Custom Truck One Source, Inc.

Hello, everyone, and welcome to Custom Truck OneSource Inc. Third Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. You will have an opportunity to ask questions to our speaker during the Q&A session by pressing star and number one on your telephone keypad. Thank you. I will now turn the call over to Brian Perman, Vice President of Investor Relations. You may now begin.

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 discussion of some of the factors that could cause actual results to differ, please refer to the risk factor 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 yesterday afternoon. That press release and our quarterly investor presentation are posted on the investor relations section of our website. We filed our third quarter 2024 10Q with the SEC yesterday 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 before the three months ended September 30th, 2024 and prior periods. Joining me today are Ryan McMoneagle, CEO, and Chris Epperjesse, CFO. I will now turn the call over to Ryan.

Thank you, Brian, and welcome everyone to today's call. Before we dive into our Q3 earnings, I want to acknowledge the recent storms and their impact on the people and communities in Florida, Georgia, and North Carolina. Our thoughts are with everyone affected, and we are committed to ensuring our equipment is available to support recovery and restoration efforts in these regions. In our Q2 earnings report in August, we noted early signs of improvement in our rental KPIs. While we were cautiously optimistic about overcoming some challenges in the transmission and distribution in markets, we weren't ready to declare a turnaround. Today, I'm pleased to share that we saw continued improvement throughout Q3 in line with our expectations. We ended the quarter with OEC on rent over $145 million higher and utilization more than 800 basis points above where we exited Q2. So far through Q4, these positive trends persist with OEC on rent and utilization currently over $1.2 billion and over 79% respectively. These trends align with our utility and telecom contractor customers' expectations of increased activity in the second half of the year and into 2025. Additionally, storm restoration work has contributed to this demand, which we'll discuss further later. With utility in-market improving, We now see robust demand across all four of our end markets, utility, infrastructure, rail, and telecom, positioning us well for a strong Q4 and a promising start to next year. As we've discussed previously, about 60% of our revenue comes from the utility end market, which includes both transmission and distribution work. We are witnessing significant growth in electricity demand driven by AI-driven data center development, manufacturing, onshoring, and electrification trends. Recent industry reports projected 24 to 29% increase in U.S. electricity demand by 2035, nearly double last year's forecast. These trends provide strong tailwinds for our future growth. We view transmission line mile completions and IOU rate case approvals as key indicators of utility in market demand. As supply chain issues resolve, interest rates moderate, and regulatory delays subside, we expect to see further improvements. Our recent trends and customer interactions confirm the conditions are normalizing, and we anticipate continued improvement through the rest of the year and into 2025. Chris will detail our ERS segments performance, but I'd like to highlight some key trends. For the first time since Q4 last year, We saw sequential growth in rental revenue in Q3, up 5% from Q2. We ended Q2 with OEC on rent just over $1 billion, which improved to $1.17 billion by the end of Q3, and it now stands over $1.2 billion, the highest in over a year. With the recovery in our transmission equipment utilization, we're seeing mid-70, to low 80% utilization rates across most of our fleet and in markets, demonstrating the long-term resilience of our markets. We estimate that 20 to 30% of the OEC on rent improvement since Q2 is due to storm-related work from hurricanes Helene and Milton. Given the extent of the damage, we expect much of this equipment to remain on rent for several months. I am incredibly proud of how our entire rental team worked hard to make sure our equipment was ready for the crews heading to help with restoration work for the damage caused by the hurricanes. Additionally, our PTA team worked tirelessly to make sure we could not only provide rental equipment, but we also tooled up and delivered hundreds of toolkits to our customers. We have seen some rate pressure that has impacted our on-rent yield, This was driven by both the mix of the equipment we put on rent and the market environment more broadly. The uptick in rental activity and customer optimism also boosted rental asset sales, marking the second consecutive quarter of sequential improvement, with Q3 up 21% from Q2. We've leveraged the recent strength in ERS to selectively invest in our rental fleet At the end of Q3, our total OEC was just under $1.5 billion, our highest quarter end level, up nearly $36 million in the quarter. We've continued to invest during Q4 to ensure we have adequate equipment to meet current and projected rental demand. It is also worth noting that today our rental fleet is larger than it was when CTAS and NESCO merged in April of 2021. In addition, the rental fleet is younger today, OEC on rent is higher, and our on-rent yield is stronger. We are well positioned to capitalize on the growth ahead. Our TES segment saw 13% revenue growth compared to Q3 last year. Year-to-date revenue is up 8%, following over 30% year-over-year growth in the first nine months of last year. We continue to see strong demand in our infrastructure, rail, telecom, and utility in markets, all contributing to robust performance in TES. The early stages of Federal Infrastructure Investment and Jobs Act funding for infrastructure projects continue to positively impact TES demand. These trends combine to result in a 21% increase in net orders compared to Q3 last year. Segment gross margin was down sequentially and year-over-year, impacted by mix and improved inventory levels across the broader industry. We anticipate this will begin to normalize later in 2025. Our inventory investment last year has positioned us to meet strong customer demand for new equipment sales and allowed us to grow our fleet to quickly meet our customers' demand and our core utility in-market. We are confident that our inventory levels will begin to decline in Q4 and return to a more normalized level. We are closely monitoring upcoming chassis emission regulations from CARB and the EPA. We are well prepared for the anticipated demand increase from the new standards between now and 2027. The entire TES team continues to perform exceptionally well, and we are proud of the business we have built. Regarding our 2024 guidance, based on current trends across our business segments, we still anticipate delivering results within the ranges we previously provided, but we are adjusting the top end of our ERS and TES revenue and consolidated adjusted EBITDA guidance ranges. Chris will provide more details, but for 2024, We now expect total revenue between $1.8 and $1.89 billion and project adjusted EBITDA between $340 and $350 million. In closing, I have the utmost confidence in the Custom Truck team. Their hard work and dedication have helped us navigate recent challenges in the utility and market. As we end the year on a stronger footing, We are confident that our current activity levels combined with strong market tailwinds will drive double-digit adjusted EBITDA growth across our consolidated business next year. We look forward to updating you on our progress on next quarter's call. With that, I'll turn it over to Chris to discuss our third quarter results in detail.