Custom Truck One Source Q1 Earnings Call Highlights

Key Points

• Custom Truck reported a strong Q1 with $462 million in revenue and $98 million of Adjusted EBITDA (up 9% and 33% YoY), driven largely by Specialty Equipment Rentals where utilization averaged 81.4%, OEC on rent rose to $1.34 billion, and SER Adjusted EBITDA reached $105 million with a 51.5% margin.
• The company implemented a new segment structure (SER and STEM), reaffirmed full-year revenue guidance at $2.005B–$2.12B and raised Adjusted EBITDA guidance to $415M–$440M, while noting prior-period segment results are not fully comparable due to inter-segment margin accounting changes.
• Balance-sheet priorities focus on deleveraging: net debt was $1.65 billion (net leverage slightly above 4x) and management expects >$50 million of levered free cash flow in 2026 to be used to pay down debt, targeting leverage meaningfully below 4x by year-end and ~3x in 2027 alongside a >$100 million inventory reduction initiative.

Custom Truck One Source NYSE: CTOS reported what management described as a strong start to fiscal 2026, posting record first-quarter revenue and higher profitability driven largely by continued momentum in its rental business serving transmission and distribution (T&D) utility markets.

First-quarter results and segment reporting changes

CEO Ryan McMonagle said the company generated first-quarter revenue of $462 million and Adjusted EBITDA of $98 million, representing year-over-year increases of 9% and 33%, respectively. CFO Christopher Eperjesy attributed the performance to “stronger operating performance across the business and improved rental fundamentals, particularly in our T&D end markets.”

Heading into 2026, Custom Truck implemented a new segment reporting structure: Specialty Equipment Rentals (SER) and Specialty Truck Equipment and Manufacturing (STEM). Investor Relations head Brian Perman and Eperjesy cautioned that prior-period segment disclosures are not fully comparable because 2025 segment results in the earnings materials did not include margin on inter-segment sales, while 2026 results do. Management directed investors to reconciliation and illustrative materials in the investor presentation appendices.

SER: High utilization, growing OEC on rent, and improving yield

Management highlighted SER as the key driver in the quarter, citing improving rental KPIs that carried over from 2025. McMonagle said rental fleet utilization averaged 81.4% in the quarter, up 370 basis points from the year-ago period. He also pointed to average original equipment cost (OEC) on rent of $1.34 billion, up 12% year over year, and said both utilization and OEC on rent were trending above first-quarter averages so far in the second quarter.

Eperjesy said SER third-party revenue (excluding inter-segment sales) rose 16% year over year to $194 million, driven by “strong double-digit growth in both rental revenue and rental equipment sales activity.” SER segment Adjusted EBITDA increased 23% to $105 million, with an Adjusted EBITDA margin of 51.5%, up more than 415 basis points from the prior year’s first quarter.

On-rent yield in SER was 38.9%, and Eperjesy said the metric remained within the company’s “targeted upper 30s-low 40% range.” McMonagle said yield benefited from both pricing and mix, noting the company took a roughly 5% rental price increase in December and has seen transmission work “coming on very strong,” which he said carries higher yield than distribution due to equipment type. He added that price changes take time to fully flow through because increases occur as new equipment goes out on rent.

The company ended the quarter with total OEC of about $1.66 billion, which McMonagle called the highest quarter-end level in its history. Eperjesy said net rental CapEx in Q1 was more than $49 million and that fleet age ended the quarter “just under 3 years,” consistent with the company’s plan to reduce maintenance CapEx and “age the fleet somewhat this year.”

STEM: Backlog growth, cost actions, and stable pricing conditions

In STEM, Eperjesy reported first-quarter third-party revenue of $268 million, up 5% year over year. The increase included equipment sales growth of more than 4% and parts sales and service revenue growth of almost 17%. STEM segment Adjusted EBITDA was $33 million with a 9% margin, which management said reflected significant cost-out and productivity improvements led by the production team, while also noting the impact of inter-segment margin accounting changes between 2025 and 2026.

McMonagle said STEM revenue (excluding sales to SER) rose 5% year over year and that gross margin expanded on productivity improvements. New sales order backlog ended the quarter at $411 million, up more than $76 million sequentially, and Eperjesy said it had grown further to more than $425 million so far in the second quarter. McMonagle said the “far majority” of the backlog is expected to deliver in 2026.

Asked about backlog composition, McMonagle said the largest pickup came from local and regional customers, with strength in “utility and forestry” within that cohort. He added the company has “still seen less of a pickup” in infrastructure-related categories and has not yet seen a significant backlog increase in waste and dump truck segments.

On new equipment pricing, Eperjesy said conditions were “more stable” than a year ago, though he acknowledged some pressure remains and said productivity and cost initiatives have helped offset it.

Guidance raised for EBITDA, revenue outlook reaffirmed

Custom Truck reaffirmed its full-year 2026 revenue outlook while raising its Adjusted EBITDA guidance. McMonagle said the company continues to expect consolidated revenue of $2.005 billion to $2.12 billion. However, he raised both ends of the Adjusted EBITDA range to $415 million to $440 million.

Eperjesy said the EBITDA increase reflects rental outperformance and operating execution, “and not so much…anything on the top line in terms of a more aggressive top-line assumption.” In response to questions about why revenue guidance was unchanged despite strong SER performance, management said the outperformance versus the prior year has been more notable on margins than on revenue, supporting a higher EBITDA outlook while keeping the revenue range intact for now.

For segment revenue guidance, the company reiterated:

• SER revenue: $835 million to $870 million
• STEM revenue: $1.58 billion to $1.655 billion

Eperjesy also noted that overall STEM sales, including inter-segment sales, are expected to be “flat to slightly down” due solely to the expected reduction in SER maintenance rental CapEx. He added that despite a tough comparison in the second quarter of 2025 due to near-record new equipment sales, the company still expects year-over-year growth in Adjusted EBITDA in the second quarter of 2026 given current trends.

Balance sheet, cash flow priorities, and tariff/EPA considerations

Eperjesy said the company ended the quarter with net debt of $1.65 billion and last-twelve-month Adjusted EBITDA of more than $408 million, resulting in net leverage “slightly more than 4 times.” He said leverage improved about 30 basis points sequentially and about 80 basis points versus the year-ago quarter. Availability under the asset-based lending facility was $257 million as of March 31, and he said the company could potentially access additional availability by upsizing the facility based on the borrowing base.

Free cash flow generation and deleveraging remain key priorities, according to management. Eperjesy said the company expects more than $50 million of levered free cash flow in 2026 and aims to reduce net leverage to “meaningfully below 4 times” by fiscal year-end, while progressing toward a 3x target in 2027. In response to a question from JPMorgan’s Tami Zakaria, Eperjesy said the expected levered free cash flow “would all be used to pay down debt.”

On working capital, Eperjesy said inventory was “probably closer to seven and a half months right now” and reiterated the goal of getting below six months on hand. He said the company expects to take “north of $100 million year-over-year out of inventory” as part of its 2026 working capital initiative, while noting most inventory is floor planned and that a $100 million inventory reduction typically equates to roughly $20 million of cash benefit. He said working capital could contribute $30 million to $40 million toward the company’s free cash flow expectation for the year.

During Q&A, McMonagle addressed potential impacts from tariffs and the EPA’s 2027 emissions standards. On Section 232 tariffs, he said the company has “inventory on the ground” and is seeing “a little bit of tariff exposure on some of our bodies,” but added the team has managed it and that OEM conversations are increasingly centered on ordering ahead of 2027. Regarding EPA 2027, he said the company’s fleet age, inventory position, and relationships with chassis OEM partners and dealers leave it “very well-positioned,” while the company monitors remaining open questions around warranty and final EPA rulings.

Management also fielded questions about potential data center-related pushback affecting T&D demand. McMonagle said the company is still seeing strong demand from customers and that “specific noise around data center doesn’t seem to be impacting our customers and the work that they are planning to start” over coming quarters and years.

About Custom Truck One Source NYSE: CTOS

Custom Truck One Source, Inc NYSE: CTOS is a North American provider of specialty rental equipment, parts and services. The company's fleet encompasses a wide range of assets, including cranes, aerial work platforms, trench safety and shoring equipment, fluid management solutions, generators and other industrial machinery. Customers rely on Custom Truck One Source to support projects in construction, energy, telecommunications, industrial manufacturing, municipalities and large-scale events.

Headquartered in Plano, Texas, Custom Truck One Source has expanded through a combination of organic growth and strategic acquisitions to establish a network of more than 140 branch locations across the United States and Canada.

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