Custom Truck One Source (CTOS) Bank of America Securities 2024 Leveraged Finance Conference summary

Business overview and market focus

• Operates as a one-stop shop for vocational trucks, with a $1.6B rental fleet and a sales business for new and used trucks.

• Primary end markets: utility (60% of revenue), infrastructure (just under 25%), rail, and telecom (each just under 5%).

• Serves mainly utility contractors, offering both rental and sales options for equipment.

• Integrated production capability allows customization of trucks for specific end uses.

Key demand drivers and industry trends

• Transmission and distribution projects are major demand drivers, with regulatory approvals and line mile completions closely monitored.

• Aging infrastructure, electrification, and rising data center demand are significant growth catalysts.

• Federal stimulus, especially the IIJA bill, supports utility and infrastructure markets.

• Utility contractors rent about 50% of their equipment, while IOUs primarily purchase; rental penetration in the sector is 25-30%.

• Outsourcing by IOUs to contractors is a positive trend for rental demand.

Regulatory and macroeconomic environment

• Environmental regulations (CARB, EPA) on electrification and emissions are closely watched; CARB rules may benefit inventory sales in California.

• EPA's 2027 Low NOx standard could drive a pre-buy cycle, increasing demand in late 2025 and 2026.

• Tariffs on Canadian and Mexican chassis are a concern, as 30% of annual purchases come from these countries.

• Uncertainty remains around timing and implementation of new regulations.