Willscot’s 2026 Q2 Call: Units-on-Rent Guidance Split and Leasing Inflection Delay Create Tension

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $612 million, up 4% year-over-year
• EPS: $0.26 per diluted share, flat to prior year
• Operating Margin: 37.2%, compressed about 500 basis points year-over-year

Guidance:

• Revenue for full year 2026 expected to be approximately $2.3 billion, up $50 million from prior outlook.
• Adjusted EBITDA outlook increased to approximately $920 million.
• Q3 revenue expected to be approximately $585 million, up 3% year-over-year.
• Q3 adjusted EBITDA expected at approximately $232 million, or 39.7% margin.
• Net capex outlook increased to approximately $375 million for 2026.

Business Commentary:

Revenue and Activation Growth:

• Will Scott reported total revenue of $612 million for Q2 2026, up 4% year-over-year.
• This growth was driven by leasing and services revenue, which increased by 6%, particularly notable was the 25% increase in delivery and installation revenue.
• The growth in revenue was supported by strong activation volumes and an increase in modular activations, which were up 16% year-over-year, with a significant portion attributed to large project deployments and the World Cup event.

Order Book and Demand Outlook:

• The company's modular pending orders increased by 13% year-over-year.
• This increase reflects strong demand across target verticals, including critical infrastructure, manufacturing, and data centers, despite a declining non-residential construction square footage backdrop.
• The positive outlook is supported by steady progress in commercial and operational initiatives, enhancing the company's ability to secure future projects.

Capital Investment and Fleet Upgrades:

• Will Scott increased its net capex outlook to approximately $375 million for the year.
• This investment is focused on new units and refurbishing highly utilized fleet to support the large-scale project pipeline.
• The significant upgrade in the modular fleet is driven by the need to meet rising utilization levels and support large project demand, which is expected to improve future leasing revenue.

Margin and Cost Dynamics:

• The company's adjusted EBITDA margin for Q2 was 37.2%, reflecting a compression of about 500 basis points year-over-year.
• This compression was due to higher costs in leasing and unit transfer to support accelerated modular activation activity, as well as revenue mix changes from higher delivery and installation revenues.
• Sequential margin expansion is expected in Q3 and Q4 as these cost pressures moderate and lease revenues continue to build.

Storage and Modular Segment Performance:

• Modular activations were up 16% year-over-year, while portable storage activations showed slight year-over-year growth, driven by the World Cup.
• Despite year-over-year headwinds in portable storage units on rent, growth in climate-controlled storage partially offset these challenges.
• The company is encouraged by the strong performance in climate-controlled storage and other value-added products, which are expected to exit 2026 with roughly 20% growth.

Sentiment Analysis:

Overall Tone: Positive

• CEO noted 'steady progress', 'increased confidence in our outlook', and that the business is 'extremely well positioned to execute and win'. He expressed being 'pleased with the start to the year and the continued momentum' and described the team's dedication as 'humbling' and prospects as 'exciting'.

Q&A:

• Question from Kyle Menges (Citigroup): Concerns about risk of modular rates turning negative in 2027 due to large project mix.
  Response: Management sees no risk; large projects support higher modular rates and better returns, with strong growth in panelized and flex fleet.

• Question from Kyle Menges (Citigroup): Whether current activation rates are higher than like-for-like rates on existing units.
  Response: Management sees no risk and views investments as opportunities with returns likely better than average units, supported by strong rate environment.

• Question from Kyle Menges (Citigroup): Expectation for free cash flow to be down year-over-year in the second half due to stepped-up CapEx.
  Response: Management agrees, expecting similar dynamic into Q3 and continued reinvestment to drive recurring lease revenue.

• Question from Kyle Menges (Citigroup): CapEx required as a percentage of sales and IRR for higher-value product categories versus traditional offerings.
  Response: Differentiated units require no change in underwriting thresholds; focus is on attractive returns, long duration, and positioning for complex projects, with high win rates.

• Question from Scott Schneeberger (Oppenheimer): Clarification on World Cup impact and units, and comp for next year.
  Response: About 2,000 units deployed, half modular; $13M revenue in Q2, with ~$5M D&I remaining in Q3. Underlying leasing revenue excluding World Cup was flat in Q2, providing a base for future growth.

• Question from Scott Schneeberger (Oppenheimer): Sustainability of demand environment, win rates, and competitiveness on large projects.
  Response: Modular activations and order book up double digits; storage activations up slightly. Demand pipeline is large and diverse; win rates have improved, especially for complex projects, due to operational capabilities.

• Question from Angel Castillo (Morgan Stanley): Color on rates, discounting activity, and margin impact across modular and storage.
  Response: No change in transactional environment; discounting is project-specific. Margin pressure primarily from upfront investments in large projects, not widespread discounting.

• Question from Angel Castillo (Morgan Stanley): Confidence in 2027 visibility and mitigation of project push-outs affecting CapEx appetite.
  Response: Pipeline supports CapEx levels; projects often delay but new ones start. Investments are in versatile fleet categories; enterprise account momentum adds comfort.

• Question from Andrew Whitman (Baird): Activations excluding World Cup and outlook for transactional/local business recovery.
  Response: Modular activations excluding World Cup were around 10% in Q2, sequentially better than prior quarter. Focus on improving local execution, enterprise accounts, and value-added products to drive recovery.

• Question from Andrew Whitman (Baird): Macro perspective on what it takes for transactional demand to return.
  Response: Believes crowding out effect from large projects may pressure other segments, but Will Scott's scale and capabilities position it well to navigate.

• Question from Maggie (Jefferies): Sequential quarter-over-quarter improvement in units on rent and expectations for back half.
  Response: Modular units on rent grew ~2,000 sequentially, half from World Cup; Q3 will drop ~1,000. Base guide assumes sequential flatness, but inflection would be positive. Storage has seasonal factors.

• Question from Maggie (Jefferies): Competitive dynamics with national players and differentiation in current market.
  Response: Competitive success is attributed to operational capabilities and customer service; win rates demonstrate ability to compete despite market pressures.

• Question from Ronan Kennedy (Sparkly): VAP trends, penetration, pricing, and attach rates on large projects.
  Response: Value-added products revenue up ~3% year-over-year; attach rates not materially different in large projects. New offerings like perimeter solutions growing well with ~20% CAGR expected.

• Question from Ronan Kennedy (Sparkly): Margin components reversing in 2H and 2027 margin opportunity.
  Response: Q3 margin expansion of 200-300 bps from reduced D&I mix and lower cost of leasing drag; Q4 expansion 300-500 bps. 2027 opportunities include operating leverage, work order cost benefits, route optimization, and SG&A improvements.

• Question from Josh Chan (UBS): Typical duration of elevated activity periods and agility in spending.
  Response: Cycles vary; agility is key due to in-house refurbishment control, allowing demand-driven investment without long-term constraints.

• Question from Josh Chan (UBS): Why full-year revenue guide isn't stronger if leasing momentum continues into Q3/Q4.
  Response: Guidance is prudent, considering transactional activity uncertainty and sequential step-down from World Cup in Q3; positive surprises possible.

• Question from Faiza Alwi (Deutsche Bank): Most impactful internal initiatives driving win rates and commercial success.
  Response: Initiatives span commercial team staffing/training, enterprise team build-out, new product lines (cold storage, industrial tenting), route optimization, fleet disposition, and shared services process improvements.

• Question from Faiza Alwi (Deutsche Bank): Industry utilization perspective and supply constraints cycle.
  Response: Constraints exist in specific segments, supporting pricing; inflation impacts new product costs. Will Scott's ability to reactivate/refurbish fleet provides advantage.

Contradiction Point 1

Sequential Units on Rent Trend for H2

Contradictory guidance on whether units on rent will continue to increase quarter-over-quarter in the second half.

Questioner (Jefferies) - Questioner (Jefferies)

2026Q2: Yes, units on rent increased sequentially ex-World Cup. For modular, base assumption is flat sequentially on average for the year (offsetting normal Q4 seasonality). Storage has some front-loaded business... but growth is expected. - Matt Jacobson(CFO)

Did modular and storage units on rent show sequential improvement post-World Cup, and is continued quarter-over-quarter growth expected in the back half? - Maggie (Jefferies) on behalf of Philip Ng

2026Q2: Excluding World Cup, modular units on rent up sequentially. For H2, base guide does not assume flat sequential units; potential for inflection but not embedded. - Tim Boswell(CEO)

Contradiction Point 2

World Cup Revenue Impact and Margin Drivers

Contradiction in the characterization of the World Cup's impact on revenue and its implication for margin expansion in Q3.

Scott Schneeberger (Oppenheimer) - Scott Schneeberger (Oppenheimer)

2026Q2: Q2 revenue was ~$13M (40% rental, 60% D&I). Q3 mainly involves dismantle costs (~$5M D&I). Excluding World Cup, leasing revenue was flat in Q2." ... "Q3 margin expansion (~200-300 bps) driven by: 1) Subsiding D&I revenue mix (logistics costs from World Cup), 2) Reduced drag from cost of leasing increases. - Matt Jacobson(CFO)

Could you clarify the World Cup impact (2,000 units total, 750 modular) and how to think about cost pressure and comps next year? - Ronan Kennedy (Barclays) on behalf of Manav Patnaik

2026Q2: Underlying leasing revenue excluding World Cup was essentially flat in Q2." ... "Q3 margin expansion ~200-300 bps driven by D&I mix subsiding and lower cost of leasing drag. - Matt Jacobson(CFO)

Contradiction Point 3

Timing of Leasing Revenue Inflection

Guidance for when leasing revenue will turn positive is pushed forward.

Kyle Menges (Citigroup) - Kyle Menges (Citigroup)

2026Q2: The previous expectation for leasing revenue inflection was early 2027; based on current activity, this has been pulled forward to around mid-2026 (Q3/Q4). - Tim Boswell(CEO)

What year-over-year order growth from May to year-end is needed to achieve the leasing revenue inflection in the second half? - Josh Chan (UBS)

2026Q1: The outlook assumes no improvement and no further deterioration in local markets... The previous expectation for leasing revenue inflection was early 2027. - Tim Boswell(CEO)

Contradiction Point 4

Q3 Margin Expansion Outlook

Expectations for Q3 margin pressure change from no pressure to significant dilution.

Kyle Menges (Citigroup) - Kyle Menges (Citigroup)

2026Q2: Yes, similar dynamics are expected in Q3 with continued reinvestment to meet the $375M net CapEx guide. - Matt Jacobson(CFO)

Will free cash flow decrease year-over-year in H2 due to increased CapEx? - Scott Schneeberger (Oppenheimer)

2026Q1: This pressure is not expected to persist into Q3; instead, expansion is anticipated to be stronger than last year as the year progresses. - Matt Jacobsen(CFO)

Contradiction Point 5

2026 Free Cash Flow Guidance

Guidance appears inconsistent between fiscal years.

What were the main drivers of Citigroup's recent earnings performance? - Kyle Menges (Citigroup)

2026Q2: Yes, similar dynamics are expected in Q3 with continued reinvestment to meet the $375M net CapEx guide. - Matt Jacobson(CFO)

Will free cash flow decrease year-over-year in the second half due to increased CapEx? - Angel Castillo Malpica (Morgan Stanley)

20260220-2025 Q4: The initial guide is around $415 million of adjusted free cash flow, excluding ~$35 million in network optimization implementation costs. Net CapEx is guided at $275 million... - Matthew Jacobsen(CFO)