Custom Truck One Source(US:CTOS)2023-05-13 21:36Financial Data and Key Metrics Changes - Total revenue for Q1 2023 was $452 million, representing a 23% increase compared to Q1 2022 [6][16] - Adjusted gross profit was $150 million, up 16% year-over-year, resulting in an adjusted gross margin of 33.2% [6][16] - Adjusted EBITDA reached $105 million, a 15% improvement from Q1 2022 [6][16] - Net income for the quarter was $13.8 million, an increase of $17.1 million from Q1 2022 [6][16] - SG&A expenses were $57 million, or 13% of revenues, an improvement from 15% in Q1 2022 [6][16] Business Line Data and Key Metrics Changes - In the ERS segment, rental revenue was $114 million, an 8% increase from Q1 2022, with adjusted gross profit of $106 million and a gross margin of 51.4% [19][20] - TES segment revenues were $209 million, a 25% increase year-over-year, with strong backlog and inventory levels [19][20] - APS segment revenue was $37 million, up 10% compared to Q1 2022, with an adjusted gross profit margin of 27.2% [20] Market Data and Key Metrics Changes - The backlog grew by more than $100 million in Q1 2023, up 13% sequentially from Q4 2022 and 46% year-over-year [4][6] - Average OEC on rent increased by over $95 million compared to Q1 2022, with rental utilization at nearly 84%, up from 83% in Q1 2022 [19][20] Company Strategy and Development Direction - The company is focused on investing in and optimizing production capacity, including acquiring land for expansion and increasing manufacturing capabilities [17][20] - Continued investment in the rental fleet is planned, with $109 million deployed in Q1 2023 [19][20] - The company aims to maintain strong service levels while addressing supply chain issues and improving inventory levels [4][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained demand across primary end markets, including utility, telecom, rail, and infrastructure [16][20] - The company expects ERS revenue between $670 million and $710 million, TES revenue between $820 million and $890 million, and total revenue of $1.635 billion to $1.755 billion for 2023 [8][20] - Adjusted EBITDA guidance is projected to be between $420 million and $440 million [8][20] Other Important Information - The company has repurchased approximately $12 million of its stock since initiating the stock repurchase program [20] - As of March 31, the company had $285 million available under its ABL facility, with a net leverage of 3.4x, down from over 3.5x last quarter [20] Q&A Session Summary Question: What is the directional outlook on utilization? - Management indicated that utilization remains strong and typically increases in Q2 and Q3, expecting a similar trend in 2023 [21] Question: Can you provide an update on the backlog in TES? - Management noted that while supply chains are improving, backlog levels are still high, and they expect to manage it effectively [26] Question: How sensitive are margins to the sales component in the ERS segment? - Management explained that the shift in revenue mix from rental to sales impacted margins, with rental margins being significantly higher [28][29] Question: What is the expected EBITDA growth for Q2? - Management anticipates high single-digit growth in EBITDA year-over-year, with some seasonality expected [34]