Custom Truck One Source Stock

Custom Truck One Source, Inc. engages in the business of providing a range of services and products to customers through rentals and sales of specialty equipment, rentals and sales of aftermarket parts and services related to the specialty equipment, and repair, maintenance, and customization services related to that equipment.

The company is a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail, forestry, waste management and other infrastructure-related industries in North America. The company’s core business relates to its new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. The company offers its specialized equipment to a diverse customer base, including utilities and contractors, for the maintenance, repair, upgrade, and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks, and rail systems, as well as for lighting and signage. The company rents, produces, sells, and services a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers.

Segments

The company operates through three segments: Equipment Rental Solutions (ERS), Truck and Equipment Sales (TES), and Aftermarket Parts and Services (APS).

Equipment Rental Solutions (ERS)

This segment owns a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of December 31, 2022, this equipment (the rental fleet) consisted of more than 10,000 units. The majority of the company’s rental fleet can be used across a variety of end-markets, which coincides with the needs of many of its customers who operate in multiple end-markets. As is customary for equipment rental companies, the company sells used equipment out of its rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable the company to effectively manage the age and mix of its rental fleet to match current market demand. The company also employs rental purchase options (RPOs) on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in the company’s ERS segment consist of the rental and sale from the rental fleet, of the foregoing products.

Truck and Equipment Sales (TES)

This segment offers a broad variety of new equipment for sale to be used across the company’s end-markets, which can be modified to meet its customers’ specific needs. The company’s integrated production capabilities and extensive knowledge gained over a long history of selling equipment have established it as a trusted partner for customers seeking tailored solutions with short lead times. In support of these activities, the company primarily employs a direct-to-customer sales model, leveraging its dedicated sales force of industry and product managers, who are focused on driving national and local sales. The company also opportunistically engages in the sale of used equipment purchased from third parties or received via trade-ins from new equipment sales customers. In all of these cases, the company will sell used equipment directly to customers, rather than relying on auctions. Activities in the company’s TES segment consist of the production and sale of new and used specialty equipment and vocational trucks, which includes equipment from leading original equipment manufacturers (OEMs) across its end-markets, as well as its Load King brand.

Aftermarket Parts and Services (APS)

This segment includes the sale of specialized aftermarket parts, including captive parts related to its Load King brand, used in the maintenance and repair of the equipment the company sells and rents. Specialized tools, including stringing blocks, insulated hot stick, and rigging equipment, are sold or rented to the company’s customers on an individual basis or in packaged specialty kits. The company also provides truck and equipment maintenance and repair services, which are executed throughout its nationwide branch network and fleet of mobile technicians supported by its 24/7 call center based in Kansas City, Missouri.

Operations

The company offers equipment rental, new and used equipment sales, and aftermarket parts and service out of more than 35 locations across the U.S. and Canada. Customers receive additional support throughout the country from Custom Truck’s twenty-four hour, seven-day a week (24/7) call center, approximately 80 mobile technicians, and over 100 third-party locations. Custom Truck and its customers also benefit from its sophisticated sourcing model and large-scale integrated production and customization capabilities.

Custom Truck owns one of the industry’s largest fleets of specialty rental equipment focused on electric utility transmission and distribution (T&D), rail, telecommunications, and infrastructure end-markets through the company’s ERS segment. As of December 31, 2022, the company’s fleet consisted of 10,000 units with an average unit age of approximately 3.7 years. The company’s rental fleet is managed on a national level, which allows it to efficiently reposition equipment in response to shifts in regional demand and thereby sustain strong utilization levels.

As is customary among equipment rental companies, the company sells used equipment out of its rental fleet to end user customers. The company also offers a broad variety of new equipment for sale across its end-markets, often highly customized to meet its customers’ specific needs. Integrated production capabilities and extensive knowledge gained over a long history of selling equipment have positioned Custom Truck uniquely in the market as a trusted partner for customers seeking tailored solutions with short lead times. New and used equipment sales are accomplished through its TES segment.

Through its APS segment, the company provides its customers a total job-site solution, offering a range of products for rent or sale to fully outfit their equipment and crews for activity in the field. The company’s comprehensive APS offering expands opportunities to serve its equipment rental and sales customers through the convenience of a single vendor for all their specialty equipment, tools and accessories needs.

End-Market

The company’s core end-markets include operators of vocational and specialty trucks and associated parts and services. These operators serve infrastructure-related electric utility Transmission and Distribution (T&D), telecom, rail, forestry, and waste management, among others.

The company provides the specialty equipment required to maintain and install telecom cells, towers, and communication lines. The company’s North American customers are principally Class I railroads and related contractors. The company also serves the general infrastructure end-market, which includes surface transportation, national highway performance, highway safety, metropolitan transit, and other key infrastructure systems, including residential and non-residential waste and water. The company considers the waste end-market as part of the general infrastructure industry.

Products and Services

Equipment Rental Solutions and Truck and Equipment Sales

The company’s equipment rental fleet consists of more than 10,000 units, which management believes is among the largest specialty equipment rental fleets in North America. The company’s fleet consists of more than 250 product variations to serve the specialized needs of its customers, including various terrain options, such as truck mounted, rail mounted, track mounted, and all-wheel drive. The company’s equipment can reach transmission lines and cell sites in excess of 200 feet in the air, dig to a depth of 60 feet to install telephone and power line poles, provide power line and fiber line pulling capacity of up to 40,000 pounds, and reach remote and inaccessible areas for rail maintenance. A large percentage of the company’s fleet is insulated, which allows customers to safely work on live electric lines. The company’s equipment is regularly tested for safety, which includes regulation-mandated dielectric testing of all insulated units to ensure safe operations nearelectrical wiring. The majority of the company’s equipment can be used across a variety of end-markets and many of its customers operate in multiple end-markets. Rental rates vary depending on product type, geography, demand, and other factors.

Examples of the company’s rental and sales equipment include:

Bucket Trucks: Trucks equipped with a bucket mounted on an insulated or non-insulated hydraulic lifting aerial device used to maintain and construct utility, rail, or telecommunication lines.

Digger Derricks: Trucks equipped with a boom and auger used to dig holes and set utility, rail, and telephone poles.

Cable Placers: Equipment used to string new and re-conduct overhead utility, rail, telecom, or cable lines including pole trailers, reel handling trailers, and other material handling trailers.

Boom Trucks: Trucks equipped with a boom mounted on an insulated or non-insulated hydraulic lifting aerial device used to maintain and construct utility, rail, or telecommunication lines.

Rail Trucks: Trucks equipped with specialty equipment to drive on rail tracks.

Roll-Off Trucks: Trucks equipped to transport waste containers.

Knuckleboom Trucks: Trucks equipped to lift for utility, construction, and building materials applications.

Vacuum Trucks: Trucks equipped to safely dig holes and transport materials by vacuuming materials or liquids.

Cranes: Equipment made to lift heavy objects utilized in the company’s core markets.

Pressure Diggers: Trucks equipped with a pressure drill used to dig holes for utility poles, structure bases, and foundations through hard materials, such as rock.

Underground Equipment: Variety of equipment used to place and remove underground utility and telecom lines without disruption to the surface.

Trucks and Miscellaneous Equipment: HiRail equipment including HiRail service trucks, grapples, roto-dumps, PTC trucks, etc.

Aftermarket Parts and Services

The company’s APS offerings include a broad range of parts, tools, and accessories inventory, which is a natural extension of its core equipment offering and can be rented or purchased on an individual basis or in packaged specialty kits.

The technical nature of certain parts, tools, and accessories requires periodic testing in a certified lab and expertise in specialized repairs, which the company provides at its test and repair facilities. The company provides nationwide coverage through eight locations that serve as hubs for the rental and sale of parts, tools, and accessories, and five of which offer technical test and repair.

Examples of the company’s aftermarket parts and services include:

Equipment Parts: Aftermarket replacement parts for various types of trucks and equipment sold and rented by Custom Truck.

Stringing Blocks: Stringing dollies and accessories used to string powerline, telephone line (including fiber), or cable, above ground or underground in the new construction, rebuild, or maintenance of the lines.

Augers: Tool used to dig holes for power, telephone, or cable poles and also used to dig holes for structure bases, pilings, and foundation supports.

Insulated Tools: Extension arms, temp arms, insulated ladders, etc., used to insulate and dielectrically protect workers and temporarily reposition powerlines for safe execution of tasks while working at height in live line circumstances.

Other parts, tools, and accessories (PTA): Crimping tools and dies, pumps/motors, underground fiber laying tools, and various other tools used in either utility, telecom, or rail applications.

Test and Repair Services: Testing and inspections of various tools and safety equipment and personal protective equipment (“PPE”) to comply with regulatory and safety requirements.

Upfit and Repair Services: Customizing existing heavy-duty trucks by adding features, and repair services, including labor and parts, for customer-owned trucks.

Geographical Diversity

The company has a large geographic footprint that enables it to provide local service throughout North America. The company’s more than 35 locations are strategically located to provide access to key high-growth end-markets and have sufficient geographic reach to provide a holistic solution to nationwide accounts. The company’s footprint is further expanded by over 100 third-party service locations. The company maintains a 24/7 call center, as well as a large team of mobile technicians, ensuring that its customers can quickly access experienced technicians regardless of geography.

Customers

The company serves more than 3,000 customers, with the top 15 customers representing approximately 25% of total revenue and no single customer representing greater than 4% of total revenue in 2022. The company has very strong brand recognition among its industry-leading customers.

Growth Strategy

The company offers a full suite of specialty equipment services and a broad portfolio of products, which provides it with numerous channels for future growth and opportunities to deepen customer relationships. The key elements of the company’s strategy are to invest in rental fleet to meet growing demand; grow equipment sales across both current and new customers, end-markets, and product offerings; increase penetration of aftermarket parts and service; and continue to pursue domestic geographic expansion.

Sales and Marketing

Sales

The company operates with a nationwide direct sales team to address the specialized needs of its customer base and to cultivate strategic partnerships with key customers. The company’s more than 100-member sales organization is led by members of its senior management team, including Presidents and Regional Sales Managers. The average years of experience in the industry of the company’s sales personnel is more than 20 years.

The company divides the remainder of its sales organization into regional go-to market teams for its ERS, TES and APS segments consisting of Territory Managers supported by Inside Rental Representatives and Assistants. Territory Managers are responsible for developing new relationships and maintaining communication with key decision makers at customer organizations and working with employees at both the corporate office and on individual job sites to ensure customer satisfaction. After a rental opportunity is generated, Inside Rental Representatives and Assistants serve in a support role by working directly with customers to finalize orders, schedule delivery, coordinate payment and handle inbound requests. This direct communication helps expedite future orders on rental equipment availability and rate quotes.

Marketing

The company utilizes targeted advertising, tradeshows, focused email distributions, a comprehensive equipment catalog, and its website for marketing its products and services. The company’s rental catalog contains detailed technical information and diagrams for all its products, while the website offers easy access to equipment specifications and rental listings. The company supplements these materials with 10 to 12 major marketing publications annually. In addition to print and online publications, the company participates in national and select regional trade shows, which represent important customer touch points for the sales team to both approach new customers and maintain strong relationships with existing customers.

Intellectual Property

The company’s material trademarks are registered or pending applications for registrations in the U.S. Patent and Trademark Office and various non-U.S. jurisdictions. The company uses Custom Truck One Source and Truck Utilities as unregistered trademarks and Load King as a registered trademark. Additionally, pursuant to an agreement with Terex, the company has a revocable, royalty-free, limited license to use certain Terex trademarks to promote the sale and servicing of Terex products, subject to certain conditions of use.

History

The company was founded in 1988. The company was formerly known as Nesco Holdings, Inc. and changed its name to Custom Truck One Source, Inc. in April 2021.