Mobile Mini's purchase of ETS has investors looking closely at its future. Source: Evergreen Tank Services.
The need for storage challenges just about everyone, and Mobile Mini (MINI) has created a successful business model based on making it simple and cost-effective for customers to use its innovative portable-storage methods to meet their personal and professional needs. Coming into Thursday morning's first-quarter financial report, Mobile Mini shareholders wanted to see continued evidence of the company's steep growth trajectory. After taking into account a one-time charge the company had made clear was coming, Mobile Mini's results were mixed. Let's look more closely at Mobile Mini's latest report and what's coming next for the storage provider.
How Mobile Mini started out 2015
Mobile Mini's first-quarter numbers looked ugly on their face. Revenue of $132.6 million was up nearly 30% from the year-ago quarter, but investors had expected even faster growth of about 31.5%. Far worse was the company's net loss of $27.3 million, which equated to $0.60 per share. But those results included a one-time charge of $64.7 million that resulted from Mobile Mini's sale of its wood mobile-office fleet, which it expects to complete next month. After adjusting for that charge, earnings of $0.28 per share reflected a nearly 60% jump in adjusted net income and were a penny per share better than traders had forecast.
Looking more closely at its operational figures, Mobile Mini did what it could to keep revenue rising. Portable-storage rental rates were up 6.2% from last year's first quarter, and rental rates on new units rose 3.7% from early 2014. But fleet utilization rates on its portable storage fleet fell slightly to 66.6%, even though the new specialty-containment division saw much-improved results, with utilization rising 3 percentage points to 71.1%. Overall, rental revenue climbed by a solid 29%, even as outright sales dropped by double-digit percentages.
The acquisition of Evergreen Tank Solutions showed up prominently in Mobile Mini's results. The unit's total revenue was $26.1 million, giving the division about a 20% share of the company's entire sales, and $22 million of that came from rental revenue.
Storage containers protect valuable assets like copper piping. Source: Mobile Mini.
CEO Erik Olsson believes that Mobile Mini remains poised to benefit from its overall strategy. As he said, "Our strategy continues to focus on deployment of high return, low-maintenance capital assets." Explaining the one-time charge, Olsson said in the earnings press release, "The announced divestiture of our wood mobile office fleet accelerates this strategy by freeing up sales, field, and management time as well as Company infrastructure that can be redirected to the expansion of the specialty containment business and the remaining portable storage business."
What's next for Mobile Mini?
Perhaps most important, Mobile Mini is taking steps to become more efficient. The integration of Evergreen Tank Services has gone well in Olsson's eyes, and organizationally Mobile Mini has streamlined its oversight structure so that individual regional managers have their fingers on the pulse of both portable storage and specialty containment operations within their geographical regions. By opening up opportunities for cross-selling, and by giving people on the ground more flexibility to make smart business decisions, Mobile Mini hopes to reap even greater rewards from the ETS acquisition.
Interestingly, it doesn't seem as though Mobile Mini has suffered from bad timing with its ETS purchase, at least from the division's early results. The drop in oil prices could eventually result in lower production activity, and that in turn might cut demand for its containment services. Yet there's only so much that Mobile Mini's energy-company customers can do to reduce their need for those services, and unless producers start going out of business entirely, that end of Mobile Mini's business should keep growing.
Traders initially focused on the one-time hit, sending shares of Mobile Mini down 3.5% in the first half-hour of trading following the announcement. In the long run, though, Mobile Mini appears to have a viable strategy to keep growing at a healthy pace.
