Custom Truck One Source Q2 2025 Earnings Report

Custom Truck One Source EPS Results

• Actual EPS: -$0.13
• Consensus EPS: -$0.05
• Beat/Miss: Missed by -$0.08
• One Year Ago EPS: -$0.10

Custom Truck One Source Revenue Results

• Actual Revenue: $511.48 million
• Expected Revenue: $460.73 million
• Beat/Miss: Beat by +$50.75 million
• YoY Revenue Growth: +20.90%

Custom Truck One Source Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 9:00AM ET

Custom Truck One Source (NYSE:CTOS) provides specialty equipment rental and sale services to the electric utility transmission and distribution, telecommunications, rail, forestry, waste management, and other infrastructure-related industries in the United States and Canada. The company operates through three segments: Equipment Rental Solutions (ERS), Truck and Equipment Sales (TES), and Aftermarket Parts and Services (APS). The ERS segment owns new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks, and other machinery and equipment. The TES segment offers new equipment for sale to be used for end-markets, which can be modified to meet customers specific needs. The APS segment provides truck and equipment maintenance and repair services; and rents and sells specialized tools, including stringing blocks, insulated hot stick, and rigging equipment, as well as sale of specialized aftermarket parts. The company was formerly known as Nesco Holdings, Inc. and changed its name to Custom Truck One Source, Inc. in April 2021. Custom Truck One Source, Inc. was founded in 1988 and is headquartered in Kansas City, Missouri.

Custom Truck One Source Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: We delivered 21% revenue growth and 17% adjusted EBITDA growth year-over-year in Q2 and are reaffirming our full-year 2025 guidance.
• Positive Sentiment: Rental demand remained robust with average fleet utilization at just under 78% and average OEC on rent rising 16% year-over-year to over $1.2 billion, driving record quarter-end OEC of $1.56 billion.
• Positive Sentiment: The TES segment achieved two consecutive months of sales over $100 million, marking its second-highest quarterly sales ever with 22% year-over-year growth and a 35% increase in signed orders.
• Positive Sentiment: Net leverage improved to 4.66x at quarter end, and management targets reducing leverage below 3x by the end of fiscal 2026 while generating over $50 million of levered free cash flow in 2025.
• Neutral Sentiment: Tariffs are expected to have a minimal direct cost impact this year, though regulatory uncertainty remains around future EPA and CARB emission standards and related pre-buy activity.

Presentation

[Operator]

Hello, and welcome to the Custom Truck OneSource, Inc. Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Now I would like to turn the call over to Brian Pearman. Brian, the floor is yours.

[Brian Perman, VP - IR at Custom Truck One Source]

Thank you. Before we begin, we would like to remind you that management's commentary and responses questions on today's call may include forward looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause results to differ, please refer to the risk factors section of the company's filings with the SEC.

[Brian Perman, VP - IR at Custom Truck One Source]

Additionally, please note that you can find reconciliations of the historical non GAAP financial measures discussed during the call in the press release we issued yesterday afternoon. That press release and our second quarter investor presentation are posted on the Investor Relations section of our website. We filed our second quarter twenty twenty five ten Q with the SEC yesterday afternoon. Today's discussion of our results of operations for Custom Truck OneSource Inc. Or Custom Truck is presented on a historical basis as of or for the three months ended 06/30/2025 and prior periods. Joining me today are Ryan MacMonagle, CEO and Chris Efrgesi, CFO. I will now turn the call over to Ryan.

[Ryan McMonagle, CEO at Custom Truck One Source]

Thank you, Brian, and welcome, everyone, to today's call. Custom Truck had a very strong second quarter, delivering 21% revenue growth and 17% adjusted EBITDA growth versus 2024, characterized by continued solid fundamentals across our primary end markets and excellent execution by our entire team.

[Ryan McMonagle, CEO at Custom Truck One Source]

Demand in our core T and D markets remained robust, leading to strong results in both our ERS and TES segments and overall sequential and year over year revenue growth for the quarter. We continue to navigate the volatile macroeconomic environment through regular engagement with our customers and suppliers. Our steady business activity and strong intra quarter order flow continue to reinforce our optimism about achieving our expected growth targets in 2025. As a result, we are reaffirming our previous fiscal twenty twenty five revenue and adjusted EBITDA guidance. While Chris will discuss our segment's performance in greater detail, I'd like to highlight some key trends.

[Ryan McMonagle, CEO at Custom Truck One Source]

In ERS, our utility contractor customers continue to see sustained and increased levels of activity, which they expect to persist for the foreseeable future, driven largely by unprecedented secular growth in electricity demand and the continuing need for substantial grid maintenance spending by the utilities. The strong rental demand in the utility end market and across our other primary end markets resulted in average OEC on rent for q two of over $1,200,000,000, a 16% year over year increase. Average utilization in the quarter was just under 78%, up almost 600 basis points versus q two of last year and up sequentially as well. We continue to see mid 70% to mid 80% utilization rates across most of our fleet, demonstrating the long term resilience of our end markets. These trends resulted in significant year over year increases in both rental revenue and rental asset sales, driving total ERS segment revenue up more than 23% versus q two of last year.

[Ryan McMonagle, CEO at Custom Truck One Source]

We continue to leverage the substantial rental demand in ERS to selectively invest in our rental fleet. At the end of q two, our total OEC was just over $1,560,000,000 our highest quarter end level ever. We plan to continue to invest during the remainder of the year to ensure we have adequate equipment to meet current and projected rental demand. PES saw outstanding sales performance in the quarter, achieving several milestones. We experienced two consecutive months of PES sales over $100,000,000 each for the first time in our history in the second quarter and saw our second highest quarter of sales ever.

[Ryan McMonagle, CEO at Custom Truck One Source]

This resulted in significant year over year sales growth of more than 22% and sequential growth of more than 30%. While our backlog was down in the quarter, our intra quarter order flow remains quite strong, particularly among local and regional customers. Signed orders in the quarter from this portion of our customer base were up more than 45% year over year, driving overall signed order growth of just under 35% on a year over year basis. As we expected, segment gross margin began to normalize in the second quarter and was up versus q one. Overall, our current pace of orders and the continued strong demand for vocational vehicles across our end markets combined to provide us with the confidence in our outlook for PES for the rest of the year.

[Ryan McMonagle, CEO at Custom Truck One Source]

There have been several legislative and regulatory matters that have affected the overall economic environment for which we gained greater clarity in the recent months. First, the passage of the recent federal spending and tax bill provided a clear understanding of the administration's economic policy and included an accelerated or bonus depreciation provision that we feel will be beneficial to Custom Trucks business, particularly for our small and medium sized customers. Next, while tariffs remain an area of focus for us as a result of the combination of our proactivity around certain inventory purchases in the first half of the year and the current expectation for the tariff effect on our vendors, we feel that tariffs will have a limited direct cost impact on our business this year. We continue to hear about uncertainty related to new equipment purchase decisions from some of our smaller customers. We obviously continue to monitor changes to the administration's product and regional tariff policies, and we'll adjust our responses accordingly.

[Ryan McMonagle, CEO at Custom Truck One Source]

Finally, with respect to the previously announced changes to emission standards from both the EPA and CARB, final decisions have yet to be made. However, last month, congress revoked California's waivers that allowed CARB to separately legislate emission standards, effectively ending upcoming changes to truck and auto emission standards as well as plans to phase out gas powered vehicles. The orders are being challenged in court by the state of California. In addition, we continue to wait for clarity from the EPA on the twenty twenty seven low NOx emission standards and warranty requirements. As we stated in recent quarters, our current outlook for TES assumes no pre buy resulting from changes in either EPA or carbon emission standards. We are reaffirming our full year 2025 guidance, Our strong year to date results, our robust order flow and resilient end market demand continue to drive our expected growth across our consolidated business this year. Despite some volatility in the macro environment, our business outlook remains positive. Long term sustained end market demand buoyed by secular megatrends and our ability to execute on behalf of our customers sets us apart from our competition. Our multi decade relationships with strategic suppliers and our long tenured and diversified customer base will continue to be key to our success.

[Ryan McMonagle, CEO at Custom Truck One Source]

I continue to have the highest degree of confidence in the Custom Truck team and want to thank everyone for their hard work and dedication that helped achieve these results this quarter. We look forward to updating everyone on our progress on next quarter's call. With that, I'll turn it over to Chris to discuss our second quarter results in detail.

[Christopher Eperjesy, CFO at Custom Truck One Source]

Thanks, Ryan. For the second quarter, we generated $511,000,000 of revenue, dollars 157,000,000 of adjusted gross profit, and $93,000,000 of adjusted EBITDA, up 21%, 17%, and 17%, respectively, versus 2024. On a year over year basis, all of our rental segment KPIs improved in the quarter. Average utilization of the rental fleet for Q2 was just under 78% compared to under 72% in Q2 of the prior year. Average OEC on rent in the quarter was over $1,200,000,000 compared to slightly more than $1,000,000,000 in 2024.

[Christopher Eperjesy, CFO at Custom Truck One Source]

Both metrics so far in Q3 remain strong and are consistent with the averages we experienced in Q2, currently standing at almost $1,220,000,000 and 77%, respectively. As of today, OEC on rent is up more than $160,000,000 or more than 15% versus a year ago. The ERS segment had $170,000,000 of revenue in Q2, up more than 23% from $138,000,000 in 2024. Both rental revenue and rental asset sales were up meaningfully on a year over year basis, showing 1740% growth, respectively. Adjusted gross profit for ERS was $100,000,000 for q two, up 20% from q two of last year.

[Christopher Eperjesy, CFO at Custom Truck One Source]

Adjusted gross margin for ERS was 59% in the quarter, slightly lower versus the same period last year, primarily driven by a higher mix of rental asset sales. For Q2, we maintained margins in the expected ranges of the low to mid-seventy percent range for rental revenue and the mid-twenty percent range for rental asset sales. On rent yield was 38.6% for the quarter, up slightly on a sequential basis. Net rental CapEx in Q2 was $64,000,000 and our fleet age improved slightly to three years. Our OEC and the rental fleet ended the quarter at over $1,560,000,000 up more than $100,000,000 versus the end of Q2 twenty twenty four and up $12,000,000 in the quarter, reflecting our strategic investment in the rental fleet given the strong demand environment we continue to experience across our primary end markets.

[Christopher Eperjesy, CFO at Custom Truck One Source]

We expect to continue to invest in the fleet through the remainder of this year, resulting in mid single digit percentage OEC growth versus the 2024. As we always do, we will adjust our CapEx plans to reflect our customers' demand to both rent equipment and purchase used equipment out of our fleet. In the TES segment, we sold $3.00 $3,000,000 of equipment in q two, up more than 22% year over year and more than 30% sequentially. The second quarter represented the second highest quarterly sales for TES in our history and saw two consecutive months of sales over $100,000,000 for the first time in our history. Gross margin in the segment in Q2 was 15.5%, down from Q2 twenty twenty four, but up more than 45 basis points from last quarter.

[Christopher Eperjesy, CFO at Custom Truck One Source]

We expect TES gross margins to continue to improve in the second half of this year. TES new sales backlog decreased by $85,000,000 in the quarter, driven by strong sales activity in the quarter. At approximately four months of LTM PES sales, our PES backlog is within our targeted historical average range. Net orders were $218,000,000 in Q2, up more than 15% to 2024. So far in q three, we continue to see strong sales and order flow, and our backlog has grown as well.

[Christopher Eperjesy, CFO at Custom Truck One Source]

That combined with ongoing feedback from our customers regarding their equipment needs for the 2025 provides us with confidence that we will see the expected double digit revenue growth in PES this year. Our strong and long standing relationships with our chassis, body and attachment vendors continue to be an important driver of PES production. Our current level of inventory positions us well to meet our production, fleet growth and sales goals for the year as well as help mitigate any impact from tariffs. Our APS business posted revenue of $38,000,000 in the quarter, up 3% compared to Q2 of last year and 6% sequentially. Adjusted gross margin in the segment was 26% for Q2, up both year over year and sequentially.

[Christopher Eperjesy, CFO at Custom Truck One Source]

Borrowings under our ABL at the end of Q2 were $670,000,000 an increase of $15,000,000 versus the end of Q1, largely to fund rental equipment CapEx and certain other working capital needs. As of the end of q two, we had $275,000,000 available and over $230,000,000 of suppressed availability under the ABL. With LTM adjusted EBITDA of $349,000,000 we finished Q2 with net leverage of 4.66x, an improvement from the end of Q1. Despite the tactical pull forward of some of our inventory purchases into the first half of the year, we continue to expect to reduce our inventory by the end of the year, which should contribute to lower balances on our floor plan lines as well as reduced borrowings on the ABL. We intend to use our levered free cash flow this year to reduce our net leverage and continue to target a level of below three times.

[Christopher Eperjesy, CFO at Custom Truck One Source]

This remains a primary and important goal for us and one that we expect to achieve by the end of fiscal twenty twenty six. We are reiterating our previous 2025 guidance with total revenue in the range of $1,970,000,000 to $2,060,000,000 adjusted EBITDA in the range of $370,000,000 to $390,000,000 and net rental CapEx of approximately $200,000,000 Our segment guidance also remains unchanged. We continue to expect to generate meaningful levered free cash flow in 2025, setting a target of more than $50,000,000 and to deliver a meaningful reduction in our net leverage by the end of the fiscal year. In closing, I want to echo Ryan's comments regarding our continued strong business outlook. Despite some macroeconomic uncertainty in the first half of the year, our year to date results and the continued strong fundamentals of our end markets allows us to be optimistic about the long term demand drivers in our industry and our ability to return to double digit adjusted EBITDA growth this year.

[Christopher Eperjesy, CFO at Custom Truck One Source]

With that, I will turn it over to the operator to open the line for questions.

[Operator]

And your first question comes from the line of Nicole DeBlase with Deutsche Bank. Nicole, please go ahead.

[Naim Kaplan, Equity Research Associate at Deutsche Bank]

Hi, good morning. This is Nayim Kaplan on for Nicole DeBlase. First question, can we get an update on the tariff impact to 2025 as well as the quarterly cadence of the impact?

[Ryan McMonagle, CEO at Custom Truck One Source]

Yes. Good to talk to you again, and happy to talk about tariffs. It really is kind of going to be a very small impact in our business this year. So I think the team has done a great job of pulling forward some of our chassis purchases to receive those chassis kind of pre tariff pre unique tariff increase. And then we've done a great job of just managing the rest of our supply base.

[Ryan McMonagle, CEO at Custom Truck One Source]

Minimal cost impact in the business this year. What cost impact we will see? You'll see some of that hit in the third and fourth quarter this year, which will then be something that we're managing through as we head into 2026. But again, minimal cost impact we saw. TES gross margin increase from Q1 to Q2, which is what we talked about and are happy kind of that, that business is performing that way.

[Naim Kaplan, Equity Research Associate at Deutsche Bank]

Okay. Got it. And just one follow-up, if I may. So the backlog has declined quarter over quarter and year over year. Is that a concern?

[Naim Kaplan, Equity Research Associate at Deutsche Bank]

And does the quarter over quarter decline reflect the business returning to a more seasonal pattern? And if you have an expectation also for the backlog at the year end, like should we expect growth in the back at the end of the year?

[Ryan McMonagle, CEO at Custom Truck One Source]

Yes. It's a great question, and it did decline. You're correct that it did decline. But you have to remember, see, revenue was up 21% in the quarter as well. And I think that's in my prepared comments, that's where I talked about what we're watching closely is order volume.

[Ryan McMonagle, CEO at Custom Truck One Source]

So I think I said that our our regional team, our local team order orders one. Right? So those are sign signed orders was up 45% q two on q two. And for the entire company, it was up almost 30% Q2 on Q2. So we're still seeing really good orders, one.

[Ryan McMonagle, CEO at Custom Truck One Source]

It is part of why it's important for us to keep inventory at a level that we can deliver intra quarter on those orders too. But now we're feeling really good. Anytime you put up 21% growth, I think that's a positive trend, and we are feeling good about the back half of the year. And even at the midpoint of our guidance, you see that there's still an implied good growth rate in the back half of the year.

[Naim Kaplan, Equity Research Associate at Deutsche Bank]

All right. Thank you very much. I'll pass it on.

[Ryan McMonagle, CEO at Custom Truck One Source]

Thanks.

[Operator]

There is no further question at this time. I will now hand it over to Ryan McMunnichall for closing remarks. Ryan?

[Ryan McMonagle, CEO at Custom Truck One Source]

Great. Thanks, everyone, for your time today and your interest in Custom Truck. We look forward to speaking with you on our next quarterly earnings call. And in the meantime, don't hesitate to reach out with any questions. Thanks again, and have a great day.

[Operator]

That concludes today's conference call. You may now disconnect.

Participants

Executives

• Brian Perman, VP - IR
• Ryan McMonagle, CEO
• Christopher Eperjesy, CFO

Analysts

• Naim Kaplan, Equity Research Associate at Deutsche Bank