024 was $417.1 million as compared to $410.3 million for the nine months ended September 30, 2023, an increase of $6.8 million.

The $382.7 million in cash provided by operating activities for the nine months ended September 30, 2024 was returned to shareholders through repurchases and cancellations of common stock of $130.3 million and reinvested into the business to support the purchase of rental equipment, including VAPS, and refurbishments, acquire three local storage and modular companies and one national provider of premium large clearspan structures for $84.5 million, and fund repayment of borrowings under our ABL Facility.

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, 2029 Secured Notes, 2031 Secured Notes, and finance leases totaling $3.5 billion as of June 30, 2024, $545.1 million of which is obligated to be repaid within the next twelve months.

We have the intent and believe was have the ability to refinance the $526.5 million carrying value of the 2025 Secured Notes on a long-term basis as demonstrated by the forecasted available capacity under the ABL Facility if other refinancing efforts are unsuccessful or uneconomical.

The Company has outstanding debt related to its ABL Facility, 2025 Secured Notes, 2028 Secured Notes, 2029 Secured Notes, 2031 Secured Notes, and finance leases totaling $3.6 billion as of September 30, 2024, $547.6 million of which is obligated to be repaid within the next twelve months.

We have the intent and believe we have the ability to refinance the $526.5 million carrying value of the 2025 Secured Notes on a long-term basis as demonstrated by the forecasted available capacity under the ABL Facility, among other refinancing alternatives to be considered opportunistically.

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 real estate.

As of June 30, 2024, the Company had lease obligations of $297.4 million, with $69.5 million payable within the next twelve months.

Entry into an Agreement to Acquire McGrath RentCorp

On January 28, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with McGrath RentCorp ("McGrath").

Under the terms of the Merger Agreement, the Company expects McGrath’s shareholders will own approximately 12.6% of the Company following the McGrath acquisition.

The McGrath acquisition has been approved by the Company's and McGrath’s respective boards of directors and McGrath's shareholders.

The McGrath acquisition is subject to the satisfaction or waiver of certain customary closing conditions, including receipt of regulatory approval, and is expected to close in 2024.

In connection with the Merger Agreement, the Company entered into a commitment letter dated January 28, 2024, which was amended and restated on June 13, 2024 and modified by a Notice of Reduction of Bridge Commitments on June 28, 2024 (the "Commitment Letter"), pursuant to which certain financial institutions have committed to make available, in accordance with the terms of the Commitment Letter, (i) a $500 million eight-year senior secured bridge credit facility and (ii) an upsize to the existing $3.7 billion ABL Facility (as defined below) of Williams Scotsman, Inc., a subsidiary of the Company ("WSI"), by $750 million to $4.5 billion to repay McGrath's existing unsecured revolving lines of credit and notes, fund the cash portion of the consideration, and pay the fees, costs and expenses incurred in connection with the McGrath acquisition and the related transactions.

As of September 30, 2024, the Company had lease obligations of $300.8 million, with $71.5 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.

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

As of June 30, 2024, $419.5 million of the approved share repurchase amount remained available.

As of September 30, 2024, $951.9 million of the approved share repurchase amount remained available.

Critical Accounting Estimates

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The actual results experienced by us may differ materially and adversely from our estimates.

For a complete discussion of our significant critical accounting estimates, see the “Critical Accounting Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K").

There were no significant changes to our critical accounting estimates during the six months ended June 30, 2024.

For a complete

discussion of our significant critical accounting estimates, see the “Critical Accounting Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K").

There were no significant changes to our critical accounting estimates during the nine months ended September 30, 2024.

Recently Issued Accounting Standards

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• our stock price volatility;

• risks associated with the completion of the McGrath acquisition within the expected timeframe, the completion of the McGrath acquisition, and the realization of anticipated synergies from the McGrath acquisition;

• such other risks and uncertainties described in the periodic reports we file with the SEC from time to time (including our 2023 Annual Report on Form 10-K), which are available through the SEC’s EDGAR system at www.sec.gov and on our website.

1 unchanged sentence

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