Custom Truck One Source, Inc. Reports Record Results for the Fourth-Quarter and Full-Year 2022
KANSAS CITY, Mo.–(BUSINESS WIRE)–Custom Truck One Source, Inc. (NYSE: CTOS), a leading provider of specialty equipment to the electric utility, telecom, rail, and other infrastructure-related end markets, today reported financial results for the fourth quarter and full year ended December 31, 2022.
CTOS Fourth-Quarter and Full-Year Highlights
- Total quarterly revenue of $486.7 million and annual revenue of $1,573.1 million, driven primarily by growth and continued strong demand from our end markets
- Quarterly gross profit improvement of $50.4 million, or 64.7%, to $128.3 million compared to $77.9 million for fourth quarter 2021
- Full-year gross profit of $383.7 million
- Adjusted gross profit increased 36.6% to $169.1 million compared to $123.8 million for fourth quarter 2021
- Quarterly net income of $30.9 million, driven by gross profit growth of $50.4 million, compared to a net loss of $3.7 million in fourth quarter 2021
- Quarterly Adjusted EBITDA of $124.5 million compared to $95.6 million in the fourth quarter 2021
- Full-year net income of $38.9 million
- Full-year Adjusted EBITDA of $393.0 million, an increase of $69.9 million, or 21.6%, compared to 2021 full-year pro forma Adjusted EBITDA of $323.1 million
- Reduced net leverage from 3.8x at the end of the third quarter of 2022 to 3.5x at the end of the year
- Announced appointment of Ryan McMonagle as Chief Executive Officer, effective March 20, 2023. Fred Ross is retiring as Chief Executive Officer and has agreed to remain with the Company as Founder and will continue to serve as a member of the Board
“Our fourth quarter results concluded an incredibly strong year despite supply chain constraints and inflationary pressures that we experienced throughout 2022. Our entire team was instrumental in delivering these results and achieving record levels of vehicle production, completing more vehicles in 2022 than in any other year in our history,” said Fred Ross, Chief Executive Officer of CTOS. “We continue to see very strong demand from customers across all our primary end-markets and in all three of our business segments. The demand environment combined with our expectation of continued improvement in the supply chain, as well as a sustained level of vehicle production are reflected in our positive outlook for 2023. We continue to believe that our significant scale and one-stop-shop business model provide us with a competitive advantage that allows us to deliver unparalleled service to our customers,” Ross added.
Summary Actual Financial Results
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
Three Months |
||||||||||||
|
(in $000s) |
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
|
|||
|
Rental revenue |
$ |
127,829 |
|
$ |
114,131 |
|
|
$ |
464,039 |
|
$ |
370,067 |
|
|
$ |
115,010 |
|
|
Equipment sales |
|
325,746 |
|
|
212,509 |
|
|
|
982,341 |
|
|
695,334 |
|
|
|
210,903 |
|
|
Parts sales and services |
|
33,149 |
|
|
29,799 |
|
|
|
126,706 |
|
|
101,753 |
|
|
|
31,867 |
|
|
Total revenue |
|
486,724 |
|
|
356,439 |
|
|
|
1,573,086 |
|
|
1,167,154 |
|
|
|
357,780 |
|
|
Gross profit |
$ |
128,325 |
|
$ |
77,852 |
|
|
$ |
383,748 |
|
$ |
210,013 |
|
|
$ |
88,172 |
|
|
Net income (loss) |
$ |
30,937 |
|
$ |
(3,713 |
) |
|
$ |
38,905 |
|
$ |
(181,501 |
) |
|
$ |
(2,382 |
) |
|
Adjusted EBITDA1 |
$ |
124,484 |
|
$ |
95,589 |
|
|
$ |
392,978 |
|
$ |
277,784 |
|
|
$ |
91,634 |
|
|
1 – Adjusted EBITDA is a non-GAAP financial measure. Further information and reconciliations for our non-GAAP measures to the most directly comparable financial measure under United States generally accepted accounting principles in the U.S. (“GAAP”) is included at the end of this press release. |
Summary Pro Forma Financial Results1
The summary combined financial data below for the three and twelve months ended December 31, 2021 is presented on a pro forma basis to give effect to the following as if they occurred on January 1, 2020: (i) the acquisition of Custom Truck LP (the “Acquisition”) and related impacts of purchase accounting, (ii) borrowings under the new debt structure and (iii) repayment of previously existing debt of Nesco Holdings and Custom Truck LP.
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||||||||
|
(in $000s) |
2022 Actual |
|
2021 Pro Forma (1) |
|
2022 Actual |
|
2021 Pro Forma (1) |
||||||
|
Rental revenue |
$ |
127,829 |
|
$ |
114,131 |
|
|
$ |
464,039 |
|
$ |
422,040 |
|
|
Equipment sales |
|
325,746 |
|
|
212,509 |
|
|
|
982,341 |
|
|
941,289 |
|
|
Parts sales and services |
|
33,149 |
|
|
29,799 |
|
|
|
126,706 |
|
|
120,296 |
|
|
Total revenue |
|
486,724 |
|
|
356,439 |
|
|
|
1,573,086 |
|
|
1,483,625 |
|
|
Gross profit |
$ |
128,325 |
|
$ |
79,236 |
|
|
$ |
383,748 |
|
$ |
278,418 |
|
|
Net income (loss) |
$ |
30,937 |
|
$ |
(2,675 |
) |
|
$ |
38,905 |
|
$ |
(90,521 |
) |
|
Adjusted EBITDA2 |
$ |
124,484 |
|
$ |
95,589 |
|
|
$ |
392,978 |
|
$ |
323,118 |
|
|
1 – The above pro forma information is presented for the twelve months ended December 31, 2021, in accordance with Article 11 of Regulation S-X. The information presented gives effect to the following as if they occurred on January 1, 2020: (i) the Acquisition, (ii) borrowings under the senior secured notes and the asset-based credit facility used to repay certain debt in connection with the Acquisition, (iii) extinguishment of Custom Truck LP’s prior credit facility and term loan borrowings assumed in the Acquisition and immediately repaid on April 1, 2021, and (iv) extinguishment of Nesco Holdings’ prior credit facility and its senior secured notes repaid in connection with the Acquisition. The pro forma information is not necessarily indicative of the Company’s results of operations had the Acquisition been completed on January 1, 2020, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or revenue opportunities that could result from the Acquisition. |
|
2 – Adjusted EBITDA is a non-GAAP financial measure. Further information and reconciliations for our non-GAAP measures to the most directly comparable financial measure under GAAP is 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 rental equipment to our customers. TES encompasses our specialized truck and equipment production and sales activities. APS encompasses sales and rentals of parts, tools and other supplies to our customers, as well as our aftermarket repair service operations. Segment performance is presented below for the three months ended December 31, 2022 and 2021 and September 30, 2022, and for the twelve months ended December 31, 2022 and 2021. Segment performance for the twelve months ended December 31, 2021, includes Custom Truck LP from April 1, 2021 to December 31, 2021.
Equipment Rental Solutions
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
Three Months |
|||||||||
|
(in $000s) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||
|
Rental revenue |
$ |
123,429 |
|
$ |
109,622 |
|
$ |
449,108 |
|
$ |
354,557 |
|
$ |
112,009 |
|
Equipment sales |
|
78,472 |
|
|
35,294 |
|
|
212,146 |
|
|
105,435 |
|
|
37,121 |
|
Total revenue |
|
201,901 |
|
|
144,916 |
|
|
661,254 |
|
|
459,992 |
|
|
149,130 |
|
Cost of rental revenue |
|
26,735 |
|
|
26,961 |
|
|
106,598 |
|
|
94,644 |
|
|
27,221 |
|
Cost of equipment sales |
|
57,504 |
|
|
29,605 |
|
|
158,167 |
|
|
90,420 |
|
|
27,015 |
|
Depreciation of rental equipment |
|
39,836 |
|
|
43,752 |
|
|
167,962 |
|
|
151,954 |
|
|
41,776 |
|
Total cost of revenue |
|
124,075 |
|
|
100,318 |
|
|
432,727 |
|
|
337,018 |
|
|
96,012 |
|
Gross profit |
$ |
77,826 |
|
$ |
44,598 |
|
$ |
228,527 |
|
$ |
122,974 |
|
$ |
53,118 |
Truck and Equipment Sales
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
Three Months |
|||||||||
|
(in $000s) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||
|
Equipment sales |
$ |
247,274 |
|
$ |
177,215 |
|
$ |
770,195 |
|
$ |
589,899 |
|
$ |
173,782 |
|
Cost of equipment sales |
|
202,887 |
|
|
153,844 |
|
|
647,685 |
|
|
528,024 |
|
|
146,573 |
|
Gross profit |
$ |
44,387 |
|
$ |
23,371 |
|
$ |
122,510 |
|
$ |
61,875 |
|
$ |
27,209 |
Aftermarket Parts and Services
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
Three Months |
|||||||||
|
(in $000s) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||
|
Rental revenue |
$ |
4,400 |
|
$ |
4,509 |
|
$ |
14,931 |
|
$ |
15,510 |
|
$ |
3,001 |
|
Parts and services revenue |
|
33,149 |
|
|
29,799 |
|
|
126,706 |
|
|
101,753 |
|
|
31,867 |
|
Total revenue |
|
37,549 |
|
|
34,308 |
|
|
141,637 |
|
|
117,263 |
|
|
34,868 |
|
Cost of revenue |
|
30,470 |
|
|
22,243 |
|
|
105,185 |
|
|
86,943 |
|
|
26,187 |
|
Depreciation of rental equipment |
|
967 |
|
|
2,182 |
|
|
3,741 |
|
|
5,156 |
|
|
836 |
|
Total cost of revenue |
|
31,437 |
|
|
24,425 |
|
|
108,926 |
|
|
92,099 |
|
|
27,023 |
|
Gross profit |
$ |
6,112 |
|
$ |
9,883 |
|
$ |
32,711 |
|
$ |
25,164 |
|
$ |
7,845 |
Summary Combined Operating Metrics
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
Three Months |
|||||||||
|
(in $000s) |
2022 Actual |
|
2021 Pro Forma |
|
2022 Actual |
|
2021 Pro Forma |
|
||||||
|
Ending OEC(a) (as of period end) |
$ |
1,455,820 |
|
$ |
1,363,451 |
|
$ |
1,455,820 |
|
$ |
1,363,451 |
|
$ |
1,428,800 |
|
Average OEC on rent(b) |
$ |
1,267,600 |
|
$ |
1,151,959 |
|
$ |
1,187,950 |
|
$ |
1,097,200 |
|
$ |
1,182,500 |
|
Fleet utilization(c) |
|
86.3 % |
|
|
83.7 % |
|
|
83.9 % |
|
|
81.2 % |
|
|
83.8 % |
|
OEC on rent yield(d) |
|
39.5 % |
|
|
39.4 % |
|
|
39.1 % |
|
|
38.0 % |
|
|
38.5 % |
|
Sales order backlog(e) (as of period end) |
$ |
754,142 |
|
$ |
411,636 |
|
$ |
754,142 |
|
$ |
411,636 |
|
$ |
709,180 |
|
(a) |
Ending OEC — original equipment cost (“OEC”) is the original equipment cost of units at a given point in time. |
|
(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 12-month 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 period 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
Total revenue in 2022 was characterized by strong year-over-year customer demand for equipment sales, rental equipment and for parts sales and service, with full-year revenue increasing 34.8%, including the full year impact of our business combination, to $1,573.1 million as compared to full-year revenue in 2021 of $1,167.2 million. Total revenue in 2022 increased 6.0% compared to 2021 pro forma revenue of $1,483.6 million. In the fourth quarter of 2022, total revenue was $486.7 million, an increase of 36.6% from the fourth quarter of 2021. Equipment sales increased 53.3% in the fourth quarter of 2022 to $325.7 million, compared to $212.5 million in the fourth quarter of 2021, as an improvement in supply chain challenges allowed for greater order fulfillments. Full-year 2022 equipment sales revenue improved 41.3%, including the full year impact of our business combination, to $982.3 million, compared to full-year 2021 in the equipment sales revenue of $695.3 million. Full-year equipment sales revenue improved 4.4% compared to 2021 pro forma equipment sales revenue of $941.3 million. Fourth quarter 2022 rental revenue increased 12.0% to $127.8 million, compared to $114.1 million in the fourth quarter of 2021, reflecting our continued expansion of our rental fleet, higher utilization and pricing gains. Full-year 2022 rental revenue improved 25.4%, including the full year impact of our business combination, to $464.0 million, compared to full-year 2021 in the rental revenue of $370.1 million. Full-year rental revenue improved 10.0% compared to 2021 pro forma revenue of $422.0 million. Parts sales and service revenue increased 11.1% in the fourth quarter of 2022 to $33.1 million, compared to $29.8 million in the fourth quarter of 2021. Full-year 2022 parts sales and service revenue improved 24.5%, including the full year impact of our business combination, to $126.7 million, compared to full-year 2021 parts sales and service revenue of $101.8 million. Full-year 2022 parts sales and service revenue improved 5.3% compared to 2021 pro forma revenue of $120.3 million.
In our ERS segment, rental revenue in the fourth quarter of 2022 was $123.4 million compared to $109.6 million in the fourth quarter of 2021, a 12.6% increase. Fleet utilization continued to increase, coming in at 86.3% compared to 83.7% in the fourth quarter of 2021. Gross profit in the segment in the fourth quarter of 2022 and 2021 was $77.8 million and $44.6 million, respectively, representing strong growth over the prior year period from both rentals and sales. Gross profit in the segment, excluding $39.8 million and $43.8 million of rental equipment depreciation in the fourth quarter of 2022 and 2021, respectively, was $117.7 million in the fourth quarter of 2022, compared to $88.4 million in the fourth quarter of 2021, representing strong growth over the prior year period from both rentals and sales. Gross profit from rentals, which excludes depreciation of rental equipment, improved to $96.7 million in the fourth quarter of 2022 compared to $82.7 million in the fourth quarter of 2021.
Revenue in our TES segment increased 39.6%, to $247.3 million in the fourth quarter of 2022, from $177.2 million in the fourth quarter of 2021, as an improvement in supply chain challenges allowed for greater order fulfillments. Gross profit improved by 89.7% to $44.4 million in the fourth quarter of 2022 compared to $23.4 million in the fourth quarter of 2021. In the fourth quarter, TES continued to see strength in product demand as sales order backlog grew by 6.3% to $754.1 million compared to the end of the third quarter of 2022, and is up 83.2% from the fourth quarter of 2021. On a sequential basis, supply chain headwinds lessened, with new equipment sales revenue increasing 42.3% in the fourth quarter of 2022 compared to the third quarter of 2022.
APS segment revenue experienced an increase of $3.2 million, or 9.3%, in the fourth quarter of 2022, to $37.5 million, as compared to $34.3 million in the fourth quarter of 2021. Growth in demand for parts, tools and accessories (“PTA”) sales was offset by reduced tools and accessories rentals in the PTA division. Gross profit margin in the segment was negatively impacted by higher inventory costs due to shifts in product mix.
Net income was $30.9 million in the fourth quarter of 2022 compared to a net loss of $3.7 million for the fourth quarter of 2021. The improvement in net income is the result of gross profit expansion, offset by higher selling costs and interest expense on variable-rate debt and variable-rate floorplan liabilities.
Adjusted EBITDA for the fourth quarter of 2022 was $124.5 million, compared to $95.6 million for the fourth quarter of 2021. The increase in Adjusted EBITDA was largely driven by growth in rental demand and in new equipment sales, both of which contributed to margin expansion.
As of December 31, 2022, CTOS had cash and cash equivalents of $14.4 million, current and long-term debt of $1,361.7 million (net of deferred financing fees of $27.7 million), and current and long-term finance lease obligations of $5.0 million. Our net debt (non-GAAP measure as defined below) was $1,380.0 million as of December 31, 2022. Our net leverage ratio (non-GAAP measure), which is net debt divided by Adjusted EBITDA, was 3.5x as of December 31, 2022. Availability under the senior secured credit facility was $309.4 million as of December 31, 2022. For the twelve months ended December 31, 2022, we added net OEC of $92.4 million to our rental fleet. During the three months ended December 31, 2022, CTOS purchased approximately $8.0 million of its common stock under the previously announced stock repurchase program.
2023 Outlook
We are providing our full-year revenue and Adjusted EBITDA guidance for 2023 at this time. We believe ERS will continue to benefit from strong demand from our rental customers as well as for purchases of rental fleet units, particularly older equipment, in 2023. We also expect to further grow our rental fleet (based on net OEC) by mid- to high-single digits. Regarding TES, supply chain improvements, improved inventory levels exiting 2022, and record backlog levels should improve our ability to produce and deliver more units in 2023. “Our FY23 outlook reflects the ongoing strength of our end markets and the continued focus by our teams to profitably grow our business. The outlook also reflects the moderated risks associated with some continued supply chain challenges, which we expect could persist through the fiscal year,” said Ryan McMonagle, President and Chief Operating Officer of CTOS.
|
2023 Consolidated Outlook |
|
|
|
|
Revenue |
$1,610 million |
— |
$1,730 million |
|
Adjusted EBITDA1 |
$415 million |
— |
$435 million |
|
|
|
|
|
|
2023 Revenue Outlook by Segment |
|
|
|
|
ERS |
$665 million |
— |
$705 million |
|
TES |
$800 million |
— |
$870 million |
|
APS |
$145 million |
— |
$155 million |
1 – CTOS is not able to 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, income tax expense and changes in fair value of derivative financial instruments. Adjusted EBITDA should not be used to predict net income as the difference between the two measures is variable.
CONFERENCE CALL INFORMATION
The Company has scheduled a conference call at 5:00 P.M. Eastern Time on March 14, 2023, to discuss its fourth quarter 2022 financial results. A webcast will be publicly available at: investors.customtruck.com. To listen by phone, please dial 1-877-425-9470 or 1-201-389-0878. A replay of the call will be available until midnight, Tuesday, March 21, 2023, by dialing 1-844-512-2921 or 1‑412‑317-6671 and entering passcode 13736182.
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 more than 10,000 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 investors.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,” “plans,” “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; 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 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; 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 customer’s 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; material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements; 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; the phase-out of the London Interbank Offered Rate (“LIBOR”) and uncertainty as to its replacement; disruptions in our information technology systems or a compromise of our system security, limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, and 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; 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.
Contacts
INVESTOR CONTACT
Brian Perman, Vice President, Investor Relations
(844) 403-6138
investors@customtruck.com
