Custom Truck One Source, Inc.

Good afternoon. At this time, I would like to welcome everyone to the Custom Track 1 Source Inc. 4th Quarter and Full Year 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, you can press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, so again, press the star 1. I would now like to turn the conference over to Brian. Please go ahead.

Thank you. Before we begin, we would like to remind you that management's commentary and responses to questions on today's call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of the company's filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during the call in the press release we issued today. That press release and our quarterly investor presentation are posted on the investor relations section of our website. We filed our 2023 10K with the SEC this afternoon. Today's discussion of our results of operations for Custom Truck OneSource, Inc., or Custom Truck, is presented on a historical basis as of or for the three months end to December 31st, 2023 and prior periods. Joining me today are Ryan McMoneagle, CEO, and Chris Epperjesse, CFO. I will now turn the call over to Ryan.

Thanks, Brian, and welcome everyone to today's call. Custom Truck's business continued to perform well in Q4. delivering revenue of $522 million, representing a 7% increase compared to Q4 of 2022 and our highest quarter of revenue ever. We finished the year with total revenue of $1.865 billion at the top end of our guidance range and up 19% versus 2022. I'm very proud of the efforts of our team to deliver another record-setting year. We continue to demonstrate the value of our business model with our ability to pivot between product categories and between selling and renting equipment as the markets dictate. Our TES segment delivered 21% revenue growth in the quarter versus the previous year and 29% growth for the full year, well ahead of both consensus estimates for the segment and our guidance for the year. We delivered record levels of TES revenue and also saw gross margin improvement of 150 basis points, highlighting the continued strong demand environment as well as the progress the team has made in continuous improvement in our production capabilities. The entire TEST performed extremely well. Our production team delivered the fourth consecutive quarter of record production, for which I am extremely grateful. As we discussed on several calls, we made the decision during 2023 to invest in significant inventory growth to ensure that we could meet customer demand heading into 2024. Growth in the TDS segment was led by growth in our infrastructure in-market, which represents about 24% of total revenues. We continue to experience high levels of demand for certain products, like our specialty dump trucks, roll-off trucks, hydro excavators, and water trucks. We believe we're in the early stages of the deployment of Federal Infrastructure Investment and Jobs Act dollars for infrastructure projects, which is beginning to positively impact demand. We are well positioned heading into 2024 to continue to meet customer demand in all the product categories we serve. Approximately 60% of our revenue comes from the utility and market, which includes both distribution and transmission work. We are seeing significant forecasted increases in electricity load growth in the U.S., which is being driven by a high level of data center development and by continued electrification trends. The amount of incremental power and grid enhancements required to meet the expected load growth, as well as the deferred maintenance that's required on our aging grid, creates significant demand momentum in the sector. Transmission line development and regional interconnection continue to be the bottlenecks in meeting this future energy demand. There is a significant backlog of transmission projects that are ready to go. However, work on these projects is advancing slowly as supply chain, regulatory approval and ownership, and funding details get resolved. We believe we are at the forefront of the energy transition that is currently mandated in California and soon will be required in varying degrees in nine additional states. Custom Truck has an array of fully functional electric Class 7 and Class 8 trucks to serve multiple end markets, including bucket trucks and digger derricks, dump trucks, refuse trucks, and tractors to serve the EV demands of our customers. We continue to work with our OEM partners, Peterbilt and Battle Motors, with whom we have developed the majority of these trucks, to ensure that our customers transition to EV is timely and efficient. Additionally, we are seeing continued early adoption of our EPTO, which is being used to electrically power our truck's attachments while on the job site, significantly reducing the amount of time the engine must be on idling and burning diesel fuel. Chris will walk through the details of the performance of our ERS segment, which continued to see strong rental rates, to experience strong operational performance, and to perform at historically high levels of utilization for the majority of our fiscal year. In the fourth quarter, we expected more transmission work to be underway than occurred. As a result, we saw lower utilization than we originally expected, but consistent with what we communicated to you in November. As I mentioned previously, we are confident that the tailwinds that support this segment of our business are robust and will continue to provide significant growth in the years as some of the delays currently impacting the large transmission projects begin to get resolved. We believe the breadth of our vehicle product offerings and our ability to meet our customers' rental and sales needs uniquely position custom trucks to capitalize on the future tailwinds created by this sustained demand, particularly as these transmission projects advance. We will continue to invest in geographic markets where custom truck is currently underrepresented in which we believe offer compelling long-term growth opportunities for our business. As we've discussed previously, we know that the Western U.S. is one such area. I am proud to announce that we recently closed on the purchase of an existing facility in Casa Grande, Arizona, to serve as an initial production hub for our Southwest expansion. We will also be opening two new one in Sacramento and one in Salt Lake City, to capitalize on the growth we see out west and to be able to better serve our customers. We expect all these locations to be fully operational later this year. As we think about our 2024 guidance, we are going to be conservative on the degree of transmission uplift that we expect in 2024, and we'll provide updates on how transmission continues to develop throughout the year. Despite that uncertainty, We anticipate that 2024 will be another year of growth for Custom Truck and that we will eclipse $2 billion of total revenue. While Chris will provide additional details later, we are providing initial revenue guidance of $2 to $2.18 billion in a projecting adjusted EBITDA in the range of $440 to $470 million. Additionally, we are committed to demonstrating our ability to generate compelling cash flow during 2024, which will allow us to meet our three times net leverage target and to continue to invest in our growth. With that, I'm going to turn it over to Chris to talk through the details of our fourth quarter results that contributed to our record-setting 2023.