Custom Truck One Source(CTOS) - 2025 Q1 - Quarterly Results

First Quarter 2025 Highlights and Overview This section provides an overview of CTOS's Q1 2025 performance, highlighting revenue growth, improved fleet utilization, and reaffirmed 2025 guidance CEO Commentary on Performance In Q1 2025, CTOS achieved year-over-year revenue growth driven by strong fundamentals in its primary end markets - Revenue growth was driven by strong fundamentals in utility, infrastructure, rail, and telecom end markets[2] - Rental fleet utilization improved to just under 78%, a significant increase compared to the same period last year[2] - Total Original Equipment Cost (OEC) reached a record $1.55 billion, expected to support 2025 growth[2] - The TES segment saw significant year-over-year net order growth, increasing the company's backlog[2] - The company reaffirmed its 2025 guidance, expressing cautious optimism despite challenges from new tariff policies[2] Financial & Operating Performance This section details the company's consolidated and segment-specific financial results, along with key operational metrics for Q1 2025 Consolidated Financial Results For the first quarter of 2025, Custom Truck One Source reported total revenue of $422.2 million, a 2.7% increase year-over-year, but recorded a net loss of $17.8 million Q1 2025 Consolidated Financial Results (in $ millions) | | 2025 | 2024 | | :--- | :--- | :--- | | Total revenue | $422.2 | $411.3 | | Gross Profit | $85.5 | $90.7 | | Adjusted Gross Profit | $135.6 | $134.5 | | Net Income (Loss) | $(17.8) | $(14.3) | | Adjusted EBITDA | $73.4 | $77.4 | - Year-over-year changes for Q1 2025: Total revenue increased by 2.7%, gross profit decreased by 5.7%, net loss increased by $3.5 million, and Adjusted EBITDA decreased by $4.0 million[5] Segment Performance The company's three segments, ERS, TES, and APS, showed varied performance in Q1 2025, with ERS revenue growing 13.5% while TES revenue slightly decreased - The company's operations are divided into three segments: Equipment Rental Solutions (ERS), Truck and Equipment Sales (TES), and Aftermarket Parts and Services (APS)[4] Equipment Rental Solutions (ERS) The ERS segment's total revenue increased by 13.5% year-over-year to $154.3 million, driven by growth in rental revenue and used equipment sales ERS Segment Financials (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Rental revenue | $113.0 | $103.3 | | Equipment sales | $41.4 | $32.7 | | Total revenue | $154.3 | $136.0 | | Gross profit | $43.6 | $39.4 | | Adjusted Gross Profit | $93.0 | $82.1 | Truck and Equipment Sales (TES) The TES segment reported a 3.1% decrease in revenue to $232.5 million for Q1 2025, with gross profit declining by 18.9% TES Segment Financials (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Equipment sales | $232.5 | $239.9 | | Gross profit | $35.0 | $43.2 | Aftermarket Parts and Services (APS) The APS segment's revenue remained nearly flat at $35.4 million, while gross profit decreased to $6.9 million due to higher material costs APS Segment Financials (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $35.4 | $35.4 | | Gross profit | $6.9 | $8.1 | Key Operating Metrics Key operating metrics showed positive trends in fleet growth and utilization, with Ending OEC reaching $1.55 billion and fleet utilization improving to 77.7% Summary Combined Operating Metrics (in $ millions, except percentages) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Ending OEC | $1,548.2 | $1,452.9 | | Average OEC on rent | $1,202.3 | $1,065.7 | | Fleet utilization | 77.7% | 73.3% | | OEC on rent yield | 38.5% | 40.5% | | Sales order backlog | $420.1 | $537.3 | Management Commentary Management discusses the drivers behind Q1 2025 financial performance, including rental revenue growth, TES segment decline, increased net loss, and current leverage ratio - Consolidated rental revenue increased 9.5% YoY due to higher OEC on rent and utilization[13] - ERS segment rental revenue grew 9.4% YoY, with fleet utilization increasing to 77.7% from 73.3%[14] - TES segment revenue decreased 3.1% YoY due to pricing pressures from the high-interest rate environment and equipment mix[15] - The increase in net loss was primarily due to decreased gross profit and higher interest expense on variable-rate debt[16] - As of March 31, 2025, Total Debt was $1,618.0 million and the Net Leverage Ratio was 4.80x[18] - On January 30, 2025, the company repurchased 8,143,635 shares of its common stock from affiliates of Energy Capital Partners for $32.6 million[19] 2025 Outlook The company reaffirmed its full-year 2025 guidance, anticipating continued growth, increased rental fleet, and a reduction in net leverage ratio 2025 Consolidated Outlook (in $ millions) | | Guidance Range | | :--- | :--- | | Revenue | $1,970 — $2,060 | | Adjusted EBITDA | $370 — $390 | 2025 Revenue Outlook by Segment (in $ millions) | Segment | Guidance Range | | :--- | :--- | | ERS | $660 — $690 | | TES | $1,160 — $1,210 | | APS | $150 — $160 | - The company expects to generate $50 million to $100 million of levered free cash flow in 2025[20] - A meaningful reduction in the net leverage ratio is targeted by the end of the fiscal year[20] Financial Statements This section presents the company's primary financial statements, including income, balance sheet, and cash flow statements for the period Condensed Consolidated Statements of Operations The company reported a net loss of $17.8 million for Q1 2025, despite increased total revenues, primarily due to higher interest expense Statement of Operations Highlights (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $422.2 | $411.3 | | Gross Profit | $85.5 | $90.7 | | Operating Income | $12.4 | $18.4 | | Interest expense, net | $38.9 | $37.9 | | Net Income (Loss) | $(17.8) | $(14.3) | | Diluted EPS | $(0.08) | $(0.06) | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $3.54 billion, with inventory and long-term debt rising, while total stockholders' equity decreased Balance Sheet Highlights (in $ millions) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,542.9 | $3,502.0 | | Inventory | $1,075.6 | $1,049.3 | | Rental equipment, net | $1,033.8 | $1,001.7 | | Total Liabilities | $2,729.5 | $2,640.7 | | Long-term debt, net | $1,593.2 | $1,519.9 | | Total stockholders' equity | $813.4 | $861.3 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $55.6 million, while investing activities used more cash, partly offset by financing activities Cash Flow Highlights (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash flow from operating activities | $55.6 | $(14.4) | | Net cash flow for investing activities | $(71.3) | $(33.4) | | Net cash flow from financing activities | $17.2 | $45.5 | | Net Change in Cash and Cash Equivalents | $1.6 | $(2.3) | Non-GAAP Measures and Reconciliations This section provides reconciliations of non-GAAP financial measures such as Adjusted EBITDA, Adjusted Gross Profit, Net Debt, and Net Leverage Ratio Adjusted EBITDA Reconciliation Adjusted EBITDA for Q1 2025 was $73.4 million, a decrease from the prior year, reconciled from net loss by adding back depreciation, interest, and other adjustments Adjusted EBITDA Reconciliation (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (loss) | $(17.8) | $(14.3) | | Depreciation and amortization | $62.5 | $56.2 | | Interest expense | $25.6 | $25.0 | | Other Adjustments | $10.8 | $9.5 | | Adjusted EBITDA | $73.4 | $77.4 | Adjusted Gross Profit Reconciliation Total Adjusted Gross Profit slightly increased to $135.6 million in Q1 2025, with the ERS segment showing improved underlying profitability Total Adjusted Gross Profit Reconciliation (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Gross Profit | $85.5 | $90.7 | | Add: depreciation of rental equipment | $50.1 | $43.7 | | Adjusted Gross Profit | $135.6 | $134.5 | ERS Segment Adjusted Gross Profit (in $ millions) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Gross profit | $43.6 | $39.4 | | Add: depreciation of rental equipment | $49.3 | $42.7 | | Adjusted Gross Profit | $93.0 | $82.1 | Net Debt and Net Leverage Ratio Reconciliation Net Debt increased to $1.61 billion as of March 31, 2025, resulting in a higher Net Leverage Ratio of 4.80x compared to the previous quarter Net Debt Reconciliation (in $ millions) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Debt (Current + Long-term) | $1,599.1 | $1,527.7 | | Deferred financing fees | $18.9 | $19.9 | | Less: cash and cash equivalents | $(5.4) | $(3.8) | | Net Debt | $1,612.6 | $1,543.8 | Net Leverage Ratio Reconciliation | | Twelve Months Ended March 31, 2025 | Twelve Months Ended December 31, 2024 | | :--- | :--- | :--- | | Net Debt (as of period end) | $1,612.6 | $1,543.8 | | LTM Adjusted EBITDA | $335.7 | $339.7 | | Net Leverage Ratio | 4.80x | 4.55x |