Custom Truck One Source (CTOS) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $447.2 million, up 3% year-over-year and 5.7% sequentially, driven by higher new equipment and truck sales, as well as increased equipment on rent, with strong demand in infrastructure, rail, and telecom end markets.

• Net loss for Q3 2024 was $17.4 million, an improvement from Q2 2024 but down from net income in Q3 2023, due to lower gross profit and higher interest expense.

• Adjusted EBITDA for Q3 2024 was $80.2 million, up slightly sequentially but down year-over-year, reflecting lower ERS revenue and higher costs.

• TES segment delivered 13% year-over-year revenue growth, with a robust sales backlog and continued production strength, while ERS utilization and OEC on rent improved sequentially.

• The company maintains a nationwide footprint with 40 locations and a diversified customer base; no single customer accounts for more than 3% of revenue.

Financial highlights

• Q3 2024 revenue: $447.2 million (+3% year-over-year); adjusted gross profit: $137.8 million; adjusted EBITDA: $80.2 million.

• Net loss for Q3 2024: $17.4 million; EPS: $(0.07) basic and diluted.

• LTM revenue totaled over $1.8 billion; LTM adjusted EBITDA was $356 million as of September 30, 2024.

• Net leverage ratio increased to 4.44x LTM adjusted EBITDA at Q3-end; total debt was $1,589.6 million.

• Cash and cash equivalents at quarter-end were $8.4 million; available liquidity was $327 million.

Outlook and guidance

• 2024 total revenue expected between $1.8 billion and $1.89 billion; adjusted EBITDA projected between $340 million and $350 million, with the top end of both ranges lowered.

• Double-digit adjusted EBITDA growth is anticipated for 2025, with meaningful positive levered free cash flow expected.

• Net leverage ratio expected to be flat or modestly lower by year-end, with a goal to reduce below 3x in 2025.

• Management expects continued headwinds from supply chain constraints, regulatory and customer financing factors impacting rental demand and project timing.

• Liquidity sources and operating cash flows are considered sufficient to meet requirements over the next 12 months.