Custom Truck One Source(US:CTOS)2021-05-13 01:17Financial Data and Key Metrics Changes - Nesco's total revenue for Q1 2021 was $78.3 million, down from $81.7 million in Q1 2020, reflecting a decline of approximately 3.9% [24] - Adjusted EBITDA decreased by 14.1% to $27.5 million, with a margin contraction of 400 basis points [24] - Net loss for the quarter was $27.9 million, compared to a loss of $16 million in Q1 2020, which included $10.4 million in transaction-related expenses and a noncash charge of $7.6 million [25] - Equipment rental and sales revenue declined by 1.6% to $62.7 million, while whole goods sales increased by 7.9% to $18 million [26] Business Line Data and Key Metrics Changes - Equipment rental revenue decreased by 4.9% to $44.7 million, with OEC on rent remaining consistent with 2020 levels but yield down due to a mix shift [26] - The parts, tools, and accessories business saw a revenue decline of 13.5% to $15.6 million, driven by a decrease in the truck utilities upfitting business [27] - Gross profit decreased by 5.5% to $20.2 million, primarily due to deferred repair and maintenance costs from the COVID slowdown [28] Market Data and Key Metrics Changes - Rental demand was strong, with both legacy Custom Truck and legacy Nesco fleets achieving over 78% utilization during Q1, with further gains expected [15] - Customers are experiencing pent-up demand and are increasingly prepared to operate safely, leading to increased equipment rentals and unit sales [15][16] - Significant capital projects in transmission and distribution have been announced, indicating strong market fundamentals [17] Company Strategy and Development Direction - The merger with Nesco is seen as a transformational opportunity, creating a leading provider of specialty equipment [4][5] - The company aims to achieve $50 million in synergies by the end of 2022, with $20 million to $25 million expected on a run rate basis by the end of 2021 [19] - Capital allocation will focus on targeted investments in the fleet while maintaining a balance with debt reduction [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery phase post-COVID, driven by pent-up demand and potential infrastructure legislation [5][16] - The company is well-positioned to capitalize on robust tailwinds in core markets, with strong customer backlogs and demand for rental equipment [13][16] - Management highlighted the importance of adapting to new conditions and maintaining operational capabilities during the pandemic [22] Other Important Information - The debt refinancing concurrent with the acquisition resulted in a stronger balance sheet, reducing the weighted interest rate on debt from 7.7% to 4.4% [30] - The integration of Custom Truck and Nesco is progressing smoothly, with plans to unify systems and operations [41] Q&A Session Summary Question: Can you elaborate on the end markets and trends moving into Q2? - Management noted strong demand across all end markets, including transmission, distribution, telecom, and rail, with utilization rates improving [34][36] Question: What are the expectations for rental rates going forward? - Management indicated that rental rates have been increasing month-on-month due to strong demand, and this trend is expected to continue [42] Question: Can you provide details on CapEx goals over the next two years? - Management outlined a CapEx range of $50 million to $70 million for core rental, with potential for increased investment if demand remains strong [43][44]