Custom Truck One Source (CTOS) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue declined 7.4% year-over-year to $423 million, with net loss of $24.5 million versus net income of $11.6 million in Q2 2023, mainly due to lower rental asset sales, reduced utility market demand, and higher interest expense.

• Adjusted EBITDA for Q2 2024 was $80.1 million, down 22.4% year-over-year but up sequentially from Q1 2024, reflecting lower ERS revenue.

• TES segment delivered solid performance with YTD revenue of $488 million, up 6% over the first six months of 2023, and a normalized sales backlog of $478 million.

• Management expects near-term headwinds in utility markets to persist through 2024, with growth anticipated to return in 2025.

• Strategic investments in inventory and fleet continue to support growth, with improved Transmission utilization and OEC on Rent in early Q3.

Financial highlights

• Q2 2024 revenue: $423 million, down 7.4% year-over-year; Adjusted EBITDA: $80.1 million; Adjusted gross profit: $134 million.

• Net loss for Q2 2024: $24.5 million (EPS: $(0.10)); gross profit margin for Q2 2024 was 21.1%, down from 24.2% in Q2 2023.

• Inventory increased by $67 million in Q2 2024 to support expected fleet investment and sales growth.

• Net leverage ratio as of June 30, 2024: 4.11x; LTM Adjusted EBITDA: $376 million.

• Cash and cash equivalents at June 30, 2024: $8.1 million; ABL Facility borrowings: $587.4 million with $159.5 million availability.

Outlook and guidance

• 2024 consolidated revenue guidance lowered to $1.8–$1.98 billion; Adjusted EBITDA guidance revised to $340–$375 million.

• Segment revenue outlook: ERS $610–$640 million, TES $1.05–$1.19 billion, APS $140–$150 million.

• Free cash flow expected to be positive but below previous $100 million target; net leverage ratio to modestly decrease by year-end.

• Management expects sequential improvement in Q3 and a stronger Q4, with recovery in utility markets anticipated into 2025.

• Net OEC expected to be flat in 2024; gross rental capex planned at $300–$350 million.