Custom Truck One Source, Inc. Reports Second Quarter 2024 Results and Updates Full-Year Guidance

KANSAS CITY, Mo.–(BUSINESS WIRE)–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 and six months ended June 30, 2024.

CTOS Second-Quarter Highlights

• Total revenue of $423.0 million, a decrease of $33.8 million, or 7.4%, compared to $456.8 million for the second quarter of 2023 primarily due to fewer rental asset sales and lower rental demand from the utility end market
• Gross profit of $89.3 million, a decline of $21.4 million, or 19.3%, compared to $110.6 million for the second quarter of 2023
• Adjusted Gross Profit of $133.9 million, a decrease of $20.4 million, or 13.2%, compared to $154.2 million for the second quarter of 2023
• Net loss of $24.5 million, compared to net income of $11.6 million in the second quarter of 2023
• Adjusted EBITDA of $80.1 million, a decrease of $23.1 million, or 22.4%, compared to $103.2 million in the second quarter of 2023

“Despite a sequential decline in net income, we delivered sequential Adjusted EBITDA growth in the second quarter compared to the first quarter of 2024. While we are not satisfied with our financial results for the first half of the year, we believe CTOS is well-positioned to capitalize on the secular tailwinds we see in the end markets we serve, driven by AI and data center investment, electrification, and utility grid upgrades. As we have discussed on our recent earnings calls, we continue to be impacted by a slow-down in work in our core T&D markets, which primarily impacts our ERS segment. We believe that this decline is temporary, and we are already seeing signs of improvement in the third quarter. We anticipate a return to growth in 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. Segment sales are up 6% for the first half of 2024, on top of the nearly 30% growth we experienced in fiscal 2023. Our sales backlog has returned to a more normalized level of just under six months, as OEM production and overall supply chain continue to improve,” McMonagle added.

Summary Actual Financial Results

	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended March 31, 2024
(in $000s)		2024				2023			2024				2023
Rental revenue	$	102,997			$	122,169		$	209,168			$	240,457		$	106,171
Equipment sales		285,633				302,117			558,235				603,407			272,602
Parts sales and services		34,383				32,544			66,917				65,129			32,534
Total revenue		423,013				456,830			834,320				908,993			411,307
Gross Profit	$	89,267			$	110,619		$	179,976			$	220,280		$	90,709
Adjusted Gross Profit1	$	133,852			$	154,235		$	268,305			$	304,226		$	134,453
Net Income (Loss)	$	(24,478	)		$	11,610		$	(38,813	)		$	25,410		$	(14,335	)
Adjusted EBITDA1	$	80,056			$	103,183		$	157,432			$	208,383		$	77,376

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 June 30,						Six Months Ended June 30,						Three Months Ended March 31, 2024
(in $000s)		2024			2023			2024			2023
Rental revenue	$	100,699		$	117,832		$	203,987		$	231,616		$	103,288
Equipment sales		37,712			50,694			70,452			142,830			32,740
Total revenue		138,411			168,526			274,439			374,446			136,028
Cost of rental revenue		29,281			31,341			59,081			60,401			29,800
Cost of equipment sales		25,792			39,802			49,890			110,883			24,098
Depreciation of rental equipment		43,581			42,805			86,278			82,317			42,697
Total cost of revenue		98,654			113,948			195,249			253,601			96,595
Gross profit	$	39,757		$	54,578		$	79,190		$	120,845		$	39,433

Truck and Equipment Sales

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31, 2024
(in $000s)		2024			2023			2024			2023
Equipment sales	$	247,921		$	251,423		$	487,783		$	460,577		$	239,862
Cost of equipment sales		205,526			205,464			402,228			380,508			196,702
Gross profit	$	42,395		$	45,959		$	85,555		$	80,069		$	43,160

Aftermarket Parts and Services

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31, 2024
(in $000s)		2024			2023			2024			2023
Rental revenue	$	2,298		$	4,337		$	5,181		$	8,841		$	2,883
Parts and services revenue		34,383			32,544			66,917			65,129			32,534
Total revenue		36,681			36,881			72,098			73,970			35,417
Cost of revenue		28,562			25,988			54,816			52,975			26,254
Depreciation of rental equipment		1,004			811			2,051			1,629			1,047
Total cost of revenue		29,566			26,799			56,867			54,604			27,301
Gross profit	$	7,115		$	10,082		$	15,231		$	19,366		$	8,116

Summary Combined Operating Metrics

	Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended March 31, 2024
(in $000s)		2024				2023				2024				2023
Ending OEC(a) (as of period end)	$	1,457,955			$	1,467,779			$	1,457,955			$	1,467,779			$	1,452,856
Average OEC on rent(b)	$	1,044,683			$	1,203,855			$	1,055,189			$	1,209,111			$	1,065,695
Fleet utilization(c)		71.7	%			81.7	%			72.4	%			82.6	%			73.3	%
OEC on rent yield(d)		40.0	%			40.1	%			40.3	%			39.8	%			40.5	%
Sales order backlog(e) (as of period end)	$	478,244			$	863,757			$	478,244			$	863,757			$	537,292

(a)		Ending OEC — Ending 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 second quarter of 2024, total revenue was $423.0 million, a decrease of 7.4% from the second quarter of 2023. Second quarter 2024 rental revenue decreased 15.7% to $103.0 million, compared to $122.2 million in the second quarter of 2023, due to lower utilization and average OEC on rent than we anticipated. Equipment sales decreased 5.5% in the second quarter of 2024 to $285.6 million, compared to $302.1 million in the second quarter of 2023, primarily driven by lower rental asset sales of used equipment. The Company continues to be impacted by end-market supply chain constraints, environmental, regulatory and customer financing factors affecting the timing of transmission job starts. These delays contributed to both lower than expected rental revenue and rental asset sales during this quarter.

In our ERS segment, rental revenue in the second quarter of 2024 was $100.7 million compared to $117.8 million in the second quarter of 2023, a 14.5% decrease. Fleet utilization declined to 71.7% compared to 81.7% in the second quarter of 2023. Average OEC on rent decreased 13% year-over-year, primarily as a result of the lower utilization in the quarter. Equipment sales decreased 25.6% in the second quarter of 2024 to $37.7 million compared to $50.7 million in the second quarter of 2023, due to market demand softness as a result of the current utility end market environment. ERS gross profit in the second quarter of 2024 and 2023 was $39.8 million and $54.6 million, respectively. Adjusted Gross Profit in the segment was $83.3 million in the second quarter of 2024, compared to $97.4 million in the second quarter of 2023. Adjusted gross profit from rentals, which excludes depreciation of rental equipment, decreased to $71.4 million in the second quarter of 2024 compared to $86.5 million in the second quarter of 2023.

Revenue in our TES segment decreased 1.4% to $247.9 million in the second quarter of 2024, from $251.4 million in the second quarter of 2023, as normalized supply chains have reduced product lead times and decreased the need for our customers to reserve equipment far in advance. Gross profit declined by 7.8% to $42.4 million in the second quarter of 2024 compared to $46.0 million in the second quarter of 2023. TES saw a reduction in backlog of 45% to $478.2 million compared to the second quarter of 2023, primarily as a result of utility market softness.

APS segment revenue remained flat in the second quarter of 2024 at $36.7 million, compared to $36.9 million in the second quarter of 2023. Gross profit margin decreased to 19.4% in the second quarter of 2024 from 27.3% in the second quarter of 2023 due to the lower levels of tools and accessories rentals and an increase in cost of revenue due to higher costs of materials.

Net loss was $24.5 million in the second quarter of 2024, compared to net income of $11.6 million for the second quarter of 2023. The $36.1 million decrease in net income 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 second quarter of 2024 was $80.1 million, a decrease of 22.4%, compared to $103.2 million for the second 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 June 30, 2024, cash and cash equivalents was $8.1 million, Total Debt outstanding was $1,551.7 million, Net Debt was $1,543.7 million and Net Leverage Ratio was 4.11x. Availability under the senior secured credit facility was $159.5 million as of June 30, 2024, and based on our borrowing base, we have an additional $328.3 million of availability that we can potentially utilize by upsizing our existing facility. For the three months ended June 30, 2024, Ending OEC decreased by $5.099 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 June 30, 2024, CTOS purchased $16.7 million of its common stock.

OUTLOOK

We are updating our full-year revenue and Adjusted EBITDA^{1, 4} guidance for 2024. Our ERS segment has continued to experience near-term pressure in demand in the utility market as a result of financing, supply chain, and regulatory factors. These headwinds in our utility end markets are driving lower than anticipated OEC on rent in our core ERS segment and will likely continue for the remainder of this year. Regarding TES, supply chain improvements, healthy inventory levels, and more normalized backlog levels continue to improve our ability to produce and deliver more units in 2024, albeit at a lower growth rate than previously expected. Our customers continue to need our equipment but are choosing to delay purchase decisions influenced by both their expectation of lower interest rates to come and the uncertainty surrounding the upcoming election. While we are lowering our consolidated revenue and Adjusted EBITDA^{1, 4} guidance for the year, we continue to focus on generating positive free cash flow in 2024, but expect it to be lower than our previous target of generating more than $100 million of levered free cash flow^{2, 4}. Also, we now expect to deliver a net leverage ratio^{3, 4} that will modestly decrease from current levels 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 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	$1,800 million	—	$1,980 million
Adjusted EBITDA1, 4	$340 million	—	$375 million
2024 Revenue Outlook by Segment
ERS	$610 million	—	$640 million
TES	$1,050 million	—	$1,190 million
APS	$140 million	—	$150 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.
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 their respective most directly comparable GAAP financial measure due to the high variability and difficulty in predicting certain items that affect such GAAP measures 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 their respective most directly comparable GAAP measure as the differences between the respective measures are variable and unpredictable.

CONFERENCE CALL INFORMATION

The Company has scheduled a conference call at 5:00 p.m. ET on August 1, 2024, to discuss its second 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, August 8, 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 10,200 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 and at such time. 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 June 30,								Six Months Ended June 30,								Three Months Ended March 31, 2024
(in $000s except per share data)		2024				2023				2024				2023
Revenue
Rental revenue	$	102,997			$	122,169			$	209,168			$	240,457			$	106,171
Equipment sales		285,633				302,117				558,235				603,407				272,602
Parts sales and services		34,383				32,544				66,917				65,129				32,534
Total revenue		423,013				456,830				834,320				908,993				411,307
Cost of Revenue
Cost of rental revenue		29,295				31,981				59,120				61,880				29,825
Depreciation of rental equipment		44,585				43,616				88,329				83,946				43,744
Cost of equipment sales		231,318				245,266				452,118				491,391				220,800
Cost of parts sales and services		28,548				25,348				54,777				51,496				26,229
Total cost of revenue		333,746				346,211				654,344				688,713				320,598
Gross Profit		89,267				110,619				179,976				220,280				90,709
Operating Expenses
Selling, general and administrative expenses		55,697				58,028				113,692				115,019				57,995
Amortization		6,692				6,606				13,270				13,278				6,578
Non-rental depreciation		3,360				2,721				6,280				5,371				2,920
Transaction expenses and other		5,844				3,689				10,690				7,149				4,846
Total operating expenses		71,593				71,044				143,932				140,817				72,339
Operating Income		17,674				39,575				36,044				79,463				18,370
Other Expense
Interest expense, net		42,401				31,625				80,316				60,801				37,915
Financing and other expense (income)		(3,319	)			(5,048	)			(6,581	)			(8,999	)			(3,262	)
Total other expense		39,082				26,577				73,735				51,802				34,653
Income (Loss) Before Income Taxes		(21,408	)			12,998				(37,691	)			27,661				(16,283	)
Income Tax Expense (Benefit)		3,070				1,388				1,122				2,251				(1,948	)
Net Income (Loss)	$	(24,478	)		$	11,610			$	(38,813	)		$	25,410			$	(14,335	)
Net Income (Loss) Per Share
Basic	$	(0.10	)		$	0.05			$	(0.16	)		$	0.10			$	(0.06	)
Diluted	$	(0.10	)		$	0.05			$	(0.16	)		$	0.10			$	(0.06	)

Contacts

INVESTOR CONTACT
Brian Perman, Vice President, Investor Relations

(816) 723 – 7906

investors@customtruck.com

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