Custom Truck One Source, Inc. (CTOS) Bundle
Understanding Custom Truck One Source, Inc. (CTOS) Revenue Streams
Understanding Custom Truck One Source, Inc.’s Revenue Streams
Custom Truck One Source, Inc. generates revenue through three primary segments: Equipment Rental Solutions (ERS), Truck and Equipment Sales (TES), and Aftermarket Parts and Services (APS).
Breakdown of Primary Revenue Sources
The following table outlines the revenue contributions from each segment for the nine months ended September 30, 2024 and 2023:
| Segment | 2024 Revenue ($000s) | 2023 Revenue ($000s) | Change ($000s) | % Change |
|---|---|---|---|---|
| Rental Revenue | 309,304 | 346,545 | (37,241) | (10.7)% |
| Equipment Sales | 863,711 | 886,486 | (22,775) | (2.6)% |
| Parts Sales and Services | 100,337 | 98,194 | 2,143 | 2.2% |
| Total Revenue | 1,281,540 | 1,343,346 | (61,806) | (4.6)% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenue decreased by 4.6% compared to the same period in 2023. The detailed breakdown is as follows:
- Rental Revenue: Decreased by 10.7%
- Equipment Sales: Decreased by 2.6%
- Parts Sales and Services: Increased by 2.2%
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to total revenue for the nine months ended September 30, 2024, is detailed below:
| Segment | Revenue ($000s) | % of Total Revenue |
|---|---|---|
| Rental Revenue | 309,304 | 24.8% |
| Equipment Sales | 863,711 | 67.4% |
| Parts Sales and Services | 100,337 | 7.8% |
| Total Revenue | 1,281,540 | 100% |
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, revenue from the ERS segment fell due to lower rental utilization and a decline in average OEC on rent. Equipment sales saw a modest decrease attributed to market pressures, although parts and services revenue increased slightly. The overall decrease in revenue can be linked to external factors such as supply chain constraints and regulatory impacts on customers' operations.
The following table summarizes the revenue changes for key segments:
| Segment | 2024 Revenue ($000s) | 2023 Revenue ($000s) | Change ($000s) | % Change |
|---|---|---|---|---|
| Rental Revenue | 317,492 | 358,666 | (41,174) | (11.5)% |
| Equipment Sales | 747,685 | 691,481 | 56,204 | 8.1% |
| Parts Sales and Services | 100,337 | 98,194 | 2,143 | 2.2% |
| Total Revenue | 1,281,540 | 1,343,346 | (61,806) | (4.6)% |
A Deep Dive into Custom Truck One Source, Inc. (CTOS) Profitability
Profitability Metrics
Gross Profit: For the three months ended September 30, 2024, gross profit was $91.829 million, down from $107.156 million in the same period of 2023, reflecting a decrease of 14.3%. For the nine months ended September 30, 2024, gross profit was $271.805 million, compared to $327.436 million in 2023, representing a decline of 17.0%.
Operating Profit: Operating income for the three months ended September 30, 2024, was $23.037 million, down from $38.011 million in the prior year, a decrease of 39.4%. For the nine months ended September 30, 2024, operating income was $59.081 million, down from $117.474 million in 2023, a decline of 49.7%.
Net Profit: The net loss for the three months ended September 30, 2024, was $(17.416 million), compared to a net income of $9.180 million in 2023, a swing of 289.7%. For the nine months ended September 30, 2024, the net loss was $(56.229 million), compared to a net income of $34.590 million in 2023, reflecting a decrease of 262.6%.
Trends in Profitability Over Time
The following table summarizes the key profitability metrics over the recent quarters:
| Period | Gross Profit ($000s) | Operating Income ($000s) | Net Income ($000s) |
|---|---|---|---|
| Q3 2024 | 91,829 | 23,037 | (17,416) |
| Q3 2023 | 107,156 | 38,011 | 9,180 |
| 9M 2024 | 271,805 | 59,081 | (56,229) |
| 9M 2023 | 327,436 | 117,474 | 34,590 |
Comparison of Profitability Ratios with Industry Averages
The gross margin for the nine months ended September 30, 2024, was 21.2%, compared to 24.4% in the same period of 2023. The operating margin was 4.6% for the nine months ended September 30, 2024, down from 8.7% in 2023. The net margin for the nine months ended September 30, 2024, was (4.4)%, compared to 2.6% in the previous year.
Analysis of Operational Efficiency
The cost of revenue for the nine months ended September 30, 2024, was $1,009.735 million, which included $875.450 million in costs excluding rental equipment depreciation and $134.285 million in depreciation of rental equipment. This reflects a decrease from $1,069.931 million in the same period of 2023.
Operating expenses for the nine months ended September 30, 2024, were $212.724 million, slightly up from $209.962 million in 2023. The overall efficiency was impacted by increased costs associated with general and administrative expenses.
The following table outlines key operational efficiency metrics:
| Metric | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|
| Gross Margin | 21.2% | 24.4% | (3.2) |
| Operating Margin | 4.6% | 8.7% | (4.1) |
| Net Margin | (4.4)% | 2.6% | (7.0) |
| Total Cost of Revenue ($000s) | 1,009,735 | 1,069,931 | (5.6) |
| Operating Expenses ($000s) | 212,724 | 209,962 | 1.3 |
Debt vs. Equity: How Custom Truck One Source, Inc. (CTOS) Finances Its Growth
Debt vs. Equity: How Custom Truck One Source, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Custom Truck One Source, Inc. reported a total long-term debt of $1,567,103,000 and current maturities of long-term debt amounting to $1,458,000.
Short-term debt, primarily from floor plan payables, totaled $922,542,000 as of the same date, which includes:
| Type | Amount (in $000s) |
|---|---|
| Trade Floor Plan Payables | $428,756 |
| Non-Trade Floor Plan Payables | $493,786 |
| Total Floor Plan Payables | $922,542 |
Debt-to-Equity Ratio
The debt-to-equity ratio is an important metric for evaluating the financial leverage of a company. As of September 30, 2024, the total stockholders' equity was $837,509,000. Therefore, the debt-to-equity ratio can be calculated as:
Debt-to-Equity Ratio = Total Debt / Total Equity = $1,581,115,000 / $837,509,000 = 1.89
This ratio indicates that the company is utilizing approximately 1.89 times more debt than equity, compared to the industry average of around 1.5.
Recent Debt Issuances and Refinancing Activity
In January 2023, the company entered into a new credit agreement allowing borrowings of up to $18 million. As of August 2024, the asset-based lending (ABL) facility was amended to increase borrowing capacity by $200 million and extend the maturity date to August 9, 2029. The outstanding amount under the ABL facility was $627,900,000 as of September 30, 2024.
Balancing Debt Financing and Equity Funding
The company has been actively managing its capital structure by balancing between debt financing and equity funding. For the nine months ended September 30, 2024, the net cash flow from financing activities was $122,779,000, which includes:
| Activity | Amount (in $000s) |
|---|---|
| Proceeds from debt | $4,200 |
| Repurchases of common stock | $(28,984) |
| Borrowings under revolving credit facilities | $168,069 |
| Repayments under revolving credit facilities | $(92,569) |
This indicates a strategic approach where the company utilizes debt to finance growth and manage working capital while also engaging in stock repurchase programs to enhance shareholder value.
Credit Ratings
As of September 30, 2024, the company has not publicly disclosed specific credit ratings from agencies such as Moody's or S&P. However, the ability to secure additional borrowing capacity and favorable terms on the ABL facility suggests a relatively stable credit profile within industry standards.
Assessing Custom Truck One Source, Inc. (CTOS) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio of the company is calculated as follows:
| Current Assets (in $000s) | Current Liabilities (in $000s) | Current Ratio |
|---|---|---|
| 1,410,965 | 1,098,433 | 1.28 |
The quick ratio, which excludes inventory from current assets, is calculated as:
| Quick Assets (in $000s) | Current Liabilities (in $000s) | Quick Ratio |
|---|---|---|
| 210,040 | 1,098,433 | 0.19 |
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is:
| Current Assets (in $000s) | Current Liabilities (in $000s) | Working Capital (in $000s) |
|---|---|---|
| 1,410,965 | 1,098,433 | 312,532 |
This represents a significant increase compared to the previous year, where working capital was:
| Current Assets (in $000s) | Current Liabilities (in $000s) | Working Capital (in $000s) |
|---|---|---|
| 1,265,899 | 897,389 | 368,510 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
| Cash Flow Activities (in $000s) | 2024 | 2023 |
|---|---|---|
| Net cash flow from operating activities | 39,934 | (2,706) |
| Net cash flow for investing activities | (164,883) | (145,612) |
| Net cash flow from financing activities | 122,779 | 142,557 |
| Net change in cash and cash equivalents | (1,871) | (5,567) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents of:
| Cash and Cash Equivalents (in $000s) | 2024 | 2023 |
|---|---|---|
| Cash and cash equivalents | 8,438 | 10,309 |
Moreover, the total outstanding borrowings under the ABL Facility are:
| Borrowings (in $000s) | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Outstanding borrowings | 627,900 | 552,400 |
Overall, while the company maintains a positive working capital position, the quick ratio indicates potential liquidity constraints that may need addressing, especially in the context of increased borrowings.
Is Custom Truck One Source, Inc. (CTOS) Overvalued or Undervalued?
Valuation Analysis
When assessing the valuation of Custom Truck One Source, Inc. (CTOS), key financial ratios such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) are critical indicators.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio for CTOS is calculated using the trailing twelve months (TTM) earnings. The company reported a net loss of $56.2 million for the nine months ended September 30, 2024, leading to a basic earnings per share (EPS) of ($0.24). Therefore, the P/E ratio is not applicable as the company is currently operating at a loss.
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, is derived from total stockholders' equity of $837.5 million and total shares outstanding of 251.4 million. This results in a book value per share of approximately $3.33. With a current stock price of approximately $2.50, the P/B ratio is calculated as follows:
- P/B Ratio = Stock Price / Book Value per Share = $2.50 / $3.33 ≈ 0.75
This indicates that the stock is trading below its book value, suggesting potential undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value (EV) is calculated by adding the market capitalization and total debt, then subtracting cash equivalents. The company has total debt of $1.64 billion and cash equivalents of $8.4 million. The market capitalization, based on a stock price of $2.50, is approximately $628.5 million.
- Enterprise Value = Market Cap + Total Debt - Cash = $628.5 million + $1.64 billion - $8.4 million ≈ $2.26 billion
The EBITDA for the last twelve months is reported as $196.7 million. Therefore, the EV/EBITDA ratio is calculated as follows:
- EV/EBITDA Ratio = EV / EBITDA = $2.26 billion / $196.7 million ≈ 11.48
This ratio indicates how many times the company’s EBITDA is covered by its enterprise value, suggesting a moderate valuation level.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly. The stock was trading at approximately $3.50 one year ago, reached a high of $4.00 in the previous quarter, and is currently at $2.50, reflecting a decline of about 29% year-to-date.
Dividend Yield and Payout Ratios
As of September 30, 2024, the company has not declared any dividends, resulting in a dividend yield of 0%. The payout ratio is also not applicable due to the negative net income.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for CTOS is currently a “Hold”. Analysts cite concerns over the company’s declining rental revenues and increased costs, suggesting that while the stock is undervalued based on book value, the lack of profitability limits upside potential in the near term.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | N/A (Loss) |
| P/B Ratio | 0.75 |
| EV/EBITDA Ratio | 11.48 |
| Stock Price (Current) | $2.50 |
| 12-Month Stock Price Change | -29% |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Custom Truck One Source, Inc. (CTOS)
Key Risks Facing Custom Truck One Source, Inc.
Overview of Internal and External Risks
Custom Truck One Source, Inc. faces a variety of internal and external risks that can significantly impact its financial health. These risks include:
- Industry Competition: The company operates in a highly competitive market with numerous players, which can lead to price wars and reduced margins. As of September 30, 2024, total revenue decreased by 4.6% from the previous year, reflecting competitive pressures.
- Regulatory Changes: Compliance with new regulations can increase operational costs. Ongoing changes in environmental regulations may require additional investment in equipment and technologies.
- Market Conditions: Fluctuations in the construction and utility sectors can directly affect demand for rental and sales services. For instance, rental revenue fell by 11.5% over the nine months ended September 30, 2024, compared to 2023.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Decreased Rental Revenue: For the nine months ended September 30, 2024, rental revenue was $317.5 million, down from $358.7 million in 2023.
- Increased Interest Expense: Interest expense for the nine months ended September 30, 2024, was $79.2 million, compared to $70.0 million in the same period in 2023, indicating rising costs associated with debt financing.
- Inventory Management: As of September 30, 2024, total inventory reached $1.2 billion, reflecting the need for effective inventory management to avoid excess and related costs.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Debt Management: The company amended its ABL Facility to increase borrowing capacity by $200 million and extend maturity to August 2029, which provides additional liquidity to manage operational costs.
- Operational Efficiency: Focus on improving fleet utilization, which was 73.2% as of September 30, 2024, down from 78.9% in 2023. Enhancing efficiency can help mitigate the impact of decreased rental revenues.
- Market Diversification: Expanding into new markets and sectors to reduce dependency on traditional revenue streams and minimize the impact of sector-specific downturns.
| Risk Factor | Current Status | Impact | Mitigation Strategy |
|---|---|---|---|
| Decreased Rental Revenue | $317.5 million (2024) | 11.5% decline | Enhance fleet utilization |
| Increased Interest Expense | $79.2 million (2024) | Increased financing costs | Amend credit facilities for better terms |
| Total Inventory | $1.2 billion (2024) | Management of excess inventory costs | Improve inventory management practices |
| Market Conditions | Rental revenue down 11.5% | Demand fluctuations | Diversify market presence |
Future Growth Prospects for Custom Truck One Source, Inc. (CTOS)
Future Growth Prospects for Custom Truck One Source, Inc.
Analysis of Key Growth Drivers
Product Innovations: The company has focused on enhancing its product lineup, particularly in the forestry and utility sectors, which has led to an increase in equipment sales. For the nine months ended September 30, 2024, equipment sales reached $863.7 million, accounting for 67.4% of total revenue.
Market Expansions: The company is actively pursuing market expansion opportunities, particularly in regions with growing infrastructure needs. The sales order backlog as of September 30, 2024, was $395.6 million, indicating significant demand for new vocational heavy-duty trucks.
Acquisitions: Strategic acquisitions have been a key driver for growth. The company has been integrating acquired businesses to enhance its service offerings and expand its customer base. For instance, transaction and integration costs for the nine months ended September 30, 2024, amounted to $14.7 million.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for 2024 anticipate a continued focus on equipment sales, with estimates suggesting a recovery in rental revenues as market conditions improve. The company reported total revenue of $1.28 billion for the nine months ended September 30, 2024, down from $1.34 billion in the same period of 2023.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change |
|---|---|---|---|
| Total Revenue | $1,281.5 million | $1,343.3 million | ($61.8 million) |
| Net Income (Loss) | ($56.2 million) | $34.6 million | ($90.8 million) |
| Equipment Sales | $863.7 million | $886.5 million | ($22.8 million) |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has formed partnerships aimed at enhancing its service capabilities and expanding its market reach. These initiatives include collaborations with equipment manufacturers to offer customized solutions that meet specific customer needs. Additionally, the company is leveraging technology to improve operational efficiencies, which is expected to yield cost savings and increased profitability.
Competitive Advantages That Position the Company for Growth
The company benefits from a diversified product portfolio that caters to various end-markets, including forestry and utility sectors. This diversification aids in mitigating risks associated with market fluctuations. Additionally, the company's strong inventory levels and improved supply chain management have positioned it well to respond to increased demand.
As of September 30, 2024, the whole goods inventory stood at $1.07 billion, up from $846.2 million at the end of 2023, reflecting the company's ability to meet customer demand effectively.
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Article updated on 8 Nov 2024
Resources:
- Custom Truck One Source, Inc. (CTOS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Custom Truck One Source, Inc. (CTOS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Custom Truck One Source, Inc. (CTOS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.