WillScot Holdings Corp Q1 FY2026 Earnings Call

Welcome to the First Quarter 2026 WillScot Earnings Conference Call. My name is Cherie, and I'll be your operator for today's call. Operator instructions were provided. Please note that this conference is being recorded. I will now turn the call over to Charlie Wohlhuter. Charlie, you may begin.

Thank you very much, Cherie. Good afternoon, everyone, and welcome to our First Quarter 2026 Earnings Call. With me in the room today are Worthing Jackman, our Executive Chairman; Tim Boswell, President and Chief Executive Officer; and Matt Jacobsen, Chief Financial Officer. Presentation material may be found on our Investor Relations website at investors.willscot.com. Today's call will contain various operating results on both a reported and adjusted basis. Adjusted results exclude special items that affect comparisons with reported results. Descriptions of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures are included in today's presentation material. Also, unless otherwise stated, we're comparing results to the same period in 2025. Before we begin, I'd like to direct your attention to Slide 2, containing our safe harbor statement. We will be making forward-looking statements during the presentation and our Q&A session. Our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control. As a result, our actual results may differ materially from comments made on today's call. For a more complete description of the factors that could cause actual results to differ and other possible risks, please refer to the safe harbor statements in our presentation and our filings with the SEC. And now it's my pleasure to turn the call over to our President and Chief Executive Officer, Tim Boswell.

Thank you, Charlie, and good afternoon, everyone. We appreciate you joining us on today's call for a discussion of the operating environment, our strategic priorities, first quarter 2026 results, and our improving outlook for the remainder of the year. As you saw with our results this afternoon, we delivered a solid first quarter, and I'd like to thank the team for their continued focus on consistent execution, on behalf of our customers, our shareholders and for one another. The operating environment remains uneven, though we continue to see encouraging internal leading indicators across the business, and we remain focused on executing the commercial, field and central operating priorities that are within our control and support our return to organic growth and long-term shareholder value creation. Matt will go into more detail regarding the first quarter financials. If I zoom out, all metrics are consistent with the progression towards organic topline growth, which continues to be our focus for the second half of 2026. Modular activations were up year-over-year for the second consecutive quarter. And total activations were up 10% year-over-year in Q1 and increased across all product lines. Leasing and services revenue grew modestly by $2 million year-over-year, which is a step in the right direction. But within that, delivery and installation revenues were up 12% year-over-year. This is evidence that our order backlogs, which have been growing for several quarters now, are converting as expected, which is a good leading indicator for future leasing revenues. Adjusted EBITDA of $211 million in the quarter exceeded our outlook. And while adjusted EBITDA margin was lower than we planned, the compression was volume driven with rental costs up 9% and commissions up 33% year-over-year, respectively. So those line items, combined with a higher mix of delivery revenue, represent short-term margin headwinds, but they are the type of headwinds associated with lease revenue inflection, which again, aligns with our objective for the year and is included in the increased guidance driven by topline growth. Even with those investments and increased capital expenditures in Q1, adjusted free cash flow was $116 million, representing a 21% margin on total revenue. So we continue to see best-in-class free cash flow conversion and strong returns on capital, which is the fundamental strength of our business. That gives us flexibility with capital allocation, and we remain balanced in Q1. We returned $20 million to shareholders through share repurchases and our quarterly cash dividend, while reducing $76 million in debt balances. And based on the increased activity levels, which are driving the guidance raise, I expect there will also be greater opportunities to reinvest organically in the business. Altogether, I'm happy with the results to start the year that mostly focused on advancing the strategic initiatives that are within our control and critical to our positioning in the market for the long term. First, from a commercial perspective, both our customer value proposition and competitive positioning have never been stronger. And we're finding this stride at a moment when the mix of market activity is skewing towards larger, more complex projects, where our capabilities are disproportionately strong. From World Cup scale logistics to data center builds, power generation, manufacturing and other critical infrastructure projects, we are supporting some of the most important work in the North American economy. These projects align extremely well with our value proposition, coordinating detailed requirements at a large scale on unforgiving timelines with dependable execution right from the start. These differentiated capabilities are resonating with our most sophisticated customers. Enterprise accounts revenue increased 12% year-over-year in the first quarter, which is higher than the growth rate we expected for the full year. Order and activation trends strengthened throughout the quarter, with the current pending order book for enterprise accounts up over 25% year-over-year, excluding the World Cup. This provides visibility into the second half of the year. And overall, this is a healthier revenue mix with growing exposure to larger, higher quality and longer duration projects that tend to draw from our full product offering and capabilities. While that is a real bright spot, we still see opportunity to execute more consistently across the entire organization. Our new regional sales management layer gives us the right leadership and oversight model in the field for improved alignment at the territory, accounts and product levels. And after four months under this structure, we're seeing newly activated revenue in line with our budgeted sales quotas and an over 30% year-over-year increase in commission payouts, and that is despite a continued 6% year-over-year decline of nonresidential construction starts square footage and continued contraction of the Architectural Billings Index in the quarter. So while we have not seen stabilization across all of our local markets, the favorable mix of end market activity, combined with better internal execution are providing commercial momentum. Operationally, I'm very proud of how our field and central teams are executing across multiple priorities. We are on track with our network optimization efforts, including real estate and fleet dispositions while simultaneously supporting elevated activity levels and fleet investments in high-demand product categories. We are increasing work order volumes to drive unit availability and reduce lead times. The ability to reactivate large volumes of idle equipment quickly and cost effectively in a rising demand environment is a significant competitive advantage, while we also make meaningful and deliberate new fleet investments to further differentiate our offering long term. And we mobilize this capacity with in-house expertise better than anyone in the industry. Continuing to develop these capabilities, we are rolling out enhanced dispatch and route optimization tools across the field. These tools are improving utilization of our drivers and trucking fleet as well as our service and setup teams, reducing average miles per route and enhancing the customer experience through more effective omnichannel communication. And we are focused on improving service levels across all customer touch points to improve the experience and ease of doing business, while reducing our cost to serve. And we're doing all of this safely. Our recordable incident rate dropped below 0.5 for the last three months. That is exceptional performance and that's a direct result of disciplined execution and a strong safety culture across the organization. So thank you again and great work by our team. The common denominator in delivering successful outcomes is our people. WillScot was again recertified as a great place to work for the fourth consecutive year, which is a designation based entirely on independent employee feedback and a reflection of our company culture. Engagement compounds when we execute at a high level and engaged teams deliver better results for customers and for shareholders. Looking out through 2026, we remain cautious around local market demand, but believe we are better positioned than ever to win when these markets stabilize and return to growth. Meanwhile, our other commercial strategies to develop enterprise accounts, new verticals and our differentiated offerings all show strong momentum. And we expect that our multiyear operational improvement roadmap will continue to be a source of both differentiated execution capabilities and structural margin expansion over time. Our focus is clear: execute on initiatives within our control, strengthen our competitive positioning, serve our customers exceptionally well, be a great place to work and drive long-term shareholder value. I'll now turn the call over to Matt to go into more detail on Q1 and our outlook. Matt?

Thanks, Tim. Starting with the quarter, our first quarter results exceeded our expectations entering the year despite continued softness across certain end markets, as Tim noted. Beginning on Slide 4. Total revenue for the quarter was $549 million, modestly lower year-over-year due to lower sales activity, but ahead of our outlook. Importantly, leasing and services revenue was up year-over-year by $2 million or about 0.5% due to the strong growth in delivery and installation revenues on increased activation volumes and large complex activity in the quarter. Breaking this down a bit further, leasing revenue totaled $426 million, down approximately 2% year-over-year, reflecting ongoing pressure in local markets with container units on rent driving the majority of the overall decline. Pricing and product mix continued to offset a portion of the volume impacts and VAPS revenue in the quarter ticked up modestly year-over-year in absolute dollars and rose 50 basis points year-over-year to 17.7% of total revenue. In contrast, delivery and installation revenue increased more than 12% year-over-year to $100 million. Large project demand is driving solid activation growth. Modular unit activations exceeded our internal expectations and increased 8% year-over-year in Q1, marking the second consecutive quarter of year-over-year activation growth. This is a testament to the hard work at all levels of the company, executing against our strategic plans and a positive indication of the continued improving commercial demand that we're seeing, even despite some continued end market softness. As Tim mentioned, we believe that our ability to execute on large projects is a competitive advantage, and we're seeing continued increased activity levels on these types of projects, proving our position as a solutions provider of choice in the industry. Based on where we stand today, coupled with our activation activity and the pending order book, we now have increased conviction around leasing revenue inflecting to year-over-year growth at some point in the second half of 2026. Adjusted EBITDA for the quarter was $211 million with an adjusted EBITDA margin of 38.5%. Margins were down year-over-year, largely due to higher variable costs and increased delivery and installation activity. Importantly, this margin pressure stems from the gross margin line reflecting unit preparation costs associated with increased volumes, which is common in a period where we're increasing activations and working towards leasing revenue and an eventual units-on-rent inflection. The large project activity we're seeing typically comes with long durations and solid returns, but there is a timing element around revenue recognition and cost absorption. While that affects margins in the near term, these activations increase fleet utilization and support leasing revenue run rates in subsequent periods. So very much a positive for units on rent and the underlying business trends. Importantly, we continue to see opportunities for efficiency gains through operational initiatives that Tim mentioned, and we expect to see positive operating leverage in the business as we return to growth. Adjusted net income in the quarter was $39 million, and adjusted diluted earnings per share was $0.21. The impacts of lower container units on rent volumes, lower sales and increased unit preparation costs year-over-year in the quarter, were partially offset by lower SG&A, depreciation and interest expense alongside a lower share count from repurchases. Overall, we're encouraged by the quality of activity in the quarter and the implications that it has on the remainder of the year. Turning to cash flow on Slide 6. The business continues to generate strong and predictable cash flows, and we're reinvesting more of those cash flows into driving growth in the business. Net cash provided by operating activities was $191 million in the quarter, which included approximately $14 million of costs associated with network optimization and executive transition costs. Given our strong, large project demand, we reinvested $89 million of net CapEx in the quarter, which increased about 40% year-over-year. Adjusted free cash flow generated in the quarter was $116 million at a 21% margin. This equates to adjusted free cash flow per share of $0.64 at our current share count or $2.54 over the last 12 months. The decrease in adjusted free cash flow year-over-year was entirely due to increased net CapEx investment to support fleet growth in higher-value product categories and the project demand pipeline. These are value-accretive investments which have strong returns and position us well for future growth. Free cash flow in the period supported a $76 million reduction of our outstanding debt and funded $20 million of returns to shareholders through our quarterly dividend and share repurchase programs. From a balance sheet perspective, on Slide 8, we ended the quarter with net debt of $3.5 billion and leverage of 3.7x. Our debt maturity profile remains favorable, with no maturities until August of 2028. And our weighted average cash interest rate is approximately 5.7%, with roughly 90% of our debt effectively fixed, inclusive of our interest rate swaps. We have approximately $1.5 billion of availability under our ABL facility, so ample liquidity with a flexible governance structure. Now on to Slide 9. Based on our first quarter performance and our current order book visibility, we are raising our full year 2026 outlook. We now expect revenue of approximately $2.25 billion, adjusted EBITDA of approximately $915 million and net CapEx of approximately $325 million. As we discussed in the prior two quarters, our conservative approach to our outlook is unchanged and does not assume a recovery in the local markets. We continue to drive internal plans and compensation targets for the year that exceed the increased revenue and EBITDA guidance we laid out today. The increase in revenue and adjusted EBITDA reflects stronger-than-expected project activity and improved visibility into the middle of the year. Our large-scale modular project pipeline is giving us more confidence that leasing revenues can inflect year-over-year at some point in the second half of 2026, which is now implied in the current outlook. Looking into Q2, we believe total revenues for the quarter will increase about 7% sequentially from Q1 2026 to approximately $585 million in Q2 of 2026 driven by higher leasing and delivery and installation revenues. Given the size of large project pipeline, we expect to incur additional unit prep costs in Q2. Additionally, increased delivery and installation revenue mix, including that which is related to our support of the World Cup event, will provide sequential margin pressure. Increasing leasing revenue should offset a good portion of these headwinds, but we expect Q2 margins to be pressured by about 30 basis points sequentially from Q1. As a result, we expect adjusted EBITDA of approximately $223 million in Q2. As Tim mentioned, serving these types of projects is part of our unique value proposition that differentiates us with a full suite of capabilities to serve our customers. Again, these are all strong investments with solid return profiles. In conjunction with this spend, our increase in net CapEx reflects higher investment in select product categories tied to those projects. Local demand remains stable, but we remain cautious about this segment of the market. As such, we believe the targeted investments in higher return opportunities is the right approach to maximize long-term value. Looking at a few other items for Q2. We expect depreciation and amortization expense in the period to be approximately $100 million, interest expense to be about $54 million and our effective tax rate to be around 27%. To wrap up, Q1 was a strong start to the year and reinforces our confidence in the durability of our business model. We're investing to support growth and growing demand in high-quality opportunities, maintaining balance sheet strength and returning capital to shareholders, all while positioning the company for improved performance as we move through the year. With that, I'll turn it back to Tim.

Thanks, Matt. We've all put in a lot of hard work over the last few years to integrate and reposition our business in a challenging market backdrop. Those efforts have put us in a position today to execute at a higher level, capture new market opportunities and deliver on expectations. And our team is committed to continuing to raise the bar and performance standards, while executing in the right way, consistent with our values. All of that makes me really proud to be part of the WillScot team. I believe that our business has never been better positioned to compete and win than we are today. And I'm confident that together, we can deliver on our commitments for sustainable long-term growth and value creation. Thanks again to our team for the strong start to the year. This concludes our prepared remarks. I'll turn it back to the operator for Q&A.

Operator instructions were provided. And our first question will come from the line of Scott Schneeberger with Oppenheimer.

Let's start with some discussion about the guidance and the back half of the year. Leasing revenue growth inflection now is what you're anticipating for the second half of 2026. Could you talk about the couple of things that maybe could put you there earlier and what would be going right, things we would look for? And then on the flip side, what would be the things that have you nervous about achieving that? I'll come back with a follow-up.

Okay, Scott. As we said in our remarks, we haven't assumed any real improvement in local market activity, nor have we assumed any continued erosion of that activity. So that's a variable that's outside of our control. As I think about what's been working to date in the business, activations were up 12% year-over-year in Q1 across the business. The sales organization size is up about 10% year-over-year across the business. But much of that activation growth is being driven by the enterprise accounts portfolio. So we haven't necessarily seen the full productivity expectation that we think we can get out of the local field sales organization. That's a variable that we're still working on, and there was a market element to that. I'm very confident in the enterprise accounts strategy and backlog. There are some really exciting things going on out there in the economy, and we tend to improve our win rates as project sizes go up. So we're really holding our own there. We have seen some examples of delays in project starts. That's not uncommon for some of these very large projects; these delays are outside of our control. We quite like it when projects get delayed after they start, that works in our favor. Those are some things that we're watching. But at this point, the team is huddling weekly on sourcing supply for some of these major opportunities, and a lot of that is building up in the back half of the year.

Great. A follow-up: Matt, thanks for the second quarter outlook. I believe I heard 30 basis points quarter-over-quarter down on a few drivers that would be dilutive in the second quarter. Are they going to persist into the third? Or when we speak of the back half by midyear, should those dilutive impacts, including World Cup, persist? Are we going to really see a bit of a hockey-stick turn in the back half? How should we think about the margins and the cadence in Q3 and Q4?

Yes, Scott, thanks for the question. I think we'll see a bit of dilution into the second quarter sequentially. But as we generally do, I would not expect to see that as we go into Q3 and Q4. Q2, even without the World Cup, is generally one of our higher periods where you start to really build activation volumes, but you're also incurring more of the upfront get-ready costs. That's a normal phenomenon. It's exacerbated a little bit this year by the large project activity and some of the World Cup impacts, which also impact D&I margins, given there's a lot of activity moving around those units. But exiting Q2, I would not expect that to persist. In fact, I think we would see some pretty good expansion, probably even more than we would have seen last year as we go into Q3 coming out of what would be a somewhat lower Q2 than we would generally expect.

And that will come from the line of Andrew Wittmann with Baird.

Let's talk about rate and AMRs here. Could you address what you're seeing there? In modular, up slightly year-over-year, but sequentially, the rates were down a little. Is that reflective of enterprise customer mix? VAPS was up, so I'm focusing on base pricing. I'm trying to get a sense of the competitive environment and what it means for the rates you're able to achieve in the modular business.

Andy, I wouldn't attribute any of this to enterprise accounts. We tend to get a strong value proposition when working with more sophisticated customers, and their purchasing criteria in many cases skew away from price toward dependability, execution and service elements, which all work in our favor. If I look across market pricing on new contracts, it varies by product category. We've had pressures on the ground-level office product line for some time. That feels like it's stabilizing, but it's still down significantly from the peak. In contrast, we're seeing pretty good price momentum in our complex and FLEX business. There is a little mix headwind from FLEX given those are smaller format units, but they have higher returns on capital and higher price per square foot. So no real concerns from a rate perspective today, and we've got some pockets of strength where we can continue to push as we progress through the year.

The Q4 to Q1 phenomenon isn't unusual. We do see some variability as you go from Q4 to Q1.

I wanted to drill into this quarter specifically. Also, on the margins: you described drivers accounting for about 240 basis points year-over-year. Can you give a sense of the relative positioning of the bigger factors? Obviously, topline deleverage is one. The mix effect and unit preparation and repair/maintenance costs are good things that suggest future benefit, but I'd like the order of magnitude and whether these subside as the year progresses.

Sure. We view most of these as good things. We're happy to be getting more units ready and decreasing our response time to customers as incremental demand comes. The impact from increased variable costs due to increased activations and higher commissions is about 150 to 160 basis points of margin compression. We expect that to continue a bit into Q2 and then subside later in the year based on current visibility. Another piece is delivery and installation revenue: a mix shift with over $10 million or a 12% increase in D&I revenue, which is a lower-margin revenue line than our overall blended EBITDA, and that's worth another roughly 50 basis points. Lastly, the container units-on-rent volume being down versus a year ago is a headwind; we discussed a $50 million headwind at the start of the year that impacts overall margins. Those are the main drivers.

And that will come from the line of Kyle Menges with Citigroup.

You mentioned enterprise account pending orders up 25% ex-World Cup. What does total order book growth look like and through April as well, ex-enterprise accounts?

Overall, pending orders in modular are up 14% year-over-year, which is strong across the board, and up 7% for storage. Within that, pending orders for climate control are up about 100% year-over-year. Pending orders are those accumulated and not yet delivered. Looking at order rates week-to-week, modular order rates are up mid-single digits year-over-year for non-enterprise customers, and storage order rates are down about the same magnitude when you remove enterprise accounts. So we're seeing better performance across customer segments in modular relative to storage, where storage remains more weighted toward enterprise wins.

As a follow-up: what sort of year-over-year orders growth would you need to see from May through the rest of the year to actually achieve that second-half leasing revenue inflection?

There are two sides to it, including returning units. Based on activity levels we've seen—this is our second quarter in a row of modular activation growth—I'd say a few consecutive quarters of year-over-year activation growth typically gets you to a leasing revenue inflection and then another quarter or two afterward to drive the actual volume inflection. Based on our current rates and activations, we have good visibility into the middle of the summer. At year-end we had been looking at early 2027 for inflection; based on current trends, we've pulled that forward roughly a quarter. We're working to accelerate it further.

And that will come from the line of Steven Ramsey with Thompson Research Group.

Wanted to continue that thought. Can you talk about returned units, maybe more on modular: are return units year-to-date coming in as expected and how is that impacting the guidance?

We've seen returns subside over time, more significantly in storage as units-on-rent declined, but we've seen the same trend in modular. Q1 was a good start from a units-on-rent perspective; it's the best we've had since 2022, with modest increases from the end of Q4 into the end of March. Activations in Q1 exceeded returns in both modular and storage. We expect the trend to continue until activations increase further and some of the projects start coming back, noting many of these projects have long durations.

The return activity is largely in line with our original plans for the year. They are down modestly year-over-year, and we modeled and expected that based on historical experience. The changed variable this year has been the delivery activity.

Helpful color. Secondly, VAPS leasing revenue edged up a bit. You've been just under $400 million the last two years on VAPS leasing revenue. Do you expect this line to grow this year?

Yes, we do expect VAPS to grow in 2026. Penetration on new contracts varies by product and some are off peak attachment rates from a couple years ago, and that's on our agenda. Even with that, we still have a healthy spread versus the reported AMRs inclusive of value-added products. We expect to grow the line this year with improved attachment rates and new product introductions, including perimeter solutions and other newer fleet categories that will contribute to VAPS revenue.

And that will come from the line of Angel Castillo with Morgan Stanley.

I want to unpack mega projects and the shift in mix. It sounds like enterprise accounts are doing well. Why is there more of a timing impact than in the past in terms of prep? Is it the type of products required, more remote locations, or something else? Also, with D&I increasing, is that due to more inflation in D&I or location? I'm a bit surprised at how much that's leading versus historical trends.

Angel, on mega projects and timing: larger projects typically have longer lead times and more involved setup and installation components. The cost and revenue recognition dynamics are the same as for other modular deliveries: variable costs are recognized when work is performed in advance of a unit being put on rent, and D&I revenue and margin is recognized as that work is performed at the beginning of a rental, with rental revenue thereafter. The D&I element picked up rapidly, up 12% year-over-year in Q1, and the rental revenues associated with these projects will accrue over the next three to four years on average based on project size. Looking at market composition, large and mega segments are up about 30% year-over-year, and within that, data centers are up 70% year-over-year. This mix shift toward larger projects fits our value proposition because we are well positioned to serve more sophisticated customers, and that often flows into the enterprise book of business.

Tim covered the D&I piece. To reiterate: D&I revenue mix as a percentage of total revenue is driving margin pressure. It's not that D&I has become more expensive on a structural basis in our model; it's that it's representing a larger share of revenue during this activation-heavy period, which depresses the blended margin in the near term.

Helpful. On CapEx: it sounds like you're following demand and making investments. Which products within VAPS are you deploying more capital to? Is it more related to mega projects or data centers? As we think about going forward, is a higher percentage of sales for CapEx the right way to think about normalizing, or is this a one-time step-up?

CapEx is always demand-driven. Historically we've ranged from about $200 million to $360 million of annual net CapEx depending on the market. Incremental CapEx is largely going into our Complex Modular business, which is highly utilized and associated with larger projects. We're investing behind that, including FLEX, and other categories like perimeter solutions and Clearspan, but the majority is for modular.

The CapEx is a combination of new fleet and refurbishment. In Q1, about 60% was new fleet and the other roughly 40% was refurbishment. We're addressing demand from both angles.

That will come from the line of Josh Chan with UBS.

On local markets: you said you're not embedding any improvement, but are you seeing anything on the ground suggesting the market is moving one way or another?

We've seen local markets be more stable. The pace of decline has reduced and it's been relatively stable. As Tim mentioned, container counts are down a little, but modular local demand appears stable.

We've been adding to the sales force, which indicates that we see opportunities in the market. However, broader data points like nonresidential square footage are still down about 6%, so we remain cautious. If market mix continues to shift toward larger projects, we'll allocate sales coverage accordingly.

On rate growth: what base rate growth is embedded in your guidance for 2026?

For modular, we were just under 3% rate growth in Q1. You may see a slight deceleration in Q2 driven by some smaller units for the World Cup, which is a project nuance. From there, we expect opportunities for increases in FLEX and Complex equipment. We continue to see pressure on ground-level offices and smaller equipment. Overall, the guidance is a bit conservative on pricing; doing better would provide upside.

And that will come from the line of Philip Ng with Jefferies.

This is Maggie on for Phil. Back to the leasing revenue inflection expectations in the back half: what trends are you seeing in modular versus storage and how is each segment contributing to that inflection? Also how should we think about the volume recovery piece versus AMR contribution to that inflection?

The opportunity is definitely in modular. We started the year with a $50 million headwind on storage, so storage has a bit further to go to inflect year-over-year. On modular, a quarter ago we were down 5% on volume; now we're down 3% on volume. We're starting to eat into that headwind for modular and the rate and VAPS tailwinds will shine through there first. So modular inflection will come before total company inflection, and that's driving the outlook.

You reported closing about 40,000 units in the quarter, presumably part of network optimization. How do you see disposition activity over the next few quarters? Is this a one-and-done or more to do? And is the primary benefit real estate or carrying cost savings, or is there cash proceeds from disposing underutilized assets?

From a fleet perspective, when we took the restructuring charge in Q4, we removed those units from fleet counts for pro forma purposes. In Q1, many of those units were physically processed as we exited properties, but there was no material change in reported fleet counts. The primary benefits include real estate savings to help control cost increases and other benefits such as lower property insurance costs and reduced indirect costs from operating multiple locations. We expect to continue discovering additional operational benefits from a more optimized footprint.

And that will come from the line of Faiza Alwy with Deutsche Bank.

Tim, on data center growth: on the last call you talked about potential increase in the data center vertical of 50%. This quarter you said 70% in the large and mega segment. Do you have an updated estimate for growth in this vertical this year into 2027? Activity seems to be accelerating.

Faiza, activity levels do feel like they've accelerated. To clarify, we still expect activated revenue in data centers to be up about 50% year-over-year this year. When I said 70%, that referred to the volume of data center projects in our CRM in the large and mega segment being up 70% year-over-year. Despite the growth, data centers still represent only about 25% of the large and mega projects we're pursuing. We're also seeing growth across many other verticals, including power generation, technical manufacturing, pharmaceuticals, stadium and special event projects. The diversity and volume of project activity across sectors is the exciting part.

Why the discrepancy between doing well in enterprise accounts and mega projects versus small project and local market side? Is it because you're devoting more sales resources to large customers or is macro activity simply stronger in the large/mega space where you're well positioned?

It's a combination. We're more mature operationally in our field-based sales organization. The enterprise accounts team investment less than a year ago represents a focused initiative that is showing traction. The market activity mix is shifting toward larger projects, and our operational strengths make us more competitive in those larger situations. So strategy, market mix and our capabilities all contribute.

I'm showing no further questions in the queue at this time. I would now like to turn the call over to Mr. Tim Boswell for any closing remarks.

Thanks, everybody, for your interest and your support of the team here at WillScot. Thanks again for a strong quarter and the focus on clear and clean execution as we round out 2026.

This concludes today's conference. Thank you, ladies and gentlemen. You may now disconnect.