Custom Truck One Source Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Revenue rose 10% year over year to $563 million, adjusted EBITDA increased 25% to $117 million, and the company posted $10 million in GAAP net income versus a loss of $28 million a year earlier.
• Strong demand across segments: Rental utilization improved to 81.6%, while SER revenue grew 20% and STEM achieved record third-party revenue of $345 million. Management cited sustained transmission and distribution demand, with quoting activity and third-quarter backlog also increasing.
• Full-year outlook raised: Custom Truck now expects 2026 revenue of $2.1 billion to $2.2 billion and adjusted EBITDA of $437.5 million to $455 million, while targeting more than $50 million in levered free cash flow and net leverage meaningfully below four times by year-end.

Custom Truck One Source NYSE: CTOS reported record second-quarter revenue and raised its full-year outlook, citing sustained demand in transmission and distribution markets, improved rental utilization and record equipment sales.

For the three months ended June 30, the company generated revenue of $563 million, up 10% from a year earlier, while adjusted EBITDA increased 25% to $117 million. On a GAAP basis, net income was $10 million, or $0.05 per diluted share, compared with a net loss of $28 million in the prior-year quarter.

CFO Chris Eperjesy said approximately $19 million of the year-over-year improvement in net income reflected a favorable tax-rate comparison, with the remaining improvement driven by higher operating income. First-half net income totaled $6 million.

Rental segment utilization and revenue rise

Custom Truck’s Specialty Equipment Rentals, or SER, segment recorded third-party revenue of $219 million, excluding inter-segment sales, a 20% increase from the prior-year period. The company attributed the gain to double-digit growth in rental revenue and rental equipment sales activity, including increased rental purchase option, or RPO, activity.

SER adjusted EBITDA rose 26% year over year to $117 million, and the segment’s adjusted EBITDA margin expanded by more than 700 basis points to 53%.

The company’s rental fleet utilization averaged 81.6% during the quarter, up 400 basis points from the second quarter of 2025. Average original equipment cost, or OEC, on rent rose 13% to $1.37 billion. Rent yield was 39.4%, increasing both sequentially and from a year earlier and remaining within the company’s targeted upper-30% to low-40% range.

CEO Ryan McMonagle said the company believes it is in the early stages of a potentially long-lasting transmission demand cycle. He said customer discussions, bidding activity and project planning point to continued demand through the rest of 2026 and beyond.

“There’s a lot of planning going on for new lines that are beginning, that are being prepared, that are being designed, and the equipment is beginning to be staged,” McMonagle said during the question-and-answer session. He said some projects are not expected to begin until 2027 and 2028.

At quarter-end, rental fleet OEC stood at nearly $1.68 billion, the highest level in the company’s history. The fleet’s average age was just over three years. Net rental capital expenditures were $36 million in the quarter.

STEM posts record quarterly third-party revenue

In the Specialty Truck Equipment and Manufacturing, or STEM, segment, third-party revenue reached a quarterly record of $345 million, up 5% from the year-earlier period. Segment adjusted EBITDA was $37 million and adjusted EBITDA margin was 8.5%.

Management said STEM gross margins were slightly lower during the quarter because of increased sales to national accounts, which tend to carry modestly lower margins. Eperjesy said the company continues to target gross margins in a 15% to 18% range for new sales and expects to move toward the upper end as demand remains strong.

New-sales backlog ended the quarter at $322 million, down $89 million sequentially as a result of record second-quarter deliveries. The backlog represented about three-and-a-half months of new sales, slightly below the company’s target range of four to six months. However, June quoting activity increased 26% year over year, and management said backlog had climbed above $340 million so far in the third quarter.

McMonagle said converted orders increased by low single digits, while orders or quotes increased by double digits. The company continues to see strong demand from utility customers, particularly for transmission equipment.

Guidance raised; free cash flow and leverage remain priorities

Custom Truck raised its 2026 consolidated revenue outlook to a range of $2.1 billion to $2.2 billion, representing projected growth of 8% to 13%. It increased adjusted EBITDA guidance to $437.5 million to $455 million, which would represent growth of 14% to 19% from 2025.

• SER revenue is projected at $850 million to $875 million.
• STEM revenue is projected at $1.63 billion to $1.7 billion.
• STEM third-party new-sales revenue is expected to grow 3% to 10%.
• Net rental fleet investment is now expected to be $170 million to $200 million, supporting mid-single-digit net OEC growth.
• Non-rental capital expenditures are expected to total $40 million to $50 million.

The revised rental fleet investment forecast is higher than the company’s prior estimate but remains below the more than $250 million of net fleet capital expenditures recorded in 2025. Management said the younger fleet should allow it to reduce maintenance capital spending while continuing to grow.

The company expects more than $50 million of levered free cash flow in 2026 and expects to reduce its net leverage ratio to meaningfully below four times by year-end. At June 30, net debt was $1.66 billion and net leverage was 3.85 times, an improvement of 0.17 turns sequentially and more than 0.8 turns from a year earlier.

Custom Truck had $229 million available under its asset-based lending facility at quarter-end, along with more than $240 million of potential additional availability based on its borrowing base. Management said it expects inventory and floor-plan balances to decline in the second half, helping support free cash flow.

For the third quarter, the company expects revenue and adjusted EBITDA to rise year over year but to come in modestly below second-quarter levels. Eperjesy said some second-quarter new- and used-equipment deliveries, including RPO buyouts, had originally been expected in the second half. He said the timing shift did not change the company’s increased full-year outlook, and that the fourth quarter remains Custom Truck’s seasonally strongest period.

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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