Custom Truck One Source(CTOS) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q4 2023 revenue of $522 million, a 7$1.865 billion, up 19% year-over-year [50][56] - Net income for Q4 was over $16 million, marking the fifth consecutive quarter of positive net income, with a total of$51 million for 2023, reflecting a 30% increase from 2022 [39][56] - Adjusted EBITDA for Q4 was $118 million, with a total of$427 million for 2023, representing a 9% increase compared to the previous year [56] Business Line Data and Key Metrics Changes - The TES segment achieved 21% revenue growth in Q4 and 29% for the full year, with gross margin improvement of 150 basis points [31][42] - The ERS segment experienced 10% growth for the full year, ending with $726 million in revenue, while adjusted gross profit for ERS was$409 million for 2023, up 3% from 2022 [40][56] - The APS business posted revenue of $38 million in Q4 and$149 million for the full year, a 5% increase compared to 2022 [62] Market Data and Key Metrics Changes - Approximately 60% of revenue comes from the utility end market, driven by electricity load growth in the U.S. due to data center development and electrification trends [32] - TES backlog ended the quarter at just under $690 million, down from a peak of over 12 months in early 2023, indicating a normalization trend [61] - Average utilization of the rental fleet was just under 78$100 million in levered free cash flow in 2024 [14][8] - The company aims to achieve a net leverage ratio of less than 3x by the end of the fiscal year, focusing on profitable growth [14][63] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are near-term headwinds in utility end markets due to supply chain issues and project timing, long-term demand remains strong [45][74] - The company anticipates continued growth in 2024, projecting total revenue between $2 billion and$2.18 billion, with adjusted EBITDA in the range of $440 million to$470 million [16][55] - Management expressed confidence in the ongoing demand for infrastructure projects, particularly as federal infrastructure investment begins to flow [51][52] Other Important Information - The company has repurchased approximately 49.5 million of its stock since initiating the stock repurchase program in Q3 2022 [44] - The company expects to continue investing in its rental fleet in 2024, with a focus on mid-single-digit growth in net OEC [76] Q&A Session Summary Question: What are the expectations for TES backlog? - Management indicated that while backlog has ticked down due to normalizing supply chains, they expect good order volume to continue, though backlog may decrease further [10][11] Question: How is the company approaching CapEx for 2024? - The company plans to maintain gross CapEx around 400 million, with expectations for mid-single-digit growth in net OEC [11][12] Question: What are the drivers behind the supply chain delays? - Management identified regulatory approvals, supply chain issues, and funding costs as key factors contributing to delays in transmission projects [73][74]