CTOS Custom Truck One Source Inc

Custom Truck One Source, Inc. (NYSE: CTOS), a leading provider of specialty equipment to the electric utility, telecom, rail, forestry, waste management and other infrastructure-related end markets, today reported financial results for its three months ended March 31, 2024.

CTOS First-Quarter Highlights

• Total revenue of $411.3 million, a decrease of $40.9 million, or 9.0%, compared to $452.2 million for the first quarter of 2023 primarily due to fewer rental asset sales and lower rental demand from the utility end market
• Gross profit of $90.7 million, a decline of $19.0 million, or 17.3%, compared to $109.7 million for the first quarter of 2023
• Adjusted Gross Profit of $134.5 million, a decrease of $15.5 million, or 10.4%, compared to $150.0 million for the first quarter of 2023
• Net loss of $14.3 million, compared to net income of $13.8 million in the first quarter of 2023
• Adjusted EBITDA of $77.4 million, a decrease of $27.8 million, or 26.4% compared to the record $105.2 million posted in the first quarter of 2023

“We continue to see strong demand in our TES segment, posting double-digit growth for the sixth consecutive quarter. CTOS is well positioned to capitalize on the secular tailwinds we see around AI and data center investment, electrification, and utility grid upgrades. We continue to be impacted by end-market supply chain, regulatory and customer financing factors affecting the timing of job starts of several large projects in our core T&D markets. These delays impacted our first quarter results specifically in the ERS segment, contributing to both lower rental revenue and rental asset sales this quarter. We believe that this decline will be temporary and anticipate a return to growth heading into 2025,” said Ryan McMonagle, Chief Executive Officer of CTOS. “We continue to see good demand in our infrastructure, rail and telecom end markets which all contributed to our TES segment performance. Our sales backlog remains at an elevated level, but we anticipate it returning to a more normalized level as OEM production and overall supply chain continue to improve. Recently, we announced the acquisition of A&D Maintenance and Repair on Long Island, New York and SOS Fleet Services in Alexandria, Louisiana, further demonstrating our commitment to expanding our footprint to better service our rental fleet and our customers,” McMonagle added.

Summary Actual Financial Results

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Rental revenue

$

106,171

 

 

$

118,288

 

$

120,244

Equipment sales

 

272,602

 

 

 

301,290

 

 

366,967

Parts sales and services

 

32,534

 

 

 

32,585

 

 

34,543

Total revenue

 

411,307

 

 

 

452,163

 

 

521,754

Gross Profit

$

90,709

 

 

$

109,661

 

$

126,824

Adjusted Gross Profit1

$

134,453

 

 

$

149,991

 

$

171,073

Net Income (Loss)

$

(14,335

)

 

$

13,800

 

$

16,122

Adjusted EBITDA1

$

77,376

 

 

$

105,200

 

$

118,361

1

Each of Adjusted Gross Profit and Adjusted EBITDA is a non-GAAP measure. Further information and reconciliations for our non-GAAP measures to the most directly comparable measure under United States generally accepted accounting principles (“GAAP”) are included at the end of this press release. 

Summary Actual Financial Results by Segment Our results are reported for our three segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”). ERS encompasses our core rental business, inclusive of sales of used rental equipment to our customers. TES encompasses our specialized truck and equipment production and new equipment sales activities. APS encompasses sales and rentals of parts, tools, and other supplies to our customers, as well as our aftermarket repair service operations.

Equipment Rental Solutions

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Rental revenue

$

103,288

 

$

113,784

 

$

116,594

Equipment sales

 

32,740

 

 

92,136

 

 

68,023

Total revenue

 

136,028

 

 

205,920

 

 

184,617

Cost of rental revenue

 

29,800

 

 

29,060

 

 

28,222

Cost of equipment sales

 

24,098

 

 

71,081

 

 

49,799

Depreciation of rental equipment

 

42,697

 

 

39,512

 

 

43,230

Total cost of revenue

 

96,595

 

 

139,653

 

 

121,251

Gross profit

$

39,433

 

$

66,267

 

$

63,366

Truck and Equipment Sales

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Equipment sales

$

239,862

 

$

209,154

 

$

298,944

Cost of equipment sales

 

196,702

 

 

175,044

 

 

246,047

Gross profit

$

43,160

 

$

34,110

 

$

52,897

Aftermarket Parts and Services

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Rental revenue

$

2,883

 

$

4,504

 

$

3,650

Parts and services revenue

 

32,534

 

 

32,585

 

 

34,543

Total revenue

 

35,417

 

 

37,089

 

 

38,193

Cost of revenue

 

26,254

 

 

26,987

 

 

26,613

Depreciation of rental equipment

 

1,047

 

 

818

 

 

1,019

Total cost of revenue

 

27,301

 

 

27,805

 

 

27,632

Gross profit

$

8,116

 

$

9,284

 

$

10,561

Summary Combined Operating Metrics

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Ending OEC(a) (as of period end)

$

1,452,900

 

 

$

1,457,870

 

 

$

1,455,708

 

Average OEC on rent(b)

$

1,065,700

 

 

$

1,214,300

 

 

$

1,159,164

 

Fleet utilization(c)

 

73.3

%

 

 

83.6

%

 

 

77.6

%

OEC on rent yield(d)

 

40.5

%

 

 

39.6

%

 

 

41.1

%

Sales order backlog(e) (as of period end)

$

537,292

 

 

$

855,049

 

 

$

688,559

 

(a)

Ending OEC — original equipment cost (“OEC”) is the original equipment cost of units at the end of the measurement period. 

(b)

Average OEC on rent — Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period. 

(c)

Fleet utilization — total number of days the rental equipment was rented during a specified period of time divided by the total number of days available during the same period and weighted based on OEC. 

(d)

OEC on rent yield (“ORY”) — a measure of return realized by our rental fleet during a period. ORY is calculated as rental revenue (excluding freight recovery and ancillary fees) during the stated period divided by the Average OEC on rent for the same period. For periods of less than 12 months, the ORY is adjusted to an annualized basis. 

(e)

Sales order backlog — purchase orders received for customized and stock equipment. Sales order backlog should not be considered an accurate measure of future net sales.

Management Commentary In the first quarter of 2024, total revenue was $411.3 million, a decrease of 9.0% from the first quarter of 2023. First quarter 2024 rental revenue decreased 10.2% to $106.2 million, compared to $118.3 million in the first quarter of 2023, due to lower utilization and a decline in average OEC on rent. Equipment sales decreased 9.5% in the first quarter of 2024 to $272.6 million, compared to $301.3 million in the first quarter of 2023, primarily driven by lower sales of used equipment due to excess supply of equipment available in the market. Parts sales and service revenue remained flat year-over-year.

In our ERS segment, rental revenue in the first quarter of 2024 was $103.3 million compared to $113.8 million in the first quarter of 2023, a 9.2% decrease. Fleet utilization declined to 73.3% compared to 83.6% in the first quarter of 2023, due to a decline in demand in the utility market as a result of supply chain constraints, environmental, regulatory, and customer financing factors affecting the timing of transmission job starts. Average OEC on rent decreased 12.2% year-over-year, primarily as a result of the lower utilization in the quarter. Equipment sales decreased $59.4 million in the first quarter of 2024 to $32.7 million compared to $92.1 million in the first quarter of 2023, due to excess supply of used equipment available in the market. ERS gross profit in the first quarter of 2024 and 2023 was $39.4 million and $66.3 million, respectively. Adjusted Gross Profit in the segment was $82.1 million in the first quarter of 2024, compared to $105.8 million in the first quarter of 2023. Adjusted gross profit from rentals, which excludes depreciation of rental equipment, decreased to $73.5 million in the first quarter of 2024 compared to $84.7 million in the first quarter of 2023.

Revenue in our TES segment increased 14.7% to $239.9 million in the first quarter of 2024, from $209.2 million in the first quarter of 2023, primarily as a result of exiting 2023 with healthy inventory levels due to the supply chain improvements experienced in 2023 and historically high backlog levels that improved our ability to produce and deliver more units during the first quarter of 2024. Gross profit improved by 26.5% to $43.2 million in the first quarter of 2024 compared to $34.1 million in the first quarter of 2023. TES saw a reduction in backlog of 37.2% to $537.3 million compared to the first quarter of 2023, primarily for the reasons detailed above.

APS segment revenue decreased $1.7 million in the first quarter of 2024 to $35.4 million, compared to $37.1 million in the first quarter of 2023 due to the decrease in rentals of tools and accessories affected by the utility end-market softness. Gross profit margin decreased to 22.9% in the first quarter of 2024 from 25.0% in the first quarter of 2023.

Net loss was $14.3 million in the first quarter of 2024, compared to net income of $13.8 million for the first quarter of 2023. The $28.1 million decrease is primarily due to lower revenue leading to decreased gross profit and higher interest expense on variable-rate debt and variable-rate floor plan liabilities.

Adjusted EBITDA for the first quarter of 2024 was $77.4 million, a decrease of 26.4%, compared to $105.2 million for the first quarter of 2023. The decrease in Adjusted EBITDA was largely driven by a decline in used equipment sales in our ERS segment as well as higher costs associated with variable-rate floorplan liabilities as a result of higher rates and inventory levels.

As of March 31, 2024, cash and cash equivalents was $8.0 million, Total Debt outstanding was $1,519.4 million, Net Debt was $1,511.4 million and Net Leverage Ratio was 3.79x. Availability under the senior secured credit facility was $194.5 million as of March 31, 2024, and based on our borrowing base, we have an additional $331.9 million of availability that we can potentially utilize by upsizing our existing facility. For the three months ended March 31, 2024 compared to December 31, 2023, Ending OEC decreased by $5.0 million as we shifted allocation of new equipment builds in favor of our TES segment in order to capitalize on a continuing solid demand environment for vocational trucks. During the three months ended March 31, 2024, CTOS purchased $6.4 million of its common stock.

OUTLOOK We are updating our full-year revenue and Adjusted EBITDA1, 4 guidance for 2024. We believe our ERS segment will continue to experience near-term pressure in demand in the utility market as a result of financing, supply chain, and regulatory factors affecting the timing of job starts. These headwinds in our utility end markets are driving lower OEC on rent in our core ERS segment. We expect to grow our rental fleet (based on net OEC) by low-single digits. Regarding TES, supply chain improvements, healthy inventory levels, and historically high backlog levels continue to improve our ability to produce and deliver more units in 2024. While we are lowering our consolidated revenue and Adjusted EBITDA1, 4 guidance for the year, we continue to focus on generating meaningful free cash flow in 2024, and reaffirm our target to generate more than $100 million of levered free cash flow2, 4. However, we now expect to deliver a net leverage3, 4 that decreases from current levels to less than 3.5 times by the end of the fiscal year. “We continue to have confidence in the long-term strength of our end markets and the continued execution by our teams to profitably grow our business, better serve our customers and position CTOS for future growth. Our updated outlook reflects the risks associated with some near-term challenges for our rental customers in the T&D sector, which we now expect could persist through the balance of the fiscal year.” said Ryan McMonagle, Chief Executive Officer of CTOS.

2024 Consolidated Outlook

 

 

 

Revenue

$1,950 million

—

$2,130 million

Adjusted EBITDA1, 4

$400 million

—

$440 million

 

 

 

 

2024 Revenue Outlook by Segment

 

 

 

ERS

$680 million

—

$710 million

TES

$1,115 million

—

$1,255 million

APS

$155 million

—

$165 million

1

Adjusted EBITDA is a non-GAAP performance measure that we use to monitor our results of operations, to measure performance against debt covenants and performance relative to competitors. Refer to the section below entitled “Non-GAAP Financial and Performance Measures” for further information about Adjusted EBITDA. 

2

Levered Free Cash Flow is defined as net cash provided by operating activities, less cash flow for investing activities, excluding acquisitions, plus acquisition of inventory through floor plan payables – non-trade less repayment of floor plan payables – non-trade, both of which are included in cash flow from financing activities in our Consolidated Statements of Cash Flows. Levered Free Cash Flow should not be used to predict net cash provided by operating activities as the difference between the two measures is variable. 

3

Net leverage ratio is a non-GAAP performance measure used by management, and we believe it provides useful information to investors because it is an important measure to evaluate our debt levels and progress toward leverage targets, which is consistent with the manner our lenders and management use this measure. Refer to the section below entitled “Non-GAAP Financial and Performance Measures” for further information about net leverage ratio. 

4

CTOS is unable to present a quantitative reconciliation of its forward-looking Adjusted EBITDA, Net Leverage Ratio and Levered Free Cash Flow for the year ending December 31, 2024 to its most directly comparable GAAP financial measure, net income and cash flow from operating activities, because management cannot reliably forecast net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP net income including, but not limited to, customer buyout requests on rentals with rental purchase options and income tax expense. Adjusted EBITDA, Net Leverage Ratio and Levered Free Cash Flow should not be used to predict net income or cash flow from operating activities as the difference between the measures is variable.

CONFERENCE CALL INFORMATION The Company has scheduled a conference call at 5:00 P.M. Eastern Time on May 2, 2024, to discuss its first quarter 2024 financial results. A webcast will be publicly available at: investors.customtruck.com. To listen by phone, please dial 1-800-715-9871 or 1-646-307-1963 and provide the operator with conference ID 2976854. A replay of the call will be available until 11:59 p.m. ET, Thursday, May 9, 2024, by dialing 1-800-770-2030 or 1-609-800-9909 and entering passcode 2976854.

ABOUT CTOS CTOS is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications, and rail markets in North America, with a differentiated “one-stop-shop” business model. CTOS offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade, and installation of critical infrastructure assets, including electric lines, telecommunications networks, and rail systems. The Company's coast-to-coast rental fleet of approximately 10,300 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, Hi-rail equipment, repair parts, tools, and accessories. For more information, please visit customtruck.com.

FORWARD-LOOKING STATEMENTS This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “suggests,” “plans,” “targets,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company's management’s control, that could cause actual results or outcomes to differ materially from those discussed in this press release. This press release is based on certain assumptions that the Company's management has made in light of its experience in the industry, as well as the Company’s perceptions of historical trends, current conditions, expected future developments and other factors the Company believes are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect the Company’s actual performance and results and could cause actual results to differ materially from those expressed in this press release. Important factors, among others, that may affect actual results or outcomes include: increases in labor costs, our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner, and our inability to manage our rental equipment in an effective manner; competition in the equipment dealership and rental industries; our sales order backlog may not be indicative of the level of our future revenues; increases in unionization rate in our workforce; our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries; our inability to attract and retain highly skilled personnel and our inability to retain or plan for succession of our senior management; material disruptions to our operation and manufacturing locations as a result of public health concerns, equipment failures, natural disasters, work stoppages, power outages or other reasons; potential impairment charges; any further increase in the cost of new equipment that we purchase for use in our rental fleet or for sale as inventory; aging or obsolescence of our existing equipment, and the fluctuations of market value thereof; disruptions in our supply chain; our business may be impacted by government spending; we may experience losses in excess of our recorded reserves for receivables; uncertainty relating to macroeconomic conditions, unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required; increases in price of fuel or freight; regulatory technological advancement, or other changes in our core end-markets may affect our customers’ spending; difficulty in integrating acquired businesses and fully realizing the anticipated benefits and cost savings of the acquired businesses, as well as additional transaction and transition costs that we will continue to incur following acquisitions; the interest of our majority stockholder, which may not be consistent with the other stockholders; our significant indebtedness, which may adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and increase our risk of default; our inability to generate cash, which could lead to a default; significant operating and financial restrictions imposed by our debt agreements; changes in interest rates, which could increase our debt service obligations on the variable rate indebtedness and decrease our net income and cash flows; disruptions or security compromises affecting our information technology systems or those of our critical services providers could adversely affect our operating results by subjecting us to liability, and limiting our ability to effectively monitor and control our operations, adjust to changing market conditions or implement strategic initiatives; we are subject to complex laws and regulations, including environmental and safety regulations that can adversely affect cost, manner or feasibility of doing business; material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements, we are subject to a series of risks related to climate change; and increased attention to, and evolving expectations for, sustainability and environmental, social and governance initiatives. For a more complete description of these and other possible risks and uncertainties, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023, and its subsequent reports filed with the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements.

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s except per share data)

2024

 

2023

 

2023

Revenue

 

 

 

 

 

Rental revenue

$

106,171

 

 

$

118,288

 

 

$

120,244

 

Equipment sales

 

272,602

 

 

 

301,290

 

 

 

366,967

 

Parts sales and services

 

32,534

 

 

 

32,585

 

 

 

34,543

 

Total revenue

 

411,307

 

 

 

452,163

 

 

 

521,754

 

Cost of Revenue

 

 

 

 

 

Cost of rental revenue

 

29,825

 

 

 

29,899

 

 

 

28,444

 

Depreciation of rental equipment

 

43,744

 

 

 

40,330

 

 

 

44,249

 

Cost of equipment sales

 

220,800

 

 

 

246,125

 

 

 

295,846

 

Cost of parts sales and services

 

26,229

 

 

 

26,148

 

 

 

26,391

 

Total cost of revenue

 

320,598

 

 

 

342,502

 

 

 

394,930

 

Gross Profit

 

90,709

 

 

 

109,661

 

 

 

126,824

 

Operating Expenses

 

 

 

 

 

Selling, general and administrative expenses

 

57,995

 

 

 

56,991

 

 

 

59,429

 

Amortization

 

6,578

 

 

 

6,672

 

 

 

7,134

 

Non-rental depreciation

 

2,920

 

 

 

2,650

 

 

 

2,683

 

Transaction expenses and other

 

4,846

 

 

 

3,460

 

 

 

4,104

 

Total operating expenses

 

72,339

 

 

 

69,773

 

 

 

73,350

 

Operating Income

 

18,370

 

 

 

39,888

 

 

 

53,474

 

Other Expense

 

 

 

 

 

Interest expense, net

 

37,915

 

 

 

29,176

 

 

 

36,370

 

Financing and other expense (income)

 

(3,262

)

 

 

(3,951

)

 

 

(3,699

)

Total other expense

 

34,653

 

 

 

25,225

 

 

 

32,671

 

Income (Loss) Before Income Taxes

 

(16,283

)

 

 

14,663

 

 

 

20,803

 

Income Tax Expense (Benefit)

 

(1,948

)

 

 

863

 

 

 

4,681

 

Net Income (Loss)

$

(14,335

)

 

$

13,800

 

 

$

16,122

 

 

 

 

 

 

 

Net Income (Loss) Per Share

 

 

 

 

 

Basic

$

(0.06

)

 

$

0.06

 

 

$

0.07

 

Diluted

$

(0.06

)

 

$

0.06

 

 

$

0.07

 

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

(in $000s)

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

7,990

 

 

$

10,309

 

Accounts receivable, net

 

169,304

 

 

 

215,089

 

Financing receivables, net

 

19,824

 

 

 

30,845

 

Inventory

 

1,103,433

 

 

 

985,794

 

Prepaid expenses and other

 

26,069

 

 

 

23,862

 

Total current assets

 

1,326,620

 

 

 

1,265,899

 

Property and equipment, net

 

153,490

 

 

 

142,115

 

Rental equipment, net

 

931,690

 

 

 

916,704

 

Goodwill

 

703,836

 

 

 

704,011

 

Intangible assets, net

 

270,461

 

 

 

277,212

 

Operating lease assets

 

42,997

 

 

 

38,426

 

Other assets

 

21,421

 

 

 

23,430

 

Total Assets

$

3,450,515

 

 

$

3,367,797

 

Liabilities and Stockholders' Equity

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

119,250

 

 

$

117,653

 

Accrued expenses

 

67,176

 

 

 

73,847

 

Deferred revenue and customer deposits

 

26,482

 

 

 

28,758

 

Floor plan payables - trade

 

307,646

 

 

 

253,197

 

Floor plan payables - non-trade

 

459,792

 

 

 

409,113

 

Operating lease liabilities - current

 

6,729

 

 

 

6,564

 

Current maturities of long-term debt

 

6,066

 

 

 

8,257

 

Total current liabilities

 

993,141

 

 

 

897,389

 

Long-term debt, net

 

1,492,346

 

 

 

1,487,136

 

Operating lease liabilities - noncurrent

 

37,398

 

 

 

32,714

 

Deferred income taxes

 

30,952

 

 

 

33,355

 

Total long-term liabilities

 

1,560,696

 

 

 

1,553,205

 

Commitments and contingencies

 

 

 

Stockholders' Equity

 

 

 

Common stock

 

25

 

 

 

25

 

Treasury stock, at cost

 

(62,958

)

 

 

(56,524

)

Additional paid-in capital

 

1,540,327

 

 

 

1,537,553

 

Accumulated other comprehensive loss

 

(8,508

)

 

 

(5,978

)

Accumulated deficit

 

(572,208

)

 

 

(557,873

)

Total stockholders' equity

 

896,678

 

 

 

917,203

 

Total Liabilities and Stockholders' Equity

$

3,450,515

 

 

$

3,367,797

 

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

Three Months Ended March 31,

(in $000s)

2024

 

2023

Operating Activities

 

 

 

Net income (loss)

$

(14,335

)

 

$

13,800

 

Adjustments to reconcile net income (loss) to net cash flow from operating activities:

 

 

 

Depreciation and amortization

 

56,160

 

 

 

52,091

 

Amortization of debt issuance costs

 

1,431

 

 

 

2,407

 

Provision for losses on accounts receivable

 

1,882

 

 

 

1,872

 

Share-based compensation

 

2,730

 

 

 

3,147

 

Gain on sales and disposals of rental equipment

 

(11,119

)

 

 

(21,320

)

Change in fair value of derivative and warrants

 

(527

)

 

 

(525

)

Deferred tax expense

 

(2,403

)

 

 

514

 

Changes in assets and liabilities:

 

 

 

Accounts and financing receivables

 

21,064

 

 

 

17,161

 

Inventories

 

(116,823

)

 

 

(117,580

)

Prepaids, operating leases and other

 

(1,645

)

 

 

(4,987

)

Accounts payable

 

2,769

 

 

 

35,916

 

Accrued expenses and other liabilities

 

(5,745

)

 

 

1,328

 

Floor plan payables - trade, net

 

54,450

 

 

 

22,395

 

Customer deposits and deferred revenue

 

(2,264

)

 

 

(2,313

)

Net cash flow from operating activities

 

(14,375

)

 

 

3,906

 

Investing Activities

 

 

 

Acquisition of business, net of cash acquired

 

(1,410

)

 

 

—

 

Purchases of rental equipment

 

(75,552

)

 

 

(109,145

)

Proceeds from sales and disposals of rental equipment

 

60,078

 

 

 

78,626

 

Purchase of non-rental property and cloud computing arrangements

 

(16,527

)

 

 

(9,429

)

Net cash flow for investing activities

 

(33,411

)

 

 

(39,948

)

Financing Activities

 

 

 

Proceeds from debt

 

4,200

 

 

 

13,537

 

Share-based payments

 

(10

)

 

 

228

 

Borrowings under revolving credit facilities

 

35,000

 

 

 

35,000

 

Repayments under revolving credit facilities

 

(35,000

)

 

 

(10,331

)

Repayments of notes payable

 

—

 

 

 

(2,020

)

Finance lease payments

 

—

 

 

 

(377

)

Repurchase of common stock

 

(6,762

)

 

 

(1,122

)

Principal payments on long-term debt

 

(2,612

)

 

 

—

 

Acquisition of inventory through floor plan payables - non-trade

 

162,781

 

 

 

187,381

 

Repayment of floor plan payables - non-trade

 

(112,102

)

 

 

(168,447

)

Net cash flow from financing activities

 

45,495

 

 

 

53,849

 

Effect of exchange rate changes on cash and cash equivalents

 

(28

)

 

 

51

 

Net Change in Cash and Cash Equivalents

 

(2,319

)

 

 

17,858

 

Cash and Cash Equivalents at Beginning of Period

 

10,309

 

 

 

14,360

 

Cash and Cash Equivalents at End of Period

$

7,990

 

 

$

32,218

 

 

Three Months Ended March 31,

(in $000s)

2024

 

2023

Supplemental Cash Flow Information

 

 

 

Interest paid

$

23,098

 

 

$

13,130

 

Income taxes paid

 

2,133

 

 

10

Non-Cash Investing and Financing Activities

 

 

 

Rental equipment and property and equipment purchases in accounts payable

 

953

 

 

 

2,938

 

Rental equipment sales in accounts receivable

 

2,210

 

 

 

621

 

CUSTOM TRUCK ONE SOURCE, INC. NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

In our press release and schedules, and on the related conference call, we report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles (“GAAP”). We utilize these financial measures to manage our business on a day-to-day basis and some of these measures are commonly used in our industry to evaluate performance by excluding items considered to be non-recurring. We believe these non-GAAP measures provide investors expanded insight to assess performance, in addition to the standard GAAP-based financial measures. The press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to. Although management evaluates and presents these non-GAAP measures for the reasons described herein, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income/loss, earnings/loss per share or any other comparable measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP performance measure that we use to monitor our results of operations, to measure performance against debt covenants and performance relative to competitors. We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of operating performance, without regard to financing methods or capital structures. We exclude the items identified in the reconciliations of net income (loss) to Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within the industry depending upon accounting methods and book values of assets, including the method by which the assets were acquired, and capital structures. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that results will be unaffected by the items excluded from Adjusted EBITDA. Our computation of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

We define Adjusted EBITDA as net income or loss before interest expense, income taxes, depreciation and amortization, share-based compensation, and other items that we do not view as indicative of ongoing performance. Our Adjusted EBITDA includes an adjustment to exclude the effects of purchase accounting adjustments when calculating the cost of inventory and used equipment sold. When inventory or equipment is purchased in connection with a business combination, the assets are revalued to their current fair values for accounting purposes. The consideration transferred (i.e., the purchase price) in a business combination is allocated to the fair values of the assets as of the acquisition date, with amortization or depreciation recorded thereafter following applicable accounting policies; however, this may not be indicative of the actual cost to acquire inventory or new equipment that is added to product inventory or the rental fleets apart from a business acquisition. Additionally, the pricing of rental contracts and equipment sales prices for equipment is based on OEC, and we measure a rate of return from rentals and sales using OEC. We also include an adjustment to remove the impact of accounting for certain of our rental contracts with customers containing a rental purchase option that are accounted for under GAAP as a sales-type lease. We include this adjustment because we believe continuing to reflect the transactions as an operating lease better reflects the economics of the transactions given our large portfolio of rental contracts. These, and other, adjustments to GAAP net income or loss that are applied to derive Adjusted EBITDA are specified by our senior secured credit agreements.

Adjusted Gross Profit. We present total gross profit excluding rental equipment depreciation (“Adjusted Gross Profit”) as a non-GAAP financial performance measure. This measure differs from the GAAP definition of gross profit, as we do not include the impact of depreciation expense, which represents non-cash expense. We use this measure to evaluate operating margins and the effectiveness of the cost of our rental fleet.

Net Debt. We present the non-GAAP financial measure “Net Debt,” which is total debt (the most comparable GAAP measure, calculated as current and long-term debt, excluding deferred financing fees, plus current and long-term finance lease obligations) minus cash and cash equivalents. We believe this non-GAAP measure is useful to investors to evaluate our financial position.

Net Leverage Ratio. Net leverage ratio is a non-GAAP performance measure used by management, and we believe it provides useful information to investors because it is an important measure to evaluate our debt levels and progress toward leverage targets, which is consistent with the manner our lenders and management use this measure. We define net leverage ratio as net debt divided by Adjusted EBITDA.

CUSTOM TRUCK ONE SOURCE, INC.

ADJUSTED EBITDA RECONCILIATION

(unaudited)

 

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Net income (loss)

$

(14,335

)

 

$

13,800

 

 

$

16,122

 

Interest expense

 

25,015

 

 

 

22,363

 

 

 

24,712

 

Income tax expense (benefit)

 

(1,948

)

 

 

863

 

 

 

4,681

 

Depreciation and amortization

 

56,161

 

 

 

52,090

 

 

 

56,909

 

EBITDA

 

64,893

 

 

 

89,116

 

 

 

102,424

 

Adjustments:

 

 

 

 

 

Non-cash purchase accounting impact (1)

 

2,960

 

 

 

7,199

 

 

 

6,190

 

Transaction and integration costs (2)

 

4,846

 

 

 

3,460

 

 

 

4,104

 

Sales-type lease adjustment (3)

 

2,474

 

 

 

2,803

 

 

 

2,722

 

Share-based payments (4)

 

2,730

 

 

 

3,147

 

 

 

2,997

 

Change in fair value of warrants (5)

 

(527

)

 

 

(525

)

 

 

(76

)

Adjusted EBITDA

$

77,376

 

 

$

105,200

 

 

$

118,361

 

Adjusted EBITDA is defined as net income, as adjusted for provision for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization, and further adjusted for the impact of the fair value mark-up of acquired rental fleet, business acquisition and merger-related costs, including integration, the impact of accounting for certain of our rental contracts with customers that are accounted for under GAAP as sales-type lease and stock compensation expense. This non-GAAP measure is subject to certain limitations.

(1)

Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment and inventory sold. The equipment and inventory acquired received a purchase accounting step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to our ABL Credit Agreement and Indenture. 

(2)

Represents transaction and process improvement costs related to acquisitions of businesses, including post-acquisition integration costs, which are recognized within operating expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses. These expenses are presented as adjustments to net income (loss) pursuant to our ABL Credit Agreement and Indenture. 

(3)

Represents the impact of sales-type lease accounting for certain leases containing rental purchase options (or “RPOs”), as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. The adjustments are made pursuant to our ABL Credit Agreement and Indenture. The components of this adjustment are presented in the table below:

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Equipment sales

$

(3,018

)

 

$

(24,172

)

 

$

(1,529

)

Cost of equipment sales

 

2,822

 

 

 

23,225

 

 

 

1,362

 

Gross profit

 

(196

)

 

 

(947

)

 

 

(167

)

Interest income

 

(2,742

)

 

 

(3,428

)

 

 

(3,770

)

Rental invoiced

 

5,412

 

 

 

7,178

 

 

 

6,659

 

Sales-type lease adjustment

$

2,474

 

 

$

2,803

 

 

$

2,722

 

(4)

Represents non-cash share-based compensation expense associated with the issuance of stock options and restricted stock units. 

(5)

Represents the charge to earnings for the change in fair value of the liability for warrants. 

Reconciliation of Adjusted Gross Profit (unaudited)

The following table presents the reconciliation of Adjusted Gross Profit:

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Revenue

 

 

 

 

 

Rental revenue

$

106,171

 

$

118,288

 

$

120,244

Equipment sales

 

272,602

 

 

301,290

 

 

366,967

Parts sales and services

 

32,534

 

 

32,585

 

 

34,543

Total revenue

 

411,307

 

 

452,163

 

 

521,754

Cost of Revenue

 

 

 

 

 

Cost of rental revenue

 

29,825

 

 

29,899

 

 

28,444

Depreciation of rental equipment

 

43,744

 

 

40,330

 

 

44,249

Cost of equipment sales

 

220,800

 

 

246,125

 

 

295,846

Cost of parts sales and services

 

26,229

 

 

26,148

 

 

26,391

Total cost of revenue

 

320,598

 

 

342,502

 

 

394,930

Gross Profit

 

90,709

 

 

109,661

 

 

126,824

Add: depreciation of rental equipment

 

43,744

 

 

40,330

 

 

44,249

Adjusted Gross Profit

$

134,453

 

$

149,991

 

$

171,073

Reconciliation of ERS Segment Adjusted Gross Profit and Rental Gross Profit (unaudited)

The following table presents the reconciliation of ERS segment Adjusted Gross Profit:

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Revenue

 

 

 

 

 

Rental revenue

$

103,288

 

$

113,784

 

$

116,594

Equipment sales

 

32,740

 

 

92,136

 

 

68,023

Total revenue

 

136,028

 

 

205,920

 

 

184,617

Cost of Revenue

 

 

 

 

 

Cost of rental revenue

 

29,800

 

 

29,060

 

 

28,222

Cost of equipment sales

 

24,098

 

 

71,081

 

 

49,799

Depreciation of rental equipment

 

42,697

 

 

39,512

 

 

43,230

Total cost of revenue

 

96,595

 

 

139,653

 

 

121,251

Gross profit

 

39,433

 

 

66,267

 

 

63,366

Add: depreciation of rental equipment

 

42,697

 

 

39,512

 

 

43,230

Adjusted Gross Profit

$

82,130

 

$

105,779

 

$

106,596

The following table presents the reconciliation of Adjusted ERS Rental Gross Profit:

 

Three Months Ended March 31,

 

Three Months Ended December 31,

(in $000s)

2024

 

2023

 

2023

Rental revenue

$

103,288

 

$

113,784

 

$

116,594

Cost of rental revenue

 

29,800

 

 

29,060

 

 

28,222

Adjusted Rental Gross Profit

$

73,488

 

$

84,724

 

$

88,372

Reconciliation of Net Debt (unaudited)

The following table presents the reconciliation of Net Debt:

(in $000s)

March 31, 2024

Current maturities of long-term debt

$

6,066

 

Long-term debt, net

 

1,492,346

 

Deferred financing fees

 

20,975

 

Less: cash and cash equivalents

 

(7,990

)

Net Debt

$

1,511,397

 

Reconciliation of Net Leverage Ratio (unaudited)

The following table presents the reconciliation of the Net Leverage Ratio:

 

March 31, 2024

(in $000s)

Net Debt (as of period end)

$

1,511,397

Divided by: Adjusted EBITDA

$

399,105

Net Leverage Ratio

 

3.79

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240502862418/en/

INVESTOR CONTACT Brian Perman, Vice President, Investor Relations (816) 723 - 7906 investors@customtruck.com