The following is a summary of the Custom Truck One Source, Inc. (CTOS) Q3 2024 Earnings Call Transcript:

Financial Performance:

• Custom Truck One Source reported Q3 2024 revenue of $447 million with adjusted gross profit of $138 million and adjusted EBITDA of $80 million.

• The Equipment Rental and Sales (ERS) segment of the company showed a year-over-year decline with $150 million in revenue for Q3 2024, decreased from $167 million in Q3 2023; however, rental revenue was up 5% sequentially.

• The Technical Equipment Solutions (TES) segment generated impressive revenue growth of 13% year-over-year, contributing significantly to the company's overall performance.

Business Progress:

• The company noted an improvement in rental KPIs, and a robust demand across all four end markets: utility, infrastructure, rail, and telecom.

• Significant sequential growth in rental revenue was noted; the OEC on rent improved sequentially and is now over $1.2 billion, the highest in over a year.

• Custom Truck is committed to maintaining a strong investment in fleet updates to ensure readiness for continued customer demand, particularly with the upcoming challenges and opportunities presented by new emissions regulations.

Opportunities:

• There is a projected sharp increase in electricity demand due to AI-driven data center development, manufacturing onshoring, and electrification trends, providing a vital growth opportunity for the utility segment of Custom Truck.

• The approval of federal infrastructure investment and JOBS Act funding is expected to continue enhancing demand in the TES segment.

Risks:

• Custom Truck has noticed rate pressure impacting the on-rent yield in the rental business, driven by equipment mix and broader market conditions, indicating potential risks in rental profitability.

• Regulatory changes, specifically upcoming chassis emission regulations from CARB and the EPA, although largely being prepared for, still pose a significant challenge and operational risk going forward.

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