Custom Truck One Source, Inc.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Custom Truck OneSource, Inc. fourth quarter and full year 2024 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, simply press star and the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Brian Perman, Vice President of Investor Relations. 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 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 yesterday afternoon. That press release and our fourth quarter investor presentation are posted on the investor relations section of our website. We filed our 2024 10K 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 or for the three and 12 months ended December 30th, 2024 and prior periods. Joining me today are Ryan McDonigal, CEO, and Chris Epperjesse, CFO. I will now turn the call over to Ryan.

Thank you, Brian, and welcome everyone to today's call. Custom Truck ended 2024 on a very positive note. Our ERS and APS segments benefited from the strong improvement in utility-related demand that we saw in the third quarter, which continued to the end of the year. TES had a record quarter in Q4 and record year, exceeding a billion dollars in annual sales for the first time. Last year's performance highlights the resilience of our end markets and our ability to adapt to meet customers' needs in a rapidly changing business environment. We feel that our performance in Q4 sets us up well for the return to growth that we anticipate in 2025. Our Q4 results show that the recovery that we experienced in our T&D in markets in Q3 continued through the end of the year. We saw sequential improvements in our two main rental KPIs, average OEC on rent and average utilization. These trends align with our utility contractor customers' expectations of sustained and increased activity through the end of last year, in which they expect to continue into 2025. About 55% of our total revenue comes from the utility in-market, which includes both transmission and distribution work. We are witnessing significant growth in electricity demand driven by AI-driven data center development, grid upgrades and investments, and electrification trends. Recent industry reports project a 24 to 29% increase in U.S. electricity demand by 2035, nearly double the previous 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. Our recent trends and customer interactions confirm that the conditions in the utility end market are continuing to normalize. We continue to see attractive rental demand across our utility and other primary end markets as well. Infrastructure, rail, and telecom, which positions us well for a strong start to the year and supports our outlook for ERS for 2025. Chris will detail our ERS segment performance, but I'd like to highlight some key trends. Average OEC on rent for Q4 was over $1.2 billion, a 12% sequential quarterly increase. In addition, average utilization for Q4 was just under 79%, a 570 basis point sequential improvement versus Q3. In Q4, rental revenue was up 15% versus Q3, the second consecutive quarter of sequential growth in rental revenue, a first since 2022. With the recovery in our transmission equipment utilization, we continue to see mid-70s, below 80% utilization rates across most of our fleet and in markets, demonstrating the long-term resilience of our markets. The uptick in rental activity and customer optimism also boosted rental asset sales, marking the third consecutive quarter of sequential improvement, with Q4 up 13% from Q3. We continue to leverage the recent strength in ERS to selectively invest in our rental fleet. At the end of Q4, our total OEC was just over $1.5 billion, our highest quarter end level and up nearly $22 million in the quarter. We've continued to invest during Q1 to ensure we have adequate equipment to meet current and projected rental demand. In June of this year, we expect to open a new branch in Portland, Oregon. This new branch highlights our confidence and the strength of the rental market. Through our investment in both our rental fleet and expanded physical presence, we believe we are well positioned to capitalize on the anticipated growth in 2025 and beyond. As we expected, Q4 was our strongest quarter of the year for our TES segment, which saw a record quarterly revenue of over $300 million, up 18% sequentially, and up 3% compared to Q4 of 2023. Full-year TES revenue exceeded $1 billion for the first time, which was up almost 7% versus 2023, following almost 29% growth in 2023. We saw very strong demand from our forestry or vegetation management customers at the end of the year, largely as a result of several utilities awarding contracts to many of our customers. Segment gross margin was up 45 basis points on a sequential basis, but down year over year, impacted by mix and improved inventory levels across the broader industry. We anticipate this will begin to normalize later in the year. While we did deliver a very strong Q4, we did see some hesitation from our customers to buy, especially in November. We think high interest rates and some level of caution on the economy influence this. As such, we are closely watching our order intake. In Q4, we saw a 35% increase in net orders compared to Q4 last year, and that trend is continuing so far in 2025. During Q4, our focused efforts to manage our inventory levels resulted in a significant reduction in inventory of more than $150 million, versus the end of Q3 and more than $170 million from peak levels at the end of August. We expect to continue to reduce our inventory levels this year to a more normalized level. We are confident that we have sufficient inventory to meet strong customer demand for new equipment, as well as to grow our fleet to meet rental demands in our core end markets. We continue to monitor developments involving tariffs. In 2024, approximately 30% of our total purchases came from Mexico and Canada, primarily from our chassis and key attachment providers. We are working closely with our suppliers in both countries, as well as our steel and aluminum suppliers, to develop plans to be able to continue to support our customers and minimize the impact of tariffs on our operations. Additionally, we are monitoring upcoming chassis emission regulations from CARB and the EPA, as well as any potential changes to those regulations under the new administration. The entire TES team continues to perform exceptionally well, and we are proud of the business we have built. During Q4, we closed on a sale-leaseback transaction on eight of our own properties for net proceeds of over $52 million. which we use to reduce borrowings under the ABL and to repay other debt. We view this transaction as an attractive opportunity to unlock the value of certain of our own real estate and to reduce our leverage. Additionally, in January of this year, we, in Platinum Equity, jointly purchased all of Energy Capital Partners' remaining CTAS shares at a price of $4 per share. We felt it was an attractive opportunity to purchase a significant number of CTAS shares at a meaningful discount to the market price. With respect to our 2025 guidance, we do expect this year to be a year of growth across all three of our business segments. While Chris will provide more details, for 2025, we expect total revenue of between $1.97 and $2.06 billion. and project adjusted EBITDA between $370 and $390 million. We will continue to focus on working capital management and free cash flow generation, which will allow us to make progress towards meeting our three times net leverage target. In closing, our business outlook remains strong, driven by long-term sustained in-market demand, buoyed by megatrends and a strong competitive advantage that sets us apart. Our multi-decade relationships with strategic suppliers and our long-tenured and diversified customer base will continue to be keys to our success. We are committed to continuing our investment and growing our industry-leading specialty rental fleet, ensuring that we remain at the forefront of the markets we serve. Additionally, our focus on continuous improvement projects throughout our business will help us maintain operational excellence. I continue to have the highest degree of confidence and the custom truck team and want to thank everyone for their hard work and dedication that helped us navigate last year's challenges in the utility and market. As we begin this year on a stronger footing, we are confident that our current activity levels combined with strong market tailwinds will drive our expected double-digit adjusted EBITDA growth across our consolidated business in 2025. We look forward to updating you on our progress on next quarter's call. With that, I will turn it over to Chris to discuss our fourth quarter results in detail.