Key Points Shareholders weren't pleased with the rental specialist's third-quarter results. It missed the consensus analyst projections for both revenue and net loss. 10 stocks we like better than Custom Truck One Source › Custom Truck One Source (NYSE: CTOS), a utility vehicle and equipment rental specialist, wasn't a stock market favorite on Tuesday. Investors traded out of the company's shares aggressively, leaving them with an almost 11% loss in value on the day. And that was during a session wh ...

Custom Truck One Source (NYSE:CTOS) Q3 2025 Earnings Call October 28, 2025 09:00 AM ET Company ParticipantsNaim Kaplan - Equity Research AssociateChristopher Eperjesy - CFOBrian Perman - VP of Investor RelationsRyan McMonagle - CEOConference Call ParticipantsMike Schlitzky - Managing Director & Senior Research AnalystBrian Brophy - Managing Director and Senior Equity AnalystNone - AnalystJustin Hauke - Senior Research AnalystOperatorLadies and gentlemen, thank you for standing by. My name is Colby, and I wi ...

Financial Data and Key Metrics Changes - Custom Truck One Source reported $482 million in revenue for Q3 2025, an 8% increase year-over-year, with adjusted gross profit of $156 million and adjusted EBITDA of $96 million, reflecting increases of 13% and 20% respectively compared to Q3 2024 [11][4][9] - Average OEC on rent was over $1.26 billion, a 17% year-over-year increase, with average utilization at just over 79%, up more than 600 basis points from Q3 2024 [6][11] - The company reaffirmed its fiscal 2025 revenue guidance in the range of $1.97 to $2.06 billion and adjusted EBITDA guidance of $370 to $390 million [18][19] Business Segment Data and Key Metrics Changes - The ERS segment generated $169 million in revenue, up more than 12% from $151 million in Q3 2024, with rental revenue increasing by 18% year-over-year [12][4] - The TES segment reported $275 million in equipment sales, a 6% increase year-over-year, with a gross margin of 15%, down from the previous year [14][15] - APS business revenue was $38 million, up 3% year-over-year, with an adjusted gross margin over 26% [16] Market Data and Key Metrics Changes - The utility contractor customers in the ERS segment are experiencing sustained activity levels, driven by increased electricity demand and projected T&D CapEx of approximately $600 billion from 2025 to 2029 [5][4] - The overall annual growth rate of spending in the T&D market is expected to be nearly 10%, with transmission spending projected to grow over 15% annually through 2029 [5] Company Strategy and Development Direction - The company plans to invest more than previously expected in its rental fleet, with net rental CapEx projected at approximately $250 million for the year [18][19] - Custom Truck One Source aims to reduce inventory by $125 million to $150 million compared to the end of the previous year, targeting a reduction to six months of inventory by the end of fiscal 2026 [18][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustained demand in the utility sector and the overall positive business outlook despite macroeconomic uncertainties [9][20] - The company noted that strong year-to-date results and robust order flow support expected growth across its consolidated business [9][20] Other Important Information - The company has seen a significant increase in signed orders, with a year-over-year growth of over 30% in the TES segment [7][39] - Management highlighted the importance of long-term relationships with strategic suppliers and a diversified customer base as key to success [10] Q&A Session Summary Question: Visibility for 2026 to sustain momentum - Management noted strong demand in the utility sector, particularly in transmission, and investments made in Q3 are expected to support growth into 2026 [22][23] Question: Clarification on inventory reduction timing - Management clarified that the $125 million to $150 million reduction in inventory is expected by the end of the current year, with a target of six months of inventory by the end of next fiscal year [27][29] Question: Update on utility T&D customers' project execution - Management confirmed that distribution and transmission projects are back on track, with good demand for new equipment [33][34] Question: Drivers of organic growth within TES - Management indicated strong demand from utility and forestry contractors, with a notable increase in signed orders [35][39] Question: Update on large transmission pipeline projects - Management reported good demand for transmission utilization and ongoing projects that are driving demand [42][43]

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Financial Performance - Q3 2025 revenue reached $482 million, an 8% increase compared to Q3 2024[17] - Adjusted Gross Profit for Q3 2025 was $156 million, a 13% increase compared to Q3 2024[17] - Adjusted EBITDA for Q3 2025 was $96 million, a 20% increase compared to Q3 2024[17] Segment Performance - Equipment Rental Solutions (ERS) revenue increased by 12%, or $18 million, in Q3 2025 compared to Q3 2024[48] Rental revenue increased by 18%, or $19 million[48] - Truck & Equipment Sales (TES) revenue increased by 6%, or $16 million, in Q3 2025 compared to Q3 2024[57] - Aftermarket Parts & Service (APS) revenue increased by 3% in Q3 2025 compared to Q3 2024[59] Fleet and Utilization - The company's specialty rental fleet consists of more than 10,350 vehicles with an original equipment cost (OEC) of $1.62 billion[18] - Average utilization for ERS in Q3 2025 was over 79%, the highest quarterly average in over two years[53] - Average OEC on Rent increased by $180 million and average utilization increased by 610 basis points in Q3 2025 compared to Q3 2024[53] Market Dynamics - The company operates in favorable end markets with positive secular tailwinds, including T&D, Rail, Telecom, and Infrastructure[14] - U S IOU T&D Capex annual total spend in 2024 was ~$91 billion with 8.7% '20-'24 CAGR[21] - U S Telecom / Broadband Capex LTM Spend @ 06/30/25 was $13B+ with 7.9% '21-LTM CAGR[21] Financial Position - Total available liquidity is over $480 million[63] - The company reaffirms its 2025 outlook, projecting consolidated revenue between $1.97 billion and $2.06 billion, representing a 9% to 14% growth[64] Adjusted EBITDA is projected between $370 million and $390 million, representing a 9% to 15% growth[64]

Core Insights - Custom Truck One Source, Inc. (CTOS) reported revenue of $482.06 million for the quarter ended September 2025, reflecting a year-over-year increase of 7.8% [1] - The earnings per share (EPS) was -$0.03, an improvement from -$0.07 in the same quarter last year [1] - The reported revenue fell short of the Zacks Consensus Estimate of $486.77 million, resulting in a surprise of -0.97% [1] - The company did not deliver an EPS surprise, with the consensus EPS estimate also being -$0.03 [1] Revenue Breakdown - Equipment sales revenue was $320.58 million, below the average estimate of $335.62 million from two analysts [4] - Parts sales and services revenue reached $34.33 million, slightly below the estimated $35.09 million [4] - Equipment Rental Solutions (ERS) generated revenue of $169.11 million, exceeding the average estimate of $166.5 million [4] - Truck and Equipment Sales (TES) revenue was $275.42 million, lower than the average estimate of $285.89 million [4] - Rental revenue amounted to $127.14 million, surpassing the average estimate of $120.14 million [4] - ERS rental revenue was $123.95 million, exceeding the estimated $116.78 million [4] - ERS equipment sales revenue was $45.16 million, below the average estimate of $49.72 million [4] - Aftermarket Parts and Services (APS) rental revenue was $3.2 million, slightly below the average estimate of $3.37 million [4] - APS parts and services revenue was $34.33 million, compared to the average estimate of $35.09 million [4] - Total APS revenue was $37.53 million, below the average estimate of $38.46 million [4] Profitability Metrics - Gross profit from Equipment Rental Solutions (ERS) was $50.27 million, exceeding the average estimate of $46.19 million [4] - Gross profit from Aftermarket Parts and Services (APS) was $9.1 million, slightly above the average estimate of $8.83 million [4] Stock Performance - Shares of Custom Truck One Source have returned +7% over the past month, outperforming the Zacks S&P 500 composite's +2.5% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Business Segments - The company operates in three segments: Equipment Rental Solutions, Truck and Equipment Sales, and Aftermarket Parts and Services[97]. - Revenue is generated through rentals, sales, and services of new and used heavy-duty trucks and cranes, with rental revenue primarily from rental agreements and freight charges[82]. Fleet and Utilization - As of September 30, 2025, the rental fleet consists of more than 10,350 units, providing a diverse range of specialty equipment[98]. - The company emphasizes the importance of fleet utilization, defined as the percentage of time the rental fleet is on rent, as a key performance indicator[94]. - Fleet utilization improved to 79.3% for the three months ended September 30, 2025, up from 73.2% in 2024[109]. Financial Performance - Total revenue for the three months ended September 30, 2025, increased by 7.8% to $482,058,000 compared to $447,220,000 in 2024[101]. - Rental revenue for the three months ended September 30, 2025, rose by 17.4% to $127,142,000, up from $108,324,000 in 2024[101]. - Equipment sales for the three months ended September 30, 2025, increased by 4.9% to $320,583,000 compared to $305,476,000 in 2024[101]. - Gross profit for the three months ended September 30, 2025, was $100,753,000, reflecting a 9.7% increase from $91,829,000 in 2024[101]. - Net loss for the three months ended September 30, 2025, decreased to $5,756,000 from a loss of $17,416,000 in 2024, representing a 66.9% improvement[101]. - Adjusted EBITDA for the three months ended September 30, 2025, was $95,963,000, compared to $80,205,000 in 2024, reflecting a significant increase[128]. - Adjusted EBITDA for the twelve months ended September 30, 2025, was $364.8 million, compared to $339.7 million for the prior fiscal year[133]. Equipment Costs - Ending OEC (Original Equipment Cost) for the three months ended September 30, 2025, was $1,621,725,000, an 8.6% increase from $1,493,799,000 in 2024[109]. - Average OEC on rent for the three months ended September 30, 2025, increased by 16.6% to $1,262,477,000 compared to $1,082,679,000 in 2024[109]. - The cost of equipment sales for the three months ended September 30, 2025, was $234,038,000, a 7.4% increase from $218,012,000 in 2024[114]. Sales and Backlog - The sales order backlog consists of purchase orders for customized and stock equipment, although it may not accurately predict future net sales[96]. - Total revenue for the Equipment Rental Solutions segment for the three months ended September 30, 2025, increased by 12.1% to $169,105,000 compared to $150,891,000 in 2024[110]. - Equipment sales for the three months ended September 30, 2025, increased to $275,423,000, a 6.0% rise from $259,902,000 in 2024[113]. - Total revenue for the Aftermarket Parts and Services segment for the three months ended September 30, 2025, was $37,530,000, up 3.0% from $36,427,000 in 2024[116]. - Gross profit for the Aftermarket Parts and Services segment increased by 22.9% to $9,095,000 for the three months ended September 30, 2025, compared to $7,402,000 in 2024[116]. Cash Flow and Debt - As of September 30, 2025, the company had $13.1 million in cash and cash equivalents, up from $3.8 million as of December 31, 2024[120]. - Outstanding borrowings under the ABL Facility increased to $708.5 million as of September 30, 2025, from $582.9 million as of December 31, 2024[120]. - The net debt as of September 30, 2025, was $1,653.3 million, with a net leverage ratio of 4.53[133]. - The company's Consolidated Total Debt Ratio was not greater than 5.00 to 1.00 as of September 30, 2025, allowing for no restrictions on distributions[122]. Risks and Uncertainties - The company faces risks including labor cost increases, supply chain disruptions, and competition in the equipment dealership and rental industries[79]. - Future performance is subject to various uncertainties, including macroeconomic conditions and government spending impacts[79]. - Each one-eighth percentage point change in interest rates would affect interest expense by approximately $1.8 million annually, given the $1,442.1 million of variable rate debt outstanding[138]. Sustainability and Taxation - The company is committed to sustainability and is subject to evolving expectations for environmental, social, and governance initiatives[79]. - The company expects annual cash taxes to remain consistent with previous years despite fluctuations in income tax expense[106].

Financial Performance - Total revenue for Q3 2025 was $482.1 million, an increase of $34.8 million, or 7.8%, compared to Q3 2024[8] - Adjusted EBITDA for Q3 2025 was $96.0 million, a 19.6% increase compared to Q3 2024[19] - Net loss for Q3 2025 was $5.8 million, a decrease of $11.7 million, or 66.9%, compared to Q3 2024[8] - Operating income for Q3 2025 was $32,629,000, an increase from $23,037,000 in Q3 2024[30] - Net income for Q3 2025 was a loss of $5,756,000, compared to a loss of $17,416,000 in Q3 2024[30] - Adjusted Gross Profit for the three months ended September 30, 2025, was $155,528,000, up from $137,785,000 in 2024, reflecting a growth of 12.9%[44] - Gross Profit for the three months ended September 30, 2025, was $100,753,000, compared to $91,829,000 in 2024, indicating a 9.9% increase[44] Revenue Segments - Rental revenue in the Equipment Rental Solutions (ERS) segment increased by 17.7% in Q3 2025 compared to Q3 2024[16] - Revenue in the Truck and Equipment Sales (TES) segment increased by 6.0% in Q3 2025 compared to Q3 2024[17] - APS segment revenue in Q3 2025 increased by 3.0% compared to Q3 2024 due to higher rental revenue[18] - Rental revenue increased to $127,142,000 for the three months ended September 30, 2025, up from $108,324,000 in 2024, representing a growth of 17.4%[44] - Equipment sales reached $320,583,000 for the three months ended September 30, 2025, compared to $305,476,000 in 2024, marking a 4.0% increase[44] Debt and Leverage - Total debt outstanding as of September 30, 2025, was $1,666.4 million, with a net leverage ratio of 4.53x[20] - The net leverage ratio is a key performance measure, calculated as net debt divided by Adjusted EBITDA for the last twelve months, providing insight into the company's debt levels[39] - Long-term debt increased to $1,628,866 from $1,519,882, an increase of 7.2%[31] - The Net Leverage Ratio decreased to 4.53 as of September 30, 2025, down from 4.66 as of June 30, 2025[48] Guidance and Future Outlook - The company reaffirms its full-year revenue guidance for 2025, expecting consolidated revenue between $1,970 million and $2,060 million, with Adjusted EBITDA between $370 million and $390 million[22] - The ERS segment revenue guidance is set between $660 million and $690 million, while the TES segment is expected to generate revenue between $1,160 million and $1,210 million[22] - The company anticipates strong demand in its rental business to continue into 2026 and beyond, driven by core utility markets[21] - The company expects to achieve a meaningful reduction in its net leverage ratio by the end of the fiscal year, despite a lower levered free cash flow target than previously set at $50 million[21] Asset Management - Total assets increased to $3,540,707, up from $3,501,967 as of December 31, 2024, representing a growth of 1.1%[31] - Total current liabilities decreased to $989,493 from $1,000,701, a reduction of 1.1%[31] - Accounts receivable decreased to $182,217 from $215,873, a decline of 15.6%[31] - Inventory levels slightly decreased to $1,035,642 from $1,049,304, a reduction of 1.3%[31] - Inventory reduction is expected to be between $125 million and $150 million compared to the end of last year, reflecting a strategic unwinding of inventory investments[21] Cash Flow - The company reported net cash flow from operating activities of $262,804 for the nine months ended September 30, 2025, compared to $39,934 in 2024, an increase of 558.5%[32] - Cash and cash equivalents at the end of the period increased to $13,058 from $3,805 at the beginning of the period, marking a significant increase of 243.5%[32] Fleet and Utilization - Average fleet utilization increased to 79.3% in Q3 2025 compared to 73.2% in Q3 2024[12] - The company plans to invest an additional net $50 million in its rental fleet this year, leading to at least high-single digit fleet growth based on net OEC[21] - Average OEC on rent increased by $179.8 million, or 16.6%, compared to Q3 2024[8] - Average OEC on rent increased by $180 million, or 17%, in Q3 compared to the same period last year, indicating strong demand in the rental market[21] Orders and Market Activity - Signed orders in Q3 2025 were up 30% year-over-year, with over 40% growth among local and regional accounts[3]

Core Insights - Custom Truck One Source, Inc. reported a strong year-over-year revenue growth of 8% and adjusted EBITDA growth of 20% in Q3 2025, driven by robust performance in core T&D markets [2][3] - The company reaffirmed its 2025 consolidated revenue and adjusted EBITDA guidance, indicating confidence in ongoing demand and market conditions [3][18] Financial Performance - Total revenue for Q3 2025 was $482.1 million, an increase of $34.8 million, or 7.8%, compared to Q3 2024 [5] - Gross profit for Q3 2025 was $100.8 million, up $8.9 million, or 9.7%, from Q3 2024 [5] - Adjusted EBITDA for Q3 2025 reached $96.0 million, a 19.6% increase compared to Q3 2024 [5][16] - The net loss for Q3 2025 was $5.8 million, a decrease of $11.7 million, or 66.9%, compared to Q3 2024 [5] Segment Performance - Equipment Rental Solutions (ERS) segment rental revenue increased by 17.7% in Q3 2025 compared to Q3 2024, attributed to improved fleet utilization [13] - Truck and Equipment Sales (TES) segment revenue rose by 6.0% in Q3 2025, driven by strong demand for vocational vehicles [14] - Aftermarket Parts and Services (APS) segment revenue increased by 3.0% in Q3 2025, supported by higher rental revenue [15] Operational Metrics - Average OEC on rent increased by $180 million, or 17%, in Q3 2025 compared to the same period last year [18] - Fleet utilization improved to 79.3% in Q3 2025 from 73.2% in Q3 2024 [10][13] - The company reported a sales order backlog of $279.8 million as of the end of Q3 2025, down from $395.6 million in Q3 2024 [10] Outlook - The company expects to invest an additional net $50 million in its rental fleet in 2025, anticipating high-single digit fleet growth [18] - Despite a strong order flow, the company expects to come in at the lower end of its TES revenue guidance due to macroeconomic uncertainties [19] - The reinstatement of accelerated depreciation provisions may boost year-end equipment sales [19]

Core Insights - Custom Truck One Source, Inc. and Load King Manufacturing showcased advanced equipment at Utility Expo 2025, highlighting their focus on innovation and customer-centric solutions in the utility, infrastructure, and construction sectors [1] Group 1: Product Launch - The Outback Series was introduced as a new family of tracked easement machines, specifically designed for off-road and hard-to-reach environments [1] - The equipment features retractable capabilities, enhancing its functionality in challenging terrains [1]