Financial Data and Key Metrics Changes - Custom Truck One Source reported $482 million in revenue for Q3 2025, an 8% increase compared to Q3 2024. Adjusted gross profit was $156 million, up 13%, and adjusted EBITDA was $96 million, reflecting a 20% growth year-over-year [12][4][10] - Average OEC on rent increased to over $1.26 billion, a 17% year-over-year rise, with average utilization reaching just over 79%, up more than 600 basis points from Q3 2024 [7][12] - The company reaffirmed its fiscal 2025 revenue guidance in the range of $1.97 billion to $2.06 billion and adjusted EBITDA guidance of $370 million to $390 million [19][21] Business Line Data and Key Metrics Changes - In the ERS segment, revenue was $169 million, up more than 12% from $151 million in Q3 2024, with rental revenue increasing by 18% year-over-year [13][14] - The TES segment reported $275 million in equipment sales, a 6% increase year-over-year, with a gross margin of 15%, slightly down from the previous year [15][16] - The APS segment generated $38 million in revenue, up 3% compared to Q3 2024, with an adjusted gross margin exceeding 26% [17] 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][6] - The overall annual growth rate of spending in the T&D sector is expected to be nearly 10%, with transmission spending anticipated to grow over 15% annually through 2029 [6] 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 [19][21] - 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 the next fiscal year [19][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustained demand in the utility sector, particularly in transmission, and indicated that the decisions made in Q3 to invest in the rental fleet will support growth into 2026 [24][10] - Despite macroeconomic uncertainties, the company remains confident in its ability to achieve double-digit adjusted EBITDA growth this year [21][10] Other Important Information - The company reported borrowings under its AVL at $708 million, an increase of $38 million from the previous quarter, with substantial liquidity available [18] - The company noted that tariffs will have a limited direct cost impact due to mitigation actions taken earlier in the year, although some customers are hesitant about new equipment purchases due to economic uncertainty [10] Q&A Session Summary Question: Visibility for 2026 to sustain momentum - Management noted strong demand in the utility sector, particularly in transmission, and expressed confidence in the growth trajectory heading into 2026 [24] Question: Clarification on inventory reduction timing - Management clarified that the $125 million-$150 million reduction in inventory is expected by the end of the current year, with a target to reach six months of inventory by the end of next fiscal year [30] Question: Update on utility T&D customers' project execution - Management confirmed that the utility sector is back on track, with significant demand for transmission projects and improved project execution [36] Question: Drivers of organic growth within TES - Management highlighted strong demand from utility and forestry contractors, with a 30% increase in signed orders year-over-year in the TES segment [40][41] Question: Update on large transmission pipeline projects - Management reported good demand for transmission utilization and noted specific projects driving this demand, with expectations for continued growth [46][47]