Mobile Mini's (MINI) CEO Erik Olsson on Q1 2016 Results - Earnings Call Transcript

| About: Mobile Mini, (MINI)

Mobile Mini, Inc. (NASDAQ:MINI)

Q1 2016 Earnings Conference Call

April 28, 2016 12:00 PM ET

Executives

Erik Olsson - President and CEO

Mark Funk - EVP and CFO

Analysts

Sean Hannan - Needham & Company

David Gold - Sidoti & Company

Scott Schneeberger - Oppenheimer

Andy Wittman - Robert W. Baird

Joe Box - KeyBanc Capital Markets

Doug Mewhirter - SunTrust Robinson Humphrey

Sean Wondrack - Deutsche Bank

Operator

Good day, everyone and welcome to the Mobile Mini 2016 First Quarter Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. There is also a presentation that accompanies this conference call, which you can access at Mobile Mini's website at www.mobilemini.com. It is on the Investors page.

Before turning the call over to Erik Olsson, Mobile Mini's President and Chief Executive Officer, I will read the Safe Harbor Statement.

Before the presentation and the comments begin, Mobile Mini would like to remind you that some of the statements and responses to your questions in this conference call may include forward-looking statements. As such they are subject to future events and uncertainties that could cause our actual results to differ materially from these statements.

Any forward-looking statements should be considered in conjunction with the cautionary statements in our press release and the risk factors included in our filings with the SEC, which Mobile Mini encourages you to read.

In addition, please refer to the Investors section of Mobile Mini's website to find additional disclosures and reconciliations of non-GAAP financial measures that will be used on today's call.

Now, I will turn the call over to Erik Olsson.

Erik Olsson

Good morning, everyone and welcome to Mobile Mini's first quarter 2016 conference call. I am Erik Olsson, Mobile Mini's President and CEO. And with me is Mark Funk, our Executive Vice President and CFO. For this presentation, I'm going to review the operational slides, Mark will review the financial slides, and then we will open up the call to questions.

I will start on Slide number 3, financial highlights. We generated another very solid quarter and I'm very pleased with the execution of our strategic plan. The strong delivery trends, which started in the second quarter of 2015, have continued through the first quarter of this year, and by the way, into April as well. Our end markets and demand has remained solid, and we are looking forward to growth throughout 2016.

But let me start out with some key stats and highlights of the most recent quarter. Total rental revenues increased 5.3% year-over-year when adjusted for unfavorable exchange rates and this growth also excludes our mobile offices, which we divested in mid-May 2015.

As far as results for our portable storage business goes, excluding the mobile offices we divested, rental revenues increased 7.3% year-over-year when adjusted for FX and this increase was driven by increases in both units on rent, as well as rental rates. In fact, our North American units on rent for portable storage were up a solid 3.9% year-over-year at March 31, 2016. First quarter rental rates also increased a solid 2.3% year-over-year on total units on rents.

On the specialty containment side, rental revenues were down 2%, as continued headwinds in oil and gas offset a solid 6.2% year-over-year increase in our downstream and diversified businesses and we continue to maintain a strong outlook for our downstream business for the balance of 2016.

We achieved total adjusted EBITDA of $46.2 million, with year-over-year margins increasing to 37.1%. This has all resulted in Q1 adjusted diluted earnings per share of $0.28. Q1 was our 33rd consecutive quarter of positive free cash flow. For the quarter, we returned $16.2 million to shareholders through $9.2 million in dividends and $7.1 million in share repurchases. Given our confidence in our growth and free cash flow prospects, we increased our Q1 dividend by 10% year-over-year to $0.206 per share.

We're also very excited to announce that we went live with our new SAP ERP platform in North America several weeks ago. This means all North American transactions across both portable storage and specialty containment are now conducted on the new centralized platform, including rental contracts, deliveries, asset management and billing to name a few. The system is operating as planned and this world-class system provides Mobile Mini with the tools and the infrastructure for efficiency, scalability and accelerated growth. So, overall, I'm very pleased with our performance in the quarter across both the sales side of the business, as well as the operations.

Turning to Slide number 4, and this slide highlights our diverse geographies and customer base. We have three divisions in North America; East, Central and West and one in the UK, which are shown on the map on the left. Each division is responsible for marketing, renting, servicing all product lines within the territory. Most importantly, this structure is optimal for our customers and ensures that they have access to all products and superior customer service.

As you can see from the first pie chart on the right, we have a very balanced end market mix. Our largest segment is Construction and we saw a 10% year-over-year growth in this segment of our business. Construction markets are strong and are forecasted for continued growth over the next several years.

Our second largest segment is Industrial & Commercial businesses, which grew 4% year-over-year. We are excited about the future growth in this segment, as we now have great cross-selling opportunities between portable storage and specialty containment, both geographically, as well as to existing customers.

Our third largest segment is Retail & Consumer Services, which was down 3% year-over-year due to the completion of several large projects we had in Q1 of 2015 that is not to repeat in 2016.

Oil and gas drilling remained a mere 2.5% of our customer base, with the majority of this business located in the Permian Basin. With the decline in oil, the overall Permian rig count is down approximately 70% since the beginning of 2015, while our utilization in the Permian is down approximately 30 percentage points. While we have been able to outperform the market, given our direct customer relationship as well as taking market share based on our high level of customer service, we do not expect this segment to improve anytime soon, but rather continue to shrink as a percentage of revenues from already insignificant levels.

From a customer concentration perspective, we're fortunate that within our portable storage business, we have only one customer with more than 1% of our revenues and our top 20 largest customer represents approximately 10% of our rental revenues.

As you can see from the pie chart on the far right, 62% of our trailing 12-month rental revenues are North American portable storage, 17% are UK portable storage and the balance of 21% is ETS specialty containments. So all in all, we maintain a broad diverse customer base with ample opportunities for continued growth.

The net promoter score, which measures customer loyalty, on the lower right graph shows that we have high marks from our customer base. Our Q1 NPS of 80% is truly best in class and in addition, our Q1 NPS is up over 300 basis points year-over-year and a further validation that our highest value provider strategy is working. And we continue to leverage these best-in-class NPS scores to drive rate growth.

We also have a diverse geographic footprint with 159 locations, of which 130 are portable storage locations, 18 are specialty containment and 11 are shared portable storage and specialty containment locations. With the ETS acquisition, we will continue to combine some overlapping locations, but more importantly, leverage our larger portable storage footprint with our recently expanded specialty containment product line.

Strategically, on the specialty containment side, we are currently expanding geographically with recent openings in Dallas, Philadelphia, Shreveport, and we are in the process of expanding into Southern California and the Austin, San Antonio area.

Moving on to Slide number 5, and this slide shows our utilization by segment and the number of units we have in our rental fleet. With our aligned sales and operational teams, we continued the momentum we generated in 2015, and as a result, average portable storage utilization for the quarter increased to 68% and this increase in utilization was driven by first quarter activations being up 12% year-over-year. Thus given our confidence in the business, we have recently expanded to 217 territories covered by ISRs. This number is up by 16 positions or 8% from the beginning of the year and we plan to continue to expand the number of sales territories going forward. Again, this investment underlines our confidence in the business and the outlook for 2016.

In our specialty containment business, utilization for the quarter was down 7 percentage points year-over-year to 64%. This was driven by the well-known market headwinds in the upstream oil and gas business, where our Q1 utilization was down 13 percentage points year-over-year. The remaining downstream and diversified businesses has increased units on rent, both on a year-over-year and sequential basis. To increase utilization, we also have been entering new portable storage markets, mainly through tuck-in acquisitions and plan to continue to do a number of acquisitions over the next year.

Turning to Slide number 6, and this slide illustrates the power of our differentiated product and execution on our sales strategy as demonstrated in our year-over-year rate and yield increase. As already mentioned, our Q1 rental rates were up by 2.3% year-over-year. For new units going out on rent in the quarter, the rate increase was 1.2% year-over-year, even as we anniversaried our 11th quarter in a row of driving higher rates on new units. So, our strategy continues to work, albeit at a somewhat more moderate pace against more difficult comps. Lastly, the slight [increase] in sequential rates was due to higher than average rates holiday or seasonal units being returned in late 2015 and early 2016.

Our Q1 year-over-year yield for portable storage is up by 3.2% to $657 per unit, which is an all-time first quarter high. Adjusting for unfavorable exchange rates, our yield increased 4.4% year-over-year, primarily driven by rental rate and delivery revenue increases. We're able to achieve this industry-leading or premium rental rates by focusing on our differentiated products and superior fleet and our strong sales and service culture resulting in our being the highest value provider to our customers. As we move forward, we will continue to balance rate increases with a strong focus on units and rents and believe that as we continue to sell value, we will also be able to continue to achieve average annual rate increases.

I will now hand over the call to Mark, who will cover the financials.

Mark Funk

Great, thanks very much, Erik. So turning to Slide 8 and revenue highlights, you'll find first quarter rental revenues excluding our divested mobile offices increased over 5% year-over-year when adjusted for FX. This is due to the pound sterling weakening versus the US dollar on a year-over-year basis. Q1 portable storage rental revenues, excluding mobile offices were up 6% year-over-year or 7.3% when adjusted for FX. Our increase in portable storage rental revenues was driven by both a solid increase in units on rent, as well as a 2.3% increase in our rental rates. And this first quarter marks our 21st consecutive quarter of year-over-year growth in rental revenues.

Turning to slide nine and profitability, we achieved total adjusted EBITDA of $46.2 million and a margin of 37.1% for the quarter. For portable storage, we generated adjusted EBITDA of $37.5 million, with a margin of 37.8%, which was up 150 basis points year-over-year, even with the sale of our mobile office business, which was also covering fixed cost in Q1 of 2015.

For our specialty containment business, we achieved adjusted EBITDA of $8.7 million and a margin of 34.3%. This was achieved even with continued headwinds in the upstream market. We are focused on replacing the divested mobile revenue with high margin portable storage and specialty containment revenues and have already made great progress towards this goal. Once again this success can be measured in our year-over-year improvement in Q1 EBITDA margins.

Continuing to Slide 10, you can see the Company's first quarter adjusted rental SG&A level was $76.3 million, which was approximately $5.7 million or 7% less year-over-year. This decrease was driven primarily by lower delivery cost, fuel and repairs and maintenance, resulting primarily from the mobile office business we sold in May 2015. And Q1's SG&A is also $1 million lower than sequential Q4 2015 levels. As a result, SG&A as a percentage of total revenue was 110 basis points less year-over-year. And so, looking to Q2's SG&A, with Q2's SG&A traditionally being higher than Q1 due to seasonality, we estimate there will be an incremental $1.2 million in expenses relating to our recent SAP implementation.

On the next slide you'll see Q1 North American portable storage rental revenues were down 6.3% year-over-year and this was due to the sale of the mobile offices in mid-May of 2015. When you exclude the mobile office sale, North American portable storage Q1 rental revenues actually increased 8.3% year-over-year. North American portable storage Q1 adjusted EBITDA margins were also up 70 basis points year-over-year, even after absorbing the fixed infrastructure costs, for divested mobile offices covered in Q1 of 2015. The UK's portable storage rental revenues also increased, with rental revenues flat year-over-year in US dollars, but up 4% in local currency. And the UK's Q1 adjusted EBITDA margin was 36.8%, which was up 460 basis points year-over-year, driven by both higher utilization and higher rate. And finally, our ETS specialty containment business had rental revenues of $24 million with adjusted EBITDA margins in excess of 34% for the first quarter.

Turning to the free cash flow slide on page 12, our free cash flow was $21 million for Q1 and this was our 33rd consecutive quarter of positive free cash flow. For the quarter, we returned $16.2 million to shareholders through $9.2 million in dividends and $7.1 million in share repurchases. Including these repurchases, we still had approximately $82 million of authorized share repurchases available. Given our strong performance, as well as our free cash flow outlook for 2016, we increased our quarterly dividend 10% year-over-year to $0.206 per share.

The chart on the right highlights our CapEx spend. Q1 net CapEx plus equipment added under capital leases totaled $19.8 million. Of this we invested $7 million in growth CapEx for our lease fleet, $5 million of the $7 million was in high demand portable storage markets in the UK and Eastern US and $2 million in growth CapEx for downstream specialty containment business. We also invested approximately $8 million in delivery equipment and $4 million in our SAP project.

As Erik mentioned, we went live in April with our new SAP platform for North America, which includes both our portable storage and specialty containment businesses. We are taking orders, activating contracts, delivering product and processing transactions on the back end. While the system is still new, it's operating as planned and going very well.

Turning to the next slide, we have a very flexible capital structure with a high level of liquidity. In December, we refinanced our $1 billion revolver. We extended its maturity to December 2020 and reduced interest rate grid 50 basis points. As far as liquidity, at March 31, we had over $320 million of excess availability on this ABL revolver. As a reminder, we would only test our one financial covenant if we were below $100 million of excess availability. Thus, we have a lot of room above this level.

Looking to the right chart and our debt levels, we ended the quarter with total debt to adjusted EBITDA at 4.6 times. Leverage decreased slightly during the quarter, while at the same time we returned over $16 million to shareholders through dividends and share repurchases, as well as investing in growth CapEx. And we expect to utilize free cash flow to delever in the next 6 to 12 months.

So to summarize, we're very pleased with the quarter, as we continue to execute and deliver on our strategic plan for both our portable storage and specialty containment businesses. Portable storage rental revenues were up over 7% year-over-year on an FX adjusted basis. Both our Q1 units on rent and rental rates were up nicely year-over-year. We delivered a consolidated adjusted EBITDA margin of 37%, which was also up nicely on a year-over-year basis and we continue to invest in growth, as we continue to return meaningful free cash flow to shareholders, both through dividends and share repurchases.

With that I will turn the call over to the operator for questions. Thank you very much.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Sean Hannan of Needham & Company. Please proceed with your question.

Sean Hannan

Thanks both. I had a number of questions here this morning. First, if we can talk a little bit about the annual rate increases, so I think in the past we've talked about something in excess of 3% on it. On a normalized basis, we've obviously gone through some difficult comp periods, but can you talk about this a little bit, because we are not really getting to that trend right now, we are in a downtrend underneath that threshold. So just trying to understand how long do you suspect that this could continue as a trend or is there perhaps an impairment or a reassessment required in the assumptions for what can be accomplished on that front? Thanks.

Erik Olsson

No, I think we continue to believe we can raise rates, as we have said many times. We're targeting mid or low single-digit numbers, as we've mentioned 3% and I think it's not an exact science. Sometimes that will be 4%, and other times it will be closer to 2%. I think in the current environment, and with the volume growth we're also getting at this time, we're quite pleased with the results in the first quarter and we will continue to try to drive rates here as we move forward.

Mark Funk

And the only thing I would add to that, keep in mind obviously, we've moved the overall portfolio, that's – I'm sure you are aware of that but the composite is up 15%. Since we started doing this new orders are up 18%. And if you look at it sequentially, if we take out the higher holiday units of Q4 that were returned, the sequential for Q1 would be about 0.6% positive, so positive Q1 versus Q4. So that should obviously add momentum going forward and as Erik said, we're very focused on getting the rate back up.

Sean Hannan

That is great, and then, specifically as we focus around specialty containment, can you talk a little bit around the perspective of whether utilization there has bottomed the expectations of that moving forward? And then also as a part of that commentary you may provide, discuss little more the reasons and logic behind the average rental fleet units being up in contrast, and obviously you've been making some investments here, but in contrast, the revenues and the utilization going down? Thanks.

Erik Olsson

So I think the – we have to separate the two end market segments here. So on the upstream side we don't expect to see any improvement and that market will continue to stay low for the foreseeable future. On the downstream side, however, we believe that we should see utilization increase as we move through the year here. We have a good pipeline of projects coming up and we're doing very well in that segment.

Mark Funk

And the only thing I would add to that, and that's why we're in the process of obviously repositioning some fleet too to the San Antonio market, the Dallas market, the Philadelphia markets. I'm using upstream product to reposition. I mean if you just look at the sequential, the upstream utilization dropped from 65% down to 57%. On a year-over-year basis it dropped from 71% down to 57%.

So really the headwinds are all there. We actually have more product on rent in the balance of the ETS business, both sequentially and on a year-over-year basis. And actually even EBITDA on a year-over-year basis is up as well on the diversified and downstream business, whereas the net number obviously is down just because of the upstream and we're addressing that with repositioning.

Sean Hannan

Okay, that is helpful. Just to clarify on that, the upstream, do you feel at this point that that has bottomed or is effectively very close to a bottom, and then the non-upstream, what are we seeing in terms of core activations, can you talk about that for how that is actually trending for that side of it?

Erik Olsson

Well, the upstream market, it's hard to say whether it has bottomed or not. We still have – I don't know, about 1,000 units on rent in that segment and hopefully, we can keep them on rent, but the level of uncertainty in that market is large, obviously. As Mark just said, on the other side of the business, the downstream is trending up, both year-over-year as well as sequentially on units on rent, and as I mentioned, we expect them to continue to build on that as we move through the year. We've a strong pipeline and performing very, very well in that segment actually.

Mark Funk

And upstream, perhaps oil and gas is only now 2% of our revenue. Earlier it was 5%, it was 3%, now it's 2%. And so all the other parts of the business are lifting and taking care of that.

Sean Hannan

Great. Thanks for all the feedback folks.

Operator

Our next question comes from the line of David Gold from Sidoti. Please proceed with your question.

David Gold

Hi, there.

Erik Olsson

Hello.

David Gold

So just following up a touch on there, I think what maybe we're trying to get at is with upstream now, as you say, 2% [Indiscernible] and downstream working for you, do you think we get to a point, maybe later this year, where we actually see utilization improve on the Evergreen side?

Erik Olsson

The combined utilization?

David Gold

Yes.

Erik Olsson

Yes, we do.

David Gold

Okay, all right. That is helpful and then second, can you give a little bit of color, obviously with the container count going up at that business, is that all headed to downstream or are there other spots that you can talk about where you're seeing really good success there?

Mark Funk

Yes, any additions on the ETS or all downstream related.

David Gold

Okay, great. So, presumably should we be reading into that increase, in other words are you seeing the demand strength enough to be adding, or are we filling out other locations?

Mark Funk

I think it's first the demand is there, right, in existing markets and new markets. So we're not buying, if you want to call it, in advance of real demand. So we're watching that very closely. We reposition if we can. If that doesn't make sense from the upstream market, then we'll buy incremental product, but it's really driven by demand and we feel very good about our prospects on the downstream side for the balance this year.

David Gold

Perfect, and then, Mark, on the SAP side, talk about if you can for the rest of the year, how that layers in by way of cost and when those costs start to subside?

Mark Funk

Yes. So as I've shared in my prepared remarks, we expect about $1.2 million incremental in Q2 versus Q1. That actually would continue to be at that same level, which means higher than Q1 and Q3 as well. What we do expect to do, because that's just the cost, if you want to call it, of operating our new ERP environment, but we do expect efficiencies as a result of that.

I mean that's a big part of the decision of implementing it. So we do expect that to start moderating if you want to call it cost takeouts to offset that incremental expense, I would say, in Q4. You're absorbing the higher costs without getting the efficiencies in Q2 and Q3 and then starting to get efficiencies in Q4 to offset that incremental run rate of cost.

David Gold

Got you, okay. It does, and then one last question, this is obviously an active repurchase during the quarter, two questions. One, can you give the average price paid, and two, thoughts for the rest of the year on repurchases?

Mark Funk

The average was $25.47, and obviously we had the flexibility to do that. We're looking at our free cash flow and obviously focused on reducing debt, investing in the business, paying a dividend and obviously looking to repurchase as well, but it depends on the other requirements of the business.

Erik Olsson

Yes, I think Mark mentioned the order of priority here. So we will be opportunistic on the share repurchase side.

David Gold

Got you. All right, thank you both.

Erik Olsson

Yes.

Operator

And our next question comes from the line of Scott Schneeberger from Oppenheimer. Please proceed with your question.

Scott Schneeberger

Thanks. Hello guys.

Erik Olsson

Hi, Scott.

Scott Schneeberger

Just following up on specialty, David Gold had asked you when – if by the end of the year we'll get to on an aggregate basis utilization growth. How soon can that happen? We all appreciate that you're growing the downstream diversified side and agree, but when are we going to hit that inflection point, because it's just a mild Bugaboo in OpEx?

Mark Funk

We expect, if you want to say, improved utilization is really this quarter, Q2.

Scott Schneeberger

Great, thanks. The pricing on portable, again it looks good. I'm curious on the – you guys had mentioned back in the fourth quarter that you become more disciplined and more effective in pricing on the seasonal retail. Does that have an impact from fourth quarter to first quarter versus historical trend, and if so, if you could address it and then confirm that there was some effect of pricing in the fourth quarter? Thanks.

Erik Olsson

Yes, it is actually the level of success if you like that we had to drive up the rates for the seasonal units has of course a negative sequential impact, as those units come back late in the fourth quarter and early in the first quarter this year, which is why we showed a small negative sequential rate between Q4 and Q1. So, it is – like I said, it has a negative impact sequentially, but obviously it has a positive impact in the quarter and they go out.

Scott Schneeberger

SAP, a couple of things, I think we had $1 million OpEx sequential 1Q to 2Q, Mark, I believe you said $1.2 million. Is that because we're off of the model or is that incremental? And I have a follow-up.

Mark Funk

Yes. I would say, we expect that to be incremental from our Q1 actual numbers and obviously, there is more business activities along Q2 versus Q1, so there would be more SG&A naturally. But what I was trying to highlight is when you look at what we reported Q1 versus Q2, cost of running SAP would be $1.2 million incremental. So I'm not sure versus your model, to be honest.

Scott Schneeberger

Then it's close enough. I'm just curious if there is anything significantly incremental in there. [Indiscernible] what we would've anticipated. And then lastly, just following up on SAP, I think you went live April 4, I believe, just guessing around that date, at the start of the quarter. Open question, if you could just give us the overview, the summary of the entire project and then honing a little bit on that launch in early April and what's to come? Thanks. And any productivity trends is also an implicit question, thanks.

Erik Olsson

So, we're obviously very pleased with the project so far. We do have UK still to come online in June. But [Indiscernible] North America is live, we're running both ETS, if you like, and mobile mainly on the same centralized platform now. Project is on time, it's on budget, so all very, very positive. We did go live on April 1, or we did our first actual business on April 4, I guess. It's gone very smoothly, there is obviously always some kinks and some things to iron out, but we've been billing, taking orders, shipping product since day one and things are going really well.

And, of course, as we move forward now, we're going to be able to get to much more information, much more timely data for us and obviously we look to drive efficiencies as productivity increases. Obviously, it's always a learning curve for employees and for the business when a new system is implemented. But we think we're going to see productivity, we're going to see efficiencies coming out of this as we move through the year here.

Mark Funk

That's a great summary. The only thing I would say is for the month of April we delivered more product than we did April of last year, and that's with us cutting over and bringing all our employees under one platform. So we're very pleased that something like this significant could be disruptive to the business, but we actually delivered more than last year.

Scott Schneeberger

Great, thanks. I will turn it over. Good job on the quarter.

Erik Olsson

Thanks Scott.

Operator

Our next question comes from the line of Andy Wittman from Robert W. Baird. Please proceed with your question.

Andy Wittman

Hi guys.

Erik Olsson

Hi.

Andy Wittman

I just want to ask about the impact of used box prices that are in the marketplace, they are obviously down significantly. And I was just wondering if that is having an impact on new entrants to the market, the overall pricing that you see in the market, and if it hasn't today, if it's shown that in the past and this happened even though maybe the downturn and the price hasn't been quite as significant, or what are your expectations for that could be in the future?

Erik Olsson

So the short answer is no. We're not seeing any new entrants in the market based on container prices. The reason is, of course, that running an operation like this is so much more than just the containments, right, you need to have the whole infrastructure with yards and trucking and delivery fleet et cetera. So there's so much more than just the containers to it. So, in our opinion, I don't think we've seen in the past either the container prices does not really matter.

Mark Funk

Right. There was a NPSA, National Portable Storage Association, meeting in Dallas just a couple weeks back. I think the takeaway from there is that the environment is good, people are doing – being very disciplined on the pricing side and if they are adding additional fleet with lower container prices, it's nominal. There is not really much change as far as dynamics in this space, even though, if you want to call it, the raw boxes are cheaper.

Andy Wittman

And then I wanted to do my follow-up question on the sales, Erik, it sounded like you had a pretty aggressive expansion plan in there. I think I heard 8% year-to-date in I think you said territories, can you confirm that, as well as what you expect, by the year end how many more territories you would have added, as well as talk about the level of productivity that you're seeing from the sales force as well?

Erik Olsson

Yes, it's correct. We have added 17 or 18 territories since the beginning of the year. And I'm not going to come out with a specific number here, but obviously we look to continue to do this. And it's not always new territories, per se, it's very often that we split the territory and just dig deeper into the existing markets we are in. Sales productivity continues to go up. We were up 10% on a year-over-year basis in Q1, so we're very pleased with that as well.

Andy Wittman

Okay, great. I think I will leave it there – I guess one last question, probably for Mark, just noticed that the trucking costs were a decent size contributor to the overall yield, is there something going on there, are you getting fuel surcharges or something there, that seems odd…?

Mark Funk

I would say, we do get some actually fuel surcharges today, believe it or not, we do. Obviously, fuel costs are down, so that was actually about $0.5 million pickup on a year-over-year basis, lower fuel on the storage side. So I think that's helping. And I think another thing is we were adding more internal drivers versus outsourcing and they're more productive, it's better for customer experience. But they're more productive and we can make higher margins as a result of having that headcount in-house versus outsourcing that activity.

Andy Wittman

Okay, thanks.

Erik Olsson

Thank you.

Operator

And our next question comes from the line of Joe Box with KeyBanc Capital Markets. Please proceed with your question.

Joe Box

Hi guys.

Erik Olsson

Hello.

Joe Box

Erik, I think you said that your productivity was up 10% year-over-year from the sales force. I apologize if I missed it earlier, but did you give specific sales headcount?

Erik Olsson

We did not, I think at the moment we have 189 heads.

Joe Box

And how did that compare to 1Q of last year?

Mark Funk

164 on Q1 last year.

Joe Box

164, okay. I want to go back to one of Andy's questions, I'm curious it's not just used box prices were down, you're also seeing significant degradation in new box prices as well. And I'm curious if you guys are managing your business differently at all, whether it's you change the mix of buying new versus used and I get that you don't need a ton of new boxes, but any change to the way that you're running your business?

Mark Funk

I would say we're not adding that much in the way of incremental units, right. We're first focused on redeploying what we already have. We have bought, if you want to call it some one-way product from China that actually is brand new product that we've had delivered both to the UK and the East as well. But obviously that's a longer lead time and that kind of thing. So we're doing a little of both, but not have – we have not changed our model significantly.

Joe Box

And one thing that did come up at NPSA last week or the week before, someone was talking about an incremental rental opportunity from doing content insurance and I'm curious if this is something that's kind of come across your desk, is it something that you would be willing to entertain where you offer content insurance and maybe you can get some margin on top of that?

Mark Funk

We've actually discussed it internally. I don't think we have a position quite yet, but we actually have discussed that. So that could be potentially ancillary revenue or obviously income. And so that's something we're still exploring, but definitely have discussed it, we just have not made a decision.

Joe Box

And then just, what was the EBITDA contribution from wood units in 1Q 2015?

Mark Funk

It would be an estimate, right, because of the shared cost. So we'd be somewhere around about $4.7 million in Q1.

Joe Box

Okay, got it. So pretty decent incremental margin once you strip that out. Okay, great. Thank you, guys. I appreciate it.

Erik Olsson

Thank you.

Operator

Our next question comes from the line of Doug Mewhirter with SunTrust. Please proceed with your question.

Doug Mewhirter

Hi, good afternoon and good morning I guess.

Erik Olsson

Good morning.

Doug Mewhirter

The first question on CapEx, looks like you actually spent below trend on your fleet, I imagine there may be a seasonal component to that too and likewise, have you changed the expectations for your total CapEx spend that you went over at last quarter's conference call?

Mark Funk

We have not. So we are still in the $80 million to $85 million range. So that really has not changed. I would just say, obviously, that's our number for the year and will keep a close eye, and everything that comes up for request is scrutinized and we're spending our money wisely, but we might spend a little less in Q1, it is more of a timing issue, but if things go as planned and we're feeling, like I said, optimistic on the year, we still expect to spend $80 million to $85 million.

Doug Mewhirter

And that's total CapEx, including PP&E, net of disposals…?

Mark Funk

Yes, that's the net CapEx including rolling stock, including SAP, all of that.

Doug Mewhirter

Okay, great. Thanks and my second question deals with your specialty containment division, the downstream has grown quite nicely, what percent do you think that growth is attributable to the strength of the end-market, just a natural growth within the market versus you taking market share or expanding geographically within that market?

Erik Olsson

I think we're definitely outpacing the underlying markets. I think we are taking market share. We are leveraging our very strong position in the Gulf area. The geographic expansion has not had any significant impact yet. We're just in the process of sort of establishing ourselves in these markets and we've taken some orders, but the revenues are still fairly small. So I think, it's hard to be exact here, but it's probably a 50/50 underlying demand growth versus – and 50% our own strength or taking market share.

Doug Mewhirter

Okay, great. Thanks. That is all my questions.

Erik Olsson

Thank you.

Operator

[Operator Instructions] Our next question comes from the line of Sean Wondrack from Deutsche Bank. Please proceed with your question.

Sean Wondrack

Hi guys.

Erik Olsson

Hello.

Sean Wondrack

I had more of a higher level question, given the margin profile on the specialty containment product, and you're already – the fact that you already have a base in Europe, would you consider expanding that product line into the UK, potentially Europe?

Erik Olsson

We should never say never or so, but it's not in our plans at the moment and it's – I don't think we'll put it in our plans even on the medium-term here. So short answer is no.

Mark Funk

There's a lot of growth potential just in the US and Canadian markets on the containment side. So, we're just scratching the surface.

Sean Wondrack

Great. Fair enough. That is all I had. Thank you.

Erik Olsson

Okay, thank you.

Operator

Ladies and gentlemen, there are no further questions at this time. I'll turn the conference back over to management for any closing comments.

Erik Olsson

Thank you very much and thank you everyone for listening in today and we look forward to report on our Q2 in the month of July. Thank you.

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