CTOS - Earnings call 4 2023 | Custom Truck One Source, Inc.

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Operator

Good afternoon. At this time, I would like to welcome everyone to the Custom Truck One Source Inc. Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Brian. ahead. go Please

Brian Perman

Thank you.

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

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

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

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

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

Ryan McMonagle

top call. Custom end our I'm record-setting guidance We finished our very highest quarter well revenue the Brian, of welcome, the the year of to $XXX of of deliver team efforts at with of total and our and business X% QX another XXXX, everyone, Thanks, billion QX, versus proud up revenue year. range increase continued to ever. to XX% a and perform XXXX. $X.XXX delivering representing Trucks today's in million, of revenue compared to

and to product of renting the model our demonstrate the with markets categories, our to pivot ability selling business as equipment continue and dictate. value between between We

strong growth for year. margin segment full estimates record revenue our improvement of We quarter of levels guidance of and growth year, XX% well and as extremely as delivered production quarter team continuous the well the XXX points, which the and also year, entire progress fourth performed and consensus I delivered team our for improvement gross for for Our TES highlighting the team the a the continued the made basis TES versus production revenue previous XX% ahead of in segment record the both demand delivered and TES saw in well, our capabilities. has environment, extremely The the am production grateful. consecutive

we into meet significant segment total to made we invest which our XX% As XXXX. during end heading in market, by revenues. growth the XXXX growth calls, in customer inventory demand the Growth discussed infrastructure could in of represents we about that several to led TES on decision ensure was

of for believe water hydro-excavators continue of dollars in early certain We demand impact experience stages roll-off and Act We the for to trucks. high which our Jobs trucks, projects, and federal beginning positively products, trucks, to demand. deployment dump the is of infrastructure specialty levels investment like we're infrastructure

from are the Approximately, to the of our distribution and utility customer categories transmission product well-positioned into continue meet comes heading market, we to both serve. all revenue demand We includes XX% end which XXXX work. in

that in the are go. the energy backlog grid, that's development aging line to deferred on to the of continued grid demand. seeing enhancements required a of as There as Transmission meeting are by ready center to well a high-level the regional expected driven of interconnection load is which transmission amount growth, be We being in demand bottlenecks continue our and development creates is in future power and in forecasted incremental this the load momentum significant maintenance and electricity significant U.S., growth by data trends. increases significant sector. required electrification projects meet The

X funding and slowly California, and as advancing and in required that derricks, at demands functional ownership bucket work X We trucks, Class mandated has the to we the currently additional these forefront varying trucks end soon Class believe is However, be trucks X multiple markets, our trucks states. transition the resolved. projects is including array an electric and of chain, approval, serve tractors energy serve details will dump on and in of get Custom supply are in fully and to customers. Truck digger refuse regulatory of degrees EV

developed OEM the transition to to work that partners, Motors, these timely efficient. to trucks we whom is continue Peterbilt with and EV ensure our our majority We Battle customers with of have and

fiscal used Significantly adoption reducing being expected the engine to we of perform walk our which electrically will of to majority and historically work see to ERS continued the our to performance details experience we which strong Chris fuel. at on be EPTO, trucks seeing occurred. the rental the idling rates year. levels early fourth and must our through while the of on our time of burning amount more In to be Additionally, underway power is segment, operational attachments performance diesel quarter, than continued of utilization are the strong for transmission of site. job the high

we lower expected, than you utilization As we to saw communicated but in November. originally we what result, consistent a with

the and these vehicle meet needs tailwinds particularly as offerings robust sales our As advance. get our years resolved. business demand, breadth growth significant Trucks rental our customers' confident product segment projects as the ability sustained continue by of to and support capitalize delays we future and the are the transmission on ahead, transmission to position our currently provide I Custom created to uniquely We this believe tailwinds the that mentioned the of previously, will projects are begin impacting the to large some in that of

to Truck will is offer opportunities continue believe in currently markets Custom long-term business. invest where and we our for geographic which underrepresented, We growth compelling

Casa an hub existing I our Arizona discussed we've to proud production of we in Grande, announce Southwest area. previously, serve that we on such expansion. facility is U.S. as Western closed one purchase know for recently As the that to the am an initial

to two and serve opening growth capitalize be in one to Sacramento to better also and West see be the able will in locations, new customers. Lake one out Salt City We we our on

We to locations later fully be year. expect operational all this these

As to XXXX growth be we billion expect of in degree transmission and provide that we and the revenue. on we develop how we $X of another going will our Custom be XXXX, that on eclipse total Despite year. uncertainty, of continues updates anticipate conservative think we will XXXX Truck, we'll throughout about that are for the uplift guidance, transmission year to that

$X revenue EBITDA billion, $XXX While Chris will range provide $XXX of additional billion guidance and million the to $X.XX we are of providing projecting initial adjusted million. to details in later, are

target, details are to setting talk XXXX, to to invest compelling which Additionally, committed XXXX. allow cash Chris meet Xx growth. to our our us that we generate our in contributed ability net With the to it demonstrating I'm leverage fourth to flow our will results that, quarter over through of going turn in continue and during record our to to to

Christopher Eperjesy

Thanks, Ryan.

$XXX in delivered fourth EBITDA revenue, million and adjusted adjusted million solid the profit, growth. $XXX QX. adjusted adjusted quarter, We year-over-year For and profit of gross of gross we $XXX EBITDA of million generated revenue,

profit, $X.XXX to lagged segment revenue billion and EBITDA adjusted versus XX% Adjusted respectively, of primarily profit revenue, mix. in due For of gross XXXX. all generated $XXX growth XXXX, and XX%, XXXX, of growth gross revenue up adjusted $XXX X%, EBITDA, and we million of million adjusted

SG&A asset our improvement growth, versus XXXX. revenue segments revenue, average versus TES While in an associated lower than XXXX XX% XX% with million QX XXXX. experienced XX.X% all have year-over-year gross revenues, in total of and rental business a our in rental in was or comprised sales of QX margin which XX% them equipment of $XX

The a year-over-year for quarter gross under for versus XXXX, is over for Net for and XX% down percentage full equipment rental QX, quarter The the actions XX% of guidance of million comprised $XXX just was XX% from the highlight $XX to For all year, improvement of X% XXXX ERS million, of rental earnings SG&A and with segment XX% revenue, per the despite profit for share growth for the in quarter the still headwinds quarter, Adjusted was XX% Adjusted net margin historically all all and yield compared our was for was from Full XXXX. full $XXX diluted implemented of over the In discussed. in was which year Ryan since the smaller than the up of just of year experienced announced of XXXX, gross of utilization for of total over of million pricing XXXX, XXXX. fleet was ERS year-over-year. year, On-rent XXX ending was revenues, up to revenue XXXX very continued XX% point the middle compared an revenue XXXX. for quarter over and for the XXXX. range. of average million beginning because fifth up previously our $XXX million basis was to ERS XX% compared XX% for XXXX. positive than the income, over XX.X% all largely of the were more XXXX. strong from XXXX, $XX the in all income approximate benefits consecutive XX% rental XXXX, XX% sales some improvements

$XXX in at million the fleet rental age aged invest X.X QX rental our We steady which in quarter, continue certain to strategically the for $XX Net kept full fourth million sell was assets our CapEx and in and fleet year. years.

ended XXXX. Our the OEC essentially fleet of rental the the flat year in $X.XX end with billion, at

in flexibility all trends our invest the quarter We plans continue under for expect sold TES in the to of to XX% to million spending in just the seeing compared in $X but of In CapEx equipment to depending increase have the markets. XXXX. a year, our the pivot end in record on the billion a XXXX, we're XXXX, segment, we $XXX and fleet

XXXX mentioned, QX. above segment just Gross in our range. Ryan under in revenue XX% the end of was As guidance the finished TES margin high

from stands to points truck and production, equipment early allowed For in headway normalized to more quarter mix at more level, well In our months vocational line the the margin which both but ending to the $XXX improved resulting basis was toward than level to of above in we ongoing of of gross just to currently and high the historical with production levels higher well a year, approximately from XXX as continued new peak X sales production at TES X backlog efficiencies XXXX, of XX moderate, higher, more our sales. us to Record TES months. TES an expectations, million. full our reducing quarter which down as related of sales, backlog our than our outage under a months attribute make specialty X

chassis, relationships vendors important our to and our body results. Our long-standing with of attachment an continue driver strong record and be

meet to sales production well Our us XXXX. fleet growth for our and intentional throughout inventory build XXXX positions goals

APS was segment our of our the the stock repurchase million at line business XXXX, range. million year, and for through revenue service quarter. million revenue the year, XX% profit The posted XXXX, just the $XX and in stock middle in approximately repurchased up finished the expectations. of our $XX over year X% under quarter versus the consistent X% guidance with in and program QX rental in of fourth for end in adjusted Year-over-year of quarter each. full growth initiating EPS of Our to fully the $XXX full the our for third X% the we strong both and for including an at have $XX.X parts XX% million and margin Since with gross in XXXX

We our under up versus we were shareholders. in our ABL the when opportunity stock XXXX the our to the to a long-term of as the market at $XXX end during QX to compelling price of invest flexibility the provides for quarter. value million, repurchase Borrowings working will capital maintain create continue end

December is up suppressed and capital. and goal one leverage of approximately important the a net slightly EBITDA LTM probably improvement Xx in turns primary with of of The XXXX $XXX as upsize last of the and of had leverage availability quarter. achieving in under Nesco Achieving remains with adjusted the since ABL XXXX. an with of delay the available, investment we a transaction and result the working in expect $XXX to As from continued XXXX, million, April facility. X.Xx, net target With in below this of close XX, ability million to strategic achieve million we X.X finished $XXX we that

at the being strong. to backlog of activity strong we range Our continue from remains and XXXX long-term guidance the demand the EBITDA entering the benefit will respect and adjusted to ERS demand our believe good our another year. end level customers to We last growth TES repurchase of from be share our of growth. lower With year. expect and our rental year We outlook for guidance, XXXX believe

near-term largely utility As Ryan which chain and previously some core supply experiencing related is the T&D we our in issues driving markets. rent our the our on transmission mentioned, of OEC projects, to certain lower are timing headwinds currently customer end commencement markets, in of

recover expect further on grow fleet OEC As to and rental digits. in by these based XXXX, markets net we grow mid-single our

and Regarding than flow, healthy $XXX to by meaningful improvements, after a to XXXX generate XXXX, produce fiscal units a significant of cash of inventory the TES, will year more high flow to less in to setting net improve than our chain XXXX. target in free even than levels supply ratio more leverage of in to did deliver backlog levered a and we inventory XXXX, year. strategic free expect exiting Further, levels cash generate and of million in ability end historically deliver investment Xx the we XXXX, in levels continue

Our of XXXX the strength outlook teams our our continued end focus our of and the to reflects business. grow profitably markets long-term

customer expansion continued positioning better new earlier, exceptional footprint, of company the for out service. mentioned we future growth Ryan opening the West, geographic several As locations our and

of results in versus We million. our ERS EPS range $XXX revenue to we of and billion between XX% TES $XXX XXXX. approximately range revenue in million the total million, are and to $XXX segment of $X.XXX of up as and providing $X.XX guidance to $X billion, X% billion follows: billion the revenue $X.XXX $XXX for between million This revenue in expect

of inflationary utility In We hold are customers. some expand in to open Despite Ryan's volatility to to range our I of highest to will I X% strong providing that, EBITDA million With closing, deliver over margins revenue $XXX growth our echo and for performance. projecting the adjusted service and line while to $XXX adjusted to continued the strong or XXXX. want operator Operator? certain reduce levels up we the unforeseen all EBITDA to regarding comments compared an environment questions. million, leverage, it turn to the in approximately in to to XX% markets, continued

Operator

Instructions]. The Oppenheimer. And is question Schneeberger floor open for now Scott from [Operator first your from our of line questions. the comes

Scott Schneeberger

mid-single jumping you're that conversations, little there's in talk us what seeing Thank what utility OEC in there. with confidence you there's a And there? are much. the very the near-term and digits guess customer Can headwinds your some Good you net end be on I it afternoon, sounds you're going -- growing of markets. Guys, fleet like just feel that more you the this hearing, guidance you to in a the bit everyone. recovery rental through

year? if of that it and So, what could in you're just customers it further you hearing out and improvement the elaborate later from drives pull this we Thanks. on hiccup drives

Ryan McMonagle

very a much timing issue Sure. it feels And you. it. right, Scott, it's happy good like address to here. hear to And from you're yes, just

then to trend significant. kind talking just boost. to any how to what kind significant much that electrification macro have has and at mean, number you around I And if it's go. of and just a are, a ready be is with at So it projects that all like upgrades of the of And look and you timing will macro be feel grid it look data transmission We done and It's centers, happen. consolidators some issue. of customers, call underlying significant, the drivers if

will an of demand when will year. Many period extended they thinking are I do very of for those people then think jobs begin, and later of begin. it a good time be lot this

end a timing equipment just got And vocational which markets distribution talking later as of and about and a November all good the be of we infrastructure the the what be to utilization TES again, transmission, saying a to mentioned very ready we've the continuing as go. transmission to seems and a we to even the year, perform And business. side. then and this from well. side saw seeing But level to on on everyone is very now seems bit we in referenced the side still we noted So call, Certainly, certainly, little it standpoint. other utilization slowdown specific in the is are well, are of

Scott Schneeberger

Thanks for All that. right.

follow-up more Just then infrastructure to the on I and you're a regard stimulus? your anecdotally, a front you that, early bit on just kind seeing delve of want other. have I'll little that in remarks, But what is rollout. in Ryan, there early build Thanks. one follow-up to with that mentioned

Ryan McMonagle

on we're Look, the we're infrastructure -- seeing more to Yes. see it think I starting side.

shows of us, we're I think and those our We when trucks certainly some roll-offs, water our there, excavators. to up to starting trucks really talk in for And we're to and dump hydro that show would the we continued and listen Scott. XX% that So of in funds of dollars to some strong we see starting kind demand, and when those is saying up say, maybe flow. backlog. it's that are of we're in XX% some other yes, XX%, customers to maybe the area space, companies seeing an And certainly

the a TES February driver think well, you had the for strong the into about quarter. was And XX% January that as And XX% we're type continuing in why the of side a fourth even here see growth so, of full and quarter business. When to year such growth of TES for trend there. on that big and

Scott Schneeberger

sounds a it back. me bounce Thanks. probably to for I'll it $XXX flow good. It like Appreciate free and million, regard with it. more Chris. -- turn strong the it's But over, then Last for sounds outlook, one cash

progression, and through a into there, inventory why deeper number what a to really delve I'm that layer the the just kind sense of levels of level here work to of Thanks. going is just confidence? and guidance I think looking and

Christopher Eperjesy

Yes, Scott.

a times we demand feel going that year so, we here and -- number to I think in really year the inventory coming of we we're because progresses the were unwind throughout had to that that an invest some strategically the we said investment. to saw comfortable of the decision opportunity as making have

we at of year in terms that of some certainly, this as This able year. significant free unlevered we'll and we unwind look so, be was think being 'XX flow, year cash 'XX. investment a And or year last capital, and that last in 'XX there to being net working levered

So, it. big be a that will driver of

Scott Schneeberger

Okay. Thanks very much.

Ryan McMonagle

Thanks, Scott.

Christopher Eperjesy

Scott. Thanks,

Operator

comes DeBlase line Nicole Our next question of from the Deutsche with Bank.

Nicole DeBlase

Good evening, guys.

Ryan McMonagle

Hi, Nicole.

Nicole DeBlase

seeing just normalizing. a a little expectations bit we based Can will amount more down that chain you sense your exit for XXXX is could I your elevated ticked expectation supply Or with chain? since about lead-time what and talk it guess that you're is backlog, backlog? think of in do possibly you the TES normalized that on remain makes supply backlog

Ryan McMonagle

That's million this a great over $XXX revenue of almost question. on Look, year. the additional we delivered segment TES

So, on with $XX the backlog about down fact really million. $XX came happy million, really that. just We're that year-on-year

So volume. order good we seeing are very still

first flow. continue really seeing all we're even And demand hold. demand think still the be wouldn't have historically bit. through end I know I is still the will XXXX. surprised think I be down way order reason that X I the months X continue. of good a But that but We're that -- been to so, said I've down just has of really it think And don't good a will seeing if to still year, the historically. that where X I to will it comes that that said months to We've by backlog here

Nicole DeBlase

about with as to well you it. are replacement Okay. on CapEx And guys growth Got respect thinking CapEx, both 'XX how CapEx? Thank as then you.

Christopher Eperjesy

Yes.

that in digits remarks, mid-single going $XXX expectation we'll that grow I think said similar be by grow this our in gross a OEC is year. million prepared net Nicole, And will we're we targeting is our this to -- or number range. year our CapEx and to net

looking So, you're a I million, $XX a mid-single of if digit, the X% million -- growth $XX pick at CapEx. net

Nicole DeBlase

on. Thank you. pass it I'll helpful. Very

Christopher Eperjesy

Thanks.

Operator

the from Robert comes Justin of W. question line Hauke with next Baird. Our

Justin Hauke

seeing my the taking there the Yes. Great. are levels back go asking mean, visibility questions. the Thanks been guess it, more I wanted clients rent and to to I transmission to are equipment buy demand you market I Has given that rather that a there. demand the than they for shift? see.

when little think are that's rental for was greater kind first on a the of driving that guys it was opting opportunity of the people you maybe to I dynamics usage there hold and was part unpenetrated, one what's down fleet side a And talked you the rate an of the be utilization for it so, came bit and to that markets as public rental in of fleet. buy longer? about

I update So an just ask I that? guess would for on

Ryan McMonagle

And We've you're of right. and is good Yes, probably bit say it's a it's Transmission to long-term a significantly we a great rented. of there. as people it, demand. said we'll question. indicator primarily buy, exception see continue is Transmission an

the don't put we that we that sell our transmission lot a we we equipment vendors, buy So, from of together. that consume,

So heavily it rented is a product.

there a dynamic because use maybe equipment. that the little case bit of different So, of just

happen that customers, a consistent about So it about it's and lot when buyouts question. to or rental long-term we're of not it something right we as feel talking categories. watch that's our a like other now demand. seems the We great of the of is when certainly, the the -- it's when closely. dynamic, all of And true timing, But with good conversations with what and just RPO product that right, in begin. happen is be a buyouts well. from does really lot industry a It's And projects fleet, talk it's seeing indicator

fourth the those were saw quarter. that in You levels high

signs of demand. all It's kind the of indicator short-term -- very just really begins. are when still long-term still work a good we're So transmission

Justin Hauke

Okay.

XQ little XX.X% down to that hold is the I bit. I basis, were obviously, in with at And you came XX.X%. you So expectation on for ended -- guys XQ this, utilization range a mean, kind even year-over-quarter going it the level, and think kind of that the of

But -- throughout your So, line where of they rate, kind is expect history. guess, I you trend are Just more XX%, the what's go? fleet high growth, And for a that are still to year? they like gave kind versus them like you expectation the but utilization more what utilization XX%? of rates

Ryan McMonagle

Yes. a look historical utilization, of We come year. high It's continue a you is if question. at great see context. down And right. end did That the the you're it to at

so, of And is are we just -- beginning that some probably spring, to QX, typically average, of into good But in at we of is which kind build the QX back bit the below QX. of follows, we kind the to it in expect XX% that that end of means kind XX% to of were continue of of the kind the yes, that are at general where it the of the And kind summer year, spot that we'll build million currently same somewhere the about follow think and line to end think a that's type and to should a and I level $XX around of then it. beginning off the flow. follow

Justin Hauke

Thank I'll right. there. All leave Okay. guys. it you,

Ryan McMonagle

Thanks a lot.

Operator

question comes JPMorgan. Zakaria line of the Our Tami with next from

Tami Zakaria

Hi, you. how are

second past, a mentioned think throughout half. quarters. first So the it, wanted the just in cadence I to you've the XX% is, how Typically, the sense in is, thinking about of call half, I you're in and the my question get the EBITDA remaining first X

about terms model seasonality think any XXXX? or we Or in guide of about historical to seasonality? should think as we typical So, the

Christopher Eperjesy

Yes, is Tami, this Chris.

do I the see, still going think we're certainly, it I generally think XX-XX what holds. holds revenue. for to

saw this a certainly which norm on of versus was just kind more I probably there's 'XX, in probably in wider what ERS, about, half, it'd little in talking second or bit EBITDA. -- 'XX half think we as first to a Ryan historical year of range, we is what that see be expect is maybe

So, a in more it's $XX less a million million, $XX $XX little but than than revenue. probably $XX million EBITDA on little and million

Tami Zakaria

Got it.

the think some delays. transmission mentioned by And ERS you've for in very chain That Okay. supply I a Got it. times then your is few segment, customers' work helpful. slowdown caused

sense Just delay? is exactly Or what the exactly wanted supply this What to just exactly chain a availability equipment, Is rate waiting other it some Or cut? Fed for delay? of they're it get this funding? what's driving is like to is or this get delay?

Ryan McMonagle

a question. is you, all some approval, And those, to would of body. right? And yes, Tami. they're X passed That rate So, that's regulatory great regulatory conversation of and I kind No, their right? it Yes. be of we're having the waiting some is yes so, tell through increases yes, on

of is on on or structure be some rates. Some supply a structure which still and I funds super So, or right? just think some we're to of available, waiting it issue, cost chain, then waiting transformers is a interest they're

It that's feels X, Tami. feels it a So, like go. it's like there's all lot ready to

they And year and this XXXX. so, each of as begin those tailwind break, we anticipate it into great will be later a

Tami Zakaria

it. Got

much. so you Thank Okay.

Ryan McMonagle

you. Thank it. got You

Operator

No time. to you. I'll Brian, call at the back turn further this questions over

Brian Perman

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

Custom Truck One Source (CTOS) 7 Mar 242023 Q4 Earnings call transcript