CTOS - Earnings call transcript Q1 2022 | Custom Truck One Source, Inc.

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Operator

Greetings, and welcome to the Custom Truck One Source First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Perman, Vice President of Investor Relations. Brian. you, Thank

begin. You may

Brian Perman

and good you, afternoon. Thank

are Before management's commentary begin, may forward-looking their we company's of on would that you include nature by which remind to statements, and and control. call outside the like today's we uncertain responses questions to

results forward-looking actual are and statements materially. these on management's differ Although expectations current based beliefs, may

the the a SEC. company's to differ results discussion cause could actual the of For of refer some Risk to that filings section of with the factors Factors please

that first the presented XXXX Additionally, evening. reconciliations for press of the historical for issued of prior Custom note or are the SEC our afternoon XX, XXXX of results find please you or during on filing call of today's this periods. Inc. The on posted months historical section can the is our discussed Source and and the measures three website. the today. for with Relations quarter Custom of the this release issued our XX-Q Truck We'll a Truck non-GAAP press financial operations ended we discussion March call presentation Today's as in be basis release One Investor

LP believe over include periods. combined presented XXXX results and all to compare Truck for reported information One results if the discussing combined April as for will While our how had combined company together has We the Nesco today time. Custom the Custom be is merger Truck since can performed and only period operated we've Source X, such date, useful pro forma

Accounting call to CFO; Brad McMonagle, Ryan now Fred. President turn and the Joining COO; over me today CEO; will Ross, Todd Chief Barrett, I are Meader, Officer. Fred and

Fred Ross

to today's and call. Brian Thanks, welcome everyone

us thank a of largely scale help our shifted we into move year our our As the to our has customers, to operations two model. like we realize challenges second enhanced optimization take business industry business over of our employees, shop integration suppliers fully this and opportunity efforts years. navigate support our to in combined last largely company, the one-stop who all With as I'd of the towards have complete, faced benefits the the

year's Our primary continuing our provide share highlight our our and the delivered industry value gross sequential around revenue QX. market up team. creation and shareholders. prior deliver adjusted incredible issues grow revenues, chain This still XX% to $XX pro are it XXXX new than customers, our while was to to On We The reflects compared results headwinds more to supply seasonality impacts was QX decline year-over-year that service million QX of typical in of QX strong of lower performance profit forma unparalleled the continued and successfully the the goals by supply compared EBITDA QX on equipment XXXX, basis up despite chain. million revenue quarter, sales. QX despite to particularly was the a $XX down gains versus

in Our up of well utilization The modest seasonality. XX.X% from XX.X% continues from perform ERS with decrease at to XXXX for QX typical utilization quarter sequential for business our XXXX. reflects QX very the

profitability end opportunity continues business new by with and improving sales a to demand rental up for during the focus XX% million both see to us TES Our margin on since and of quarter record very backlog $XXX growing expansion. XXX% to by the provides demand XXXX. the strong and Strong of

X.X full turn our making down from almost forma good progress times leverage X.X Finally, the time net we're towards of at the the a at pro merger. quarter ending times reducing

created for markets the end exhibit shop XXXX business realization a rest are through They build the Our strong very of one-stop fundamentals of positive less acceptable strong benefits underlying first the of cyclicality. year. focus continuation of to on and foundation provided quarter consistently our that reflect our solid the and on a the model are to we us results for have momentum

issues outlook that of possible. will the the we for chain impact our are inflation, the While rest of to and we by the navigate year these tempered confident best supply global is extent continued

the During our we see segments. revenue, continued XXXX, of remainder margin adjusted and growth expect EBITDA strong across to business

ahead, Looking I it Custom prospects excited more cannot With I favorable to be about that Truck. over turn for Ryan. the will

Ryan McMonagle

Thanks, good afternoon, Fred everyone. and

us fundamentals. base. and bolsters our utility implementation and driving at positively, Pricing is held rail trending comments end for of of up deliver is facing the our Despite our to economic contractors, quarter rent the of steady regarding from demand of the time financial and cycle build demand of robust want the in results. in who employees now, infrastructure I the The tiered transmission and the end each reflecting We telecom business primary further strategically opportunities strengthens pricing our growth strategy, of future. for echo tremendous telecom, foreseeable we're right excess the see the Fred's expansion challenges segments. largest this backlogs our across QX our the versus in these in These and First, efforts selected markets the everyone On strong in yield customer demand distribution markets our overall T&D, strong XX% largest helped remains should infrastructure. GDP merger. or markets; and growing rental XX.X% margin reflected extends four well offer long-term at and

desired trucks, bodies. significant customer have attachments to our Continued we ability our at impacted to our to demand. the chassis, only ability receiving and recent Over industry certainly and the supply to rental namely our fleet product pace issues adequate quarters, deliver supply customers major QX. our the This of grow intermittent chain issues for meet experienced limitation present during input

truck increasing in March million our production equipment inventory versus QX goods However, production ever, QX. of $XX significantly ramped resulting and in QX. And highest whole by month versus represented,

of supply saw we several these in in chain than our QX, the the in production quarters during XX% inflows than We March. QX an to did from inventory experience to been quarter-over-quarter well. QX, as compared anticipate over year. adding We're Inflation this to on we impact further of increase QX, anticipate average during continues in in we anticipate we trends, And increase past to will equal levels XXXX. QX our and TES We monthly the production year. industry. fleet improve Based second expect for our inventory that growth that the we've QX in more second challenges the discussing of rental to half will growth to the CapEx quarter the we and saw of last more remainder optimistic vendors continue improved deliveries

wage the with some well as higher of consistent rest seeing inputs. inflation of as production the are We our market, for costs

ERP reasonable largely in Nesco in optimizing customers we integration We the are onto system. single complete, towards how moving optimizing all system. less certain synergies input focused passing and our From an the increases customers. our our price With this important deliver a to to are they and integration efforts directed now Kansas production, possible. where cost we of increases, City Today bringing cost through we of forward, recently achieved service perspective, are on are location our our and service implementing than on savings milestone the locations

our of producing margin, revenue, how shareholder of who we adjusted are run increasing continued growth, business. and EBITDA gross become and we value and strong goals part Our have

we year, customer believe market our execution position tailwinds, favorable ahead goals. demand, the achieve these solid us of As we team the and rest that by look all end to to robust

the financial advantage sincere we to While them. of it unmatched you to and year delivering supply customer will Brad. the multiple in opportunities employees chain first our and key a know to thank results I'd progresses, I challenges and fully service, look are inflation now demonstrated remain extend over turn the take obstacles as to emerging. We to as quarter, like the

Brad Meader

more end I granting privilege financial company at remarkable. creation over for over markets couldn't for last the will thank several years. Custom this Truck to are in years our years. working an next part and in turn Todd is role. custom excellent the and his to that, be three I'd The the to truck afternoon, the announced the attractive, But in role Ryan, Todd. Thanks, me QX for to the has everyone of want seven call an company, going now Officer serve value the people new incredible performance been effective weeks Those of Chief through assume will current job team ago a and his Todd two Accounting and of CFO good Todd Todd We I The like at detail. better our Friday. critical the such the spot. know first, as month; elements Barrett, of end the walk during do this model have business will shareholder for be interim cornerstone a will everyone. I three I'm leaving with

Todd Barrett

Thanks, Brad.

of the by pricing, result Total approximately by down compared was for indicated focus revenue $XXX an as drop $XX and to margin gross run QX Ryan for up X% from XXXX, QX improvement million, balance the XX.X% sequential last was than in primarily in of XX% Gross QX. improvement improvement profit $XX profit, Fred for $X.X As expected revenues, driven in segments. quarter. driven revenue million Net was depreciation pro as QX well QX pro chain-driven pro EBITDA revenue in a SG&A or XX.X% was to SG&A our $XXX quarter. versus was by for compared million QX, our up net QX, adjusted forma the strategic drop million excluding increased QX, XXXX, XX.X% improvement higher compared and million, of sequentially, mix. expense, was million, primarily on another have excluding share-based The in the rate sales. quarter in quarterly to was increase the to was loss year result QX. This XX.X% and QX, new Adjusted X% sequential QX. payments down all of Total rental QX was shift with and forma XXXX, XX% a representing only XXXX QX an of million XX.X%, forma QX revenue forma higher SG&A. supply a across gross compared SG&A from of margin pro X% loss costs from for from quarter timing. our $X.X equipment strong as a $XX

We our and OEC Fred for which to our to for the results, XX.X% rent segment rental XX.X% March. adding was was did $XX utilization and the The down our to from see referenced previous the decrease the combined XX.X% of to with quarter, yield in on QX for fleet drove due challenges lower limitations annualized for our QX On the rent, XXXX. up to slightly at quarter, was ORY in XX.X%, within on continued segment up turning for compared QX strong utilization QX XXXX. ERS supply Now, with from average XX.X% sequential the end quarter improvement increasing chain a from in XX.X% which QX million quarter. flat to XXXX,

excellent Our an team on is strategy. job our doing pricing executing

Consistent $X.XX XXXX. the on balance expect the we Our OEC improvements comments production billion to OEC compared of XXXX. experienced chain with have ended flat, QX Ryan's supply earlier for year-to-date, to and QX at activity based we current increase

rental For was revenue versus modest QX, $XXX decrease million, QX. a ERS

supply quarter that up gross increased issues. the As modestly resulting to end to of million from from for the $XX Overall first revenues, strong, the the million, down $XXX million. QX. lower continues QX. versus discussed. of million see QX fundamentals were increased XX.X% million, impacted $XX in QX. despite in was ERS underlying $X previously excluding XX.X%, by in benefits a continued chain but million mentioned, for strong to $XX Gross to be depreciation market gross margin of million profit profit equipment Revenues TES remained sales QX profit ERS in performance compared quarter $XXX up ERS Ryan $XX to almost

our While XX% strength growing revenue strong broad-based activity sales was million. backlog this our to was down, across portfolio. product sequentially $XXX with be very And extremely from by continues to QX

strong our fully take supply reflects to and issues chain indicative to TES of temporary the being in of strong demand, our in for sales resulting equipment discipline. growth advantage gains the are we our demand believe the impediment a pricing While growing market able backlog share

XXXX put We have cost of successful to increases customers. addition inflationary initiatives through implementation our net in place pressures efficiency in passing countering to during the through production in been

quarters coming confident record will hold TES of we quarter. are be even the are improve Overall, to inflation. able very with or We pleased we over the levels the with performance business margins of last the

to compared revenue APS decline modest of million, Our a business QX. posted $XX

rental EPS shift QX, coupled by revenue slightly made the While mix parts to we revenue compared levels. APS decreased be from year core sequential APS sustain than gross and revenue That and more the challenged our APS to $X.X of service in doubled in optimize QX with its compared QX. rental in our in of continues the grew cost quarterly to since order decrease to in has XX% XX% rental strategic services our XX% decision or revenue as margin to depreciation XXXX did million QX APS to distribution gross fleet in to the last costs a current inventory revenue business higher Despite reduction gross structure, certain valuation restructure utilization. QX. fulfillment decision the and margin technicians service segment service stemming as step-ups to levels our APS a strong QX fleet to to of from benefit recapture well in APS margin to in during X% total contribute allocate

profitable to Through our We well-positioned for and margin are providing a wallet segment, XX% alike resources quarters. accessories larger necessary to with strengthen execute range and of our position plan. are coming upper suppliers we remain our a expect APS the we and the our and to dedicated division strong tools customers' in to share customers the gross in capture business

to through acquisition maintaining focus in position the strong M&A selective fleet investing same continue the at January. including growth time improved HiRail and a leverage We liquidity while in of and rental on Leasing pursuing our

million, and balance improvement of the a to $XX with under net of improvement by ability transaction. XX, the mainly in of under XXXX an result one X.X from adjusted we of remains of that at end acquisition During end leverage an to X.X With fund Approximately turns our by the outstanding is times three early using EBITDA of finished the times, we the the the QX goal ABL attain turn as million a January. an achievable since upsize increased with we $XXX million, $XXX or which of QX to quarter, close XXXX. the HiRail ending $XXX almost facility. everage the At borrowings LTM ABL ABL March of with of ours the million available had the

that continue provided will the make believe seek incremental and when we shareholder we respect to create outlook However, in they With for acquisitions to investments long-term prudent XXXX to value. we chain fleet, strength, at on we current year-to-date March based our market our full year and performance, outlook continued our are rental for supply this backlog, maintaining the our initiatives guidance time.

we on regarding finish supply service cost exceptional confident management, Given guidance will I our echo chain within focus performance. control closing, Fred's and Ryan's provided. our to In year want we customer EBITDA and comments previously the that are the strong

that environment growth, of will down over I to questions. year now operator the inflationary a line We executing delivering With the our an with to out and one continuing and the open combination it service. of are highest for transformational path adjusted Nesco are well EBITDA integration, level double-digit customer to the margins from deliver in expanding turn

Operator

[Operator you. Instructions] Thank

from is Justin proceed with Baird. question. question Hauke first Please Our with your

Justin Hauke

Thank was just I kept the you. through has able you discretion to would Do adjust you afternoon. margin could and segment guess where are of it rental? in backlog? unchanged just revenue the sales -- the on from some good to highest incremental maybe wondering revenue I equipment how bound I'm one your Guess, guidance go way? Hi, the fleet that be have to the you mean wondering or I to much into sell of to mean slip that your be I guidance

Ryan McMonagle

Sure.

you or more about one side. that, But how flex with to of the on have operate talk we pivot rental we react demand we things that. we is This demand the that's ability about. model, sales if the what that thanks shop more Ryan. that's and when to side to and one-stop the the right start there's unique call. talk is on for no, I'll is good on to we the When talk demand and getting Justin can about there's

finalize point, flex. of working product we'll can year to we sales or fee But balance from this So some will what versa. the we yes, rental for to this we're At do assets sell. add the to in general terms shift to have ability vice we yes, how rental and

Justin Hauke

when the you both And about talk one? and business then Okay. or is production record business that increase the TES the on ERS just

Ryan McMonagle

That's correct. It's on both.

trucks we rent about that either can as we or So, building production the sell. completed think then

thing one production its and now very through continue with happy best with expectation then and QX. clear financials will that this to that month is quarter certainly strong that seeing an to So, in in we're addition ramp is expectations March really

Justin Hauke

great. Okay, Thank you.

Ryan McMonagle

problem. No

Operator

you. Thank

Our question. from proceed DeBlase Nicole next your Bank. comes Please question with with Deutsche

Nicole DeBlase

thanks. guys. Yeah, Good afternoon,

Ryan McMonagle

Hi, Nicole.

Nicole DeBlase

in really which we Maybe the if much little But just seasonal in more the the you of that XQ? of doesn't dip of of do throughout a tend I a out year? rest me. think to levels utilization, utilization didn't likely seasonal uptick talk bit higher context flattens Is you about could it that in the quarter these see that how normal guess, see of kind first the surprise at

Fred Ross

-- Fred I this what Ross. guess is

it we it the going if pretty to up. you're back. we see what tick didn't get at. where it customers they wouldn't stay could think biggest knew they probably get see Probably is why drop-off reason it's Hopefully level a in didn't turned -- because I it, to they it

for building. dip see to I But simple they and probably pretty forward a don't much needed think was keep it. it pay going I So, it of

Nicole DeBlase

Got it.

what And maybe about the Okay. chain supply like you to helpful. happens through And could on maybe would ideally side? then and issue getting us remind the you spend. That's other think what

constrained your we by this could respect wasn't guys of year would and to looking at maintenance be chain, CapEx? have what list supply wish and growth you with it CapEx If

Ryan McMonagle

This sure. is Yes start I'll Ryan. that. with

demand I right adding the fleet clearly of now. there out there's we're think terms than to is in what Nicole, more there

I would it's see just high single mid be maintenance with operating operating balance think pretty It CapEx of we've increasing consistent year. of how the CapEx kind to for how digits. would we it the but talked this about year be and growth component, this

to start So you single digits high digits. low or move double towards

market could we responds demand I think we that's growth. think, to that. we the and where think where And little to I how that's react a accelerate bit

Nicole DeBlase

last And one and it. Got on. from it I'll then pass me

to with respect have signs still bill, infrastructure those that see building year? to guys or come of infrastructure to Just through you we pipeline something the any started dollars is progress as

Ryan McMonagle

I about think of talked tailwind XG more runway. actively increase lot come something happening. but going now just of to to -- the it favorable seeing for we time, be a the increase to happening I it's with exception think long a is we a which are our it's But to

Nicole DeBlase

Thank you.

Operator

with Crist [Operator next Securities. comes Stefanos Instructions] your proceed question Please question. Our CJS from with

Stefanos Crist

Hey my thanks guys, quarter taking questions. congrats for on and the

Are For that or an obviously the sales in maybe backlog order it's market the any up you're end particular demand? pieces most there of seeing significantly. equipment

Ryan McMonagle

all We across of really end demand markets. four seeing the strong are

is up, up, is telecom up. So, utility and rail is up, infrastructure

So, numbers segment, Stefan. by have so I up significantly is those but me front of is of they're which why up all backlog don't kind in much

Stefanos Crist

as working balance you capital talked think about well then the in ramping up did And as of in Thanks. for QX. the I should you we as year? how guess about QX inventory

Ryan McMonagle

of flat vendors But cash. from fairly we're floor you Stefan. be to inventory of line. we bit our finance of if finance that might plan with should remember majority the be working little our There capital, how use receive able we It the a

a really cash. of meaningful it's So, not use

balance of but of be over You might year. bit uptick, it significant see won't a the the little

Brad Meader

Brad. And Stef is this

dollars things, come investment mentioned The million going mean you're work we but I for some The expand give capital is piece components. others, think really I which be of other in consider Ryan talking thing drivers us PTA there real and in to couple a parts to the your most. inventory are two side to which of will as

of and I working more and rental relatively short. just be think timing the because terms the of revenue providing capital and most true a our would are sales definition function bigger AR that's

dollars. AR. type. So, cash It's collection in see you of again as an might timing a investment But good is investment not in it's really

Stefanos Crist

Perfect. Thanks guys.

Operator

Thank you.

is with question Scott from Oppenheimer. next Our Please your question. with proceed Schneeberger

Scott Schneeberger

on very quarter their a just you so much in to environment Thanks. reception bit the speak late if conversations to-date I to little to and rental anything pricing this little or costs progress with came Thanks inflationary second your with rate duplicating you've seen the more apologies And off. customers could increases? I'm it a regard and guys. how the year? But

Ryan McMonagle

months tier -- I'll customer and the I'll Scott Ryan. this we we we've XX reaction. I'll may a financial of couple as would let on statements. and Fred all of of last to begin is we quarters way to about the call, implemented talked said kind Sure. take to to start the really said it XX it months the up talk now take roll But some through pricing

that still path. we're So, on

to We we're to to of roll let I'll And stop Fred response. are strong continue still out. demand and inflationary able the pressures out. some the customer rolling it it given And environment,

Fred Ross

are to fuel. The thing. it at same without understand the buy really much pushback is go go all. They to they when the customers facing store Everybody they accepting

our understand it's not we problem you. are to have really cover So, that costs be honest to there's they with been pushback up and going costs little and a very those

Scott Schneeberger

year Great hopefully as of the are a duplicating, as integration well just guys. progressing the follow-up as and synergies point businesses? Thanks. mentioned Thank not how Nesco appreciate that. this transaction. overall then since I'm you And now two been it's a And you. I cost at synergies, as revenue but

Ryan McMonagle

is integration ERP spot. mentioned of comments a service Sure. I'll on I now same we Nesco the have in We with City I'll the on good all that earlier Kansas and my start question, and go centers but backwards in system. say your integration

one. us was to that for operation the milestone operating a majority significant So have on of that

$XX and from with will when rest $XX actions initially, that a think beginning see number to take feel it to good then and in we out XXXX into started And that. quantifying the really the laid of -- the we majority synergies, taken. have never million standpoint we realized, revenue be actions of categories cost now put million, increased have the actions I the to associated of we synergies the The we been those They that then about synergy So the of we XXXX starting of terms are but those we of see been with a are revenue taken. take place. fully majority but out starting two to

The the first sell and is, customers is because the we has PTA the now equipment sales on ranges and team to between utility of have our equipment piece their which They customers. by I are legacy trucks. equipment. those And to and not a that's $XX,XXX average received Nesco $XX,XXX equipment, being with because by then that able sell needed wasn't kit think able well side,

side, And seeing we're so of the changes terms take as PTA we how talked to start about operate place. some we now we of those making the on in are

to think talking in So when buying I it's and to give -- detail more us. but customers, some who for to talking selling we're QX, early about historically starting utility have we'll our those we're you able in of we're wins terms buckets there, been see kits diggers -- be

Scott Schneeberger

Great. pass Thanks it so much guys. on. I’ll

Ryan McMonagle

Thanks, Scott.

Operator

with is your question Stifel. Noelle Instructions] [Operator you. Dilts Please question. Our with Thank from proceed next

Noelle Dilts

trucks buying And was changing procurement? what could point? lead are just you how at at is Hi. Thank this hoping looking sort you. at and sort and speak attachments, you're looking chassis you times Thanks. that you're about thinking how of of or impacting I to when

Fred Ross

we been -- of why far for us. it's even less for We into business future it's always that's chain everybody, the a reasons though have, been one supply painful model. by the has our And pain

We long relationships. have decades

So up we're into end XXXX. some stuff will into already placing XXXX, orders actually going

going Again, to our we we're to we're able what So will be but get going going feel need. that to do we challenges, large. competition there's than I and always to by better be good think

Noelle Dilts

Great. for Thanks. me. That's it

Fred Ross

Noelle. Thanks,

Operator

turn like at are this for Thank the Ross back floor to to questions any you. further no comments. over time. Fred closing I'd There

Fred Ross

call. hesitate your truck. night. reach next you don't We you Thank forward earnings you time quarterly again. custom to please Thank interest and your everyone with have for speaking any today Good to look the meantime, you on questions. our if out in In

Operator

This concludes today's conference.

your this disconnect time. you your may at Thank lines You for participation.

Custom Truck One Source (CTOS) 13 May 222022 Q1 Earnings call transcript