WillScot Mobile Mini (NASDAQ:WSC) Reports Q4 In Line With Expectations But Full-Year Sales Guidance Misses Expectations Significantly
Temporary space provider WillScot (NASDAQ:WSC) met Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 1.6% year on year to $602.5 million. On the other hand, the company’s full-year revenue guidance of $2.38 billion at the midpoint came in 3.3% below analysts’ estimates. Its non-GAAP profit of $0.49 per share was 4.9% above analysts’ consensus estimates.
Revenue: $602.5 million vs analyst estimates of $605.5 million (1.6% year-on-year decline, in line)
Adjusted EPS: $0.49 vs analyst estimates of $0.47 (4.9% beat)
Adjusted EBITDA: $284.7 million vs analyst estimates of $280.6 million (47.3% margin, 1.4% beat)
Management’s revenue guidance for the upcoming financial year 2025 is $2.38 billion at the midpoint, missing analyst estimates by 3.3% and implying -0.9% growth (vs 1.4% in FY2024)
EBITDA guidance for the upcoming financial year 2025 is $1.05 billion at the midpoint, below analyst estimates of $1.09 billion
Operating Margin: 28.9%, in line with the same quarter last year
Free Cash Flow Margin: 22.7%, down from 34.9% in the same quarter last year
Market Capitalization: $7.21 billion
Brad Soultz, Chief Executive Officer of WillScot, commented “Our fourth quarter financial results capped another solid year for WillScot, notably Adjusted EBITDA margins of 47.3% in the period and Adjusted Free Cash Flow of $137 million at a margin of 22.7%. We believe we have a robust and sustainable free cash flow profile that reflects the resiliency of our cash flows across the cycle, the strength of our balance sheet, and our confidence in the Company’s long-term growth strategy. The initiation of our quarterly dividend program provides an additional avenue to return surplus capital to shareholders."
Company Overview
Originally focusing on mobile offices for construction sites, WillScot (NASDAQ:WSC) provides ready-to-use temporary spaces, largely for longer-term lease.
Construction and Maintenance Services
Construction and maintenance services companies not only boast technical know-how in specialized areas but also may hold special licenses and permits. Those who work in more regulated areas can enjoy more predictable revenue streams - for example, fire escapes need to be inspected every five years–. More recently, services to address energy efficiency and labor availability are also creating incremental demand. But like the broader industrials sector, construction and maintenance services companies are at the whim of economic cycles as external factors like interest rates can greatly impact the new construction that drives incremental demand for these companies’ offerings.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Luckily, WillScot Mobile Mini’s sales grew at an incredible 17.6% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
WillScot Mobile Mini Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. WillScot Mobile Mini’s recent history shows its demand slowed significantly as its annualized revenue growth of 5.7% over the last two years is well below its five-year trend.
WillScot Mobile Mini Year-On-Year Revenue Growth
WillScot Mobile Mini also breaks out the revenue for its most important segments, Leasing and Delivery and Installation, which are 77.2% and 15.9% of revenue. Over the last two years, WillScot Mobile Mini’s Leasing revenue (recurring) averaged 7.1% year-on-year growth while its Delivery and Installation revenue (non-recurring) was flat.
This quarter, WillScot Mobile Mini reported a rather uninspiring 1.6% year-on-year revenue decline to $602.5 million of revenue, in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
WillScot Mobile Mini has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 19.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, WillScot Mobile Mini’s operating margin decreased by 2.3 percentage points over the last five years. Even though its historical margin is high, shareholders will want to see WillScot Mobile Mini become more profitable in the future.
WillScot Mobile Mini Trailing 12-Month Operating Margin (GAAP)
This quarter, WillScot Mobile Mini generated an operating profit margin of 28.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
WillScot Mobile Mini’s EPS grew at an astounding 55.5% compounded annual growth rate over the last five years, higher than its 17.6% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.
WillScot Mobile Mini Trailing 12-Month EPS (Non-GAAP)
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For WillScot Mobile Mini, its two-year annual EPS growth of 5.6% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.
In Q4, WillScot Mobile Mini reported EPS at $0.49, up from $0.44 in the same quarter last year. This print beat analysts’ estimates by 4.9%. Over the next 12 months, Wall Street expects WillScot Mobile Mini’s full-year EPS of $1.62 to grow 11.1%.
Key Takeaways from WillScot Mobile Mini’s Q4 Results
It was encouraging to see WillScot Mobile Mini beat analysts’ EPS expectations this quarter. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed significantly and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 3.4% to $37.37 immediately after reporting.
WillScot Mobile Mini didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
