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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Custom Truck One Source Inc | NYSE:CTOS | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4.80 | 0 | 11:32:35 |
From Mar 2023 to Mar 2025
Custom Truck One Source, Inc. (NYSE: CTOS), a leading provider of specialty equipment to the electric utility, telecom, rail, and other infrastructure-related end markets, today reported financial results for the fourth quarter and full year ended December 31, 2023.
CTOS Fourth-Quarter and Full-Year Highlights
“Our fourth quarter results concluded a strong year despite some end-market pressures in the second half of the year. In 2023, our TES segment realized 29% revenue growth compared to 2022. In addition, our ERS segment realized 10% year-over-year revenue growth. Our entire team was instrumental in achieving record vehicle production this year, which helped drive the performance in both segments,” said Ryan McMonagle, Chief Executive Officer of CTOS. “As we head into 2024, we continue to see strong demand from customers across all our primary end-markets and in all three of our business segments. Our outlook for this year makes it clear that we expect 2024 to be another year of growth for Custom Truck. A strong focus on capital allocation this year will allow us to pursue our growth strategy and to deliver free cash flow generation and continued deleveraging, all of which will create long-term value for shareholders,” McMonagle added.
Summary Financial Results
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Rental revenue
$
120,244
$
127,829
$
478,910
$
464,039
$
118,209
Equipment sales
366,967
325,746
1,253,453
982,341
283,079
Parts sales and services
34,543
33,149
132,737
126,706
33,065
Total revenue
521,754
486,724
1,865,100
1,573,086
434,353
Gross profit
$
126,824
$
128,325
$
454,260
$
383,748
$
107,156
Net income
$
16,122
$
30,937
$
50,712
$
38,905
$
9,180
Adjusted EBITDA1
$
118,361
$
124,484
$
426,930
$
392,978
$
100,185
1
Adjusted EBITDA is a non-GAAP financial measure. Further information and reconciliations for our non-GAAP measures to the most directly comparable financial measure under United States generally accepted accounting principles (“GAAP”) are included at the end of this press release.
Summary Financial Results by Segment Our results are reported for our three segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”). ERS encompasses our core rental business, inclusive of sales of rental equipment to our customers. TES encompasses our specialized truck and equipment production and sales activities. APS encompasses sales and rentals of parts, tools and other supplies to our customers, as well as our aftermarket repair service operations.
Equipment Rental Solutions
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Rental revenue
$
116,594
$
123,429
$
463,139
$
449,108
$
114,929
Equipment sales
68,023
78,472
263,028
212,146
52,175
Total revenue
184,617
201,901
726,167
661,254
167,104
Cost of rental revenue
28,222
26,735
118,236
106,598
29,613
Cost of equipment sales
49,799
57,504
198,510
158,167
37,828
Depreciation of rental equipment
43,230
39,836
167,199
167,962
41,652
Total cost of revenue
121,251
124,075
483,945
432,727
109,093
Gross profit
$
63,366
$
77,826
$
242,222
$
228,527
$
58,011
Truck and Equipment Sales
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Equipment sales
$
298,944
$
247,274
$
990,425
$
770,195
$
230,904
Cost of equipment sales
246,047
202,887
817,639
647,685
191,084
Gross profit
$
52,897
$
44,387
$
172,786
$
122,510
$
39,820
Aftermarket Parts and Services
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Rental revenue
$
3,650
$
4,400
$
15,771
$
14,931
$
3,280
Parts and services revenue
34,543
33,149
132,737
126,706
33,065
Total revenue
38,193
37,549
148,508
141,637
36,345
Cost of revenue
26,613
30,470
105,791
105,185
26,203
Depreciation of rental equipment
1,019
967
3,465
3,741
817
Total cost of revenue
27,632
31,437
109,256
108,926
27,020
Gross profit
$
10,561
$
6,112
$
39,252
$
32,711
$
9,325
Summary Combined Operating Metrics
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Ending OEC(a) (as of period end)
$
1,455,708
$
1,455,820
$
1,455,708
$
1,455,820
$
1,466,000
Average OEC on rent(b)
$
1,159,164
$
1,267,600
$
1,183,253
$
1,187,950
$
1,155,600
Fleet utilization(c)
77.6
%
86.3
%
80.4
%
83.9
%
78.9
%
OEC on rent yield(d)
41.1
%
39.5
%
40.4
%
39.1
%
40.8
%
Sales order backlog(e) (as of period end)
$
688,559
$
754,142
$
688,559
$
754,142
$
779,295
(a)
Ending OEC — original equipment cost (“OEC”) is the original equipment cost of units at the end of the measurement period.
(b)
Average OEC on rent — Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period.
(c)
Fleet utilization — total number of days the rental equipment was rented during a specified period of time divided by the total number of days available during the same period and weighted based on OEC.
(d)
OEC on rent yield (“ORY”) — a measure of return realized by our rental fleet during a period. ORY is calculated as rental revenue (excluding freight recovery and ancillary fees) during the stated period divided by the Average OEC on rent for the same period. For period less than 12 months, ORY is adjusted to an annualized basis.
(e)
Sales order backlog — purchase orders received for customized and stock equipment. Sales order backlog should not be considered an accurate measure of future net sales.
Management Commentary Total revenue in 2023 was characterized by strong year-over-year customer demand for equipment sales, rental equipment and for parts sales and service, with full-year revenue increasing 18.6% to $1,865.1 million, as compared to full-year revenue in 2022 of $1,573.1 million. In the fourth quarter of 2023, total revenue was $521.8 million, an increase of 7.2% from the fourth quarter of 2022. Equipment sales increased 12.7% in the fourth quarter of 2023 to $367.0 million, compared to $325.7 million in the fourth quarter of 2022, reflecting record levels of production, continuing improvements in the supply chain, and our ability to replenish inventory. Full-year 2023 equipment sales revenue improved 27.6% to $1,253.5 million, compared to full-year 2022 equipment sales revenue of $982.3 million. Fourth quarter 2023 rental revenue decreased 5.9% to $120.2 million, compared to $127.8 million in the fourth quarter of 2022, due to lower utilization and a decline in average OEC on rent. Full-year 2023 rental revenue improved 3.2% to $478.9 million, compared to full-year 2022 rental revenue of $464.0 million. Parts sales and service revenue increased 4.2% in the fourth quarter of 2023 to $34.5 million, compared to $33.1 million in the fourth quarter of 2022. Full-year 2023 parts sales and service revenue improved 4.8% to $132.7 million, compared to full-year 2022 parts sales and service revenue of $126.7 million.
In our ERS segment, rental revenue in the fourth quarter of 2023 was $116.6 million compared to $123.4 million in the fourth quarter of 2022, a 5.5% decrease. Fleet utilization declined to 77.6% compared to 86.3% in the fourth quarter of 2022, due to a decline in demand in the utility market. Average OEC on rent decreased 8.6% year-over-year, primarily as a result of the lower utilization in the quarter was impacted by a slowdown in transmission work caused by our customers’ supply chain delays, as well as regulatory and funding bottlenecks. Gross profit in the segment in the fourth quarter of 2023 and 2022 was $63.4 million and $77.8 million, respectively. Adjusted gross profit in the segment was $106.6 million in the fourth quarter of 2023, compared to $117.7 million in the fourth quarter of 2022. Adjusted gross profit from rentals, which excludes depreciation of rental equipment, decreased to $88.4 million in the fourth quarter of 2023 compared to $96.7 million in the fourth quarter of 2022.
Revenue in our TES segment increased 20.9%, to $298.9 million in the fourth quarter of 2023, from $247.3 million in the fourth quarter of 2022, as a result of continued supply chain improvements, which allowed us to acquire more inventory and achieve record production levels that led to greater order fulfillments, as well as sustained strong customer demand. Gross profit improved by 19.1% to $52.9 million in the fourth quarter of 2023 compared to $44.4 million in the fourth quarter of 2022. At the end of the fourth quarter, TES saw a reduction in backlog of 11.6% to $688.6 million compared to the end of the third quarter of 2023, and a reduction of 8.7% from the fourth quarter of 2022, primarily for the reasons detailed above, as well as the fact that new equipment sales revenue increased 29.5% in the fourth quarter of 2023 compared to the third quarter of 2023.
APS segment revenue experienced an increase of $0.6 million, or 1.6%, in the fourth quarter of 2023, to $38.2 million, as compared to $37.5 million in the fourth quarter of 2022 as a result of growth in demand for parts, tools and accessories (“PTA”) sales. Gross profit in the segment improved 72.8% in the fourth quarter of 2023 to $10.6 million, as compared to $6.1 million in the fourth quarter of 2022 as a result of the Company’s focus on managing costs.
Net income was $16.1 million in the fourth quarter of 2023 compared to $30.9 million for the fourth quarter of 2022. The decrease in net income is primarily the result of higher interest expense on variable-rate debt and variable-rate floorplan liabilities.
Adjusted EBITDA for the fourth quarter of 2023 was $118.4 million, compared to $124.5 million for the fourth quarter of 2022. The decrease in Adjusted EBITDA was largely driven by higher costs associated with variable-rate floorplan liabilities as a result of higher rates and inventory levels in 2023 compared to 2022.
As of December 31, 2023, cash and cash equivalents was $10.3 million. Total Debt outstanding was $1,517.8 million, Net Debt was $1,507.5 million and Net Leverage Ratio was 3.5x as of December 31, 2023. Availability under the senior secured credit facility was $194.5 million as of December 31, 2023, and based on our borrowing base, we have an additional $323.6 million of availability that we can potentially utilize by upsizing our existing facility. For the twelve months ended December 31, 2023, Ending OEC decreased by $0.1 million as our fleet additions were more than offset by our continued focus on selling older equipment from our rental fleet at current advantageous residual values. With an average fleet age of 3.5 years, we believe our fleet is well positioned to capitalize from continuing strong rental demand. During the three months ended December 31, 2023, CTOS purchased approximately $18.9 million of its common stock.
2024 Outlook We are providing our full-year revenue and Adjusted EBITDA guidance for 2024 at this time. We expect 2024 to be another year of growth. We believe TES will continue to benefit from good demand and our strong backlog entering the year. We believe the ERS outlook from our rental customers for long-term demand and growth remains strong. In 2024, we are currently experiencing some near-term headwinds in our utility end markets, largely related to our customers’ supply chain issues and timing of the commencement of certain transmission projects, which is driving lower OEC on rent in our core T&D markets. As these markets recover and grow in 2024, we expect to further grow our rental fleet (based on net OEC) by mid-single digits. Regarding TES, supply chain improvements, healthy inventory levels exiting 2023, and historically high backlog levels will continue to improve our ability to produce and deliver even more units in 2024. Further, after a year of significant strategic investment in inventory levels in 2023, we expect to generate meaningful free cash flow in 2024, setting a target to generate more than $100 million of levered free cash flow1 and delivering a net leverage ratio of less than 3.0 times by the end of the fiscal year. “Our FY24 outlook reflects the long-term strength of our end markets and the continued focus by our teams to profitably grow our business. The outlook also reflects the risks associated with some continued challenges for our rental customers, particularly in the T&D sector, which we expect could persist through a large portion of the fiscal year,” said Ryan McMonagle, Chief Executive Officer of CTOS.
2024 Consolidated Outlook
Revenue
$2,000 million — $2,180 million
Adjusted EBITDA2
$440 million — $470 million
2024 Revenue Outlook by Segment
ERS
$730 million — $760 million
TES
$1,115 million — $1,255 million
APS
$155 million — $165 million
1
Levered Free Cash Flow is defined as net cash provided by operating activities, less cash flows from investing activities, excluding acquisitions, plus acquisition of inventory through floor plan payables – non-trade less repayment of floor plan payables – non-trade, both of which are included in cash flow from financing activities in our Consolidated Statements of Cash Flows.
2
CTOS is not able to present a quantitative reconciliation of its forward-looking Adjusted EBITDA for the year ending December 31, 2024 to its most directly comparable GAAP financial measure, net income, because management cannot reliably forecast net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP net income including, but not limited to, customer buyout requests on rentals with rental purchase options, income tax expense and changes in fair value of derivative financial instruments. Adjusted EBITDA should not be used to predict net income as the difference between the two measures is variable.
CONFERENCE CALL INFORMATION The Company has scheduled a conference call at 5:00 P.M. Eastern Time on March 7, 2024, to discuss its fourth quarter and full year 2023 financial results. A webcast will be publicly available at: investors.customtruck.com. To listen by phone, please dial 1‑800‑715‑9871 or 1-646-307-1963 and provide the operator with conference ID 6601040. A replay of the call will be available until 11:59 P.M. Eastern Time, Thursday, March 14, 2023, by dialing 1-800-770-2030 or 1-609-800-9909 and entering passcode 6601040.
ABOUT CTOS CTOS is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America, with a differentiated “one-stop-shop” business model. CTOS offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade and installation of critical infrastructure assets, including electric lines, telecommunications networks and rail systems. The Company's coast-to-coast rental fleet of more than 10,300 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, hi-rail equipment, repair parts, tools and accessories. For more information, please visit customtruck.com.
FORWARD-LOOKING STATEMENTS This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company's management’s control, that could cause actual results or outcomes to differ materially from those discussed in this press release. This press release is based on certain assumptions that the Company's management has made in light of its experience in the industry, as well as the Company’s perceptions of historical trends, current conditions, expected future developments and other factors the Company believes are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect the Company’s actual performance and results and could cause actual results to differ materially from those expressed in this press release. Important factors, among others, that may affect actual results or outcomes include: increases in labor costs, our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner, and our inability to manage our rental equipment in an effective manner; competition in the equipment dealership and rental industries; our sales order backlog may not be indicative of the level of our future revenues; increases in unionization rate in our workforce; our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries; our inability to attract and retain highly skilled personnel and our inability to retain or plan for succession of our senior management; material disruptions to our operation and manufacturing locations as a result of public health concerns, equipment failures, natural disasters, work stoppages, power outages or other reasons; potential impairment charges; any further increase in the cost of new equipment that we purchase for use in our rental fleet or for sale as inventory; aging or obsolescence of our existing equipment, and the fluctuations of market value thereof; disruptions in our supply chain; our business may be impacted by government spending; we may experience losses in excess of our recorded reserves for receivables; uncertainty relating to macroeconomic conditions, unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required; increases in price of fuel or freight; regulatory technological advancement, or other changes in our core end-markets may affect our customer’s spending; difficulty in integrating acquired businesses and fully realizing the anticipated benefits and cost savings of the acquired businesses, as well as additional transaction and transition costs that we will continue to incur following acquisitions; the interest of our majority stockholder, which may not be consistent with the other stockholders; our significant indebtedness, which may adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and increase our risk of default; our inability to generate cash, which could lead to a default; significant operating and financial restrictions imposed by our debt agreements; changes in interest rates, which could increase our debt service obligations on the variable rate indebtedness and decrease our net income and cash flows; disruptions or security compromises in our information technology systems or those of our critical services providers could adversely affect our operating result by subjecting us to liability, and limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, or implement strategic initiatives; we are subject to complex laws and regulations, including environmental and safety regulations that can adversely affect cost, manner or feasibility of doing business; material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements; we are subject to a series of risks related to climate change; and increased attention to, and evolving expectations for, sustainability and environmental, social and governance initiatives. For a more complete description of these and other possible risks and uncertainties, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023, and its subsequent reports filed with the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements.
CUSTOM TRUCK ONE SOURCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s except per share data)
2023
2022
2023
2022
2023
Revenue
Rental revenue
$
120,244
$
127,829
$
478,910
$
464,039
$
118,209
Equipment sales
366,967
325,746
1,253,453
982,341
283,079
Parts sales and services
34,543
33,149
132,737
126,706
33,065
Total revenue
521,754
486,724
1,865,100
1,573,086
434,353
Cost of Revenue
Cost of rental revenue
28,444
27,481
120,198
110,272
29,874
Depreciation of rental equipment
44,249
40,803
170,664
171,703
42,469
Cost of equipment sales
295,846
260,391
1,016,149
805,852
228,912
Cost of parts sales and services
26,391
29,724
103,829
101,511
25,942
Total cost of revenue
394,930
358,399
1,410,840
1,189,338
327,197
Gross Profit
126,824
128,325
454,260
383,748
107,156
Operating Expenses
Selling, general and administrative expenses
59,429
58,599
231,403
210,868
56,955
Amortization
7,134
6,940
27,110
33,940
6,698
Non-rental depreciation
2,683
2,112
10,656
9,414
2,602
Transaction expenses and other
4,104
9,026
14,143
26,218
2,890
Total operating expenses
73,350
76,677
283,312
280,440
69,145
Operating Income
53,474
51,648
170,948
103,308
38,011
Other Expense (Income)
Interest expense, net
36,370
26,582
131,315
88,906
34,144
Financing and other income
(3,699
)
(6,425
)
(18,443
)
(32,330
)
(5,745
)
Total other expense
32,671
20,157
112,872
56,576
28,399
Income Before Income Taxes
20,803
31,491
58,076
46,732
9,612
Income Tax Expense
4,681
554
7,364
7,827
432
Net Income
$
16,122
$
30,937
$
50,712
$
38,905
$
9,180
Net Income Per Share:
Basic
$
0.07
$
0.13
$
0.21
$
0.16
$
0.04
Diluted
$
0.07
$
0.13
$
0.21
$
0.16
$
0.04
CUSTOM TRUCK ONE SOURCE, INC.
CONSOLIDATED BALANCE SHEETS
(in $000s)
December 31, 2023
December 31, 2022
Assets
Current Assets
Cash and cash equivalents
$
10,309
$
14,360
Accounts receivable, net
215,089
193,106
Financing receivables, net
30,845
38,271
Inventory
985,794
596,724
Prepaid expenses and other
23,862
25,784
Total current assets
1,265,899
868,245
Property and equipment, net
142,115
121,956
Rental equipment, net
916,704
883,674
Goodwill
704,011
703,827
Intangible assets, net
277,212
304,132
Operating lease assets
38,426
29,434
Other assets
23,430
26,944
Total Assets
$
3,367,797
$
2,938,212
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable
$
117,653
$
87,255
Accrued expenses
73,847
68,784
Deferred revenue and customer deposits
28,758
34,671
Floor plan payables - trade
253,197
136,634
Floor plan payables - non-trade
409,113
293,536
Operating lease liabilities - current
6,564
5,262
Current maturities of long-term debt
8,257
6,940
Current portion of finance lease obligations
—
1,796
Total current liabilities
897,389
634,878
Long-term debt, net
1,487,136
1,354,766
Finance leases
—
3,206
Operating lease liabilities - noncurrent
32,714
24,818
Deferred income taxes
33,355
29,086
Warrants and other liabilities
—
3,015
Total long-term liabilities
1,553,205
1,414,891
Commitments and contingencies
Stockholders' Equity
Common stock
25
25
Treasury stock, at cost
(56,524
)
(15,537
)
Additional paid-in capital
1,537,553
1,521,487
Accumulated other comprehensive loss
(5,978
)
(8,947
)
Accumulated deficit
(557,873
)
(608,585
)
Total stockholders' equity
917,203
888,443
Total Liabilities and Stockholders' Equity
$
3,367,797
$
2,938,212
CUSTOM TRUCK ONE SOURCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31,
(in $000s)
2023
2022
Operating Activities
Net income
$
50,712
$
38,905
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation and amortization
218,993
223,483
Amortization of debt issuance costs
5,653
4,860
Provision for losses on accounts receivable
8,522
12,650
Share-based compensation
13,309
12,297
Gain on sales and disposals of rental equipment
(67,721
)
(55,213
)
Change in fair value of derivative and warrants
(2,485
)
(20,290
)
Deferred tax expense
4,241
7,387
Changes in assets and liabilities:
Accounts and financing receivables
(20,879
)
(36,821
)
Inventories
(388,063
)
(194,691
)
Prepaids, operating leases and other
3,518
(11,936
)
Accounts payable
28,339
(5,589
)
Accrued expenses and other liabilities
4,339
8,108
Floor plan payables - trade, net
116,563
63,920
Customer deposits and deferred revenue
(5,924
)
(1,102
)
Net cash flow from operating activities
(30,883
)
45,968
Investing Activities
Acquisition of businesses, net of cash acquired
—
(49,832
)
Purchases of rental equipment
(364,190
)
(340,791
)
Proceeds from sales and disposals of rental equipment
229,559
205,852
Purchase of non-rental property and cloud computing arrangements
(41,967
)
(34,165
)
Net cash flow from investing activities
(176,598
)
(218,936
)
Financing Activities
Proceeds from debt
21,417
—
Share-based payments
792
(1,838
)
Borrowings under revolving credit facilities
221,046
153,036
Repayments under revolving credit facilities
(106,377
)
(110,249
)
Repayments of notes payable
(7,679
)
(1,012
)
Finance lease payments
(2,682
)
(3,955
)
Repurchase of common stock
(38,845
)
(10,279
)
Acquisition of inventory through floor plan payables - non-trade
789,199
619,896
Repayment of floor plan payables - non-trade
(673,622
)
(491,599
)
Payment of debt issuance costs
(373
)
(104
)
Net cash flow from financing activities
202,876
153,896
Effect of exchange rate changes on cash and cash equivalents
554
(2,470
)
Net Change in Cash and Cash Equivalents
(4,051
)
(21,542
)
Cash and Cash Equivalents at Beginning of Period
14,360
35,902
Cash and Cash Equivalents at End of Period
$
10,309
$
14,360
Twelve Months Ended December 31,
(in $000s)
2023
2022
Supplemental Cash Flow Information
Interest paid
$
122,868
$
81,177
Income taxes paid
2,133
567
Non-Cash Investing and Financing Activities
Property and equipment purchases in accounts payable
2,120
68
Rental equipment sales in accounts receivable
22,517
11,283
CUSTOM TRUCK ONE SOURCE, INC. NON-GAAP FINANCIAL AND PERFORMANCE MEASURES
In our press release and schedules, and on the related conference call, we report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles (“GAAP”). We utilize these financial measures to manage our business on a day-to-day basis and some of these measures are commonly used in our industry to evaluate performance by excluding items considered to be non-recurring. We believe these non-GAAP measures provide investors expanded insight to assess performance, in addition to the standard GAAP-based financial measures. The press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to. Although management evaluates and presents these non-GAAP measures for the reasons described herein, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income/loss, earnings/loss per share or any other comparable measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial performance measure that we use to monitor our results of operations, to measure performance against debt covenants and performance relative to competitors. We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of operating performance, without regard to financing methods or capital structures. We exclude the items identified in the reconciliations of net income (loss) to Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within the industry depending upon accounting methods and book values of assets, including the method by which the assets were acquired, and capital structures. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that results will be unaffected by the items excluded from Adjusted EBITDA. Our computation of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.
We define Adjusted EBITDA as net income or loss before interest expense, income taxes, depreciation and amortization, share-based compensation, and other items that we do not view as indicative of ongoing performance. Our Adjusted EBITDA includes an adjustment to exclude the effects of purchase accounting adjustments when calculating the cost of inventory and used equipment sold. When inventory or equipment is purchased in connection with a business combination, the assets are revalued to their current fair values for accounting purposes. The consideration transferred (i.e., the purchase price) in a business combination is allocated to the fair values of the assets as of the acquisition date, with amortization or depreciation recorded thereafter following applicable accounting policies; however, this may not be indicative of the actual cost to acquire inventory or new equipment that is added to product inventory or the rental fleets apart from a business acquisition. Additionally, the pricing of rental contracts and equipment sales prices for equipment is based on OEC, and we measure a rate of return from rentals and sales using OEC. We also include an adjustment to remove the impact of accounting for certain of our rental contracts with customers containing a rental purchase option that are accounted for under GAAP as a sales-type lease. We include this adjustment because we believe continuing to reflect the transactions as an operating lease better reflects the economics of the transactions given our large portfolio of rental contracts. These, and other, adjustments to GAAP net income or loss that are applied to derive Adjusted EBITDA are specified by our senior secured credit agreements.
Adjusted Gross Profit. We present total gross profit excluding rental equipment depreciation (“Adjusted Gross Profit”) as a non-GAAP financial performance measure. This measure differs from the GAAP definition of gross profit, as we do not include the impact of depreciation expense, which represents non-cash expense. We use this measure to evaluate operating margins and the effectiveness of the cost of our rental fleet.
Net Debt. We present the non-GAAP financial measure “Net Debt,” which is total debt (the most comparable GAAP measure, calculated as current and long-term debt, excluding deferred financing fees, plus current and long-term finance lease obligations) minus cash and cash equivalents. We believe this non-GAAP measure is useful to investors to evaluate our financial position.
Net Leverage Ratio. Net leverage ratio is a non-GAAP financial performance measure used by management and we believe it provides useful information to investors because it is an important measure to evaluate our debt levels and progress toward leverage targets, which is consistent with the manner our lenders and management use this measure. We define net leverage ratio as net debt divided by Adjusted EBITDA.
CUSTOM TRUCK ONE SOURCE, INC.
SCHEDULE 1 — ADJUSTED EBITDA RECONCILIATION
(unaudited)
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Net income
$
16,122
$
30,937
$
50,712
$
38,905
$
9,180
Interest expense
24,712
21,432
94,694
76,265
24,044
Income tax expense
4,681
554
7,364
7,827
432
Depreciation and amortization
56,909
52,362
218,993
223,483
54,552
EBITDA
102,424
105,285
371,763
346,480
88,208
Adjustments:
Non-cash purchase accounting impact (1)
6,190
8,268
19,742
23,069
5,884
Transaction and integration costs (2)
4,104
9,026
14,143
26,218
2,890
Sales-type lease adjustment (3)
2,722
1,411
10,458
5,204
1,640
Share-based payments (4)
2,997
2,771
13,309
12,297
2,843
Change in fair value of derivative and warrants (5)
(76
)
(2,277
)
(2,485
)
(20,290
)
(1,280
)
Adjusted EBITDA
$
118,361
$
124,484
$
426,930
$
392,978
$
100,185
Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes, depreciation and amortization, and further adjusted for non-cash purchase accounting impact, transaction and process improvement costs, including business integration expenses, share-based payments, the change in fair value of derivative instruments, sales-type lease adjustment, and other special charges that are not expected to recur. This non-GAAP measure is subject to certain limitations.
(1)
Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment and inventory sold. The equipment and inventory acquired received a purchase accounting step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to our credit agreement.
(2)
Represents transaction and process improvement costs related to acquisitions of businesses, including post-acquisition integration costs, which are recognized within operating expenses in our Consolidated Statements of Comprehensive Net Income (Loss). These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses. These expenses are presented as adjustments to net income (loss) pursuant to our ABL Credit Agreement.
(3)
Represents the adjustment for the impact of sales-type lease accounting for certain leases containing RPOs, as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. This adjustment is made pursuant to our credit agreement.
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Equipment sales
$
(1,529
)
$
(14,518
)
$
(58,064
)
$
(41,525
)
$
(12,760
)
Cost of equipment sales
1,362
14,509
55,716
37,582
11,714
Gross profit
(167
)
(9
)
(2,348
)
(3,943
)
(1,046
)
Interest income
(3,770
)
(4,303
)
(16,065
)
(12,130
)
(4,461
)
Rental invoiced
6,659
5,723
28,871
21,277
7,147
Sales-type lease adjustment
$
2,722
$
1,411
$
10,458
$
5,204
$
1,640
(4)
Represents non-cash share-based compensation expense associated with the issuance of stock options and restricted stock units.
(5)
Represents the charge to earnings for our interest rate collar and the change in fair value of the liability for warrants.
Reconciliation of Adjusted Gross Profit
(unaudited)
The following table presents the reconciliation of adjusted gross profit:
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Revenue
Rental revenue
$
120,244
$
127,829
$
478,910
$
464,039
$
118,209
Equipment sales
366,967
325,746
1,253,453
982,341
283,079
Parts sales and services
34,543
33,149
132,737
126,706
33,065
Total revenue
521,754
486,724
1,865,100
1,573,086
434,353
Cost of Revenue
Cost of rental revenue
28,444
27,481
120,198
110,272
29,874
Depreciation of rental equipment
44,249
40,803
170,664
171,703
42,469
Cost of equipment sales
295,846
260,391
1,016,149
805,852
228,912
Cost of parts sales and services
26,391
29,724
103,829
101,511
25,942
Total cost of revenue
394,930
358,399
1,410,840
1,189,338
327,197
Gross Profit
126,824
128,325
454,260
383,748
107,156
Plus: depreciation of rental equipment
44,249
40,803
170,664
171,703
42,469
Adjusted gross profit
$
171,073
$
169,128
$
624,924
$
555,451
$
149,625
Reconciliation of ERS Segment Adjusted Gross Profit and Adjusted Gross Profit from Rentals
(unaudited)
The following table presents the reconciliation of ERS segment adjusted gross profit:
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Revenue
Rental revenue
$
116,594
$
123,429
$
463,139
$
449,108
$
114,929
Equipment sales
68,023
78,472
263,028
212,146
52,175
Total revenue
184,617
201,901
726,167
661,254
167,104
Cost of Revenue
Cost of rental revenue
28,222
26,735
118,236
106,598
29,613
Cost of equipment sales
49,799
57,504
198,510
158,167
37,828
Depreciation of rental equipment
43,230
39,836
167,199
167,962
41,652
Total cost of revenue
121,251
124,075
483,945
432,727
109,093
Gross profit
63,366
77,826
242,222
228,527
58,011
Plus: depreciation of rental equipment
43,230
39,836
167,199
167,962
41,652
Adjusted gross profit
$
106,596
$
117,662
$
409,421
$
396,489
$
99,663
The following table presents the reconciliation of ERS adjusted gross profit from rentals:
Three Months Ended December 31,
Twelve Months Ended December 31,
Three Months
Ended
September 30,
(in $000s)
2023
2022
2023
2022
2023
Rental revenue
$
116,594
$
123,429
$
463,139
$
449,108
$
114,929
Cost of rental revenue
28,222
26,735
118,236
106,598
29,613
Adjusted gross profit from rentals
$
88,372
$
96,694
$
344,903
$
342,510
$
85,316
Reconciliation of Net Debt
(unaudited)
The following table presents the reconciliation of net debt:
(in $000s)
December 31, 2023
Current maturities of long-term debt
$
8,257
Long-term debt, net
1,487,136
Deferred financing fees
22,406
Less: cash and cash equivalents
(10,309
)
Net debt
$
1,507,490
Reconciliation of Net Leverage Ratio
(unaudited)
The following table presents the reconciliation of the net leverage ratio:
(in $000s)
Twelve Months
Ended
December 31, 2023
Net debt
$
1,507,490
Divided by: Adjusted EBITDA
426,930
Net leverage ratio
3.53
View source version on businesswire.com: https://www.businesswire.com/news/home/20240307514164/en/
INVESTOR CONTACT Brian Perman, Vice President, Investor Relations (816) 723-7906 investors@customtruck.com
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