Custom Truck One Source(US:CTOS)2025-07-31 14:00Financial Data and Key Metrics Changes - The company reported a revenue of $511 million for Q2 2025, representing a 21% increase compared to 2024. Adjusted gross profit and adjusted EBITDA both grew by 17% to $157 million and $93 million, respectively [14][21]. - Average utilization of the rental fleet improved to just under 78%, up from 72% in Q2 2024, while average OEC on rent increased to over $1.2 billion, a 16% year-over-year rise [14][15]. Business Line Data and Key Metrics Changes - The ERS segment generated $170 million in revenue, up more than 23% from $138 million in Q2 2024, with significant increases in both rental revenue and rental asset sales [15][17]. - The PES segment achieved over $100 million in sales for two consecutive months, marking a historical milestone, with year-over-year sales growth exceeding 22% [8][17]. - The APS segment reported revenue of $38 million, reflecting a 3% increase year-over-year [19]. Market Data and Key Metrics Changes - Demand in core T and D markets remained strong, contributing to robust results across ERS and TES segments [6][12]. - Signed orders from local and regional customers increased by more than 45% year-over-year, driving overall signed order growth of just under 35% [9][18]. Company Strategy and Development Direction - The company plans to continue investing in its rental fleet to meet current and projected demand, with a focus on maintaining adequate equipment levels [8][16]. - The management expressed confidence in achieving expected growth targets for 2025, reaffirming revenue and adjusted EBITDA guidance [6][21]. Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment remains volatile but expressed optimism due to strong fundamentals and order flow [6][12]. - The company is closely monitoring legislative and regulatory changes, particularly regarding tariffs and emission standards, which are expected to have minimal impact on business this year [10][11][25]. Other Important Information - The company finished Q2 with net leverage of 4.66x, an improvement from the end of Q1, and aims to reduce net leverage to below three times by the end of fiscal 2026 [20][21]. - The company expects to generate meaningful levered free cash flow in 2025, targeting over $50 million [21]. Q&A Session Summary Question: Update on tariff impact for 2025 and quarterly cadence - Management indicated that the tariff impact will be minimal this year, with some costs expected to hit in Q3 and Q4, but overall, the business is well-managed regarding supply base [24][25]. Question: Concern regarding backlog decline - Management acknowledged the backlog decline but emphasized that revenue growth of 21% is a positive trend, with strong order volume still being observed [26][28].