Financial Performance Overview

Revenue Trends

CTOS’s total revenue for the first quarter of 2024 was $411.3 million, down 9.0% compared to $452.2 million in the first quarter of 2023. The decrease was driven by lower rental revenue and used equipment sales.

Rental revenue declined 10.2% to $106.2 million due to lower fleet utilization and average fleet size. Equipment sales revenue decreased 9.5% to $272.6 million, primarily due to excess supply of used equipment in the market. Parts sales and services revenue was flat at $32.5 million.

Profitability

Gross profit margin declined from 24.3% in Q1 2023 to 22.1% in Q1 2024. Operating income dropped 53.9% from $39.9 million to $18.4 million. Net income swung to a net loss of $14.3 million compared to net income of $13.8 million in the prior year period.

The decline in profitability was driven by lower revenues and gross margins as well as higher operating expenses, interest expense, and other expenses.

Cash Flow

Operating cash flow was negative $14.4 million in Q1 2024 compared to positive $3.9 million in Q1 2023. The change was mainly due to increased inventory purchases and production.

Business Segment Performance

Equipment Rental Solutions

Rental revenue decreased 9.2% to $103.3 million due to a 12.2% decline in average fleet size and 10.3 percentage point drop in fleet utilization. Equipment sales revenue fell 64.5% to $32.7 million because of excess used equipment supply. Total revenue was down 33.9% and gross profit decreased 40.5%.

Truck & Equipment Sales

Revenue rose 14.7% to $239.9 million thanks to healthy inventory levels and high backlog entering 2024. Gross profit increased 26.5% on higher sales and positive demand/pricing dynamics.

Aftermarket Parts & Services

Revenue dropped 4.5% to $35.4 million caused by lower rentals of tools and accessories. Gross profit declined 12.6% mostly due to the rental revenue decrease.

Financial Condition

Liquidity

CTOS had $8.0 million of cash at March 31, 2024 and $194.5 million of available borrowing capacity under its credit facility. The company believes its liquidity sources are adequate to meet expected cash needs over the next 12 months.

Debt

Total debt outstanding was $1.5 billion at quarter end, with $1.3 billion of variable rate debt. CTOS was in compliance with all debt covenants at March 31, 2024.

Outlook

While Q1 results were challenged by market dynamics, CTOS maintains leading positions across diverse infrastructure end markets with opportunities for long-term growth. The company continues to focus on integrating its operations and strengthening its financial position. However, near term results will depend heavily on rental demand trends, used equipment pricing, interest rates, and other external factors. Overall, CTOS faces uncertainty in 2024 but believes its flexible business model can adapt to evolving market conditions.