WillScot Holdings Corp 10-Q

ITEM 1. Financial Statements WillScot Holdings Corporation Condensed Consolidated Balance Sheets (in thousands, except share data) September 30, 2024 (unaudited) December 31, 2023 Assets Cash and cash equivalents $ 11,046 $ 10,958 Trade receivables, net of allowances for credit losses at September 30, 2024 and December 31, 2023 of $ 99,241 and $ 81,656 , respectively 445,869 451,130 Inventories 52,576 47,406 Prepaid expenses and other current assets 64,750 57,492 Assets held for sale – current 4,078 2,110 Total current assets 578,319 569,096 Rental equipment, net 3,401,198 3,381,315 Property, plant and equipment, net 353,338 340,887 Operating lease assets 257,054 245,647 Goodwill 1,176,889 1,176,635 Intangible assets, net 260,539 419,709 Other non-current assets 9,882 4,626 Total long-term assets 5,458,900 5,568,819 Total assets $ 6,037,219 $ 6,137,915 Liabilities and equity Accounts payable $ 107,789 $ 86,123 Accrued expenses 168,462 129,621 Accrued employee benefits 24,551 45,564 Deferred revenue and customer deposits 249,973 224,518 Operating lease liabilities – current 65,708 57,408 Current portion of long-term debt 22,933 18,786 Total current liabilities 639,416 562,020 Long-term debt 3,607,957 3,538,516 Deferred tax liabilities 492,152 554,268 Operating lease liabilities - non-current 192,133 187,837 Other non-current liabilities 51,482 34,024 Long-term liabilities 4,343,724 4,314,645 Total liabilities 4,983,140 4,876,665 Preferred Stock: $ 0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at September 30, 2024 and December 31, 2023 — — Common Stock: $ 0.0001 par, 500,000,000 shares authorized and 187,048,646 and 189,967,135 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 19 20 Additional paid-in-capital 1,960,163 2,089,091 Accumulated other comprehensive loss ( 69,924 ) ( 52,768 ) Accumulated deficit ( 836,179 ) ( 775,093 ) Total shareholders' equity 1,054,079 1,261,250 Total liabilities and shareholders' equity $ 6,037,219 $ 6,137,915 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 3 WillScot Holdings Corporation Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share data) 2024 2023 2024 2023 Revenues: Leasing and services revenue: Leasing $ 455,578 $ 466,769 $ 1,374,771 $ 1,356,040 Delivery and installation 114,765 115,598 323,274 334,982 Sales revenue: New units 17,850 10,155 52,727 29,816 Rental units 13,239 12,312 42,431 31,553 Total revenues 601,432 604,834 1,793,203 1,752,391 Costs: Costs of leasing and services: Leasing 96,050 104,331 296,692 300,402 Delivery and installation 91,775 82,081 250,787 238,437 Costs of sales: New units 9,665 5,096 31,296 16,099 Rental units 6,246 6,682 22,207 16,203 Depreciation of rental equipment 76,212 66,950 226,731 190,556 Gross profit 321,484 339,694 965,490 990,694 Other operating expenses: Selling, general and administrative 150,865 151,983 493,043 449,663 Other depreciation and amortization 23,108 17,852 59,163 52,371 Termination fee 180,000 — 180,000 — Impairment loss on intangible asset — — 132,540 — Restructuring costs 2,334 — 8,540 — Lease impairment expense and other related charges, net 144 — 867 22 Currency (gains) losses, net ( 129 ) 96 ( 94 ) 6,885 Other expense (income), net 380 ( 8,336 ) 1,935 ( 14,533 ) Operating (loss) income ( 35,218 ) 178,099 89,496 496,286 Interest expense, net 55,823 53,803 167,959 145,915 (Loss) income from continuing operations before income tax ( 91,041 ) 124,296 ( 78,463 ) 350,371 Income tax (benefit) expense from continuing operations ( 20,566 ) 32,780 ( 17,377 ) 94,855 (Loss) income from continuing operations ( 70,475 ) 91,516 ( 61,086 ) 255,516 Discontinued operations: Income from discontinued operations before income tax — — — 4,003 Gain on sale of discontinued operations — — — 176,078 Income tax expense from discontinued operations — — — 45,468 Income from discontinued operations — — — 134,613 Net (loss) income $ ( 70,475 ) $ 91,516 $ ( 61,086 ) $ 390,129 (Loss) earnings per share from continuing operations: Basic $ ( 0.37 ) $ 0.47 $ ( 0.32 ) $ 1.27 Diluted $ ( 0.37 ) $ 0.46 $ ( 0.32 ) $ 1.25 Earnings per share from discontinued operations: Basic $ — $ — $ — $ 0.67 Diluted $ — $ — $ — $ 0.66 (Loss) earnings per share: Basic $ ( 0.37 ) $ 0.47 $ ( 0.32 ) $ 1.94 Diluted $ ( 0.37 ) $ 0.46 $ ( 0.32 ) $ 1.91 Weighted average shares: Basic 188,281,346 196,198,638 189,362,364 201,042,902 Diluted 188,281,346 199,258,304 189,362,364 204,461,042 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 4 WillScot Holdings Corporation Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Net (loss) income $ ( 70,475 ) $ 91,516 $ ( 61,086 ) $ 390,129 Other comprehensive (loss) income: Foreign currency translation adjustment, net of income tax expense of $ 0 . 1,952 ( 6,732 ) ( 7,750 ) 7,117 Net (loss) gain on derivatives, net of income tax (benefit) expense of $( 8,183 ) and $ 2,247 for the three months ended September 30, 2024 and 2023, respectively, and $( 3,134 ) and $ 6,293 for the nine months ended September 30, 2024 and 2023, respectively. ( 24,570 ) 6,768 ( 9,406 ) 18,932 Total other comprehensive (loss) income ( 22,618 ) 36 ( 17,156 ) 26,049 Total comprehensive (loss) income $ ( 93,093 ) $ 91,552 $ ( 78,242 ) $ 416,178 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 5 WillScot Holdings Corporation Condensed Consolidated Statements of Changes in Equity (Unaudited) Nine Months Ended September 30, 2024 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Equity (in thousands) Shares Amount Balance at December 31, 2023 189,967 $ 20 $ 2,089,091 $ ( 52,768 ) $ ( 775,093 ) $ 1,261,250 Net income — — — — 56,240 56,240 Other comprehensive income — — — 7,992 — 7,992 Withholding taxes on net share settlement of stock-based compensation — — ( 14,524 ) — — ( 14,524 ) Common Stock-based award activity 628 — 9,099 — — 9,099 Issuance of Common Stock from the exercise of options 3 — 69 — — 69 Balance at March 31, 2024 190,598 20 2,083,735 ( 44,776 ) ( 718,853 ) 1,320,126 Net loss — — — — ( 46,851 ) ( 46,851 ) Other comprehensive loss — — — ( 2,530 ) — ( 2,530 ) Common Stock-based award activity 26 — 9,614 — — 9,614 Repurchase and cancellation of Common Stock ( 2,036 ) ( 1 ) ( 79,074 ) — — ( 79,075 ) Issuance of Common Stock from the exercise of options 4 — 52 — — 52 Balance at June 30, 2024 188,592 19 2,014,327 ( 47,306 ) ( 765,704 ) 1,201,336 Net loss — — — — ( 70,475 ) ( 70,475 ) Other comprehensive loss — — — ( 22,618 ) — ( 22,618 ) Withholding taxes on net share settlement of stock-based compensation — — ( 1,429 ) — — ( 1,429 ) Common Stock-based award activity 45 — 9,534 — — 9,534 Repurchase and cancellation of Common Stock ( 1,588 ) — ( 62,269 ) — — ( 62,269 ) Balance at September 30, 2024 187,049 $ 19 $ 1,960,163 $ ( 69,924 ) $ ( 836,179 ) $ 1,054,079 6 Nine Months Ended September 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 ) Common stock-based award activity 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 Common stock-based award activity 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 Net income — — — — 91,516 91,516 Other comprehensive income — — — 36 — 36 Withholding taxes on net share settlement of stock-based compensation — — ( 4,113 ) — — ( 4,113 ) Common stock-based award activity 124 — 8,636 — — 8,636 Repurchase and cancellation of Common Stock ( 5,042 ) — ( 222,024 ) — — ( 222,024 ) Issuance of Common Stock from the exercise of options 3 — 40 — — 40 Balance at September 30, 2023 193,461 $ 20 $ 2,218,110 $ ( 44,073 ) $ ( 861,421 ) $ 1,312,636 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 7 WillScot Holdings Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (in thousands) 2024 2023 Operating activities: Net (loss) income $ ( 61,086 ) $ 390,129 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 285,894 242,927 Provision for credit losses 45,317 38,079 Gain on sale of discontinued operations — ( 176,078 ) Impairment loss on intangible asset 132,540 — Gain on sale of rental equipment and other property, plant and equipment ( 19,103 ) ( 26,256 ) Amortization of debt discounts and debt issuance costs 9,192 8,281 Stock-based compensation expense 28,247 26,134 Deferred income tax (benefit) expense ( 47,789 ) 118,455 Loss on settlement of foreign currency forward contract — 7,715 Unrealized currency gains, net ( 157 ) ( 943 ) Other 3,129 3,312 Changes in operating assets and liabilities: Trade receivables ( 38,501 ) ( 85,261 ) Inventories ( 5,398 ) ( 600 ) Prepaid expenses and other assets ( 12,583 ) ( 3,772 ) Operating lease assets and liabilities 1,073 707 Accounts payable and other accrued expenses 35,879 ( 26,518 ) Deferred revenue and customer deposits 26,071 25,607 Net cash provided by operating activities 382,725 541,918 Investing activities: Acquisitions, net of cash acquired ( 84,462 ) ( 482,190 ) Purchase of rental equipment and refurbishments ( 206,989 ) ( 166,097 ) Proceeds from sale of rental equipment 43,906 37,974 Purchase of property, plant and equipment ( 16,119 ) ( 16,752 ) Proceeds from sale of property, plant and equipment 1,133 13,266 Purchase of investments ( 6,137 ) — Proceeds from sale of discontinued operations — 403,992 Payment for settlement of foreign currency forward contract — ( 7,715 ) Net cash used in investing activities ( 268,668 ) ( 217,522 ) Financing activities: Receipts from borrowings 1,101,484 1,651,600 Repayment of borrowings ( 1,046,793 ) ( 1,277,872 ) Payment of financing costs ( 6,932 ) ( 6,377 ) Payments on finance lease obligations ( 14,815 ) ( 12,549 ) Receipts from issuance of Common Stock from the exercise of options 121 453 Repurchase and cancellation of Common Stock ( 130,346 ) ( 678,166 ) Taxes paid on employee stock awards ( 15,953 ) ( 14,171 ) Net cash used in financing activities ( 113,234 ) ( 337,082 ) Effect of exchange rate changes on cash and cash equivalents ( 735 ) 701 Net change in cash and cash equivalents 88 ( 11,985 ) Cash and cash equivalents at the beginning of the period 10,958 17,774 Cash and cash equivalents at the end of the period $ 11,046 $ 5,789 Supplemental cash flow information: Interest paid, net $ 141,702 $ 135,301 Income taxes paid, net $ 42,693 $ 22,764 Capital expenditures accrued or payable $ 13,326 $ 15,615 See the accompanying notes which are an integral part of these condensed consolidated financial statements. 8 WillScot Holdings Corporation Notes to the Condensed Consolidated Financial Statements (Unaudited) NOTE 1 - Summary of Significant Accounting Policies Organization and Nature of Operations WillScot Holdings Corporation (“WillScot” and, together with its subsidiaries, the “Company”) is a leading business services provider specializing in innovative and flexible turnkey temporary space 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. On July 29, 2024, the Company amended and restated its certificate of incorporation to effect a change of the Company’s name from “WillScot Mobile Mini Holdings Corp.” to “WillScot Holdings Corporation." 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 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 nine months ended September 30, 2024 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, 2023. Segment Reporting In January 2024, the Company completed the unification of its go-to market structure by integrating its modular and storage divisions under a single leadership team organized by geography, achieving local product unification within each metropolitan statistical area and the ability to consistently deliver its portfolio of solutions to its entire customer base. In connection with this change in operating model, the Company realigned the composition of its operating and reportable segments to reflect how its Chief Operating Decision Maker reviews financial information to allocate resources to and assess performance of the segments. As a result, the Company concluded that its two operating segments (US and Other North America) are aggregated into one reportable segment as the operating segments share similar economic characteristics (e.g., comparable gross margins and comparable adjusted earnings before interest, taxes, depreciation and amortization margins) and similar qualitative characteristics as the operating segments offer similar products and services to similar customers, use similar methods to distribute products and are subject to similar competitive risks. Reclassifications Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Recently Issued Accounting Standards ASU 2023-07. Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 expands the breadth and frequency of segment disclosures, requiring disclosure of (i) significant segment expenses, (ii) other segment items, (iii) the chief operating decision maker's title and position, (iv) how the chief operating decision maker uses the reported measures of a segment's profit or loss and (v) interim disclosure of all segment profit, loss and asset disclosures currently required annually. ASU 2023-07 clarifies that a public entity may report one or more measures of segment profit or loss and requires that single reportable segment entities provide all required segment disclosures. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its segment disclosures. 9 ASU 2023-09. Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued Accounting Standards Update No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires entities to disclose more detailed information in their reconciliation of their statutory tax rate to their effective tax rate. Public business entities ("PBEs") are required to provide this incremental detail in a numerical, tabular format, while all other entities will do so through enhanced qualitative disclosures. The ASU also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and income tax expense (or benefit). ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its income tax disclosures. NOTE 2 - Acquisitions Acquisitions During the nine months ended September 30, 2024, the Company 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 in cash, net of cash acquired. As of the acquisition dates, the fair value of rental equipment acquired was $ 80.7 million. Integration Costs The Company recorded $ 1.5 million and $ 0.8 million in integration costs related to acquisitions during the three months ended September 30, 2024 and 2023, respectively, and $ 7.4 million and $ 6.9 million in integration costs related to acquisitions during the nine months ended September 30, 2024 and 2023, respectively, within selling, general and administrative expense ("SG&A") . Termination of 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"). On September 17, 2024, the Company and McGrath mutually agreed to terminate the Merger Agreement. In accordance with the terms of the Merger Agreement, the Company paid McGrath a $ 180.0 million termination fee during the three months ended September 30, 2024. During the three and nine months ended September 30, 2024, the Company recorded $ 8.8 million and $ 41.3 million, respectively, in legal and professional fees related to the McGrath transaction within SG&A. In connection with the Company's proposed acquisition of McGrath, 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 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) of Williams Scotsman, Inc. ("WSI") As a result of the termination of the Merger Agreement, the Commitment Letter was terminated. 10 NOTE 3 - Discontinued Operations UK Storage Solutions Divestiture On January 31, 2023, the Company sold its former UK Storage Solutions segment for $ 418.1 million. Exiting the UK Storage Solutions segment represented the Company’s strategic shift to concentrate its operations on its core modular and storage businesses in North America. Results for the former UK Storage Solutions segment are reported in income from discontinued operations within the 2023 condensed consolidated statement of operations. The following table presents the results of the former UK Storage Solutions segment as reported in income from discontinued operations within the condensed consolidated statement of operations. (in thousands) Nine Months Ended September 30, 2023 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 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 nine months ended September 30, 2023 . For the nine months ended September 30, 2023 , significant investing items related to the former UK Storage Solutions segment were as follows: (in thousands) Nine Months Ended September 30, 2023 Investing activities of discontinued operations: Proceeds from sale of rental equipment $ 514 Purchases of rental equipment and refurbishments $ ( 371 ) Proceeds from sale of property, plant and equipment $ 8 Purchases of property, plant and equipment $ ( 64 ) 11 NOTE 4 - Revenue Revenue Disaggregation Geographic Areas The Company had total revenue in the following geographic areas for the three and nine months ended September 30, 2024 and 2023 as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 US $ 565,021 $ 567,221 $ 1,683,434 $ 1,645,727 Canada 29,657 30,921 88,495 88,702 Mexico 6,754 6,692 21,274 17,962 Total revenues $ 601,432 $ 604,834 $ 1,793,203 $ 1,752,391 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 turnkey temporary modular space and portable storage units along with value-added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, integral tool racking, heavy duty capacity shelving, workstations, electrical and lighting products and other items used by customers in connection with the Company's products. The Company also offers its lease customers a damage waiver program that protects them in case the leased unit is damaged. Leasing is complemented by new unit sales and sales of rental units. In connection with its leasing and sales activities, the Company provides services including delivery and installation, maintenance and ad hoc services and removal services at the end of lease transactions. The Company’s revenue by major product and service line for the three and nine months ended September 30, 2024 and 2023 was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Modular space leasing revenue $ 254,531 $ 243,947 $ 760,404 $ 705,041 Portable storage leasing revenue 85,746 98,155 263,628 288,932 VAPS and third party leasing revenues (a) 100,176 99,872 296,602 291,697 Other leasing-related revenue (b) 15,125 24,795 54,137 70,370 Leasing revenue 455,578 466,769 1,374,771 1,356,040 Delivery and installation revenue 114,765 115,598 323,274 334,982 Total leasing and services revenue 570,343 582,367 1,698,045 1,691,022 New unit sales revenue 17,850 10,155 52,727 29,816 Rental unit sales revenue 13,239 12,312 42,431 31,553 Total revenues $ 601,432 $ 604,834 $ 1,793,203 $ 1,752,391 (a) Includes $ 10.3 million and $ 6.4 million of service revenue for the three months ended September 30, 2024 and 2023, respectively, and $ 30.4 million and $ 18.1 million of service revenue for the nine months ended September 30, 2024 and 2023, respectively. (b) Includes primarily damage billings, delinquent payment charges, other processing fees, and provisions for specific uncollectible receivables. Leasing and Services Revenue The majority of revenue ( 74 % and 75 % for the three and nine months ended September 30, 2024, respectively, and 76 % for both the three and nine months ended September 30, 2023) was generated by lease income subject to the guidance of Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASC 842"). The remaining revenue was generated by performance obligations in contracts with customers for services or the sale of units subject to the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). Receivables and Credit Losses The Company manages credit risk associated with its accounts receivable at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 842 and ASC 606, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues. 12 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 manages credit risk through credit approvals, credit limits, and other monitoring procedures. The Company's allowance for credit losses reflects its estimate of the amount of receivables that it will be unable to collect . The estimated losses are calculated using the loss rate method based upon a review of outstanding receivables, related aging, and historical collection experience. The Company's estimates reflect changing circumstances, and the Company may be required to increase or decrease its allowance in future periods. Activity in the allowance for credit losses was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Balance at beginning of period $ 89,070 $ 68,096 $ 81,656 $ 57,048 Provision for credit losses, net of recoveries 22,121 15,871 45,317 38,079 Write-offs ( 11,869 ) ( 5,252 ) ( 27,528 ) ( 16,758 ) Foreign currency translation and other ( 81 ) 23 ( 204 ) 369 Balance at end of period $ 99,241 $ 78,738 $ 99,241 $ 78,738 Contract Assets and Liabilities When customers are billed in advance for services, the Company defers recognition of revenue until the related services are performed, which generally occurs at the end of the contract. The balance sheet classification of deferred revenue is determined based on the contractual lease term. For contracts that continue beyond their initial contractual lease term, revenue continues to be deferred until the services are performed. As of September 30, 2024 and December 31, 2023, the Company had approximately $ 136.9 million and $ 124.1 million , respectively, of deferred revenue related to services billed in advance. During the three and nine months ended September 30, 2024, $ 13.3 million and $ 61.0 million, respectively, of deferred revenue billed in advance was recognized as revenue. The Company does not have material contract assets, and it did not recognize any material impairments for any contract assets. 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 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. As a result, the Company has applied the practical expedient for incremental costs of obtaining a sales contract and expenses commissions as incurred. NOTE 5 - Leases As of September 30, 2024, the future lease payments for operating and finance lease liabilities were as follows: (in thousands) Operating Finance 2024 (remaining) $ 13,853 $ 7,523 2025 76,801 28,583 2026 61,389 28,331 2027 49,025 25,083 2028 37,149 27,564 Thereafter 62,605 38,450 Total lease payments 300,822 155,534 Less: interest ( 42,981 ) ( 21,375 ) Present value of lease liabilities $ 257,841 $ 134,159 Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets. 13 The Company’s lease activity during the nine months ended September 30, 2024 and 2023 was as follows: (in thousands) Nine Months Ended September 30, Financial Statement Line 2024 2023 Finance Lease Expense Amortization of finance lease assets $ 10,355 $ 11,976 Interest on obligations under finance leases 4,679 2,571 Total finance lease expense $ 15,034 $ 14,547 Operating Lease Expense Fixed lease expense Cost of leasing and services $ 860 $ 1,013 Selling, general and administrative 59,396 49,327 Lease impairment expense and other related charges 31 — Short-term lease expense Cost of leasing and services 21,586 18,631 Selling, general and administrative 1,524 1,353 Lease impairment expense and other related charges — 22 Variable lease expense Cost of leasing and services 739 1,865 Selling, general and administrative 7,732 7,028 Lease impairment expense and other related charges 836 — Total operating lease expense $ 92,704 $ 79,239 Supplemental cash flow information related to leases for the nine months ended September 30, 2024 and 2023 was as follows: (in thousands) Nine Months Ended September 30, Supplemental Cash Flow Information 2024 2023 Cash paid for the amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 59,847 $ 50,495 Operating cash outflows from finance leases $ 4,621 $ 2,515 Financing cash outflows from finance leases $ 14,815 $ 12,425 Right of use assets obtained in exchange for lease obligations $ 63,599 $ 78,969 Assets obtained in exchange for finance leases $ 31,907 $ 38,534 Weighted average remaining operating lease terms and the weighted average discount rates as of September 30, 2024 and December 31, 2023 were as follows: Lease Terms and Discount Rates September 30, 2024 December 31, 2023 Weighted average remaining lease term - operating leases 5.1 years 5.4 years Weighted average discount rate - operating leases 5.9 % 5.9 % Weighted average remaining lease term - finance leases 4.8 years 5.0 years Weighted average discount rate - finance leases 5.1 % 4.8 % 14 NOTE 6 - Inventories Inventories at the respective balance sheet dates consisted of the following: (in thousands) September 30, 2024 December 31, 2023 Raw materials $ 42,276 $ 43,071 Finished units 10,300 4,335 Inventories $ 52,576 $ 47,406 NOTE 7 - Rental Equipment Rental equipment, net at the respective balance sheet dates consisted of the following: (in thousands) September 30, 2024 December 31, 2023 Modular space units $ 3,660,481 $ 3,541,451 Portable storage units 1,059,704 1,009,059 Value added products 203,764 204,933 Total rental equipment 4,923,949 4,755,443 Less: accumulated depreciation ( 1,522,751 ) ( 1,374,128 ) Rental equipment, net $ 3,401,198 $ 3,381,315 NOTE 8 - Goodwill and Intangibles Goodwill Changes in the carrying amount of goodwill were as follows: (in thousands) Balance at December 31, 2022 $ 1,011,429 Additions from acquisitions 164,502 Effects of movements in foreign exchange rates 704 Balance at December 31, 2023 1,176,635 Addition from acquisition 887 Effects of movements in foreign exchange rates ( 633 ) Balance at September 30, 2024 $ 1,176,889 The Company had no goodwill impairment during the nine months ended September 30, 2024 or the year ended December 31, 2023. Intangible Assets Intangible assets other than goodwill at the respective balance sheet dates consisted of the following: September 30, 2024 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Customer relationships 3.8 $ 214,408 $ ( 106,141 ) $ 108,267 Technology 1.8 1,500 ( 1,063 ) 437 Trade name – Mobile Mini 2.8 31,460 ( 4,625 ) 26,835 Indefinite-lived intangible assets: Trade name – WillScot 125,000 — 125,000 Total intangible assets other than goodwill $ 372,368 $ ( 111,829 ) $ 260,539 15 December 31, 2023 (in thousands) Weighted average remaining life (in years) Gross carrying amount Accumulated amortization Net book value Intangible assets subject to amortization: Customer relationships 4.5 $ 214,408 $ ( 84,324 ) $ 130,084 Technology 2.5 1,500 ( 875 ) 625 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 $ 504,908 $ ( 85,199 ) $ 419,709 Amortization expense related to intangible assets was $ 11.9 million and $ 5.9 million for the three months ended September 30, 2024 and 2023, respectively, and $ 26.6 million and $ 17.8 million for the nine months ended September 30, 2024 and 2023, respectively. In the second quarter of 2024, the Company determined that a review of the carrying value of the Mobile Mini trade name was necessary based on the Company's plan to rebrand under a single WillScot brand name and discontinue the use of the Mobile Mini trade name. As of June 30, 2024, the Mobile Mini trade name was tested for impairment using the relief from royalty valuation method. The most significant unobservable input (Level 3) used to estimate the fair value was a discount rate of 9 %. After determining the estimated fair value, t he Company recorded an impairment charge of $ 132.5 million during the nine months ended September 30, 2024. This non-cash charge was recorded to impairment loss on intangible asset on the consolidated statement of operations. 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. The Company did not record any other impairment charges during the nine months ended September 30, 2024. As of September 30, 2024, the expected future amortization expense for intangible assets is as follows for the years ended December 31: (in thousands) 2024 (remaining) $ 11,770 2025 42,804 2026 36,460 2027 29,885 2028 14,620 Total $ 135,539 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 September 30, 2024 December 31, 2023 2025 Secured Notes 6.125 % 2025 $ 524,630 $ 522,735 ABL Facility Varies 2027 1,489,297 1,929,259 2028 Secured Notes 4.625 % 2028 495,306 494,500 2029 Secured Notes 6.625 % 2029 493,328 — 2031 Secured Notes 7.375 % 2031 494,170 493,709 Finance Leases Varies Varies 134,159 117,099 Total debt 3,630,890 3,557,302 Less: current portion of long-term debt 22,933 18,786 Total long-term debt $ 3,607,957 $ 3,538,516 16 Maturities of debt, including finance leases, during the periods subsequent to September 30, 2024 are as follows: (in thousands) 2024 (remaining) $ 7,523 2025 555,083 2026 28,331 2027 1,535,368 2028 527,564 Thereafter 1,038,450 Total $ 3,692,319 Asset Backed Lending Facility On July 1, 2020, certain subsidiaries of the Company, including WSI, entered into an asset-based credit agreement. As amended on June 30, 2022, the agreement provides for revolving credit facilities in the aggregate principal amount of up to $ 3.7 billion, consisting of: (i) a senior secured asset-based US dollar revolving credit facility in the aggregate principal amount of $ 3.3 billion (the “US Facility”), (ii) a $ 400.0 million senior secured asset-based multicurrency revolving credit facility (the "Multicurrency Facility," and together with the US Facility, the "ABL Facility"), available to be drawn in US Dollars, Canadian Dollars, British Pounds Sterling or Euros, and (iii) an accordion feature that permits the Company to increase the lenders' commitments in an aggregate amount not to exceed the greater of $ 750.0 million and the amount of suppressed availability (as defined in the ABL Facility), plus any voluntary prepayments that are accompanied by permanent commitment reductions under the ABL Facility, subject to the satisfaction of customary conditions including lender approval. The ABL Facility is scheduled to mature on June 30, 2027. The applicable margin for Canadian Bankers' Acceptance Rate, Term Secured Overnight Financing Rate ("SOFR"), British Pounds Sterling and Euro 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 % or one step up of 0.25 % based on the Company's leverage ratio and excess availability from the prior quarter. The ABL Facility requires the payment of a commitment fee on the unused available borrowings of 0.20 % annually. As of September 30, 2024, the weighted average interest rate for borrowings under the ABL Facility, as adjusted for the effects of the interest rate swap agreements, was 5.40 %. Refer to Note 12 for a detailed discussion of interest rate management. On February 26, 2024, WSI entered into an amendment to the ABL Facility (the "Fifth Amendment") to, among other things, change the rate under the ABL Facility for borrowings denominated in Canadian Dollars from a Canadian Dollar Offered Rate ("CDOR")-based rate to a Canadian Overnight Repo Rate Average ("CORRA")-based rate, subject to certain adjustments specified in the ABL Facility, and to update certain other provisions regarding successor interest rates to CDOR. In connection with the Company's proposed acquisition of McGrath, on February 27, 2024, WSI and certain other subsidiaries of the Company entered into an amendment to the ABL Facility (the "Sixth Amendment") to, among other things, (i) permit the incurrences of indebtedness by WSI and certain other subsidiaries of the Company to finance the McGrath acquisition; (ii) increase the maximum revolving credit facility amount; and (iii) modify the borrowing base, certain thresholds, basket sizes and default and notice triggers to account for the increased size of the business and new asset types of WSI and its subsidiaries following the proposed McGrath acquisition. Following the termination of the Merger Agreement on September 17, 2024, the Sixth Amendment was null and void. 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 September 30, 2024, the Line Cap was $ 3.2 billion and the Company had $ 1.7 billion of available borrowing capacity under the ABL Facility, including $ 1.5 billion under the US Facility and $ 199.2 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 swingline loans. At September 30, 2024, the available capacity was $ 199.2 million of letters of credit and $ 203.8 million of swingline loans. At September 30, 2024, letters of credit and bank guarantees carried fees of 1.625 %. The Company had issued $ 20.8 million of standby letters of credit under the ABL Facility at September 30, 2024. The Company had approximately $ 1.5 billion of outstanding borrowings under the ABL Facility at September 30, 2024. Debt issuance costs of $ 21.0 million and $ 26.8 million were presented as direct reductions of the corresponding liabilities at September 30, 2024 and December 31, 2023, respectively. The ABL Facility and related guarantees are secured by a first priority security interest in substantially all of the assets of WSI and the Company’s other subsidiaries that are borrowers or guarantors under the ABL Facility (collectively the “ABL Loan Parties”), subject to customary exclusions. 17 Senior Secured Notes The 2025 Secured Notes mature on June 15, 2025. At September 30, 2024, the 2025 Secured Notes were classified as long-term on the Condensed Consolidated Balance Sheet because the Company has the intent and believes it has the ability to refinance this obligation on a long-term basis as demonstrated by the forecasted available capacity under the ABL Facility, among other refinancing alternatives to be considered opportunistically. 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 . P roceeds were used to repay approximately $ 495.0 million of outstanding indebtedness under the ABL Facility and certain fees and expenses. T he 2029 Secured N otes mature on June 15, 2029 and bear interest at a rate of 6.625 % per annum. Interest is payable semi-annually on June 15 and December 15 of each year, beginning December 15, 2024. Unamortized deferred financing costs pertaining to the 2029 Secured Notes were $ 6.7 million as of September 30, 2024. The 2025 Secured Notes, 2028 Secured Notes, 2029 Secured Notes and 2031 Secured Notes (collectively, “the Secured Notes”) are unconditionally guaranteed by certain subsidiaries of the Company (collectively, “the Note Guarantors”). WillScot is not a guarantor of the Secured Notes. The Note Guarantors are guarantors or borrowers under the ABL Facility. To the extent lenders under the ABL Facility release the guarantee of any Note Guarantor, such Note Guarantor will also be released from obligations under the Secured Notes. The Secured Notes and related guarantees are secured by a second priority security interest in substantially the same assets of WSI and the Note Guarantors securing the ABL Facility. Upon the repayment of the 2025 Secured Notes and the 2028 Secured Notes, if the lien associated with the ABL Facility represents the only lien outstanding on the collateral under the 2029 Secured Notes and the 2031 Secured Notes (other than certain permitted), the collateral securing the 2029 Secured Notes and the 2031 Secured Notes will be released and the 2029 Secured Notes and the 2031 Secured Notes will become unsecured subject to satisfaction of customary conditions. Finance Leases The Company maintains finance leases primarily related to transportation-related equipment. At September 30, 2024 and December 31, 2023, obligations under finance leases were $ 134.2 million and $ 117.1 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 September 30, 2024. NOTE 10 – Equity Common Stock In connection with the stock compensation vesting and stock option exercises described in Note 14, the Company issued 704,809 shares of Common Stock during the nine months ended September 30, 2024 . Stock Repurchase Program In September 2024, the Board of Directors approved a reset of the share repurchase program authorizing the Company to repurchase up to $ 1.0 billion of its outstanding shares of Common Stock. 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. During the nine months ended September 30, 2024 , the Company 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 Common Stock remained available. 18 Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive income (loss) ("AOCI"), net of tax, for the nine months ended September 30, 2024 and 2023 were as follows: Nine Months Ended September 30, 2024 (in thousands) Foreign currency translation Unrealized gains (losses) on hedging activities Total Balance at December 31, 2023 $ ( 56,031 ) $ 3,263 $ ( 52,768 ) Other comprehensive (loss) income before reclassifications ( 5,548 ) 18,807 13,259 Reclassifications from AOCI to income — ( 5,267 ) ( 5,267 ) Balance at March 31, 2024 ( 61,579 ) 16,803 ( 44,776 ) Other comprehensive (loss) income before reclassifications ( 4,154 ) 7,247 3,093 Reclassifications from AOCI to income — ( 5,623 ) ( 5,623 ) Balance at June 30, 2024 ( 65,733 ) 18,427 ( 47,306 ) Other comprehensive income (loss) before reclassifications 1,952 ( 18,973 ) ( 17,021 ) Reclassifications from AOCI to income — ( 5,597 ) ( 5,597 ) Balance at September 30, 2024 $ ( 63,781 ) $ ( 6,143 ) $ ( 69,924 ) Nine Months Ended September 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 ) Other comprehensive (loss) income before reclassifications ( 6,732 ) 10,240 3,508 Reclassifications from AOCI to income — ( 3,472 ) ( 3,472 ) Balance at September 30, 2023 $ ( 63,005 ) $ 18,932 $ ( 44,073 ) For the three months ended September 30, 2024 and 2023, gains of $ 5.6 million and $ 3.5 million, respectively, were reclassified from AOCI into the condensed consolidated statements of operations within interest expense related to the interest rate swa ps. For the nine months ended September 30, 2024 and 2023, gains of $ 16.5 million and $ 7.9 million, respectively, were reclassified from AOCI into the condensed consolidated statements of operations within interest expense related to the interest rate swaps. Th e interest rate swaps are discussed in Note 12. Associated with these reclassifications, t he Company recorded tax expense of $ 1.5 million and $ 0.9 million for the three months ended September 30, 2024 and 2023, respectively, and tax expense of $ 4.5 million and $ 2.1 million for the nine months ended September 30, 2024 and 2023, respectively. NOTE 11 – Income Taxes The Company recorded $ 20.6 million and $ 17.4 million of income tax benefit from continuing operations for the three and nine months ended September 30, 2024, respectively, and $ 32.8 million and $ 94.9 million of income tax expense from continuing operations for the three and nine months ended September 30, 2023, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2024 was 22.6 % and 22.2 %, respectively. The Company's effective tax rate for the three and nine months ended September 30, 2023 was 26.4 % and 27.1 %, respectively. The effective tax rate for the three and nine months ended September 30, 2024 differed from the US federal statutory rate of 21% primarily due to state and provincial taxes, partially offset by discrete excess tax benefits related to equity compensation. The effective tax rate for the three and nine months ended September 30, 2023 differed from the US federal statutory rate of 21% primarily due to state and provincial taxes and an add-back for non-deductible executive compensation. 19 NOTE 12 - Derivatives 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 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. In January 2024, the Company entered into two interest rate swap agreements with financial counterparties relating to $ 500.0 million in aggregate notional amount of variable-rate debt under the 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 3.70 % on the notional amount. The swap agreements were designated and qualified as hedges of the Company's exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on the ABL Facility. The swap agreements terminate on June 30, 2027. The floating rate that the Company receives under the terms of these swap agreements was 4.86 % at September 30, 2024. The location and the fair value of derivative instruments designated as hedges were as follows: (in thousands) Balance Sheet Location September 30, 2024 December 31, 2023 Cash Flow Hedges: Interest rate swaps Prepaid expenses and other current assets $ 3,414 $ 9,145 Interest rate swaps Other non-current liabilities $ ( 11,248 ) $ ( 4,595 ) The fair value of the interest rate swaps was based on dealer quotes of market forward rates, which are Level 2 inputs on the fair value hierarchy (see Note 13), and reflected the amount that the Company would receive or pay as of September 30, 2024 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 condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023 : Nine Months Ended September 30, (in thousands) 2024 2023 Gain recognized in OCI $ 3,947 $ 33,153 Location of gain recognized in income Interest expense, net Interest expense, net Gain reclassified from AOCI into income $ ( 16,487 ) $ ( 7,928 ) 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 following 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 values of cash and short-term deposits, marketable securities, trade receivables, trade payables, and other current liabilities approximate their carrying amounts. The Company's nonfinancial assets, which are measured at fair value on a nonrecurring basis, include rental equipment, property, plant and equipment, goodwill, intangible assets and certain other assets. Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair values of finance leases at September 30, 2024 and December 31, 2023 approximate their respective book values. 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. 20 The fair values of the 2025 Secured Notes, the 2028 Secured Notes, the 2029 Secured Notes, and the 2031 Secured Notes are based on their last trading price at the end of each period obtained from a third party. The following table shows the carrying amounts and fair values of these financial liabilities measured using Level 2 inputs: September 30, 2024 December 31, 2023 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value 2025 Secured Notes $ 524,630 $ 526,826 $ 522,735 $ 527,021 2028 Secured Notes 495,306 486,495 494,500 474,285 2029 Secured Notes 493,328 515,390 — — 2031 Secured Notes 494,170 528,695 493,709 528,075 Total $ 2,007,434 $ 2,057,406 $ 1,510,944 $ 1,529,381 As of September 30, 2024, the carrying values of the 2025 Secured Notes, the 2028 Secured Notes, the 2029 Secured Notes, and the 2031 Secured Notes included $ 1.9 million, $ 4.7 million , $ 6.7 million , and $ 5.8 million , respectively, of unamortized debt issuance costs, which were presented as a direct reduction of the corresponding liability. As of December 31, 2023, the carrying values of the 2025 Secured Notes, the 2028 Secured Notes, and the 2031 Secured Notes included $ 3.8 million, $ 5.5 million, and $ 6.3 million, respectively, of unamortized debt issuance costs, which were presented as a direct reduction of the corresponding liability. The location and the fair value of derivative assets and liabilities in the condensed consolidated balance sheets 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 include 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'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 nine months ended September 30, 2024 and 2023 : 2024 2023 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 28,946 $ 44.44 35,244 $ 37.17 Granted 32,332 $ 38.20 28,946 $ 44.44 Vested ( 28,946 ) $ 44.44 ( 35,244 ) $ 37.17 Outstanding at end of period 32,332 $ 38.20 28,946 $ 44.44 Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 0.3 million for both the three months ended September 30, 2024 and 2023. Compensation expense for RSAs recognized in SG&A on the condensed consolidated statements of operations was $ 1.0 million for both the nine months ended September 30, 2024 and 2023. At September 30, 2024, unrecognized compensation cost related to RSAs totaled $ 0.8 million and was expected to be recognized over the remaining weighted average vesting period of 0.7 years. 21 Time-Based RSUs The following table summarizes the Company's Time-Based RSU activity for the nine months ended September 30, 2024 and 2023 : 2024 2023 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 618,836 $ 36.07 789,779 $ 26.16 Granted 273,524 $ 48.68 213,388 $ 50.74 Forfeited ( 35,254 ) $ 45.91 ( 52,435 ) $ 36.29 Vested ( 264,907 ) $ 30.36 ( 322,482 ) $ 21.38 Outstanding at end of period 592,199 $ 43.87 628,250 $ 36.12 Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 2.8 million and $ 2.2 million for the three months ended September 30, 2024 and 2023, respectively. Compensation expense for Time-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 7.8 million and $ 6.1 million for the nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024, unrecognized compensation cost related to Time-Based RSUs totaled $ 18.0 million and was expected to be recognized over the remaining weighted average vesting period of 2.4 years. Performance-Based RSUs The following table summarizes the Company's Performance-Based RSU award activity for the nine months ended September 30, 2024 and 2023 : 2024 2023 Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 1,939,691 $ 42.95 1,894,250 $ 33.67 Granted 295,833 $ 66.60 376,826 $ 69.52 Forfeited ( 26,325 ) $ 56.58 ( 27,500 ) $ 48.38 Vested ( 377,197 ) $ 39.08 ( 293,934 ) $ 16.34 Outstanding at end of period 1,832,002 $ 47.37 1,949,642 $ 42.96 Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of operations was $ 6.4 million and $ 6.2 million for the three months ended September 30, 2024 and 2023, respectively. Compensation expense for Performance-Based RSUs recognized in SG&A on the condensed consolidated statements of o perations was $ 19.5 million and $ 18.8 million for the nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024, unrecognized compensation cost related to Performance-Based RSUs totaled $ 32.8 million and was expected to be recognized over the remaining weighted average vesting period of 1.3 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 the S&P 400 index at the grant date over the performance period of three years . 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). For 555,790 Performance-Based RSUs granted in 2021, the awards cliff vest based on achievement of specified share prices of the Company's Common Stock at annual measurement dates over performance periods of 4.5 years to 4.8 years. The target number of RSUs may be adjusted from 0 to 1,333,334 based on the stock price attainment levels defined by the Company's Compensation Committee. The target payout for the 555,790 Performance-Based RSUs is tied to a stock price of $ 47.50 , with a payout ranging from 0 RSUs (for a stock price less than $ 42.50 ) to 1,333,334 RSUs (for a stock price of $ 60.00 or greater). 22 Stock Options The following table summarizes the Company's stock option activity for the nine months ended September 30, 2024 : 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 $ 13.60 829,246 $ 12.86 Exercised — $ — ( 7,093 ) $ 17.04 Outstanding at end of period 534,188 $ 13.60 822,153 $ 12.82 Fully vested and exercisable options, September 30, 2024 534,188 $ 13.60 822,153 $ 12.82 The following table summarizes the Company's stock option activity for the nine months ended September 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 — $ — ( 32,623 ) $ 13.87 Outstanding at end of period 534,188 $ 13.60 831,653 $ 12.87 Fully vested and exercisable options, September 30, 2023 534,188 $ 13.60 831,653 $ 12.87 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 September 30, 2024, 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. 23 NOTE 16 - (Loss) Earnings Per Share The following table reconciles the weighted average shares outstanding for the basic earnings per share calculation to the weighted average shares outstanding for the diluted earnings per share calculation: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Numerator: (Loss) income from continuing operations $ ( 70,475 ) $ 91,516 $ ( 61,086 ) $ 255,516 Income from discontinued operations — — — 134,613 Net (loss) income $ ( 70,475 ) $ 91,516 $ ( 61,086 ) $ 390,129 Denominator: Weighted average Common Shares outstanding – basic 188,281 196,199 189,362 201,043 Dilutive effect of shares outstanding RSAs — 5 — 16 Time-based RSUs — 232 — 283 Performance-based RSUs — 1,864 — 2,138 Stock Options — 958 — 981 Weighted average Common Shares outstanding – diluted 188,281 199,258 189,362 204,461 The following common shares that the Company may be obligated to issue were excluded from the computation of diluted EPS because their effect would have been anti-dilutive: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 RSAs 32 — 32 — Time-based RSUs 592 — 592 141 Performance-based RSUs 1,832 368 1,832 247 Stock Options 1,356 — 1,356 — Total anti-dilutive shares 3,813 368 3,813 388 NOTE 17 - 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. The following is a summary of the activity in the Company’s restructuring accrual for the three and nine months ended September 30, 2024 : Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2024 Beginning balance $ 5,693 $ — Charges 2,334 8,540 Cash payments ( 5,185 ) ( 5,698 ) Ending balance $ 2,842 $ 2,842 24