CTOS - Earnings call transcript Q3 2024 | Custom Truck One Source, Inc.

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Operator

Hello, everyone, and welcome to Custom Truck One Source, Inc.

Third Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions] I will now turn the call over to Brian Perman, Vice President of Investor Relations.

You may now begin.

Brian Perman

Thank you.

nature, would to remind may questions statements, by we commentary that include begin, outside which, responses and and on their we like company's you to management's 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.

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

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

Ryan McMonagle

to everyone, call. Thank and you, Brian, welcome, today's

earnings, Before the and Carolina. their acknowledge Georgia people Florida, I we impact and our dive the into QX North and on to want recent storms communities in

support restoration and early our affected, and report everyone KPIs. equipment committed to noted August, earnings to available are our we improvement with signs we are thoughts Our in in recovery in these QX rental our is of efforts regions. In ensuring

with ready pleased continued line QX. above on and share throughout where rents than distribution $XXX transmission higher utilization challenges some turnaround. that we quarter exited more expectations. We Today, overcoming over in basis OEC end I'm about the to optimistic cautiously we XXX a were markets, QX, our the weren't points we declare we ended million and to with improvement saw While in

our with persist the expectations utilization increased into these billion XXXX. contractor and positive XX%, over through $X.X over far OEC and of trends and activity second currently with and customers' on So half year QX, utility align telecom rent the trends in of respectively. These

Additionally, storm later. discuss restoration we'll demand, further, this contributed which has work to

utility our we all a next promising markets: rail across and utility, end robust and positioning to With for QX now see market X the a improving, year. end demand telecom, us well of strong start infrastructure,

market, As transmission discussed end XX% of revenue the we've and work. our about which comes both previously, from distribution includes utility

development, trends. Recent electricity by We are growth industry center onshoring, and by U.S. XX% XX% electricity data to significant witnessing reports electrification demand. year's market tailwinds in project nearly double forecast. trends AI-driven manufacturing end in XXXX, growth. a line demand demand key for driven We completions indicators and as our of view These utility IOU provide rate strong increase transmission approvals case last future mile

As regulatory expect subside, we to supply see chain resolve, interest issues improvements. delays rates moderate further and

like the will recent confirm anticipate to customer XXXX. Chris ERS Our highlight I'd performance, segment's improvement we and are normalizing, and through conditions key and into our that of the rest detail trends but some trends. interactions year continued

over QX, For OEC with saw improved $X.X ended We $X $X.XX billion, on QX. highest over rent of last rental year. over the QX, the it time in which sequential by and X% from now in QX billion, we billion in since a revenue QX end year, the first just up growth to stands

is the demonstrating improvement and OEC end Hurricanes in seeing of QX Milton. markets, work our and on since recovery the our storm-related XX% the to across we're XX% of mid-XX% Helene utilization, With XX% our rates rents markets. to resilience estimate to fleet long-term from transmission We utilization low that most due equipment of

months. I hurricanes. several this the the crews of equipment we rental for our rent damage, am incredibly ready our team was with the the worked heading how extent of help caused sure to much expect hard equipment remain of make by the proud to Given for restoration to damage entire for on work

team not to also can only kits make PTA equipment, we delivered but our of we tirelessly rental worked our provide and hundreds to customers. sure tooled Additionally, tool up

second rental activity we some impacted recent uptick the have pressure with rent in rental quarter-end and the level, fleet. asset merged projected QX. We've invest also have adequate $X.X our up CTOS the seen today, it in QX invest broadly. XXXX. QX We XX% highest of to current The We've in QX, environment million improvement that the of consecutive is quarter noting rate customer our ensure sequential on-rent yield. was the the and rental in our rental continued than equipment also end sales, to both of OEC has selectively our up worth mix under demand. It we of total Nesco leveraged to driven billion, during strength was optimism when quarter. market meet that just At This our $XX more by boosted and on equipment put marking from to ERS rental the April is larger nearly in and was fleet

yield rental stronger. addition, the today, In is rent OEC higher younger is and on-rent on is fleet our

ahead. on We the capitalize well are positioned to growth

first QX saw over last year-over-year is up X%, year. revenue XX% of growth months following segment the in growth to last Our Year-to-date, X TES XX% compared revenue year.

demand. strong end to QX performance investment impact see begin across and was this by orders contributing in projects improved trends and in sequentially infrastructure, and margin utility stages increase mix last compared telecom to Act combine down net federal the inventory in infrastructure result year-over-year, markets, gross XXXX. JOBS of demand XX% to to to funding infrastructure and continue We industry. later We levels positively Segment impacted to robust all TES our These anticipate early for in TES. The normalize continue year. broader in a rail, will

fleet allowed customer equipment for strong our to core meet and in to positioned utility end quickly us demand meet our new customers' our investment last demand sales inventory market. Our grow to year has us

We normalized more level. inventory decline return to to that levels our a are will in confident and begin QX

chassis emission are regulations EPA. closely monitoring We CARB and the from upcoming

We are anticipated The new proud well, prepared from TES continues the are XXXX. we entire perform have between the and well team we business increase the exceptionally of demand and now to for built. standards

ERS adjusted Regarding closing, I the ranges. Chris have the and expect our challenges adjusting we delivering billion provided, across but and XXXX, TES XXXX but consolidated end end within segments, for guidance, we utmost on we million adjusted of current the our million. In hard EBITDA EBITDA trends Truck we results $X.X $X.XX revenue us previously confidence revenue dedication and more will recent business based in Their $XXX $XXX still market. between are anticipate and provide and now details, have between our navigate guidance the the work helped utility and top Custom total in billion project team. ranges

third As to call. With we updating strong a next stronger Chris quarter growth our will market the business we levels, tailwinds on progress our it across combined over you in detail. results adjusted end our I'll year look drive that to quarter's are consolidated EBITDA with that, on turn on confident double-digit next discuss footing, forward to our We current activity year.

Christopher Eperjesy

Ryan. Thanks,

$XXX generated EBITDA. million revenue, third adjusted we and profit of million quarter, gross $XXX $XX of of million the For adjusted

decline $X.XX quarter in by year, our of XXXX XX%. the average drove year-over-year to billion to quarter fleet over just almost in results year-over-year were just over from quarter. last KPIs relative improved While our the impacted rent significantly in of the segment third $X.XX on decline utilization This XX% the QX OEC past in in rental rental to billion decrease a average quarter from this

was in segment average on last revenue $XXX However, from million QX. year, The in ERS trends year. $X.XX sequentially QX had million rent OEC QX of experienced up this billion QX, in of of from improved we the in reflecting down QX $XXX in

rental average and X% improvements OEC was up the given revenue quarter, However, in in the rent sequentially. on utilization

In XX% on range and sales. On-rent by mid-XX% period in equipment last from margins XXXX, yield same was overall was for expected down from in almost rental the We quarter. Adjusted growth low we mix resulted second million rental in quarter, down QX, for $XX ERS up in well. revenue drive rental and $XXX the from demand helped profit market of equipment range ERS mid-to-high the sales quarter, as rent QX XX% straight down ERS X% over segment the Adjusted the just for for maintained XX% XXXX, of Both for XX% asset gross improvement to broadly. million year. of the for but overall environment, margin of sequentially. the addition, gross XX% the in put both XX% range under QX for in for QX the the was asset trends a more in increased sequential for increasing impacted

and sell fleet from age As in million, quarter. we Ryan customers. Net sustained markets lines in levels X.X our rental invest are mentioned, CapEx our added where to assets rental strategically slightly and we was from and equipment our in in seeing $XX aged product fleet improved end demand continued years. of the to certain QX We

in ended currently month into over and end $X.XX billion with end at XX%. last utilization fleet versus OEC $X.X rental up at up billion, A of as OEC the the year total well. QX, sequentially the QX of QX Our quarter of $XX over the stands versus million our at

quarter, remainder we quarters of fleet XXXX, continue scaled end back we have to growth recent the given our expect last in utility but as CapEx We to the the invest discussed over experienced the expected market. trends we in for

the reducing to year customers' we and quarter. $XXX TES across segment, more the by demand. In the represented in inventory $XXX the remainder million last by segment the QX months. Net However, reduction than the the level, supported our continued sold This just and expected customers compared levels revenue more margin second in sequential Despite impacted the last of our grow and $XXX of and such historical down moderate, our and in XX% is Strong margin to slightly the our marginally beyond of extent provides allowed million. the up down more the and of for from of with Gross pivot TES. in improved but levels their with to to see LTM currently basis. ongoing targeted growth under a backlog backlog months equipment in equipment with a highest of margin headway XX% quarter is inventory quarter that needs was than over the is early in to average more current normalized broader peak regarding X.X improved year investment up make expectations towards for line X% the of TES consistent from down equipment from quarter stands months than us we QX TES a to our range orders QX which which confidence our the us quarter, at new from last XX X at our of segment. TES ending versus sales to production level to XXXX, quarter, gross sales. mix fleet sequentially industry. backlog, was to we just sales have will in in of our million, history. over the QX for X TES feedback year XXXX into on continue XXXX in

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

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

of $XX discussed versus quarter. our million utility the of quarter, QX EBITDA well and end of accessories, increase of a up the by costs. Borrowings impacted the Our market for which in from last in gross of XX% revenue APS the material QX performance as end were by higher profit the business in $XXX APS margin QX. last previously softness was end segment business increase ABL the in Adjusted the tools at in primarily million, decrease as the as was QX, an a the of inventory under posted million of year. marginally rentals and quarter, affected result were in Overall, adjusted $XX lower-than-anticipated

balances begin to in in lower which levels to expect QX into to plan contribute our and meaningful the borrowings year, see on floor in should lines. ABL inventory reducing the We and a reduction on next result

million extended maturity upsized million of by $XXX August During $XXX to QX, facility our we the and size the XXXX. ABL to

EBITDA net $XXX had with the $XXX over finished of we suppressed LTM leverage available X.Xx. XX, adjusted million availability approximately As million, of of and we under September $XXX million ABL. With of QX

lower returning to Achieving As below we improvements levered to generation as floor important growth we goal of the we and ERS coming complete contribute Xx interest our in to net KPIs net into in which expect respect our and inventory end experience will year, towards quarters, QX used use increased cash year-to-date. reduced to primary the guidance, expect despite the our trend that we and year-over-year for leverage. head softness remains rates intend reduce continued leverage levels next plan as a since that to well balances to free flow QX, experienced our all we have us. With segment in equipment sales the and

we such, end As ERS by reducing $XX guidance are of revenue the million. top our

surrounding For their certain while election. and some to choosing compared decisions upcoming and continue of expectation are grow to XXXX by us in deliver production vehicles increased customers TES, to has interest lower the allowed revenue uncertainty of delay XXXX, influenced rates more the both to purchase our

top $XX revenue end our lowering As of million. the a we by result, outlook are

we APS, of million, range guidance range follows: existing guidance $X.X to segments $XXX our as billion. TES the results in total revenue million. billion in revenue This for million revenue the the billion updated revenue $XXX $XXX of those million in APS we are $X.XXX $X.XX range. Reflecting ERS is affirming our $XXX $X.XX For expect to of revenue and between of and changes, and billion between

below We a the current will $XXX stated Xx XXXX but to million see net operator are hold. In net be to to range projecting by our progress it working line continue the I a ratio year, million. demand deliver outlook. Despite Also, growth take business of recent comments the we adjusted of over a from initiatives over the capital our to that experienced return be further with we echo ability for questions. fiscal modest in we now strong end markets, leverage our to continued of industry quarters we in drivers ratio the that, long-term the to as regarding to adjusted the in double-digit to utility demand decrease year. With about EBITDA flat levels expect closing, achieve and leverage $XXX expect in fiscal benefits to certain management want to EBITDA next our recent the optimistic Ryan's turn will I open weakness goal

Operator

first question Michael Your from Shlisky Instructions] D.A. [Operator comes from Davidson.

Michael Shlisky

to or used think right perhaps there's holding the by comments me the you back? that Can the Just first now? more on you buy quarter? affecting people on for it Is done maybe to of of volumes business? as some that's kind the looking okay? assets hear are mentioned that market? will some Can what's that provide that not been And with end you the right be comments do fourth issues what Or pricing you sale just

Ryan McMonagle

Yes.

I think we're seeing some used. demand on

are good we used seeing think there. growth I in sequentially So the market

been that's positive. So I think

is I think the we're typically bit I think Mike, little with. of perspective quarter a dealing it broadly, and there, pricing fourth is from a -- But there. is there what buy which pressure quarter think I the be through managing will that biggest

I to is will rate the more think And fourth improve we think interest that then area quarter. that's one there also in it sensitivity. So continue

will to So, think used for I market I the as lower, think as well. be good a continue rates that trend

Michael Shlisky

now, Got then quite have time the it fleet on it. for right least. some in X utilization, And trending or touching at things month seems certainly, a like been direction

market. little this of brings bit XX% and quarter in guys that challenges and than XX% both your point? up even from the worried think said, you XX% the XX%, XX% expectations bit currently little brings be comments, you said I'm of another that. that you think or at that is where of that you that you're Do the to I of a higher kind seeing or you coming each a want

kind can us around? kind you Just things bit want more range do and it of last keep to versus a tell you of little in time what you how high can do a about to reasonable go,

Ryan McMonagle

yes, later as question, And I return happening. seeing into look, a is is so what great us important which quarter, utilization -- it's third think it's in with we most the October. And we in said, holding both line of we're what's think the that Yes. No, Mike. point I expected,

you're think I So, right.

spot so high we and that now, is XXs remain, are consistent good -- think to with which I where too. a is very

at to high kind low-XX that And sense of kind the makes think the are come maintain. to We I this what as about spot like and good to pretty that has size good of we attempt So can said levers it really important to starting of to utilization demand end comments, XXXX business underlying we part XXs, to feels the that use for pricing we is well. underlying year. as it the there. But be the what like is to imply the and feel, dictating. our keep fleet a of back, with expected the where that starting most seems will feel And market

Michael Shlisky

also from We're that an orders the that pretty making I high. we've wanted I'm think touch are for truck ever demand perspective, an business out also patterns we're Custom next Great. orders there. on if seen seeing Class Truck here demand year. mean, industry some the in an best industry-wide big seeing is X of curious I basis. vocational to on all-time I at

order buyer among already out already normalized buy emissions starting year not there more? biggest As there. even you any I'm curious, orders want biggest a Or one, of seeing even come X isn't the to know, you're there pre this Are guys of part perhaps the I if buy Class out starting? Are got truck kind is either the and just guess in now? strong Custom pattern. you've is more in a Truck a really just to folks 'XX and

chassis appreciated. be us would 'XX supply you for for chassis can kind the just So of orders anything about tell

Ryan McMonagle

a Yes. see question, of XXXX, like in to good the you all could some No, OEMs especially buy there's comes availability to obviously Class as beginning We chassis. pre X it But think our our with later heading we're of very it's that start great feels it orders, into now close and of around XXXX. the dynamic. right

look, that's like good the and right dynamic the And trucks year later with it closely our listening we're be I -- is think, great buy and chassis what be what the will OEMs year, XXXX. I will where us our now, feels availability, kind so mean there for side, will valuable. But the when relationships think what to vocational that in between pre the and of will understand to really freight begin side in mix on next

Michael Shlisky

Just to Class in customers kind sure there's the happening will orders. order capacity just for -- we clarify, about you their Maybe the make that strong regular that of the -- necessarily giant Custom some industry-wide or Truck across you're Is isn't the very there X no reason there orders first working it sector Custom Or such are that just currently is of require see us that is vocational what's the I'm part Truck buy pre and 'XX I'm business? to trying for growth worried made why strong -- some trucks to happening, already. their there? in out that capital not

Ryan McMonagle

planning not the there. buy -- Yes. beginning a are No, significant XXXX. I pre seeing at our good We're partners with still availability of we on

of actually will and well. and trend said, think through the in inventory QX come XXXX we we're right that down continue as beginning as so, And seeing normalize

Operator

next comes Hauke Justin question from Baird. from Your

Justin Hauke

that's to kind they're I've mean, clear rental the pick that on I into question, wanted combined going it I I below together. it's EBITDA was But and is signaling was the the ask growth utilization. what end that $XXX million guess the backlog you're for better demand on of that's I the and just got going the to XXXX segment XQ at understand up. revenue is, double-digit results great adjusted pressure XXXX, see think the I algorithm of the maybe TES for kind of what there. And factors given I and that X-part if are When kind a guess, understand XXXX. here to the the fact from of side to I'm sales of really for talking commentary you're be of adjusted down, growth hoping the drive about -- get kind EBITDA for kind to trying the I reason your double-digit 'XX? to expectation the

Ryan McMonagle

when and side. seeing TES the still we But we that's are And we'll on in business. on QX segment. still TES so -- side we're by have of No, demand good Yes. Justin, thanks. seeing We'll great guidance, formal question, a the out look, March, the report growth obviously,

backlog normalized, that true. has So is

of Truck, been has to X Over historically delivered growth been, the range that. with we've Custom backlog having a we've and history in X where month

And will so, the we think be that case.

to normal, QX And X data the what the as come months, growth segment. 'XX TES out. you share as the backlog interesting growth have to about which But the it think shaping still there. But absolutely just to a down, about well. that. really Mike feels few that see the up be questions with side always will is all anticipate we reverted business correct, we're of was we we've time period. asking better we'll that And for growth So is that the but are on with of be will TES so like a talked some has pre quarter buy seeing figure X obviously, you it's too, with to about to more month Certainly,

a bit. some where we the the little on was also pressure on When little pricing. true TES where true about on said ORY, a think business. is gross was we down and talk there business that mentioned That's it's we margin is both that bit, our the down I rental

continued pressure Does to Justin? the as inventory pricing of we're of we're selling build a -- that or in the bit a quarter what help function mix. fourth and margin as well. then you, that into we're as segments, but in third and who just seeing to, terms of both just also has on quarter too, seeing little we're selling from market So the that overall seeing we're

Justin Hauke

guess mean, would you in I equal, all Yes. I giving else right you the the these can XXXX as grow TES off that but guidance, you stand you're right 'XX of summarize, now? levels I and assume in if with here, obviously, have segment not will backlog you

Ryan McMonagle

Yes.

Justin Hauke

is lower why Okay. you came on ORY, rates. mean say that know the the question storm don't And in equipment then that When is mix, I What of that's is lower just or guess some that? you to my was -- that it your that. I what by one-time Is the work second really margin maybe relative what?

Ryan McMonagle

a us mix No, just that's Yes. that question. I going mix rent, the And, Justin. on good think yes, for equipment means out is of

we've in that distribution I of the past our at is think our about an a as lower than example. So, some of equipment equipment ORY vocational some talked

transmission just between higher mix so there's And and that's a ORY. inherent even some distribution slightly

some it renting is we're just it to So of well. that, is as some customers of that the

kind during it's talk both of those So things, as course is -- -- of just and some occurs we that mix, well. year about the of it when but the of

Operator

Your comes DeBlase from next question from Bank. Deutsche Nicole

Naim Kaplan

on This for Naim Kaplan is Nicole.

segment hear -- ERS you could been the has So me?

Ryan McMonagle

Yes.

Naim Kaplan

the revenue Great. growth guidance has quarter. implies in fourth and this your the ERS Okay. been Yes, so XX% quarter-over-quarter midpoint segment year challenged

just how already in that underwritten by rent this the understand OEC We're here. wondering the seen? outlook So, is of to you've much on trying growth

Christopher Eperjesy

numbers. make Chris. is -- this to your I to want understand I make I want sure

I end a and our flat up high low of because effectively think guidance would be segment ERS the about couple year-over-year would of end be the percentage talking You're points.

XX% sequential. the where is sure coming not Unless I'm you from. So mean

Naim Kaplan

yes, Yes, quarter-over-quarter. Sorry, quarter-over-quarter.

Christopher Eperjesy

Yes.

see accelerated, so, But at And continued the October. about, QX. we through in as we QX, into decent a and end certainly, pretty OEC of did talked on it rise rent that's

it's I be X to on So we've past weeks rent. seen what going the yes. the is answer over mean, on OEC

Ryan McMonagle

strong I'd then, rental rental the is sales. sales QX And a is a to typically perspective. quarter from other add thing

anticipating that well, sequentially. up so, And as we're that be will

Naim Kaplan

But mentioned And Okay, investment you on pretty the there release. you press you're telecom Our got that is what continued in understanding strength it. weak. in within seeing is TES? could comment the

Ryan McMonagle

Yes, good telecom. to it's in see we lot starting segment Look, activity for a but a us, more that's question. a small are

rental orders, We small be on we It's that's us, again, equipment are a side telecom rented, than the seeing less larger sales activity. additional and very revenue. seeing X% for to both more But of our some for segment. are

so be market of a as will perspective share that some And well. just from growth

Operator

Tami Instructions] comes from Zakaria [Operator Your from JPMorgan. question next

Tami Zakaria

are my up. question as OEC forward-looking. like a about How So, end CapEx thinking you is growth out market growth conditions Because next T&D you little looking first it finally look to and seems are year?

So, you're thinking of couple a around for about next or any of can thoughts maybe share generation, you year There's growth. lot next how demand it talk years? power power

any side? from So, color your

Ryan McMonagle

question, the is it encouraging a great market It's coming and Tami. is see how back, to T&D

about in past, we're are kind working what think talked I So the that guidance, numbers think somewhat consistent kind our with year of through formal we've obviously, for next now. But I reasonable single-digits from back. an we're for T&D planning beginning watching coming on of overall and our perspective is kind to as growth mid-ish of how that do demand fleet feels we're XXXX,

good, have drivers formal and T&D it certainly when demand we'll I demand underlying guidance, into encouraging think there, the as feel -- in But guidance. So formal announce does heading we are I we think XXXX. March about Tami, but think,

Tami Zakaria

and And second as out the Got call to few we thinking. it. quarters? how we is Gross next That's helpful. a gross my to about in margin what think than for APS parts. through there margin Anything question look lighter little on were came

Christopher Eperjesy

Chris. Yes. Tami, it's

we formal margins. we've there, of on within our rental same of some have I which APS comments, impact the our think have rentals said seen we seen in higher terms in tend to

also some mix, we costs is but in of there. have our seen increase part So it overall

mid-XX% of look at that to continuing it. in model to I the think best to XX% kind way high is

service. about We third-party continue keep the really prioritize, going past, opposed our network the to service as to fleet to in we've as talked

'XX can I in of to continue lot as well. that think you a expect

So while think of continues growth, model. would we're mid-XXs that kind I expecting to be number I the

Operator

We to the to I'd management moment. don't now for remarks. as the back hand questions like any final pending have over of

Ryan McMonagle

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

Operator

for everyone, you, attending Thank today's call.

You day. may now disconnect. Have a wonderful

Custom Truck One Source (CTOS) 31 Oct 242024 Q3 Earnings call transcript