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ResearchA closer look: WillScot Mobile Mini Holdings Corp

A closer look: WillScot Mobile Mini Holdings Corp

Nov 23, 2022

Holding Name: WillScot Mobile Mini Holdings Corp. (NASDAQ: WSC)

Strategy: Opportunities

Percent weighting of strategy: ~9.8%

TLDR: WSC’s compelling unit economics and all weather business have allowed the storage company to continuously beat estimates despite a challenging macroeconomic environment. 

Business overview: WillScot Mobile Mini Holdings Corp. provides work space and portable storage solutions in the United States, Canada, Mexico, and the United Kingdom. The company leases modular space and portable storage units to customers in the commercial and industrial, construction, education, energy and natural resources, government, and other end markets.

Why we own it: WSC and MINI’s merger in 2020 created a dominant market leader with leading share in the attractive portable storage and modular space. The company’s strong competitive positioning, margin expansion potential, and cross-selling upside represent idiosyncratic growth in an otherwise cyclical end market.

WillScot’s VAPs (Value Add Products) penetration has continued to drive double digit rental rate growth which should continue given the long runway for growth in both WSC’s legacy business as well as its acquired MINI office assets.

WSC’s strong free cash flow generation provides the company with attractive optionality for M&A, de-leveraging, and/or share buybacks while also reducing cyclical risk during potential downturns. Moreover, WillScot’s management team has proven its ability to navigate the company through market volatility and deliver significant shareholder value in the form of consistent revenue and earnings growth.

What’s the latest: WillScot Mobile delivered an impressive third quarter print with revenues growing over 31% year over year, EBITDA growing 40% year over year and adjusted EPS coming in well above consensus estimates. WSC's strong results were broad based across segments as management was able to capitalize on robust demand and volume growth to meaningfully drive pricing performance in its North American Modular and Storage segments with monthly spot rates increasing 19% and 27% respectively. 

The positive results despite a difficult macro landscape allowed the management team to raise its full year guidance targets which lead to a ~10% increase in the stock. The most recent earnings and guidance raise is a testament to WSC’s all weather business model and its consistent ability to perform.

Sign posts moving forward: In our view, WSC's latest earnings print confirms that our thesis continues to track nicely. Looking forward, we believe our idiosyncratic growth thesis, underpinned by WSC's dominant market share, compelling unit economics, and high-margin VAPs (Value Add Products) initiatives, still remains highly under appreciated by the market. 

These reasons, among others, should enable WSC to generate above-consensus revenue and earnings growth over the next 2-3 years along with healthy margin expansion. WSC remains one of our highest conviction positions in the Opportunities strategy and we expect the company to continue to outperform heading into fiscal year 2023.

The content contained in this material is intended for general informational purposes only and is not meant to constitute legal, tax, accounting, solicitation of an offer, or investment advice.


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