Custom Truck One Source's Q4 2024: Navigating Contradictions in Revenue Growth, Utilization Rates, and Backlog Visibility

These are the key contradictions discussed in Custom Truck One Source's latest 2024Q4 earnings call, specifically including: TES Revenue Growth Expectations, Utilization Rate Expectations, Backlog Visibility and Growth Expectations, and Fleet Utilization Expectations:



Utility End Market Recovery and Growth:
- Custom Truck's average utilization improved to just under 79% for Q4, a 570 basis point increase from Q3.
- The growth was driven by continued recovery in T&D end markets and strong utility-related demand.

Strong TES Performance and Future Growth:
- The TES segment achieved record quarterly revenue of over $300 million, up 18% sequentially and 3% year-over-year.
- This was due to strong demand from forestry and vegetation management customers and optimism about future utility-related demand.

Improved Order Intake and Inventory Management:
- Net orders for the TES segment improved to $280 million, up more than 90% sequentially and 35% year-over-year.
- Inventory levels were reduced by over $150 million, contributing to improved order intake and better utilization of resources.

Financial Leverage and Debt Reduction:
- Custom Truck reduced its borrowings under the ABL by $45 million in Q4 and ended the year with a net leverage ratio of 4.5x.
- This reduction was achieved through a sales leaseback transaction and improved inventory management strategies.