Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Custom Truck One Sources First Quarter 2023 Earnings Conference Call. Please note this conference call is being recorded.

I would now like to hand the conference call over to your host today, Brian Peman, Vice President of Investor Relations for Custom Truck. Thank you, sir. Please go ahead.

Brian Peman

afternoon. good and you, Thank

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

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

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

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

turn and Ryan. today McMonagle, me Ryan will over Eperjesy, call CEO; are I CFO. now Joining the to Chris

Ryan McMonagle

of to and to our to for equipment strong fleet our continued levels support production, Brian, goal entire to demand continues to The all our to of enabling us to team quarter. business of deliver Thanks, tirelessly rental providing to and helped our a suppliers today's truck grow thanking strong to continue everyone, and work record service like maintain begin our and by new welcome, customers. call. I'd who employees, unrivaled such fulfill meet custom customers us

record Overall adjusted and quarter of of We telecom, and EBITDA growth. demand QX remains revenue, long-term the and should profit The of profit markets strategically for of $XXX adjusted largest proxies telecom the see good to future. up end continued T&D, strong and growth opportunities each EBITDA For of contractors, excess our be new gross $XXX reported we million for These the XX%, primary continue the compelling very sustained XX%, growth demand of customer selected million rail fleet. of QX, rental backlog remain well levels. respectively, performance in in strong year, million near of and base, believe foreseeable and in or utility which infrastructure. gross $XXX XX% revenue, at backlogs this sales generated GDP, delivered offer and or in strong in the XXXX. our versus our the adjusted adjusted We year-over-year continue we utility first markets,

we to see rental in in leading of as experience We Additionally, positive purchase the these continued quarter, fleet. from strong to future the assets customers for indicators sustained our first demand all demand.

believe and impact age fleet investment of certain under positively rental the margin, assets years, which to aged industry. $XXX gross X.X QX reduction our in fleet both in Rental of make ERS utilization high turn and rental to of levels, back go and pricing it segment the time piece rent, near a on remains equipment sales adjusted which into the million the available takes resulted of of in we to youngest to continue amount the it and in on focus record of the we remains

million in of quarter, continue we aggressively for to equipment we fleet in on sold In XX% XXXX. increase $XXX segment, the quarter's the the remainder of last expect compared As the TES we to invest stated a call, to the year. QX

end than of in versus quarter the the Additionally, XX% more our grew than more million by backlog XXXX. $XXX or

equipment. up XX% versus new continued year. strong These last QX results Our point demand to for the backlog is of end

and body growing proud this supply area are work meet by relationships the inventory production in sales the as We see of Progress with with and conditions $XXX million us arise. to resulted chassis, the of in we our improving issues supply have chain closely they remainder address indicator continue quarter, to chain attachment in our them vendors, and to our year. well positions fleet and growth positive which goals as we a for the we of

growth to we In new second will that the segment. both in investing focused the to deliver sufficient year and PTA our are in from to These In optimizing XX Union in investments, complete capacity. customers our capacity in City, production expect Grove, acquired levels are bringing our remain ensure expect manufacturing, half process and than growth feet and online. equipment Wisconsin, have of we production Strategically, adjacent the XXX,XXX investing double square acres capacity and APS to and catalyst for production we be more Kansas we fleet a that for service our on our we of as as our warehouse meet capacity product to nearly be Missouri, targets us. well rental we facility which the sales of approximately ensure

we profit with ahead by deliver first supply EBITDA provide strong results, our dynamics outstanding continued demand, to end Custom quarter to team, and believe the we and Truck As gross growth. the favorable year, adjusted market our chain adjusted tailwinds, momentum customer execution improving look rest of the revenue, robust that all

a are exceptional remainder discuss performance range $X.XXX our billion we results we saw customer revenue know and unmatched will adjusted year, service we XXXX year-to-date $XXX the to increasing total extend million. and financial them. $X.XXX in quarter. outlook to the the for first Chris are I'd sincere to and in range like the greater key to to the billion our detail, delivering to $XXX projected closing, our you to of on employees our million thank outlook the and While In EBITDA based

now over Chris. it turn will I to

Chris Eperjesy

Thanks, Ryan.

profit to revenue in up XX% quarter XXXX. of as As QX $XXX million, was mix. total an strong gross in a revenue demand QX XX.X%. segment very result Ryan XXXX, of for and QX indicated, adjusted to gross EBITDA improvement million, a QX largely of margin to profit compared resulting End $XXX lagged XX% Adjusted remained EBITDA up $XXX market growth was gross resulting was compared XX% growth XXXX. compared Adjusted quarter. million, the revenue Adjusted adjusted a strong,

an While XXXX. with TES XXXX revenue all in of QX QX consecutive net quarter XXXX. gross of have income. our from increase segments total positive a or associated growth, the comprised in experienced year-over-year was QX for XX% quarter $XX.X $XX.X XXXX and which of asset a of margin second was million XX% XX% versus million in $XX million, improvement revenues, the revenue, versus QX income SG&A sales rental for and XX% lower Net QX them,

utilization rent quarter within more ERS to $XX segment QX almost Ryan million quarter, OEC increased segment XXXX. for XX%, our than yield compared compared continued was referenced Turning Average to On which XXXX. the results. from XX.X% XX% up for to rent by XXXX. our QX was on strong for for the our QX XX.X%

OEC the million versus ended quarter at billion, fleet Our rental the QX $X.XX in XXXX. up $XX

we in our mentioned, invest of strong rental consistent for in deployed our investment the in equipment fleet the $XXX rental new with to we quarter, As heavily fleet, fleet expect XXXX. our into remainder and of the million expectation continued continue of to Ryan

demand flows ERS this versus sales asset million, first asset XX% the revenue continued of strong from QX of the X% record sales Adjusted was Rental adjusted to with quarter. XXXX our up ERS versus strong backlog, up line up of largely QX QX more in Gross QX, than QX than gross QX XX% margin profit our gross from segment last a a Gross record with QX more XXXX. compared for from XXXX, strong in from comprised an the than comments quarters more In million, revenue QX last quarter were as XX.X%, XXXX. result customers XXXX. increased up margin of ERS $XX for $XXX record levels another mix million used QX of XXXX. For rental ERS quarter decrease which of XXXX. regarding for QX, adjusted production. profit was saw as for inventory rental two equipment XX% up XX%, the gross be quarter year from XX% and revenues the at purchases, million, in from in a strong was XXXX. and from quarter XX.X%. continues increase XX% $XXX rental to XX% revenue was were total $XXX to versus by from margin TES This continued XX% almost benefit quarter X%

broad-based backlog Our $XXX be million. or across sales product our QX to backlog extremely by sequentially was growth in The than growing continues portfolio. strong very to from million activity with XX% our $XXX more

market reflects backlog favorable sales our believe market of continued gains share end growth for our dynamics, TES the in equipment, We demand discipline. pricing strong indicative our the and growing

pressures production surcharges. implementation the We have through of well discipline, as countering vendor been inflationary successful through ongoing passing efficiency maintaining as including pricing initiatives in

results above over we inflation. with XXXX As even or the all of the margins TES for average are confident we quarters, to this will hold at quarter's we able be elevated of show, experienced coming levels

profit XX% APS XXXX. Our Adjusted in XX.X% $XX the versus segment million, revenue QX margin up QX. of to gross improved posted business in

rental than us year, mainly improving balance fleet, capital revenue meet stock. up APS the borrowings priorities service the Maintaining to the QX replenish our have repurchase as inventory XXXX. more $XX to ramp third M&A. and selective in QX more stock we million production and a program of of was strategic than strong quarter with fund position and $XXX by expanding our investing increased to end outstanding remains footprint at We Within million, the demand of last in repurchased pursuing growth $XX our approximately working compared our million. under at to initiating segment, Since up as ABL our for the we through X% parts liquidity and leverage

ability million suppressed As million ABL $XXX available the to the the upsize availability of had we under March with and $XXX of facility. XX,

leverage the over of below fiscal the QX XXXX by almost X.X we and an With believe EBITDA April Xx adjusted we remains of leverage $XXX times Achieving improvement last quarter. of transaction target NASCO the of with since can one the end net from X.X XXXX. turns we million, achieve that in X.Xx, of finished and just down LTM with our close

they believe acquisitions we make incremental create We will continue long-term seek value. to prudent shareholder and investments when to

equipment outlook, strong our respect of believe our units, benefit will older rental purchases from continue well particularly the of demand fleet as ERS rest With for rental customers from as XXXX the to year. for to we

We to high mid digits. by grow further to OEC single also our net expect

deliver Regarding chain TES, our produce levels and record improve and backlog more coming units to ability supply quarters. the levels improved should improvements, inventory in

range the our $XXX of $XXX guidance between We and ERS as segments between updated of million million, for revenue providing million follows: expect of revenue $XXX APS are $XXX in to $XXX and million and million. We million TES revenue $XXX

$X.XXX EBITDA Ryan results we I range and billion, previously, $X.XXX performance. Ryan's projecting our want mentioned $XXX In million in this revenue regarding to strong from total the $XXX closing, echo comments billion As to million. to are of continued adjusted in

year NESCO, all moved in As strong service an of of revenue to adjusted margins expanded into continue highest our to combination reduced leverage, we've the successful growth, inflationary deliver customers. the we third while with providing EBITDA levels our and and environment

I questions. will operator the the over turn to lines that, Operator? to With it open for

Operator

first Davidson. The D.A. is Shlisky from [Operator question of Mike Instructions]

Mike Shlisky

in up off will on even Typically, in XXXX. goes the past directional on edition XQ. curious I guess here start with you Can what is this I'm that XQ, question years, and in I'm it pattern whether XQ, from wondering in continue outlook utilization? a point. just

Ryan McMonagle

strong. QX I then typically would say the there And that of some right remaining that of after think is I come hottest of And is utilization out the increase normally the of is part kind strong in summer. end QX. you're we

that this expect of in utilization basis year. of trend. of was than QX XXX year where So similar type we more would happy was last it We're points ahead QX a in

And so feeling we're good fleet. rental the about overall in utilization

Mike Shlisky

X outlook, even X this times plan lever past times year by Chris, improved is below will can I the -- at I still the it be tell curious at the or guess you below be for leverage to then end this point. you of And EBITDA was given

Chris Eperjesy

our seeing And times. end Mike, I X dependent terms what at whether said we're really the in it's upon of the the in year, the opportunity in by now, all there's below indicate right I would of investment fleet. our end targeting as the plan we of say But we're still would X that's terms of of still signs kind that be rental fiscal to -- year. times

Mike Shlisky

the you about I'm us think just update curious. backlog one is -- me, the like have Can overtime? many more And but to months to given of down what from how as backlog maybe in bring you eventually one months today, a TES. correct on going last that area this what you normalized is would far plan is the number prepaid as the you prefer to

Ryan McMonagle

chain will just it think I depend terms how supply strong We it improving, in $XXX in is grew as see an the still of supply demand incredibly on by that while significantly right? the quarter. sign is. So fact good million chain,

at we as it, as six we where to I'd can closer historical in of and as work backlog look months, look and through March, there's the that back we're reported that backlog, want as seeing to like backlog for low about But continues can. strong you to as quickly a It's run quarterly we'll been months be which us, we've end of been, five month. build is month historically, months saw If if or you as that very of markets, it's you four that look as demand, of if the as month in thought it in -- and to to think you far which kind even say, kind long range again, across at is of We continue see we'd was in -- math. in strong kind even as the past. we what all

now. that us, for customers it serving of right really still strong markets reading end we're signals all so demand from we're our just the And across is

Operator

Tami The from JPMorgan. next Zakaria is of question

Tami Zakaria

So I couple have questions. of a

XX we that good number? The first should XX.X% nicely rent points a yield. year-over-year. the basis Is think is for on was up next three It rate that or one run about how quarters,

Chris Eperjesy

that said I going for that best we at the is level. to this at maintain year think year-end, we're estimate that's to use

Tami Zakaria

should and should So the be some expect next of quarters three we or in pretty because range much that down up seasonality? the

Ryan McMonagle

bit calc. And because is impact. bit as a a little in Tami, positive variability actually of increasing, is it just a in it impact yield there's decreasing, has negative has a always it on-rent as utilization of then the utilization

a it going last I so about right there. feel there. over And good always there's think to I we're around you're think bit room little But we QX. So be that -- thinking of up

take some to way know, you of we year. increases are -- We through our we take -- some beginning do And time at work the price contracts. -- those expect did the as the all those will

next we in think price So that increase there continued as do is in over business the some that of quarters. will the up well couple show

Tami Zakaria

is second in the but $XX midpoint well I raised the seems we my then your And of quarter what equipment sales. by came question It modeling. the think, on million, about segment, TES you were like guide above for first

forward terms think quarters modeling segment? quarter, a a in pull the TES the three or should was from So we growth how perspective, there in the of in next first sequential about

Chris Eperjesy

didn't probably our as versus it about way in it the think is did versus expectations yours. it would come Tami, I high as

the taken million, in $XX continues probably that's range. top than the a equipment the of with guidance, Demand of year. the why are for what that record I on bottom be the And in strong. expectations quarters to the new end we've both our terms sales. and two balance of add had wouldn't we've up But row the so more

a have We in very are levels still inventory about, talked demand, the obviously. we've As good position.

did of loosen to And I where new of the the equipment have the up second half that this the challenges year, a some. started to was expect around So to significant year, inventory. we last year obviously, continue half last of to year comp some certainly say see first would sales. pretty we

And we significant a have pretty QX. did so

Tami Zakaria

to that fair your versus kind supply segment have TES your could back higher, been it it held but probably sales say Is chain of expectation?

Ryan McMonagle

equipment terms continue Look, I of how think sales in to think why that was chains new supply you the I on see right? significant QX-on-QX. improve, increase So is the QX the QX,

hand seeing we would so before seeing to Tami, build start decrease still even and to of backlog to at are question months yes, we But some backlog. on in it we're And expect Mike's point, improve. terms yours,

have But question supply So about are we improving. yes, more trucks. there would up more to able things and that. had been no if are certainly been deliver chain, looking There's

reporting. You're results seeing the in that we're

Operator

is W. Hauke The from next question Justin Baird. Robert of

Justin Hauke

margins was The through really your guys how sensitive the here. that that strong there's know fully that. are revenue Obviously, sales appreciates that to margin ERS component don't you mix about, runs I and that talked everyone that a

impact sales of of year, least the are So your segment given they could kind a in are segment that sales. at XX% give level, what what maybe margins Xtimes rental margin you XX% at some rough in on are just that versus like being us math from revenue was last the in

that the like-for-like I'd that, versus maybe really diluted So basis. a margins imagine

Chris Eperjesy

expand that. And can on maybe I a little bit

we first mix, quarter year. from shifted last versus the XX%, comments, last year, As said in our year quarter first XX% introductory this

revenue we we overall, expected exactly continue margins year, we is, out as to our year to XXXX for the this we year, margins full And them it guide XX% can That much equipment We revenue So and gross was driven to XX% that year, sales. was are XX% margins by rental on under largely XX%. for versus of just the we for adjusted because This and for a where mix The or good for -- came like said end XX% overall felt XX% see margins the -- as mentioned that last sales. profit we rental we from segment to XXXX. down of came versus equipment exceed at XX% XX%. be. higher year,

Justin Hauke

could and component it's the out, that like-for-like on it are break we you mean rental they out like last but break be the sales basis, a of Would of be fair? kind margins that above sounds yes, maybe that I absent ERS obviously, the issue. segment, just the can't if would maybe year, what -- because

Chris Eperjesy

I would that consistent the were those subsegments. from There mix margins. each they're those quarter-to-quarter for could, say with be could the within where of some margins impact

Ryan McMonagle

that to the remember margin. sales have by also margin you used it's Justin, accounting -- the on impacted an equipment so is

depends what's So of age sold. being it the on

how And is. depends depreciated so on it it

age may depending sold that's on the that being the the within equipment so -- shift And on how quarter-to-quarter of ERS.

Justin Hauke

but quarter you obviously, the up guide, maybe guess I relates second about it digits. be was going growth EBITDA that to question this talked is -- quarterly, would as was into my just kind and give don't of the It mid-single you'd XX%. in

So obviously, first it quarter. was strong in the

about the that year mix XX-XX in And $XX talked there around implies second You the numbers being I of your half the the terms around do the The half guidance, EBITDA. for at EBITDA guess if are you first $XX million. that Street midpoint at of XQ math million. are weighted versus out

up that So kind guess about maybe seasonality. square I in what of thinking just XQ you're and

Chris Eperjesy

narrower Yes, the a seasonality XX, in is XX the way half. The quarters. could first XX, there bit I little at some be that the built would second in is into it XX, half, range look XX% XX,

We also of just had rental had in as well new the sales strongest ever equipment or strongest sales. two terms of -- as we've the quarters asset quarters

QX. of -- that be there's could going there So some be potentially impact to in

than I year-over-year still would So we'd little of single XX%, that from bit the digit, XX%, kind it probably to expect that hold. high maybe XX% is look I would and range is increase way EBITDA narrower expect at a

Operator

are no closing to this comments. Ryan over back McMonagle for at floor questions turn further time. like to I the There would

Ryan McMonagle

Custom questions. And We hesitate Take call. you your speaking your next out Thank don't any the today for everyone, to earnings please Truck. care. our Thanks, meantime, Irene. in forward with and again. look on to you, Thanks, reach with in interest time quarterly

Operator

Thank for Ladies and joining today's gentlemen, conference. concludes that us. you

You lines. may disconnect your now

Custom Truck One Source (CTOS) 9 May 232023 Q1 Earnings call transcript