Welcome to the Third Quarter 2025 WillScot Earnings Conference Call. My name is Gary, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Charlie Wohlhuter. Charlie, you may begin.

All right. Thank you, Gary. Good afternoon, everyone, and welcome to the WillScot Third Quarter 2025 Earnings Call. Participants on today's call include Brad, Chief Executive Officer; Tim Boswell, President and Chief Operating Officer; Matt Jacobsen, Chief Financial Officer; and Worthing Jackman, Executive Chairman. Today's presentation material may be found on our Investor Relations website at investors.willscot.com. Before we begin, I'd like to direct your attention to Slide 2 containing our safe harbor statements. 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. With that, it's my pleasure to turn the call over to our Executive Chairman, Worthing Jackman.

Thank you, Charlie. Good afternoon. We appreciate you joining us for today's call, where we will discuss the current operating environment and strategic priorities, third quarter results and our updated outlook for 2025. As many of you know, I joined the WillScot Board about a year ago, became Chairman this past June and was named Executive Chairman in early September upon our announcement that Tim will be succeeding Brad as CEO, effective January 1. My expanded role has been designed both to assist Tim and the senior leadership team in achieving our strategic plan, returning to growth and driving shareholder value creation. With ongoing cyclical headwinds and an intense competitive environment, we must compete differently and execute better to drive growth. With a focus on returning to growth, we expect that a mix shift in revenue to more differentiated, higher-value offerings should create more consistent and predictable results while also reducing variability from more commoditized or transactional lines of business such as dry storage. When revenue inflects back to positive growth, adjusted EBITDA growth should outpace top line growth. We see the ability to drive adjusted EBITDA margins above 45% as units on rent trends begin to improve given the associated high incremental flow-through. That is in addition to initiatives underway to optimize our platform outlined at our Investor Day in March. There are multiple aspects of our optimization plan, a new component of which is evaluating our branch network and fleet storage acreage needs following the integration last year of WillScot and Mobile Mini's field sales and operations teams. We see opportunity to reduce our real estate footprint and related expenses, along with eliminating excess fleet, which Matt will review in his remarks. Together with continuing efforts to streamline corporate support functions and drive a more decentralized operating model,…

Great. Thanks, Worthing. I'd like to underscore Worthing's comments and emphasize that we are fully aligned to deliver on our commitments and to drive profitability and returns higher. Accountability is paramount, and I firmly believe we've have aligned the organization and the team is well prepared to execute on our strategy. Tim has been by my side throughout the evolution of the company, and he knows this company and this industry through and through. I have immense trust in his leadership and excited for what is to come. With the leadership we have in place and a well-defined strategic plan, I'm more confident than ever in our ability to achieve our top line growth, operational excellence and profitability goals. With that, I'll turn it over to Matt for a review of our third quarter financial performance.

Thanks, Brad. Before I jump in, I just wanted to thank you for your leadership over the last 10 years and for all you've done for the company and for me, both professionally and personally. On behalf of the finance team, we wish you the best in your future endeavors. As noted in our earnings release, third quarter 2025 financial results were mixed. We delivered strong cash flow and leasing revenues were stable sequentially from Q2 to Q3 across both our modular and storage portfolio with favorable rate and mix offsetting volume headwinds. Looking at the results. Revenue for the quarter was $567 million, down $34 million year-over-year, driven primarily by increased accounts receivable cleanup of approximately $20 million in the quarter as we continue to accelerate improvements in our order-to-cash process and lower delivery and installation revenues related to our large project with the LA Rams in the prior year that we discussed in the Q2 call. This accounts receivable cleanup overshadowed what would otherwise have been a sequential quarter stability in our leasing revenues, which I'll jump into here shortly. Sales in new and rental units increased 10% year-over-year. Our ability to take out variable costs in the business supported a 42.9% margin on adjusted EBITDA of $243 million for the quarter, which was up 60 basis points sequentially from the second quarter. Slide 5 is a new slide that takes a deeper look at leasing revenue trends with and without the impact of write-offs related to our order-to-cash improvement initiatives. In total, leasing revenues were $434 million in the quarter, a 5% year-over-year decline. However, Q3 year-over-year leasing revenues, excluding write-offs, were only down 1.3% year-over-year. So this cleanup is driving a bit of noise in the top line results. The key takeaway here, however, is the…

Thanks, Matt, and good afternoon, everyone. Before opening the call for Q&A, I would like to elaborate more on WillScot's strategic priorities to better position us for growth, increase margins and returns and ultimately drive shareholder value as we transition into 2026. First is reestablishing organic growth in the business through our local market initiatives, enterprise accounts and our adjacency offerings. Historically, approximately 80% of our revenue is derived locally and improving performance starts with ensuring consistent sales coverage across the network, then driving productivity. Following last year's sales reorganization, we have implemented best-in-class sales enablement tools and consistent sales coverage and sales leadership such that we have a simplified structure with clear accountability for performance heading into 2026. Our focus on enterprise accounts and new industry verticals continues to show great traction. We rebuilt and strengthened this team in Q2 and expect that enterprise accounts revenue in the second half will be up approximately 5% year-over-year despite the seasonal storage headwind that Matt described. Data center and power generation infrastructure are very active subsectors for us right now across the United States. With expansion of existing relationships and more intentional focus on our nonconstruction verticals, we expect that our enterprise portfolio will carry a mid- to high single-digit growth rate into 2026. Value-added products and our newer product line additions remain compelling organic growth levers for us. VAPS revenues are up 5% year-over-year on a per unit basis on modular units and approximately 22% on storage units. Climate-controlled storage units on rent were up 44% year-over-year at the end of October. FLEX units were up 30% year-over-year, and we expect our perimeter and clearspan offerings will continue ramping into 2026. So as Worthing mentioned, there are some positive signs in a favorable mix shift within the portfolio and a…

[Operator Instructions] Our first question today comes from Tim Mulrooney with William Blair.

First, I just want to say farewell to Brad. It's been a pleasure working with you these last few years, Brad [indiscernible] on your next chapter.

Thank you.

So on the revenue outlook, I just wanted to ask about the lowered top line outlook this year. If we set aside the seasonal retail headwind that you telegraphed earlier in the quarter, what other parts of the business underperformed relative to your revised guidance that you gave on the second quarter call? Were there any other end markets or regions that you'd characterize as being a bit surprising on the softer side relative to where you were sitting a few months ago?

Tim, this is Tim Boswell. I'll take that one. Certainly, the seasonal storage component is one of the biggest contributors, circa $20 million or so of revenue relative to our original expectations. There's about another $20 million across the write-off activity that Matt talked about. And that's important because those are all out-of-period adjustments to kind of aged accounts. And on that Page 5 in the presentation, which we can go back to, when you strip that impact out, you actually see very solid sequential stability of those lease revenue streams. So those are the 2 biggest components. The only other pieces I'd call out relative to the guidance coming out of Q2 would be the Canadian market. That's roughly $130 million of total revenue for us. That economy has been hit hard since Q2, I think, for obvious reasons related to the trade posture here in the U.S. So we have seen a slowing in our Canadian market. And then the ramping of our clearspan and perimeter businesses are still quite attractive in terms of the market opportunities that we see but ramping slower into Q4 than we anticipated. And as Worthing mentioned, we have built in some conservatism into this outlook so that we're exceeding these expectations going forward. So that's not an insignificant part of the overall message here. But certainly, the write-off activity accelerated. I'm really happy with where the portfolio is from a cleanup standpoint. And while it does create some noise in the top line, the customer experience side of that is really important for us. That's the area where we've probably gotten the most negative feedback in terms of NPS and customer satisfaction historically. And we definitely see that temperature coming down as we go into 2026, which is an important part of our strategy going forward to drive the customer experience positively.

Okay. That's a lot of helpful additional color with the write-offs. And I hadn't given enough consideration to the Canada dynamic as well that I probably should have. So that's good color. Maybe sticking on this policy point. I wanted to ask about any potential impacts that you're seeing on your business from the federal government shutdowns. I know it's a smaller piece of your overall revenue stream, but I thought I'd ask because I know you've talked about government and other verticals tied to government like military, maybe education as being a growth vertical for your business moving forward.

Yes. Good news, bad news. They are growth verticals going forward, I guess, is the positive piece. And as part of our enterprise portfolio, we have added dedicated resources to go after government opportunities at the federal state and local levels, both in the U.S. and Canada. Good news is that's not a huge part of our business today. So we've seen negligible disruption across the -- either unit on rent portfolio today or the payment side of things, which is also important. So no material impact sitting here today and still enthusiastic about the ability to penetrate those sectors better going forward.

The next question is from Andy Wittmann with Baird.

I wanted to ask about the fleet review that is ongoing here and sounds at least possible, if not likely to be more explicitly defined by the end of the fourth quarter. But this $250 million to $350 million of fleet basically write-down or impairment or scrap here, do you think that this is actual scrap like it's going to the junkyard because you mentioned in the press release kind of tired old, been sitting? Or do these get sold off and maybe wind up in your same markets as discounted units? I'm just kind of curious as to what the final disposition of this is going to be. And you talked about the book value here. I did some quick math. It looks like that's about 4% of your net book value. Is it fair to think that this would be then probably less than 4% of your fleet because these are kind of below average unit price. Maybe you could just comment on some of that, please.

Yes. Sure, Andy. This is Matt, and I'll hit your questions. We do sell our fleet in the normal course of business as rental unit sales, as you know. But we kind of view this as excess fleet that we've got and the intent there is to dispose and scrap of it. As we look at the percentages, though, that's -- it's more than the 4% that you're talking about, kind of at the middle of that range, you're getting closer to probably 10% of kind of total, but it's excess fleet, right? The whole point here is we've got adequate fleet to service our customers in the market and to grow in the future. And this is fleet that today we're paying to store on some excess acreage and there's other indirect costs and things around that, that we can optimize. And so we're taking action now to review this with the Board, obviously. And as you said, we'll give more of an update once that continues a bit more, but it is probably more about 10% kind of around that midpoint. So it's a big thing, but I think it's something that we should do, and we know that there's cost savings associated to this in the future.

Andy, this is Tim. The only thing I'd add is if you look at that chart in the deck that looks at non-res starts and the cycle that we've been through here, we're sitting here today in a position where non-res square footage starts are off about 30% from the peak and appear to be stabilizing in line with 2017 or 2018 levels. So if you can think about the ramp of the company up through 2022 and 2023, we've got enough idle fleet in the business to support growth prospectively over the next couple of years. And we can do that, we can eliminate some of this excess, reduce the related real estate, still have adequate market coverage, still have adequate idle inventory to drive the business more efficiently. So this is about tightening things up, moving back towards the 45% to 50% EBITDA margin range and allowing our team in the field to operate more efficiently.

Yes, that's clear. And I remember, obviously, Mobile Mini had a similar type of scale write-down when they did a kind of a cleanup like this, and that was a very good thing probably a decade ago. So okay. Just for my follow-up question, I wanted to kind of ask about the fundamental trends in the business. And it's often asked how your order book and your activations have evolved during the course of the quarter. Maybe, Tim or Matt, you could talk about that, just to maybe give us a flavor of where we are in this kind of bottoming process. It's been elusive. And so I thought just getting kind of your latest thoughts on it would be helpful.

Yes, Andy, this is Tim. It has been elusive. I won't deny that. If you look at the modular order book sitting here today, it's actually now down about 1% year-over-year relative to the pending order book in early November last year. We actually converted a fair amount of it over the last 1.5 months or 2 months such that activations in modular have been up low single digits over the last month, and I'm optimistic that we'll see growth of similar magnitude in November. So I view that as stable. It's good to see the order book converting, but I certainly wouldn't call that a victory or overall change in the trajectory of the business. I think that's the conversion of the order book that we've been hoping to see through the course of the year. Storage is still quite weak, right? So no real change in the trajectory of the traditional storage business. On the climate controlled storage business, all signs are flashing green with orders and activations up circa 60% year-over-year. So that initiative continues to show great traction. Modular is stable and consistent with what we've been seeing all year and continued weakness across the traditional storage business.

The next question is from Angel Castillo with Morgan Stanley.

Brad, I guess, first, just to start out, it's been a pleasure working with you and wish you all the best in a new chapter. And Worthing, welcome and looking forward to working with you in your new role. I actually had a question for you. I guess I wanted to go back to your opening remarks. It just wasn't entirely clear to me, I guess, as you commented on the operational strategy or some of the changes that you're talking about here, whether this was indicative of kind of continuation of the initiatives the company laid out at Investor Day or whether based on what you've seen so far since taking over as Chairman, understanding that it's only been a couple of months. But just whether you believe that there's anything kind of incremental or more meaningful changes required, whether it's at a portfolio level or operational strategy than what's maybe already been laid out at Investor Day.

Sure. Well, again, my remarks endorsed the initiatives that the company laid out at the Investor Day, but then went on to expand that portfolio of initiatives to include the asset optimization and network optimization that Matt and Tim referred to, and that's laid out in the press release. The company has also, since that Investor Day, made structural changes within the sales organization, within the field to help bring more decentralization and accountability to the field. I'd tell you the energy level I've seen throughout the organization has been fantastic. We've talked about green shoots in the past. I know people hate to hear green shoots. But I think today, you heard a lot about all the good things happening with regard to activations and rate, et cetera. But what I also found when I came here was just kind of a dark cloud of the impact that declines in traditional storage has over the business because it's basically masking all the good things that have been happening. I look back over about a 3-year period and the company has probably taken a $150 million hit, EBITDA hit from that more commoditized or transactional side of the business, but obviously has not fallen that much. They've clawed back about half of that through growth in other areas. And when we talk about this mix shift in the portfolio to more differentiated, higher value-added products and the success around enterprise accounts, et cetera. I mean, it's truly a shift in the book that will insulate us going forward once this whole runout, finishes on traditional storage to have a different higher margin, more predictable business, more defensible business. We're probably in the sixth or seventh inning of the decline in traditional storage that has -- we're 70% or 80% of the way through that. Once we get that behind us, obviously, what's happening beneath the surface, so to speak, will come to the [ time ].

That's very helpful. And maybe just related to the disposals. Tim, you talked about, I think, 10% of the fleet essentially being reviewed here for potential disposal. At the Investor Day, I think you had identified $600 million of kind of potential revenue growth that you could achieve, I think, at 20% of kind of new fleet cost, thanks to kind of your refurbishment capabilities overall. Is that still the right number? Or do these disposals imply a smaller opportunity kind of at that lower 20% of cost and kind of future growth? Just kind of any implications of that to CapEx? Is there a requirement then if we grow? How does that change, I guess, the algorithm around the required CapEx to grow beyond this point? If you could touch on that, that would be helpful.

Good question, Angel. And no, we would not dispose of any fleet that we thought would constrain us and constrain our ability to grow in the future. So we view this disposal as purely targeting surplus that we do not need over the next several years, that allows us to tighten up both the branch network and the fleet without compromising ability to service customers either with product or with proximity to customer in our real estate footprint. No, I don't think this materially changes that concept at all. We still absolutely have the lowest marginal cost in the industry. If we want to activate older fleet through our refurbishment process, we've got the capability to do so. I think that capability is differentiated. To the extent we're adding new fleet, which we are in certain pockets today, tends to be allocated more towards our complexes and FLEX, which are performing great. We obviously did a small regional acquisition in climate-controlled storage this year and got some excess capacity through that acquisition, which we are deploying. So that's how we're thinking about fleet investments going forward, and I don't see the disposal here as changing that narrative whatsoever.

The next question is from Kyle Menges with Citigroup.

It'd be helpful to hear just trends you're seeing with local and regional customers, especially as you're looking into 2026. And in your view, what do you think you need to see really in the markets to see some recovery within those local and regional accounts?

Kyle, this is Tim. I'll start and anybody else can jump here and -- jump in. Nice to meet you. We really haven't seen any change in market trends at the local level. As I mentioned in my remarks, our enterprise portfolio is going to be up approximately 5% year-over-year total revenue in the second half of the year. That implies that the rest of that local market and regional exposure continues to be down. And I don't have any indicators right now, whether you look at the Architectural Billings Index or other third-party indicators that says that, that underlying market trend is changing at the local level. I think what is changing, if you think about our structure is the stability of our field-based sales organization. Worthing just alluded to some structural changes we've made there in terms of how the sales leadership function is organized. We've also added over 10% to the field sales organization through the course of this year, and there is a natural ramp time in those resources. So I've got some optimism that we'll see greater productivity out of those resources as we go into 2026. We've got our team in town in Scottsdale this week for budget meetings. And the message is irrespective of changes in those local market conditions. We know we weren't performing optimally over the last 18 months and there's an opportunity here to outperform ourselves at the local level. And that's the challenge that we're pushing down to our local market teams as we go into 2026, and we're not sitting here holding our breath waiting for the market to rebound.

Got it. That's helpful. And then on the enterprise customer side, good to hear that you're expecting those customers to grow mid- to high single digits next year. I'm curious what your sense is. Is that growth in line with the market, maybe a little bit below or above? Would love to hear that. And then my understanding is enterprise customers would have greater VAPS penetration. I am curious, though, it seems like maybe competition is heating up with others coming out with offerings that are comparable to your VAPS offerings. in this space, just your confidence in maintaining market share with VAPS as well with the enterprise customers?

This is another area where I think outperforming ourselves is step number one. This is a function that looking back over the last 5 years, just given the relative size of our company had been relatively immature. And going into really Q2 of this year, we took a step back, put some of our best field-based leadership into this function, reorganized the team by industry vertical across 5 or 6 high potential verticals, construction being the largest today. But historically, we've never intentionally gone into federal government, which I talked about earlier. Retail, we've had some presence but not with a lot of intentionality. Professional services, energy and industrial or other sectors where we see opportunities to grow our penetration in those markets. So step one is let's outperform our historical baseline, and we're absolutely doing that. Your comment around value-added products and propensity to consume those at the enterprise level, I would just broaden and make a more general statement that when we're having enterprise-level RFPs, the ability to bundle not just value-added products, but climate controlled clearspan, parameters and all aspects of this broader space solution offering that we're putting together is pretty attractive, right? So I think it's cross-selling those products within the enterprise, not just value-added products is a big part of the opportunity that we see going forward.

The next question is from Phil Ng with Jefferies.

Well, Brad, thank you. I appreciate your partnership over the years. Tim, congratulations to the new role. Looking forward to working with you. I guess from a high level, you guys talked about how you want to shift your portfolio away from more commodity products to differentiated offerings, driving more of a decentralized model. Does that require a meaningful step-up in CapEx and SG&A? There was an element of holding management more accountable and you're kind of rebuilding the field-based structural changes. Are you realigned the KPI and incentive comp and having a higher portion of your comp tied to variable, especially on the sales side of things?

Okay. I'll start and anybody else who would like to jump in, please do so. So we had a question a minute ago about, hey, does this fleet disposal change -- fundamentally change the capital requirements in the business going forward? No, I don't think it does. I think the mix of that CapEx has absolutely changed. And that process started probably a year, 1.5 years ago. So I don't see a significant change in the overall magnitude of CapEx requirements in the business. I think the mix of where that capital is going is likely to be very different than it would have been over the last 5 years in some of the categories that I mentioned. Actually, see an SG&A opportunity in the business, not an incremental add, especially as we look across our corporate functions. And some of that efficiency, I think, is supported by the fact that we've completed a lot of the integration activities that were related to the Mobile Mini acquisition now almost 5 years ago. So I don't really see any fundamental changes to the cost structure or the CapEx requirements in the business based on those comments.

Incentive comp and variable comp?

So we have always had a significant portion of our annual bonus plan that is tied to forward-looking revenue metrics in our business. As you're well aware, this is a sequentially compounding business. every period, we should be incentivized to put more units on rent at higher prices with more value-added products and services to drive that forward-looking lease revenue stream. And that's roughly about 30% of our annual short-term incentive bonus plan. We will tweak that calculation methodology a little bit to be more closely aligned with the metrics that our sales force is compensated based on. And I think that's extremely healthy. But that's really a refinement rather than a significant change, Phil.

Okay. Super. And then in your prepared remarks, you mentioned reestablishing organic growth. What are like the one or two things you want to call out that will help accelerate that? Is there a big shift in terms of your go-to-market strategy? And I did -- if I heard you correctly, a pivot to some of these different end markets. How are you going to tackle that? -- historically, there's been a big focus on M&A and AMR growth. Is there more of a pivot now towards organic growth on the volume side and just a big shift in terms of what markets you're going to really go after now?

Absolutely more of an emphasis on the organic volume side across all product lines. And in some cases, as Worthing alluded to, I think we need to compete a little bit differently, leveraging our service infrastructure and customer service capabilities in some of those more commoditized product lines where maybe the product itself isn't as differentiated. But through our scale and capabilities, we can actually offer a differentiated experience to the customer. So that's absolutely a big focus within the company right now in terms of ease of doing business, speed of delivery and consistency of execution across all our product lines. But I think it becomes even more important in some of those legacy more commoditized lines. Meanwhile, we are allocating capital and resources to grow in some of those more differentiated product lines like complexes, FLEX, climate controlled, et cetera, all the stuff that we've been talking about. So that's one of the 3 kind of commercial go-to-market pillars. A second would be everything that we've done in the field-based sales organization. I mentioned we've added over 10% to that population through the course of this year. That population is ramping up from a productivity standpoint in many cases, and we would expect to see benefits from that going into 2026. And then the enterprise portfolio is the place where I'd say, we are tapping into new verticals with more intentionality than we have in the past and also being more strategic with existing relationships and growing wallet share and deepening partnerships with existing contractors, especially in the construction vertical. So we've got 3 pillars to that go-to-market strategy across adjacencies, the field sales force and enterprise, and we're pushing hard across all 3.

The next question is from Manav Patnaik with Barclays.

This is Ronan Kennedy on for Manav. As far as the rental footprint and fleet optimization and the ongoing evaluation as to whether you will do the further acceleration of the recognition of depreciation expense. I know we've talked about potential impacts on CapEx structure requirements and mix. But is there any potential change and lessons learned around capacity and utilization management into this initiative and out of it going forward?

Ronan, thanks this is Matt. Thanks for the question here. I think for us, it's kind of a kind of where we're at right now with the acreage that we've got and the fleet that we have. I mean, I think, we're always trying to manage the fleet, and we spend a lot of time planning the amount of CapEx and maintenance that needs to go into the fleet. And none of that has changed because of this. As we're just at a point where, as Tim spoke about, we're off about 30% from peak levels, and we have excess fleet that we need to get cleaned up right now, and now it's time to do it. So I think markets are going to ebb and flow over time. You always have to keep an eye on these things, but just kind of a point of where we are right now.

Okay. And then just if you could shed some further light with regards to the changed approach and guiding. Obviously, there's an element if you are going to have that less transactional subject to the volatility around activations, et cetera. But was there anything else from philosophy or process or perhaps even anchoring to leading indicators that had good historical correlation, but has changed given the length and severity of the decline in non-resi or intensifying competition? How should we think about that?

No, I think it's just -- this is Matt again. It's just a change in approach, right? We want to make sure that we're setting guidance out there that's got a little bit of cushion to it so that we can beat it. That's really what it is. We've had some times where we haven't met those expectations, pretty quite a few here in the last couple of years, and we want to turn that around. That's it.

Yes. I'd also add, it's Worthing. You mentioned a protracted decline. I think the historical approach basically set a range of expectations that could materialize based on whether it be execution, the competitive environment or recovery in the markets, in the end markets. And I think the decision now is just to make sure we're not making bets on things we don't control. And so let's let a lot of things be upside. Let's make sure we're guiding conservatively. But I think also going into it, look, the company has spent the last couple of months tightening up how they forecast the business. And I think you look at -- Matt, you didn't cover it, but I think you look at the October results and activations and units on rent. I mean every metric that we forecasted for the month, we met or exceeded. And so it's just nice to see the effort the team has made throughout the organization to try to tighten down the forecasting, to not try to call a turn and to keep a lot of things that are out of our control as upside.

[Operator Instructions] The next question is from Scott Schneeberger with Oppenheimer.

Brad, I really enjoyed working with you, best wishes. I guess for the first question, it's going to play off of Ronan's discussion there on guidance. I know you're not going to provide 2026 guidance right now. We're not going to get that until probably February. However, with the trends you're seeing here into the end of the year across the primary asset classes, how should we think about volume and price on modulars and storage as we enter next year? And what type of influence would that have just kind of starting out next year as an endpoint of '25 into '26?

Scott, it's Tim. I'll give you my current view of the playing field here. And as I said a minute ago, I don't see anything sitting here right now in the third-party leading indicators that says that we found stability. I mean, you track the ABI as closely as anyone and most recent reading was around 43%, which is pretty soft, and it's been that way for 3 years, right? You have seen some slowing in the rate of decline of non-res square footage starts, which is encouraging. And that's definitely a precursor to a bottom, but there's nothing that says that, that has actually occurred yet. As I look across the portfolio right now, spot rates across most of our product -- modular product line are really solid. Ground level offices are really the only category where we've made some strategic decisions to soften our pricing stance. But I see stability or opportunity across much of our modular portfolio going into 2026. Storage, I mentioned earlier, order book, if I exclude -- seasonal orders right now is down about 6%. So you've still got that mid- to high single-digit volume decline implicit in the current storage order book as we're going into 2026. And I've seen continued softening in the rate environment for traditional storage. And that's not just us. I think that's fairly well documented across the industry at this point. So definitely some mixed trends as I look at the leasing KPIs across the legacy kind of product line. Climate-controlled storage, I mentioned, volumes, rates, value-added products associated with them are all trending very strongly. So that's a place where I think we can make some luck going into 2026. And overall, if you just think about the volume trajectory in the business, we're trending down year-over-year across traditional modular and storage. If we were to see an inflection there, you're probably looking at the second half of the year sometime, but we don't have any crystal ball, and some of that's going to be dependent on the market environment. So as you well know, we typically give our full year guidance on the Q4 call. The reason for that is, at that point, you typically have better leading indicators and visibility for the U.S. construction cycle, which tends to ramp up as you go from March and April into Q2. And we'll stick to that practice in terms of providing the formal guidance.

Tim. I appreciate all that color. It's helpful. And prompts a few follow-ups, but I'll ask them later in a follow-up. I wanted to ask another question just on the optimization of the footprint and the assets. I guess on the assets portion of it, what -- are we going to see it more in modular? Are we going to see it more in traditional storage? I know it's a little bit of everything, but can you give us a sense of where you're really going to focus in on? And this feels like it could potentially be a first step. Is this a tip of the iceberg, the $250 million, $350 million or -- and it could be more as you go because you do have a few years of utilization potential to grow into and you'll be coming at it from one angle. It just feels like there could be a little bit more. So what assets and what made you decide upon this size right now?

Scott, I'd say -- this is Tim, and then Matt jump in. We've actually approached this more from the real estate side of things, right? And the priority #1 here is reduce operating costs and inefficiency in the system. And as you accumulate surplus fleet, you get drop lots and things like that and industrial real estate is expensive. So what we've looked at are actionable real estate opportunities over the next couple of years where you actually have an actionable ability to reduce those costs. And where we see those cost reduction opportunities if we see surplus fleet associated with those locations that we can dispose of in order to take advantage of that savings, that's kind of the lens that we've used to approach this. Absolutely, yes, we'll keep an eye on changes in overall market activity. If markets ramped up, maybe you want to dispose less, although we're at pretty low utilization levels right now. If markets continue to decline, you might take a different approach. But we're using actionable real estate cost reduction as the guiding light in this initiative.

Yes, Scott, this is Matt. The only thing I would add is that we started this really kind of beginning of the year and did some property-by-property analysis, and you've seen us do some of these throughout the year. Given where we're -- what we've seen, we saw the opportunity to kind of look at all of this at once, everything we kind of see in the next 3 or 4 years to really try and pull it all together and have a multiyear plan. So that's what you're seeing right now. From an asset perspective, I mean, think of this, it's very tied to forward-looking demand. Complexes and FLEX and these newer products are high-demand products, the differentiated products. It's not those, right? It's more going to be around the transactional type things where we've seen a real reduction in demand over the last few years as non-res has come down and the local smaller local projects have done. So it's some storage containers. It's going to be some single units, those single, smaller units typically, but any single. So it's not these differentiated products. It's stuff that we have ample supply of, and we know we can still meet the demand that we need to meet with remaining fleet.

Got it. And so it's real estate first that you're going. And then when you're at a selective location, you're then assessing the assets at that location. That's the order process.

That's correct.

We have now reached the end of today's call. I'll now turn the call back over to Charlie.

This is Brad. I'll take the closing here. First, I'd just like to say I'm proud of and humbled to have been part of this fantastic team as we've navigated the initial chapters of this young and great company. In closing, I'd like to thank my family, our customers, shareholders, all of you on this phone and most importantly, this team for the support over the years. And I'll remain an invested and exciting supporter of this company for the long future. Thanks.

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