Custom Truck One Source, Inc. ((CTOS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Custom Truck One Source, Inc. painted a picture of robust growth and strategic optimism, despite some challenges. The overall sentiment was positive, with strong revenue and EBITDA growth, increased utilization, and a promising outlook for 2026 driven by strategic investments and high demand in the Transmission and Distribution (T&D) sector. However, there were noted challenges in the TES segment backlog and gross margin, alongside economic uncertainties affecting customer purchase decisions.
Strong Third Quarter Performance
Custom Truck One Source, Inc. reported a remarkable third quarter, with a 20% increase in adjusted EBITDA and an 8% rise in revenue compared to the same period in 2024. This growth was largely driven by strong demand in the core T&D markets and excellent execution by the company.
Increased Utilization and Rental Revenue
The company achieved an average utilization rate of over 79% during the quarter, marking an increase of more than 600 basis points from the previous year. This improvement was accompanied by an 18% rise in rental revenue, underscoring the strength of their rental operations.
Record OEC on Rent
Custom Truck ended the third quarter with over $1.3 billion of Original Equipment Cost (OEC) on rent, setting a new record for the highest quarter-end level. This represents a 17% year-over-year increase, highlighting the company’s expanding rental fleet.
Strong Order Growth
The company saw a significant increase in signed orders from local and regional customers, which were up more than 40% year-over-year. This surge contributed to an overall order growth of over 30%, indicating strong market demand.
Positive Outlook for 2026
Looking ahead, Custom Truck is optimistic about 2026, with expectations for increased transmission demand and strategic investments in their rental fleet positioning the company for continued growth.
TES Segment Backlog Decrease
Despite strong sales activity, the TES segment experienced a $55 million decrease in new sales backlog during the quarter. This decline could pose challenges for future sales, warranting close attention.
Slight Decline in Segment Gross Margin
The TES segment’s gross margin fell to 15% in Q3, down from the previous year. This decline was attributed to an elevated supply of certain vocational vehicles and pricing pressures.
Economic Uncertainty Impact
Economic uncertainty, high interest rates, and an inflationary pricing environment have led to hesitancy among customers regarding new equipment purchases, posing potential risks to future sales.
Forward-Looking Guidance
Custom Truck One Source, Inc. reaffirmed its fiscal 2025 guidance, projecting revenue between $1.97 billion and $2.06 billion and adjusted EBITDA ranging from $370 million to $390 million. The company plans to invest over $250 million in rental fleet CapEx to support growth, while also increasing non-rental CapEx for production improvements. Despite macroeconomic challenges, the company remains optimistic about sustained demand and has reaffirmed its full-year guidance.
In conclusion, Custom Truck One Source, Inc.’s earnings call reflected a strong performance and a positive outlook, driven by strategic investments and robust demand in the T&D sector. While challenges exist in the TES segment and economic uncertainties persist, the company’s reaffirmed guidance and growth strategies suggest a promising future.