Custom Truck One Source(CTOS) - 2023 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2023, total revenue for the Equipment Rental Solutions (ERS) segment increased to $990,425,000 from$770,195,000 in 2022, representing a growth of 28.5%[201]. - Gross profit for the ERS segment rose to $172,786,000 in 2023, up from$122,510,000 in 2022, reflecting a significant increase driven by higher rental revenues and equipment sales[200]. - Total revenue for the Aftermarket Parts and Services (APS) segment also increased in 2023, driven by growth in demand for parts, tools, and accessories sales, as well as increased rentals in the Parts, Tools, and Accessories division[203]. - Adjusted EBITDA for the year ended December 31, 2023, was $426,930,000, an increase of 8.6$392,978,000 in 2022[212]. - Net income for the year ended December 31, 2023, was $50,712,000, representing a 30.3$38,905,000 in 2022[212]. - Total revenue for 2023 reached $1,865,100,000, a 18.5$1,573,086,000 in 2022[296]. - Rental revenue increased to $478,910,000 in 2023, up from$464,039,000 in 2022, reflecting a growth of 1.9%[296]. - Equipment sales surged to $1,253,453,000, a 27.6$982,341,000 in 2022[296]. - Gross profit for 2023 was $454,260,000, representing a 18.4$383,748,000 in 2022[296]. - Operating income improved to $170,948,000 in 2023, compared to$103,308,000 in 2022, marking a 65.3% increase[296]. - Net income for 2023 was $50,712,000, up from$38,905,000 in 2022, indicating a growth of 30.1%[296]. Cash Flow and Liquidity - Net cash used in operating activities was $30.9 million for the year ended December 31, 2023, compared to$45.968 million provided in 2022[218]. - Net cash used in investing activities was $176.6 million for the year ended December 31, 2023, a decrease from$218.9 million in 2022[248]. - Net cash provided by financing activities increased to $202.9 million in 2023 from$153.9 million in 2022, primarily due to an increase in borrowings under revolving credit facilities[249]. - As of December 31, 2023, the company had cash and cash equivalents of $10.3 million, down from$14.4 million in 2022[237]. - The company reported a Net Leverage Ratio of 3.53 as of December 31, 2023, slightly up from 3.51 in 2022[214]. - The company has floor plan payables of $662.3 million as of December 31, 2023, which are collateralized by inventory[216]. - Future contractual cash requirements include minimum operating lease obligations of$8.8 million and debt principal and interest payments totaling $109.8 million[215]. - The company’s net debt increased to$1.507 billion as of December 31, 2023, from $1.380 billion in 2022[214]. - The total cash requirements for notes payable and loans are$8.0 million short-term and $1.509 billion long-term as of December 31, 2023[245]. Market and Growth Opportunities - The company estimates the addressable market to be approximately$65 billion, with segments including $20.4 billion in new sales,$23.2 billion in aftermarket parts and services, and $21.4 billion in rental and used sales[205]. - The company plans to capitalize on favorable trends across a large addressable market, particularly in fragmented industries, to increase market share[205]. - The company aims to increase penetration of aftermarket parts and services through expanded product offerings and enhanced service capabilities[206]. - The company operates in three reporting segments: Equipment Rental Solutions, Truck and Equipment Sales, and Aftermarket Parts and Services[344]. Assets and Liabilities - As of December 31, 2023, the company's total assets amounted to$3,367.8 million, an increase from $2,938.2 million in 2022, reflecting a growth of approximately 14.6$704.0 million, with $498.8 million assigned to the Equipment Rental Solutions (ERS) reporting unit and$37.9 million to the Aftermarket Parts and Services (APS) reporting unit[269]. - The company's current assets totaled $1,265.9 million, significantly up from$868.2 million in the previous year, indicating a growth of approximately 45.7%[273]. - The total long-term liabilities increased to $1,553.2 million from$1,414.9 million, reflecting a rise of about 9.8%[273]. - The company's accounts receivable, net, rose to $215.1 million from$193.1 million, marking an increase of approximately 11.4%[273]. - The rental equipment, net, was valued at $916.7 million, slightly up from$883.7 million, indicating a growth of about 3.7%[273]. Interest and Debt Management - The company reported a 24.2% increase in interest expense, rising to $94,694,000 in 2023 from$76,265,000 in 2022[212]. - Interest paid increased to $122.868 million in 2023 from$81.177 million in 2022, representing a 51% increase[300]. - The company has $1,214.7 million in aggregate principal amount of variable rate debt as of December 31, 2023, with interest rate changes impacting future net income and cash flows[383]. - Each one-eighth percentage point increase or decrease in applicable interest rates would change the company's interest expense by approximately$1.5 million on an annual basis[383]. Operational Insights - The company’s operating model and variable cost structure enable it to sustain high margins and strong cash flow generation throughout various economic cycles[198]. - The company is engaged in providing a range of services and products through rentals and sales of specialty equipment, aftermarket parts, and related services[371]. - The rental fleet comprised more than 10,300 units as of December 31, 2023, supporting diverse customer needs across multiple end-markets[304]. - The rental fleet comprised more than 10,300 units with an average unit age of approximately 3.5 years[332]. Regulatory and Compliance - The company is subject to complex laws and regulations, including environmental and safety regulations that can adversely affect costs[330]. - The company established a Code of Conduct to ensure employees understand the commitment to operate honestly and ethically[365]. Social Responsibility - In 2023, the company provided 20 paid internship opportunities to students from various vocational high school and university programs[364].