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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022 |
OR |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________ |
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Commission File Number: | 001-37552 |
WILLSCOT MOBILE MINI HOLDINGS CORP.
(Exact name of registrant as specified in its charter) | | | | | | | | |
Delaware | | 82-3430194 |
(State or other jurisdiction of incorporation) | | (I.R.S. Employer Identification No.) |
4646 E Van Buren St., Suite 400
Phoenix, Arizona 85008
(Address of principal executive offices, including zip code)
(480) 894-6311
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | WSC | The Nasdaq Capital Market |
Warrants to purchase Common Stock(1) | WSCTW | OTC Markets Group Inc. |
(1) Issued in connection with the registrant's acquisition of Modular Space Holding, Inc. in August 2018, which are exercisable for one share of the registrant's common stock at an exercise price of $15.50 per share.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Shares of Common Stock, par value $0.0001 per share, outstanding: 213,700,706 shares at August 1, 2022.
WILLSCOT MOBILE MINI HOLDINGS CORP.
Quarterly Report on Form 10-Q
Table of Contents
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| | | Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021 |
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ITEM 1. Financial Statements
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Balance Sheets | | | | | | | | | | | |
(in thousands, except share data) | June 30, 2022 (unaudited) | | December 31, 2021 |
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Assets | | | |
Cash and cash equivalents | $ | 11,706 | | | $ | 12,699 | |
Trade receivables, net of allowances for credit losses at June 30, 2022 and December 31, 2021 of $53,544 and $47,629, respectively | 440,993 | | | 399,887 | |
Inventories | 41,824 | | | 32,739 | |
Prepaid expenses and other current assets | 44,245 | | | 36,761 | |
Assets held for sale | 1,518 | | | 954 | |
Total current assets | 540,286 | | | 483,040 | |
Rental equipment, net | 3,257,475 | | | 3,080,981 | |
Property, plant and equipment, net | 322,707 | | | 312,178 | |
Operating lease assets | 235,266 | | | 247,064 | |
Goodwill | 1,171,725 | | | 1,178,806 | |
Intangible assets, net | 446,578 | | | 460,678 | |
Other non-current assets | 4,771 | | | 10,852 | |
Total long-term assets | 5,438,522 | | | 5,290,559 | |
Total assets | $ | 5,978,808 | | | $ | 5,773,599 | |
Liabilities and equity | | | |
Accounts payable | $ | 155,901 | | | $ | 118,271 | |
Accrued expenses | 115,124 | | | 100,195 | |
Accrued employee benefits | 63,331 | | | 68,414 | |
Deferred revenue and customer deposits | 189,333 | | | 159,639 | |
Operating lease liabilities - current | 52,495 | | | 53,005 | |
Current portion of long-term debt | 20,663 | | | 18,121 | |
Total current liabilities | 596,847 | | | 517,645 | |
Long-term debt | 3,017,678 | | | 2,694,319 | |
Deferred tax liabilities | 390,092 | | | 354,879 | |
Operating lease liabilities - non-current | 183,851 | | | 194,256 | |
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Other non-current liabilities | 16,390 | | | 15,737 | |
Long-term liabilities | 3,608,011 | | | 3,259,191 | |
Total liabilities | 4,204,858 | | | 3,776,836 | |
Commitments and contingencies (see Note 16) | | | |
Preferred Stock: $0.0001 par, 1,000,000 shares authorized and zero shares issued and outstanding at June 30, 2022 and December 31, 2021 | — | | | — | |
Common Stock: $0.0001 par, 500,000,000 shares authorized and 216,090,996 and 223,939,527 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 22 | | | 22 | |
Additional paid-in-capital | 3,295,747 | | | 3,616,902 | |
Accumulated other comprehensive loss | (55,276) | | | (29,071) | |
Accumulated deficit | (1,466,543) | | | (1,591,090) | |
Total shareholders' equity | 1,773,950 | | | 1,996,763 | |
Total liabilities and shareholders' equity | $ | 5,978,808 | | | $ | 5,773,599 | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Operations
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands, except share and per share data) | 2022 | | 2021 | | 2022 | | 2021 |
Revenues: | | | | | | | |
Leasing and services revenue: | | | | | | | |
Leasing | $ | 428,620 | | | $ | 343,179 | | | $ | 821,812 | | | $ | 658,841 | |
Delivery and installation | 125,403 | | | 91,680 | | | 225,734 | | | 175,184 | |
Sales revenue: | | | | | | | |
New units | 11,094 | | | 11,008 | | | 17,691 | | | 21,963 | |
Rental units | 16,525 | | | 15,235 | | | 25,299 | | | 30,437 | |
Total revenues | 581,642 | | | 461,102 | | | 1,090,536 | | | 886,425 | |
Costs: | | | | | | | |
Costs of leasing and services: | | | | | | | |
Leasing | 96,912 | | | 83,032 | | | 185,790 | | | 152,927 | |
Delivery and installation | 93,587 | | | 77,153 | | | 175,102 | | | 147,289 | |
Costs of sales: | | | | | | | |
New units | 6,139 | | | 7,052 | | | 10,465 | | | 14,161 | |
Rental units | 8,955 | | | 8,162 | | | 14,099 | | | 17,267 | |
Depreciation of rental equipment | 67,176 | | | 62,893 | | | 129,392 | | | 118,591 | |
Gross profit | 308,873 | | | 222,810 | | | 575,688 | | | 436,190 | |
Expenses: | | | | | | | |
Selling, general and administrative | 162,164 | | | 122,387 | | | 312,374 | | | 239,716 | |
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Other depreciation and amortization | 19,054 | | | 21,622 | | | 38,658 | | | 39,946 | |
Lease impairment expense and other related charges | (9) | | | 474 | | | 254 | | | 1,727 | |
Restructuring costs | (86) | | | 6,960 | | | (86) | | | 10,102 | |
Currency (gains) losses, net | (127) | | | 33 | | | 11 | | | 69 | |
Other (income) expense, net | (3,784) | | | 719 | | | (5,093) | | | (1,269) | |
Operating income | 131,661 | | | 70,615 | | | 229,570 | | | 145,899 | |
Interest expense | 33,574 | | | 29,212 | | | 64,564 | | | 59,176 | |
Fair value (gain) loss on common stock warrant liabilities | — | | | (610) | | | — | | | 26,597 | |
Loss on extinguishment of debt | — | | | 2,814 | | | — | | | 5,999 | |
Income before income tax | 98,087 | | | 39,199 | | | 165,006 | | | 54,127 | |
Income tax expense | 24,711 | | | 18,828 | | | 40,459 | | | 29,309 | |
Net Income | $ | 73,376 | | | $ | 20,371 | | | $ | 124,547 | | | $ | 24,818 | |
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Earnings per share | | | | | | | |
Basic | $ | 0.33 | | | $ | 0.09 | | | $ | 0.56 | | | $ | 0.11 | |
Diluted | $ | 0.32 | | | $ | 0.08 | | | $ | 0.55 | | | $ | 0.11 | |
Weighted average shares: | | | | | | | |
Basic | 223,376,276 | | | 228,406,812 | | | 222,196,986 | | | 228,350,318 | |
Diluted | 227,484,012 | | | 236,536,713 | | | 226,983,150 | | | 234,898,911 | |
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Net income | $ | 73,376 | | | $ | 20,371 | | | $ | 124,547 | | | $ | 24,818 | |
Other comprehensive (loss) income: | | | | | | | |
Foreign currency translation adjustment, net of income tax expense of $0 for both the three and six months ended June 30, 2022 and $60 and $0 for the three and six months ended June 30, 2021, respectively. | (25,628) | | | 3,093 | | | (29,702) | | | 8,127 | |
Net change in derivatives, net of income tax expense of $394 and $656 for the three months ended June 30, 2022 and 2021, respectively, and $1,171 and $1,323 for the six months ended June 30, 2022 and 2021, respectively. | 1,176 | | | 2,146 | | | 3,497 | | | 4,323 | |
Total other comprehensive (loss) income | (24,452) | | | 5,239 | | | (26,205) | | | 12,450 | |
Total comprehensive income | $ | 48,924 | | | $ | 25,610 | | | $ | 98,342 | | | $ | 37,268 | |
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See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Changes in Equity
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2022 |
| Common Stock | Additional Paid-in-Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Shareholders' Equity | | |
(in thousands) | Shares | Amount |
Balance at December 31, 2021 | 223,940 | | $ | 22 | | $ | 3,616,902 | | $ | (29,071) | | $ | (1,591,090) | | $ | 1,996,763 | | | |
Net income | — | | — | | — | | — | | 51,171 | | 51,171 | | | |
Other comprehensive loss | — | | — | | — | | (1,753) | | — | | (1,753) | | | |
Stock-based compensation and issuance of Common Stock from vesting | 498 | | — | | 6,395 | | — | | — | | 6,395 | | | |
Repurchase and cancellation of Common Stock and warrants | (2,064) | | — | | (77,409) | | — | | — | | (77,409) | | | |
Issuance of Common Stock from the exercise of options and warrants | 800 | | — | | 3,313 | | — | | — | | 3,313 | | | |
Withholding taxes on net share settlement of stock-based compensation | — | | — | | (12,295) | | — | | — | | (12,295) | | | |
Balance at March 31, 2022 | 223,174 | | $ | 22 | | $ | 3,536,906 | | $ | (30,824) | | $ | (1,539,919) | | $ | 1,966,185 | | | |
Net income | — | | — | | — | | — | | 73,376 | | 73,376 | | | |
Other comprehensive loss | — | | — | | — | | (24,452) | | — | | (24,452) | | | |
Stock-based compensation and issuance of Common Stock from vesting | 70 | | — | | 9,292 | | — | | — | | 9,292 | | | |
Repurchase and cancellation of Common Stock and warrants | (7,222) | | — | | (249,515) | | — | | — | | (249,515) | | | |
Issuance of Common Stock from the exercise of options and warrants | 69 | | — | | 139 | | — | | — | | 139 | | | |
Withholding taxes on net share settlement of stock-based compensation | — | | — | | (1,075) | | — | | — | | (1,075) | | | |
Balance at June 30, 2022 | 216,091 | | $ | 22 | | $ | 3,295,747 | | $ | (55,276) | | $ | (1,466,543) | | $ | 1,773,950 | | | |
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Six Months Ended June 30, 2021 |
| Common Stock | Additional Paid-in-Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Shareholders' Equity |
(in thousands) | Shares | Amount |
Balance at December 31, 2020 | 229,038 | | $ | 23 | | $ | 3,852,291 | | $ | (37,207) | | $ | (1,751,234) | | $ | 2,063,873 | |
Net income | — | | — | | — | | — | | 4,447 | | 4,447 | |
Other comprehensive income | — | | — | | — | | 7,211 | | — | | 7,211 | |
Stock-based compensation and issuance of Common Stock from vesting | 229 | | — | | 4,951 | | — | | — | | 4,951 | |
Repurchase and cancellation of Common Stock and warrants | (2,793) | | — | | (76,788) | | — | | — | | (76,788) | |
Issuance of Common Stock from the exercise of options and warrants | 341 | | — | | 5,414 | | — | | — | | 5,414 | |
Withholding taxes on net share settlement of stock-based compensation | — | | — | | (3,219) | | — | | — | | (3,219) | |
Balance at March 31, 2021 | 226,815 | | $ | 23 | | $ | 3,782,649 | | $ | (29,996) | | $ | (1,746,787) | | $ | 2,005,889 | |
Net income | — | | — | | — | | — | | 20,371 | | 20,371 | |
Other comprehensive income | — | | — | | — | | 5,239 | | — | | 5,239 | |
Stock-based compensation and issuance of Common Stock from vesting | 60 | | — | | 9,038 | | — | | — | | 9,038 | |
Repurchase and cancellation of Common Stock and warrants | (4,100) | | — | | (35,508) | | — | | — | | (35,508) | |
Issuance of Common Stock from the exercise of warrants | 4,058 | | — | | 384 | | — | | — | | 384 | |
Balance at June 30, 2021 | 226,833 | | $ | 23 | | $ | 3,756,563 | | $ | (24,757) | | $ | (1,726,416) | | $ | 2,005,413 | |
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See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited) | | | | | | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 |
Operating activities: | | | |
Net income | $ | 124,547 | | | $ | 24,818 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 168,050 | | | 160,480 | |
Provision for credit losses | 18,865 | | | 16,910 | |
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Gain on sale of rental equipment and other property, plant and equipment | (14,195) | | | (14,793) | |
Amortization of debt discounts and debt issuance costs | 6,975 | | | 7,082 | |
Fair value loss on common stock warrant liabilities | — | | | 26,597 | |
Loss on extinguishment of debt | — | | | 5,999 | |
Stock-based compensation expense | 15,687 | | | 13,989 | |
Deferred income tax expense | 31,072 | | | 24,389 | |
Unrealized currency gains, net | (71) | | | (184) | |
Other | 1,916 | | | — | |
Changes in operating assets and liabilities: | | | |
Trade receivables | (60,737) | | | (50,324) | |
Inventories | (9,293) | | | (8,535) | |
Prepaid expenses and other assets | (13,907) | | | 10,004 | |
Operating lease assets and liabilities | 936 | | | (537) | |
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Accounts payable and other accrued expenses | 34,756 | | | 30,689 | |
Deferred revenue and customer deposits | 29,252 | | | 15,024 | |
Net cash provided by operating activities | 333,853 | | | 261,608 | |
Investing activities: | | | |
Acquisitions, net of cash acquired | (103,927) | | | — | |
Proceeds from sale of rental equipment | 35,080 | | | 30,437 | |
Purchase of rental equipment and refurbishments | (225,389) | | | (117,817) | |
Proceeds from sale of property, plant and equipment | 751 | | | 16,438 | |
Purchase of property, plant and equipment | (20,253) | | | (17,450) | |
Net cash used in investing activities | (313,738) | | | (88,392) | |
Financing activities: | | | |
Receipts from issuance of Common Stock from the exercise of options | 3,452 | | | 5,798 | |
Repurchase and cancellation of Common Stock and warrants | (319,225) | | | (214,299) | |
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Receipts from borrowings | 454,322 | | | 387,658 | |
Payment of financing costs | (8,021) | | | — | |
Repayment of borrowings | (127,607) | | | (347,225) | |
Payment of debt extinguishment premium costs | — | | | (3,705) | |
Principal payments on finance lease obligations | (10,353) | | | (7,921) | |
Taxes paid on employee stock awards | (13,370) | | | (3,219) | |
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Net cash used in financing activities | (20,802) | | | (182,913) | |
Effect of exchange rate changes on cash and cash equivalents | (306) | | | 162 | |
Net change in cash and cash equivalents | (993) | | | (9,535) | |
Cash and cash equivalents at the beginning of the period | 12,699 | | | 24,937 | |
Cash and cash equivalents at the end of the period | $ | 11,706 | | | $ | 15,402 | |
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Supplemental cash flow information: | | | |
Interest paid 1 | $ | 59,980 | | | $ | 52,053 | |
Income taxes paid, net | $ | 10,608 | | | $ | 4,383 | |
Capital expenditures accrued or payable | $ | 39,949 | | | $ | 19,099 | |
1 Includes $5,948 of payments related to the interest rate swap for the six months ended June 30, 2021.
See the accompanying notes which are an integral part of these condensed consolidated financial statements.
WillScot Mobile Mini Holdings Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
WillScot Mobile Mini Holdings Corp. (“WillScot Mobile Mini” and, together with its subsidiaries, the “Company”) is a leading business services provider specializing in innovative flexible work space and portable storage solutions in the United States (“US”), Canada, Mexico and the United Kingdom ("UK"). The Company also maintains a fleet of specialty containment products, including liquid and solid containment solutions. The Company leases, sells, delivers and installs mobile solutions and storage products through an integrated network of branch locations that spans North America and the UK.
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 Mobile Mini 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 date 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 three and six months ended June 30, 2022 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, 2021.
Reclassifications
Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.
Recently Issued Accounting Standards
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). ASU 2021-08 is effective for annual periods beginning after December 15, 2022, including interim periods therein, with early adoption permitted. The guidance will be applied prospectively to acquisitions occurring on or after the effective date. The Company will continue to evaluate the impact of this guidance, which will depend on the contract assets and liabilities acquired in future business combinations.
NOTE 2 - Acquisitions
On July 1, 2020, WillScot Corporation (“WillScot”), and Mobile Mini, Inc. (“Mobile Mini”) merged (the “Merger”). Immediately following the Merger, WillScot changed its name to “WillScot Mobile Mini Holdings Corp.”
Asset Acquisitions
During the second quarter of 2022, the Company acquired certain assets and liabilities of several smaller entities, which consisted primarily of approximately 4,100 storage units and 1,000 modular units for $47.1 million in cash. The accompanying consolidated financial statements include $47.1 million of rental equipment as a result of these acquisitions. During the first quarter of 2022, the Company acquired certain assets and liabilities, which consisted primarily of approximately 400 blast resistant modular units.
Integration Costs
The Company recorded $5.2 million and $7.6 million in integration costs related to acquisitions and the Merger within selling, general and administrative ("SG&A") expense during the three months ended June 30, 2022 and 2021, respectively, and $9.3 million and $15.0 million in integration costs related to acquisitions and the Merger during the six months ended June 30, 2022 and 2021, respectively.
NOTE 3 - Revenue
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the following geographic areas for the three and six months ended June 30, 2022 and 2021 as follows:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
US | $ | 517,374 | | | $ | 399,280 | | | $ | 969,342 | | | $ | 770,549 | |
Canada | 32,901 | | | 29,543 | | | 58,174 | | | 53,127 | |
Mexico | 4,703 | | | 3,848 | | | 8,917 | | | 7,311 | |
UK | 26,664 | | | 28,431 | | | 54,103 | | | 55,438 | |
Total revenues | $ | 581,642 | | | $ | 461,102 | | | $ | 1,090,536 | | | $ | 886,425 | |
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 modular space, portable storage and tank and pump units along with value-added products and services ("VAPS"), which include furniture, steps, ramps, basic appliances, internet connectivity devices, security products, shelving systems and other items used by customers in connection with the Company's products. 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 six months ended June 30, 2022 and 2021 was as follows:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Modular space leasing revenue | $ | 212,862 | | | $ | 181,376 | | | $ | 411,939 | | | $ | 351,328 | |
Portable storage leasing revenue | 88,548 | | | 58,848 | | | 166,532 | | | 113,461 | |
Tank and pump leasing revenue | 20,706 | | | 17,109 | | | 39,937 | | | 32,869 | |
VAPS and third party leasing revenues(a) | 87,498 | | | 70,880 | | | 168,424 | | | 133,306 | |
Other leasing-related revenue(b) | 19,006 | | | 14,966 | | | 34,980 | | | 27,877 | |
Leasing revenue | 428,620 | | | 343,179 | | | 821,812 | | | 658,841 | |
Delivery and installation revenue | 125,403 | | | 91,680 | | | 225,734 | | | 175,184 | |
Total leasing and services revenue | 554,023 | | | 434,859 | | | 1,047,546 | | | 834,025 | |
New unit sales revenue | 11,094 | | | 11,008 | | | 17,691 | | | 21,963 | |
Rental unit sales revenue | 16,525 | | | 15,235 | | | 25,299 | | | 30,437 | |
Total revenues | $ | 581,642 | | | $ | 461,102 | | | $ | 1,090,536 | | | $ | 886,425 | |
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(a) | Includes $6.8 million and $7.8 million of service revenue for the three months ended June 30, 2022 and 2021, respectively, and $14.3 million and $14.0 million of service revenue for the six months ended June 30, 2022 and 2021, respectively. |
(b) | Includes primarily damage billings, delinquent payment charges, and other processing fees. |
Leasing and Services Revenue
The majority of revenue (73% and 74% for the three and six months ended June 30, 2022, respectively, and 73% for both the three and six months ended June 30, 2021) was generated by rental income subject to the guidance of ASU 2018-11, Leases (Topic 842) ("ASC 842"). The remaining revenue was generated by performance obligations in contracts with customers for services or sale of units subject to the guidance in ASC 606.
Receivables and Credit Losses
The Company is exposed to credit losses from trade receivables and manages credit risk at the customer level. Because the same customers generate the revenues that are accounted for under both ASC 606 and ASC 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues.
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 assesses each customer’s ability to pay for the products it leases or sells by conducting a credit review that considers expected billing exposure, timing for payment and the customer’s established credit rating. The Company performs its credit review of new customers at inception of the customer relationship and for existing customers when the customer transacts after a defined period of dormancy. The Company also considers contract terms and conditions, country risk and business strategy in the evaluation.
The Company monitors ongoing credit exposure through an active review of customer balances against contract terms and due dates. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowance for credit losses reflects the estimate of the amount of receivables that the Company will be unable to collect based on historical collection experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. The Company's estimate reflects changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance.
Activity in the allowance for credit losses was as follows:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Balance at beginning of period | $ | 49,258 | | | $ | 31,630 | | | $ | 47,629 | | | $ | 29,258 | |
Provision for credit losses, net of recoveries | 10,264 | | | 8,390 | | | 18,865 | | | 16,910 | |
Write-offs | (5,900) | | | (4,058) | | | (12,910) | | | (9,872) | |
Foreign currency translation and other | (78) | | | 823 | | | (40) | | | 489 | |
Balance at end of period | $ | 53,544 | | | $ | 36,785 | | | $ | 53,544 | | | $ | 36,785 | |
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. During the three months ended June 30, 2022, deferred revenue relating to services billed in advance of $20.7 million was recognized as revenue. As of June 30, 2022 and December 31, 2021, the Company had approximately $95.7 million and $79.4 million, respectively, of deferred revenue related to these services.
The Company does not have material contract assets and it did not recognize any material impairments of 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 Company has elected to utilize the optional disclosure exemption made available 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 costs ultimately incurred to provide those services and therefore the Company is applying the optional expedient to omit disclosure of such amounts.
The primary costs to obtain contracts for 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; therefore, the commissions are expensed as incurred.
NOTE 4 - Leases
As of June 30, 2022, the undiscounted future lease payments for operating and finance lease liabilities were as follows:
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(in thousands) | Operating | | Finance |
2022 (remaining) | $ | 32,125 | | | $ | 11,992 | |
2023 | 56,620 | | | 20,004 | |
2024 | 47,858 | | | 17,092 | |
2025 | 40,227 | | | 17,200 | |
2026 | 29,457 | | | 15,202 | |
Thereafter | 69,628 | | | 21,304 | |
Total lease payments | 275,915 | | | 102,794 | |
Less: interest | (39,569) | | | (7,651) | |
Present value of lease liabilities | $ | 236,346 | | | $ | 95,143 | |
Finance lease liabilities are included within long-term debt and current portion of long-term debt on the condensed consolidated balance sheets.
The Company’s lease activity during the six months ended June 30, 2022 and 2021 was as follows:
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(in thousands) | Six Months Ended June 30, |
Financial Statement Line | 2022 | | 2021 |
Finance Lease Expense | | | |
Amortization of finance lease assets | $ | 10,546 | | | $ | 9,514 | |
Interest on obligations under finance leases | 1,299 | | | 1,098 | |
Total finance lease expense | $ | 11,845 | | | $ | 10,612 | |
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Operating Lease Expense | | | |
Fixed lease expense | | | |
Cost of leasing and services | $ | 1,574 | | | $ | 2,131 | |
Selling, general and administrative | 32,430 | | | 29,359 |
Lease impairment expense and other related charges | 213 | | | 1,107 |
Short-term lease expense | | | |
Cost of leasing and services | 17,056 | | | 11,575 |
Selling, general and administrative | 1,071 | | | 723 |
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Variable lease expense | | | |
Cost of leasing and services | 2,822 | | | 3,373 |
Selling, general and administrative | 4,273 | | | 3,792 |
Lease impairment expense and other related charges | 40 | | | 335 |
Total operating lease expense | $ | 59,479 | | | $ | 52,395 | |
Lease impairment expense and other related charges relate to closed locations that are no longer used in operations as a result of consolidation activities within the Company. During the six months ended June 30, 2022, the Company recorded $0.3 million in lease impairment expense and other related charges which is comprised of closed location rent expense. During the six months ended June 30, 2021, the Company recorded $1.7 million in lease impairment expense and other related charges which is comprised of $1.5 million in closed location rent expense and $0.2 million loss on lease exit and impairment charges.
Supplemental cash flow information related to leases for the six months ended June 30, 2022 and 2021 was as follows:
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(in thousands) | Six Months Ended June 30, |
Supplemental Cash Flow Information | 2022 | | 2021 |
Cash paid for the amounts included in the measurement of lease liabilities: | | | |
Operating cash outflows from operating leases | $ | 33,850 | | | $ | 33,409 | |
Operating cash outflows from finance leases | $ | 1,297 | | | $ | 1,095 | |
Financing cash outflows from finance leases | $ | 10,371 | | | $ | 6,935 | |
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Right of use assets obtained in exchange for lease obligations | $ | 19,504 | | | $ | 28,288 | |
Assets obtained in exchange for finance leases | $ | 17,065 | | | $ | 11,530 | |
Weighted-average remaining operating lease terms and the weighted average discount rates as of June 30, 2022 and December 31, 2021 were as follows:
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Lease Terms and Discount Rates | June 30, 2022 | | December 31, 2021 |
Weighted-average remaining lease term - operating leases | 6.1 years | | 6.1 years |
Weighted-average discount rate - operating leases | 4.9 | % | | 5.0 | % |
Weighted-average remaining lease term - finance leases | 4.8 years | | 4.5 years |
Weighted-average discount rate - finance leases | 3.2 | % | | 2.9 | % |
NOTE 5 - Inventories
Inventories at the respective balance sheet dates consisted of the following:
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(in thousands) | June 30, 2022 | | December 31, 2021 |
Raw materials | $ | 35,411 | | | $ | 26,854 | |
Finished units | 6,413 | | | 5,885 | |
Inventories | $ | |