Q4 2024 Earnings Summary
- WillScot is well positioned to capture demand from mega projects, with mega project demand remaining strong and the company being disproportionately positioned to win these projects.
- Significant opportunities exist in enterprise accounts, with the company's top 200 customers generating about $500 million of revenue (about 20% of total). WillScot aims to increase wallet share among existing enterprise customers and add new ones, leveraging its unique value proposition across geographies.
- Investments in new products such as cold storage, clearspan structures, perimeter solutions, and solar are expanding the company's product offerings, which could drive future growth.
- Volume headwinds: The company is starting the year with volumes down 5% in modular and 17% in storage, leading to uncertainty in achieving growth targets.
- Stalled value-added products (VAPs) growth: The VAPs delivered rate for both modular and storage has stalled over the past four quarters due to mix shifts and inconsistent sales performance, potentially limiting revenue growth opportunities.
- Reduced free cash flow margin: The company expects a slight reduction in free cash flow margin in 2025 due to increased capital expenditures (an additional $30 million) and higher cash taxes (about $30 million more than 2024), which could impact its ability to generate free cash flow.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –1.6% (from $612.4M to $602.48M) | The overall decline in Total Revenue (-1.6% YoY) appears driven by a mix of regional performance shifts – notably, weaker U.S. and Mexican performance partially offset by stronger Canadian revenue. This suggests that while aggressive initiatives or pricing improvements may have helped in Canada, broader market headwinds in the U.S. and Mexico continued to exert downward pressure compared to Q4 2023. |
U.S. Revenue | –2.4% (from $573.89M to $560.1M) | The U.S. revenue decline of 2.4% YoY likely reflects operational challenges and softer demand in key segments, consistent with previous trends of declining leasing volumes and potential pricing pressures. The drop of approximately $13.8M relative to Q4 2023 indicates that regional dynamics continue to weigh on performance despite previous period strengths. |
Canadian Revenue | +16.7% (from $31.48M to $36.73M) | The notable increase in Canadian revenue (+16.7% YoY) suggests effective local initiatives—possibly including pricing improvements or higher activation of service offerings—that more than offset broader economic headwinds. This strong growth contrasts with other regions, reflecting either improved market conditions in Canada or targeted business strategies relative to Q4 2023. |
Mexican Revenue | –19.3% (from $7.13M to $5.75M) | The significant drop in Mexican revenue (-19.3% YoY) may be attributable to declining market demand or disruptions that led to reduced sales or leasing activity compared to Q4 2023. Such a steep decline emphasizes that challenges in the Mexican market have become more pronounced, diverging from earlier period performance. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | FY 2025 | Modest growth expected for FY 2025, with flatter revenue growth in the first half and improvement in the second half | no current guidance | no current guidance |
Margin Expansion | FY 2025 | Margins expected to continue expanding, supported by structural improvements, cost optimization and technology investments | no current guidance | no current guidance |
Volume Trends | FY 2025 | Units on rent expected to be down at the start of FY 2025—but not to the same degree as the start of FY 2024 | no current guidance | no current guidance |
New Product Lines | FY 2025 | Contributions from new product lines (e.g., climate-controlled storage and Clearspan structures) expected to double again in FY 2025 | no current guidance | no current guidance |
Pricing Trends | FY 2025 | Stability in pricing expected; modular average monthly rental rates up 6% YoY and storage rates up 9.5% YoY, with these trends to continue | no current guidance | no current guidance |
Cost Optimization | FY 2025 | Continued cost structure optimization planned—building on $40M annualized indirect cost takeout in Q2 2024 and $20M variable cost reductions in Q3 2024 | no current guidance | no current guidance |
Capital Allocation | FY 2025 | Disciplined capital allocation strategy including organic CapEx investments, tuck‐in acquisitions and increased share repurchase authorization of $1B | no current guidance | no current guidance |
Free Cash Flow (per share) | FY 2025 | On track to achieve a $4 free cash flow per share milestone; adjusted free cash flow per share grew by 13% to $3.12 | no current guidance | no current guidance |
Non‑Residential Construction Market | FY 2025 | Non‑residential construction starts expected to bottom in the first half of FY 2025, with improvements later | no current guidance | no current guidance |
Retail Storage Dynamics | FY 2025 | Seasonal retail dynamics on the storage side performing in line with expectations, with storage units on rent expected to reach 130,000 by end October 2024 | no current guidance | no current guidance |
Long‑Term Outlook | FY 2025 | Plan to host next Investor Day in the first half of FY 2025 to outline new 3‑ to 5‑year financial targets and capital allocation updates | no current guidance | no current guidance |
Revenue | FY 2025 | no prior guidance | Midpoint guidance anticipates $2.375 billion in revenue for FY 2025 | no prior guidance |
Adjusted EBITDA | FY 2025 | no prior guidance | Midpoint guidance anticipates $1.045 billion in adjusted EBITDA for FY 2025 | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | Approximately $500 million in free cash flow for FY 2025 | no prior guidance |
Net Capital Expenditures (CapEx) | FY 2025 | no prior guidance | Guiding at $265 million at midpoint for FY 2025 | no prior guidance |
Cash Taxes | FY 2025 | no prior guidance | Total cash taxes expected to be around $80 million (about $50 million federal) for FY 2025 | no prior guidance |
Average Monthly Rental Rate (AMR) Growth | FY 2025 | no prior guidance | Mid‑single‑digit AMR growth for modular and low single‑digit growth for storage for FY 2025 | no prior guidance |
EBITDA Margins | FY 2025 | no prior guidance | First quarter EBITDA margins expected to be modestly lower (100 basis points) | no prior guidance |
Revenue for Q1 2025 | FY 2025 | no prior guidance | First quarter revenues expected to be down mid‑single digits versus prior year | no prior guidance |
Seasonality and Activations | FY 2025 | no prior guidance | A more normal seasonal pattern with strong sequential increases in net order rates from December into February is assumed | no prior guidance |
Free Cash Flow Margin | FY 2025 | no prior guidance | Expected to see a slight reduction compared to FY 2024 due to increased CapEx and cash taxes | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Mega Projects | Q1–Q3 2024: Consistently highlighted as a core strength with disproportionate exposure (e.g. Q1 ), steady demand driving large-scale projects (Q2 ), and mitigating weaker small projects (Q3 ). | Q4 2024: Demand remains consistent and stable, with no change in project cadence. | Consistent emphasis with sustained bullish sentiment. |
Onshoring/Reshoring Initiatives | Q1–Q3 2024: Initially cited as a tailwind and strategic multiperiod theme (Q1 , Q2 ) and discussed in the context of political risk not affecting demand (Q3 ). | Q4 2024: Not specifically mentioned during the call. | Topic no longer explicitly discussed in Q4, indicating a possible deprioritization. |
Modular Segment Performance and Volume Trends | Q1–Q3 2024: Q1 showed robust activation growth and positive backlog ; Q2 reflected mixed results with headwinds from slower sequential growth ; Q3 noted a volume decline (−7% activations) with stable pricing. | Q4 2024: Modular activation volumes are slightly down entering 2025 but are being offset by improved pricing strategies. | Ongoing focus with evolving caution on volume but continued reliance on pricing offsets. |
Storage Segment Underperformance and Recovery Challenges | Q1–Q3 2024: Q1 acknowledged storage volumes lagging behind modular and anticipated sequential improvements ; Q2 and Q3 detailed significant volume declines (e.g. −12% in Q2 and −13% in Q3) and persistent operational challenges. | Q4 2024: Storage volumes declined 17% YoY with continued challenges from mix shifts and seasonal factors. | Persistent underperformance with a consistently bearish sentiment and slow recovery outlook. |
New Product Development and Expansion into Adjacencies | Q1 2024: Little to no discussion. Q2 introduced nascent new product lines and strategic acquisitions ; Q3 expanded on portfolio adjacencies and organic growth. | Q4 2024: Robust discussion on solidifying platforms like cold storage, clearspan structures, and the addition of perimeter solutions, with plans for further investment. | Emerging and growing theme with increasing strategic focus and optimistic outlook. |
Free Cash Flow, Capital Allocation, and Margin Management | Q1–Q3 2024: Q1 reported strong free cash flow and resumed share repurchases ; Q2 and Q3 reaffirmed robust FCF, enhanced capital allocation (e.g. increased repurchase authority and acquisitions), and margin expansions. | Q4 2024: Free cash flow remains strong though a slight margin reduction is expected going forward; overall disciplined capital allocation and stable margins persist. | Consistently strong performance with very positive sentiment, albeit with minor future caution. |
Operational Efficiency and Cost Savings Initiatives | Q1–Q3 2024: Q1 detailed integration of field service systems and new dispatch platforms ; Q2 and Q3 emphasized headcount reductions and cost takeouts yielding nearly $40M benefit. | Q4 2024: Continued focus on network optimization, insourcing, and streamlined systems integration, delivering margin expansion. | Steady progress with sustained operational improvements and positive cost management. |
Political Uncertainty Impacting Project Timelines | Q1–Q2 2024: No discussion. Q3 raised customer concerns regarding uncertainty influencing project timing and delays. | Q4 2024: Political uncertainty remains a concern with potential delays arising from immigration enforcement and tariffs. | Emerged in Q3 and persists in Q4, with cautious sentiment regarding potential construction delays. |
Reduced Revenue Growth Guidance and Sluggish Demand | Q1 2024: Revenue guidance was maintained with an optimistic tone despite some storage challenges. | Q2–Q4 2024: From Q2 onward, guidance was reduced (e.g. Q2 revised from 8% to 4% growth ), further confirmed in Q3 and sustained in Q4 due to sluggish nonresidential construction and volume declines. | A bearish shift emerging from Q2 with progressively cautious outlook and reduced revenue assumptions. |
Stalled Value-Added Products (VAPs) Growth | Q1 2024: VAPs growth was strong in both modular and storage segments. | Q2–Q4 2024: Q2 noted modular VAPs reaching a neutral point ; Q3 showed modest modular growth and robust storage growth ; Q4 highlighted challenges with modular VAPs due to mix shifts (growth in FLEX units) and ongoing efforts to reaccelerate penetration. | Mixed outlook: modular VAPs experiencing stagnation while storage VAPs continue to show solid performance, leading to a nuanced sentiment. |
Enterprise Accounts Expansion Opportunities | Q1 2024: Initial discussions indicated encouraging potential to boost unit on rent through enterprise accounts. | Q4 2024: Expanded discussion on consolidating a fragmented portfolio, realigning sales incentives, and targeting increased wallet share among large accounts. | Reemerging as a strategic growth lever with renewed emphasis and a positive long‐term impact outlook. |
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2025 Free Cash Flow Outlook
Q: Will free cash flow margin expand in 2025?
A: Free cash flow for 2025 is expected to be around $500 million, slightly down from $554 million in 2024 due to an increase of about $30 million in net CapEx and an increase of about $30 million in cash taxes. Total cash taxes are expected to be around $80 million, with $50 million being federal taxes. This results in a slight reduction in free cash flow margin year-over-year. -
EBITDA Guidance and Swing Factors
Q: What are the main drivers for 2025 EBITDA guidance?
A: The midpoint of the 2025 EBITDA guidance considers volume headwinds, with volumes down 5% in modular and 17% in storage. Rate increases and value-added products (VAPS) are expected to offset most of the modular decline. On the cost side, variable compensation costs, investments in a company meeting, and additional sales resources will impact EBITDA. Swing factors include market volumes and cost management. -
Modular Units on Rent Outlook
Q: When will modular units on rent turn positive?
A: The company does not know exactly when modular units on rent will turn positive. At the midpoint of guidance, they assume headwinds will subside as the year progresses, possibly crossing into positive territory later in the year, but the timing is uncertain. -
Impact of Macro Uncertainties
Q: How might tariffs and immigration affect the outlook?
A: The impact of tariffs and immigration policies is uncertain. Construction employment remains high, but stricter immigration enforcement could cause labor shortages, delaying projects. Tariffs could lead to reshoring and more domestic investment, which would be positive. However, it's too early to predict the overall effect. -
Capital Allocation and Buybacks
Q: Will share buybacks increase in 2025?
A: There has been no change to the capital allocation policy. The company continues to consider all options to return value to shareholders, including buybacks. Buybacks remain a powerful lever, and while they were out of the market for part of last year, they plan to continue using them alongside the new dividend program. -
VAPS Penetration and Growth Plans
Q: Can VAPS delivered rates improve in 2025?
A: The company plans to introduce new guided selling and bundling features to improve VAPS penetration. By reducing variability in sales rep performance and focusing on quoting processes, they aim to increase the delivered rate of VAPS in 2025.
Research analysts covering WillScot Holdings.