8-K: Custom Truck One Source Reports Mixed Q1 2025 Results, Reaffirms Full-Year Guidance

Custom Truck One Source reports a slight revenue increase but a decrease in gross profit and adjusted EBITDA for Q1 2025, while reaffirming its full-year 2025 guidance.

Summary

• Custom Truck One Source, Inc. (CTOS) reported its financial results for the first quarter of 2025.
• Total revenue increased by 2.7% to $422.2 million compared to Q1 2024.
• Gross profit decreased by 5.7% to $85.5 million.
• Adjusted Gross Profit increased slightly by 0.9% to $135.6 million.
• The company reported a net loss of $17.8 million, an increase of $3.5 million compared to the first quarter of 2024.
• Adjusted EBITDA decreased by $4.0 million to $73.4 million.
• Average OEC on rent increased by 13% to $136.6 million.
• The company reaffirmed its 2025 revenue guidance of $1.97 billion to $2.06 billion and Adjusted EBITDA guidance of $370 million to $390 million.
• The company expects to generate $50 million to $100 million of levered free cash flow in 2025 and reduce its net leverage ratio.
• As of March 31, 2025, cash and cash equivalents were $5.4 million, total debt outstanding was $1,618.0 million, and the net leverage ratio was 4.80x.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While revenue increased, profitability metrics declined. The reaffirmation of full-year guidance provides some reassurance, but concerns remain about debt levels and the impact of tariffs.

Positives

• Revenue increased by 2.7% year-over-year.
• Adjusted Gross Profit increased slightly by 0.9% year-over-year.
• Average OEC on rent increased by 13% year-over-year.
• Rental fleet utilization improved to just under 78%.
• The company ended the quarter with total OEC of $1.55 billion, the highest in its history.
• Order backlog increased 22% compared to the fourth quarter of 2024.
• The company reaffirms its full-year guidance for 2025.

Negatives

• Gross profit decreased by 5.7% year-over-year.
• Net loss increased by $3.5 million compared to the first quarter of 2024.
• Adjusted EBITDA decreased by $4.0 million compared to the first quarter of 2024.
• Cash and cash equivalents were $5.4 million as of March 31, 2025.
• Total debt outstanding was $1,618.0 million as of March 31, 2025.
• Gross profit margin declined reflective of continued higher costs of materials.

Risks

• Ongoing challenges to economic activity being posed by the implementation of the new tariff policy.
• Uncertainty related to macroeconomic conditions and unfavorable conditions in the capital and credit markets.
• Increases in price of fuel or freight.
• The interest of the majority stockholder may not be consistent with the other stockholders.
• Volatility of the company's common stock market price.
• Significant indebtedness may adversely affect the company's financial position.
• Changes in interest rates could increase debt service obligations.

Future Outlook

The company reaffirms its full-year 2025 revenue guidance of $1.97 billion to $2.06 billion and Adjusted EBITDA guidance of $370 million to $390 million. They anticipate generating $50 million to $100 million of levered free cash flow and reducing their net leverage ratio by the end of the fiscal year.

Management Comments

• Ryan McMonagle, Chief Executive Officer of CTOS, stated that the company achieved year-over-year revenue growth driven by strong fundamentals in utility, infrastructure, rail, and telecom markets.
• McMonagle noted significant improvements in core T&D markets, resulting in increases in rental revenue and rental asset sales within the ERS segment.
• McMonagle added that sustained, robust demand for vocational vehicles across end markets continues to drive performance within the TES segment.
• McMonagle stated that the company remains cautiously optimistic about fiscal 2025 and believes Custom Truck is well-positioned to benefit from secular tailwinds.
• Mr. McMonagle stated that the company's fiscal year 2025 outlook reflects the long-term strength of its end markets, strong strategic and competitive positioning, and continued focus on profitable growth.

Industry Context

The company operates in the specialty equipment market, serving the electric utility, telecom, rail, forestry, and waste management industries. The results reflect the ongoing demand for infrastructure-related equipment and services, driven by factors such as data center investments, manufacturing onshoring, electrification, and utility grid upgrades. The company's performance is also influenced by macroeconomic conditions, interest rates, and trade policies.

Comparison to Industry Standards

• It's difficult to provide a precise comparison without knowing the specific peer group CTOS benchmarks against.
• However, companies like United Rentals (URI) and Herc Rentals (HRI) are major players in the equipment rental space.
• Comparing CTOS's fleet utilization rate (77.7%) and OEC on rent yield (38.5%) to these companies' metrics would provide valuable insights.
• For example, URI often reports utilization rates in the high 70s to low 80s, so CTOS is within a reasonable range.
• Similarly, comparing CTOS's net leverage ratio (4.80x) to its peers' ratios would indicate its relative financial risk.
• Many equipment rental companies target leverage ratios in the 3-4x range, suggesting CTOS has higher leverage.

Stakeholder Impact

• Shareholders may be concerned about the decrease in profitability and the increased net loss.
• Employees may be affected by potential cost-cutting measures to improve profitability.
• Customers may benefit from the company's continued investment in its rental fleet and equipment sales.
• Suppliers may experience continued demand for their products and services.
• Creditors may be concerned about the company's high debt levels and net leverage ratio.

Next Steps

• The company will hold a conference call on May 1, 2025, to discuss the results.
• The company expects to continue growing its rental fleet and producing more units in 2025.
• The company aims to generate meaningful free cash flow and reduce its net leverage ratio by the end of the fiscal year.

Key Dates

Keywords

Custom Truck One Source, financial results, equipment rental, truck sales, Adjusted EBITDA, revenue, OEC, fleet utilization, backlog