Custom Truck One Source(CTOS) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2021 was $375 million, representing a 27% increase compared to the prior year, while adjusted EBITDA excluding certain charges was $79 million, up 23% year-over-year [51][52] - The reported net loss for the quarter was $129 million, which included $62 million of charges related to extinguishment of debt and $25 million of transaction-related costs [51][54] - Adjusted gross margin for the quarter was 29%, down from 33% in the combined Q2 last year, primarily due to a change in revenue mix [53] Business Line Data and Key Metrics Changes - Truck and Equipment Sales (TES) segment revenue increased by 56% in Q2, with backlog growing by 169% year-over-year [44][45] - Equipment Rental Solutions (ERS) rental revenue excluding asset sales was up 3% versus Q2 2020, with utilization at 81%, a 10 percentage point increase from last year [38][41] - Aftermarket Parts and Service (APS) revenue was $32.3 million, down from $34.6 million the previous year, attributed to increased repair and maintenance activity [46] Market Data and Key Metrics Changes - Transmission and Distribution (T&D) accounted for 50% of combined revenues year-to-date and 78% of rental revenues, driven by demand for renewable energy and aging infrastructure [17][22] - Telecom, particularly 5G, is expected to grow, although it currently represents only 6% of revenue [19] - Infrastructure, including road and bridge maintenance, accounted for 26% of combined year-to-date revenue and remains strong [21] Company Strategy and Development Direction - The company focuses on resilient end markets with strong growth potential, leveraging a one-stop shop model to maximize customer share of wallet [11][12] - Plans to expand market presence through new locations and acquisitions over the next three years [32][33] - Integration of Custom Truck and Nesco is progressing well, with identified cost synergies exceeding initial targets [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand across all end markets, despite supply chain challenges [62][82] - The company anticipates continued growth in the second half of the year, with a revenue forecast of $1.5 billion to $1.55 billion for FY 2021 [58] - The potential benefits from the $1 trillion infrastructure bill are expected to materialize over time, with a positive long-term outlook [22][76] Other Important Information - The company has a strong balance sheet and cash flow, allowing for investments in capital and growth opportunities [14] - The integration efforts have identified more than $55 million in annual cost synergies, ahead of the original $50 million target [35] Q&A Session Summary Question: What did you see in rental from Q1 to Q2? - Management noted strong demand across all industries, particularly in utility and distribution, with high utilization rates [62] Question: What type of contribution do you expect in the back half of the year? - Management expects double-digit growth in sales for the second half, tempered by supply chain constraints [64] Question: Can you elaborate on the deficiencies in Aftermarket Parts and Service? - Management is reconfiguring the sales organization and improving operational efficiencies to enhance performance in this segment [66] Question: What are the drivers behind the increased synergy outlook? - Synergies are coming from SG&A efficiencies, service and production optimization, and procurement opportunities [70] Question: When do you expect to see benefits from the infrastructure bill? - Management anticipates that benefits will materialize in the second quarter of next year, with ongoing demand already in place [76][78]