Specialist
Former VP, Business Improvement at United Site Services Inc
Agenda
- Regional end market update and growth opportunities for United Site Services (USS)
- Portable sanitation industry competitive landscape overview and new entrants
- Housing market cycle and industry impact
- H2 2023 demand outlook
Questions
1.
What is your business overview of USS [United Site Services], highlighting the business model and key end markets? What should we know about how the company makes money, especially in 2023?
2.
Could you expand on why USS is losing market share and who the company is losing share to?
3.
What might make customers – whether new or existing USS clients – choose United Rentals or another competitor such as Honey Bucket over USS?
4.
How much more expensive is USS vs other competitors? Would you be able to estimate for certain regions, or provide a range?
5.
What type of pricing environment should we expect for portable sanitation in H2 2023 and throughout 2024, especially relative to 2021-22? Do you anticipate significant pricing increases from USS and other competitors? How should we understand the pre- and post-pandemic pricing environment? What’s your outlook?
6.
How does your pricing outlook relate to utilisation of portable sanitation systems in 2023 overall? If we assess historical utilisation rates, where would we be?
7.
You indicated that USS has slightly higher prices. Are other players significantly discounting toilets to drive utilisation in 2023 overall? Would lower-priced toilets inherently increase utilisation?
8.
Could you comment on USS’s major geographies or the major cities that largely generate revenues?
9.
What’s your assessment of the overall demand level for portable sanitation systems in 2023 vs 2022? We seem to be in a fairly unique scenario where there is a higher demand and greater scope for other competitors to come in because USS has been lacking in the service department. Do you think demand will soften or increase going into 2024?
10.
As you highlighted, it seems that the competitors to USS aren’t having to decrease prices because they aren’t being affected by the soft recession we’re in right now. If we were to slip into a deeper recession, would sacrificing pricing to drive volumes and maintain utilisation be a way to deal with demand declines? How did the industry react when there was lower demand during past recessions?
11.
How might a soft recession typically impact EBITDA for larger players such as USS or Honey Bucket? I think we’ve delineated a unique situation around the company’s format in 2023. Is there any way for us to assess expectations for today’s soft recession or if that develops into a deeper one?
12.
How would you turn the USS business around? You mentioned the company’s need to improve its service for customers. What exactly is going wrong?
13.
What are the key things to understand about the portable toilet industry that’s different than rentals? You highlighted this has been tossed under the rug at USS, so is there anything to be aware of for the portable toilet vs rental industry? What are the inherent differences?
14.
How have wage inflation and increases in fuel cost trended relative to pre-pandemic? Have providers generally been able to raise prices to cover fuel and wage inflation over the past year?
15.
How would you estimate USS’s revenue in 2023? How much do you expect that revenue to soften if the company keeps losing market share at the current rate?
16.
Who would you name as the biggest potential winners given that USS isn’t quite meeting its service requirements? Which core competitors have the ability to come into the space, address the demand and win market share?
17.
What is your assessment of USS overall in terms of the company’s estimates, guidance and expectations for profitably? What is a likely outcome for it in the next 1-3 years?
18.
Do you think USS’s slowdown in service can be attributed to a lack of service technicians or labour?
19.
You mentioned a potential restructuring in terms of USS returning to its immediate post-pandemic performance. Hypothetically, what might that restructuring look like in terms of cutting costs and focusing the business?
20.
Could you comment on USS’s historical M&A strategy? What could the company implement to regain market share and right the ship?
21.
Has the softening of M&A been felt in the portable sanitation industry before, or is this hitting its peak in terms of the industry’s inorganic growth potential? Could this turn itself around in the next 5-10 years as a generation passes? How should we view long-term industry consolidation in the industry?
22.
What type of multiples can generally be found in the portable sanitation industry when it comes to buying mom-and-pop players or smaller competitors?
23.
Are any particularly high-demand regions less consolidated than others? I appreciate you noted Texas, but in which regions could you see players such as USS, United Rentals or Honey Bucket moving into and significantly growing market share?
24.
How much higher is EBITDA in California relative to other regions? What might USS have to do to work its way back into the region to grow market share there and really set down a base?
25.
Who is the biggest portable sanitation provider in California? Which names stick out to you, or is it a more fragmented market?
26.
Does USS have any unique MIS [management information systems] that help it operate more efficiently vs mom-and-pop operators? I think the company reads through to the larger national player industry too. Could you estimate how higher technology competency translates to business improvements? This seems to be one of the key areas in terms of driving EBITDA when USS starts acquiring local mom-and-pops.
27.
Have any specific business improvement projects worked in driving higher efficiency and reducing cost? Is there anything USS hasn’t done that you think it should have done to improve efficiency, reduce cost or win more market share?
28.
You noted that USS has a system that manages routes very efficiently. Could routes become more efficient, or has that business improvement been fully executed on?
29.
What might a typical analyst not know about USS or the portable sanitation industry? What should we monitor throughout H2 2023 and 2024? What leading indicators can we track in terms of business recovery or demand slowing vs rising?
