McGrath Acquisition Update
Q: Can you update us on the McGrath deal and regulatory review?
A: Management is confident in closing the McGrath acquisition in the second half of 2024. They are complying with the FTC's information requests, expecting to complete them in Q2. Despite market speculation, they are focused on the process and not engaging in hypotheticals. "

Margin Expansion Confidence
Q: What gives confidence in second-half margin expansion?
A: They expect margins to expand meaningfully in the second half due to lease revenue growth, better leverage of the trucking fleet as storage movements increase, and efficiencies from the new field service and dispatch platform implemented in Q1. These factors will unlock efficiencies not just in the second half but into 2025. "

Modular and Storage Demand Outlook
Q: How do you see modular and storage demand progressing?
A: Modular activations are improving and on track with original plans, driven by larger projects in nonresidential construction. Storage volumes are weaker but building sequentially into Q2 due to normal seasonality. Expectations for storage are modest, with units on rent expected to flatten sequentially and build into Q3 and Q4. "

Portable Storage Pricing Trends
Q: What's driving portable storage rental rate growth excluding cold storage?
A: Approximately half of storage rental rate growth is attributable to cold storage. Product differentiation within the storage fleet, including specialty units, drives higher rates. Management expects continued mix benefits from both cold storage and specialty products. "

Share Repurchases and Capital Allocation
Q: Can you discuss share repurchases and capital allocation plans?
A: The company resumed share repurchases in April, viewing it as a good use of capital at current valuations due to the delay in closing the McGrath acquisition. They plan to continue repurchases while ensuring post-closing leverage remains at around 4.25x. They will reduce leverage by a full turn within 12 months post-closing. "

CapEx and Free Cash Flow Post-Acquisition
Q: How will McGrath acquisition affect CapEx and free cash flow?
A: The McGrath acquisition is expected to be modestly accretive to earnings and free cash flow per share in the first full year post-closing. Numerous synergy and value creation opportunities, including $50 million of straightforward cost synergies and operational efficiencies, will positively impact returns over time. "

Unit on Rent Inflection Expectations
Q: What's driving the expected unit on rent inflection in H2 2024?
A: The inflection is driven by sustained mid-single-digit year-over-year activation growth in modular products. With 3-year lease durations, several quarters of growth are needed for units on rent to increase, and current trends support this outlook. "

Volume Changes and Pricing Impact
Q: Are volume declines due to pricing or market share loss?
A: Volume changes are attributed to macro factors, especially retail exposure in the storage portfolio and a 13% year-over-year decline in nonresidential construction starts. There is no evidence of market share loss or pricing issues affecting volumes. "

Quotation Conversion Rates and Customer Behavior
Q: How are conversion rates and customer price sensitivity trending?
A: Conversion rates are slowing, particularly in storage, but not due to losing business. It's seen as a timing issue similar to last year's modular trends. Management continues to test price elasticity and doesn't see significant concerns in customer behavior. "

Storage Units on Rent Outlook
Q: What's the outlook for units on rent in storage given lower activations?
A: Storage activations are below expectations, with units on rent expected to be slightly down sequentially into Q2. A year-over-year inflection in units on rent for storage is not expected until Q4 at the earliest, though discussions with enterprise accounts could impact this. "