So, overall, we are not assuming a major increase in non-residential construction activity in 2024. But as Brad mentioned, if we stay stable at 2023 levels. That’s a very, very healthy environment. 2023 should be up about — in terms of non-res square footage starts up about 12% versus 2019, just to give you some calibration of where we sit right now. And if we have that type of backdrop going into 2024, combined with the pricing tailwinds that are just outstanding. The value-added products tailwinds. I mean, we talked about value-added products and Modular briefly and how that penetration is recovering. Value-added products revenue in the Storage segment is going to exceed $90 million this year, up over 40%, right, year-over-year. So we are seeing very good traction across all space categories and value-added products.
Margins are performing well and we always have the tuck-in M&A pipeline in our back pocket.
Ronan Kennedy: That’s very helpful. Thank you. And then a follow-up to a question on margins that I think was more specifics fourth quarter — 4Q. But looking forward, can you talk about, I think you had previously alluded to a kind of a new level of margins. Can you talk about kind of the puts and takes there, the drivers, whether it’s logistic margins, the ability to leverage and improve SG&A back-office workflow, et cetera?
Tim Boswell: The great thing here is it’s really all of the above.
Brad Soultz: Yeah.
Tim Boswell: And if you start we are where the lease revenue growth is coming from on the organic side, it’s pricing and value-added products. So you are going to be naturally accretive to margins, if your organic revenue growth is coming from those two variables. As you know, the tuck-ins are also accretive to margins over time and that comes from a couple of different levers, not even so much cost reductions these days, just given the size of these, but the price in value-added products convergence as those portfolios churn over time. If you just look at rental gross margin, I have said for, shoot almost a year now that we are enjoying a divergence of favorable growth rates on rental pricing that’s obvious and a stabilization of material input costs, we track a basket of goods that go into our Modular refurbishments and that basket has been flat now for about 12 months.
So that’s going to be supportive of margins. I am not really assuming any further improvement in transportation margins. They have been a highlight for the last two years. I do think there is opportunity there over time as we rollout the Field Service Lightning platform next year and subsequently route optimization capabilities, but I wouldn’t even embed that in my assumption for 2024 at this point. And now that we are in the single CRM, this allows for things like quoting all Modular and Storage products on a single quote, which ultimately can lead to single invoicing and consolidation of some of those back-office processes. So I can almost go to any cost line or margin line in the P&L, Ronan, and find an argument to — for margin expansion.
Ronan Kennedy: Excellent. Thank you very much.
Operator: One moment for our next question. Our next question will be coming from Sean Wondrack of Deutsche Bank. Your line is open.
Brad Soultz: Sean, we can’t hear you?
Operator: Sean, your line is open.
Sean Wondrack: Hi. Good morning and nice quarter. When I take a look at your sort of aggregate fleet, sort of maybe on a percentage basis, what portion of that fleet is fungible across both traditional rental and these mega projects?
Tim Boswell: Sure, Sean. It’s all of it.
Brad Soultz: It’s all of it.
Tim Boswell: Mega projects, the core of that project is likely to be a large Modular complex or in many cases, multiple large Modular complexes and that often will be the core for the primary general contractor that’s leading the project. But the nice thing about these mega projects is you are going to have subcontractors and other trades on and off of the project over the course of multiple years and we are talking three-plus year projects when you get into the larger scale opportunities and those subcontractors could be taking containers, they could be taking single-wides, there’s really no — there’s no limit to the fungibility of the fleet for those types of opportunities.
Sean Wondrack: That’s interesting. And what percentage of your fleet would you say is that flex offering at this point? Has that migrated over time?
Tim Boswell: It is migrating. And ballpark, just off the top of my head, I think, we are circa 8,000 units of total fleet there and it is the only fleet category where we are buying stock fleet. And I do expect the fleet mix does migrate more in that direction very slowly over time, right?
Sean Wondrack: Right.
Tim Boswell: I know in the most recent quarter, I think, the flex units were accounting for just over 10% of our deliveries on the Modular side. So it is a growing mix of the Modular fleet and very conducive to those larger projects.
Sean Wondrack: Great. Thank you. That’s very helpful. Also just kind of on another note, over the long-term lines, we have been hearing that only a marginal amount of the infrastructure funds really have been released. Is that what you are seeing out there in your markets? Do you expect that to sort of ramp up a bit more next year?
Brad Soultz: Yeah. And that’s consistent with our outlook throughout the year. I mean, we have seen these mega projects without regard to CHIPS Act, without regard to federal infrastructure stimulus. It’s happening because it’s good business and then we are uniquely positioned to capitalize on those. So when federal stimulus really starts to flow. That’s a 2024 event, likely, I think it’s just further longer term tailwinds with respect to this megaproject.
Sean Wondrack: That’s great. And then I have one last question for you, Tim, and feel free to answer this to the degree you want to. When would you expect to repay these 2025 notes? Would you be waiting for the step down at par or would you be willing to let these bonds go current before repaying them prior to maturity or refi them?
Tim Boswell: Right. Like I said in my prepared remarks, we have got $1.3 billion of capacity in the ABL, and right now, the ABL is actually priced a bit higher than the 2025s. So from just a pure interest cost optimization standpoint are lead towards leading — leaving the 2025s outstanding and we can refinance them into the at any time. Now the other variable is what other uses of capital do we have and we reassess that as opportunities present themselves. But there is absolutely no urgency in my mind, as long as benchmark rates stay where they are above 5%.
Sean Wondrack: All right. That’s very clear. Thank you very much.
Operator: We have now reached the end of today’s call. I will now turn the call back over to Nick.
Nick Girardi: Thanks, Tanya. Thank you all for your interest in WillScot Mobile Mini. If you have additional questions after today’s call, please contact me. Thank you.
Operator: Thank you, ladies and gentlemen. This concludes today’s conference. You may now disconnect.
