Custom Truck One Source Reports Record Q3 2026 Results, Raises Full-Year Guidance
Custom Truck One Source, a provider of specialty equipment serving the electric utility, telecommunications, rail, forestry, waste management and other infrastructure-related markets, reported record third-quarter 2026 results, supported by strong rental demand, improved profitability and continued growth in utility transmission and distribution markets. The company also increased its full-year 2026 Adjusted EBITDA and Specialty Equipment Rentals (SER) revenue guidance for the third time this year.
For the three months ended September 30, 2026, CTOS reported revenue of $495.2 million, an increase of $13.2 million, or 2.7%, compared with the third quarter of 2025. Rental revenue increased 20.1%, reflecting stronger equipment demand, higher fleet utilization and growth in the average original equipment cost (OEC) of rental assets in service.The company recorded significant improvements in profitability during the quarter. Gross profit rose to $113.3 million, up $12.5 million, or 12.4%, year over year. Adjusted Gross Profit increased 9.4% to $170.2 million, while net income improved by $8.1 million to $2.3 million compared with the prior-year period.Adjusted EBITDA reached $110.9 million, an increase of $15 million, or 15.6%, compared with the third quarter of 2025. Adjusted EBITDA margin expanded by approximately 250 basis points to 22.4%, supported by higher gross profit and lower floor plan interest expense associated with reduced inventory levels.
Rental Business Records Strong Performance
CTOS’s Specialty Equipment Rentals segment continued to benefit from strong demand for equipment used in electric utility transmission and distribution, infrastructure development and other vocational applications.Average OEC on rent reached a quarterly record of $1.39 billion, increasing $132.2 million, or 10.5%, compared with the third quarter of 2025. Fleet utilization improved to 81.5%, compared with 79.3% in the prior-year period, while OEC on rent yield reached 39.4%.
Rental revenue growth was primarily driven by increased equipment utilization and rental volume. The company also reported a 14.1% increase in SER rental equipment sales, reflecting higher buyout activity involving rental contracts that included purchase options.SER segment Adjusted EBITDA increased 22.5% year over year to $121.9 million. The segment’s Adjusted EBITDA margin expanded to 54.6%, compared with 52.4% in the third quarter of 2025. Adjusted rental gross margin reached 78.7%, reflecting the segment’s strong operating performance.
Demand for specialty equipment supporting utility grid modernization and transmission expansion remained elevated during the quarter. CTOS said utilities continued to invest in transmission and distribution infrastructure as electricity demand increases and power networks require additional capacity and upgrades.The company also reported continued growth in its vocational rental market, where OEC on rent increased approximately $45 million year over year. Management expects this market to provide an additional source of rental revenue growth alongside the strong demand for transmission-related equipment.
The company’s total ending fleet OEC reached a record $1.76 billion at September 30, 2026, an increase of $143 million compared with the same period in 2025. Average fleet age remained approximately three years, supporting the company’s ability to meet customer requirements while maintaining a relatively modern rental fleet.CTOS also reported that rental performance continued to strengthen in October. Average OEC on rent surpassed $1.5 billion, while fleet utilization exceeded 84%, according to management. These results provide additional visibility into rental business growth during the fourth quarter and into 2027.
STEM Segment Faces Temporary Delivery Delays
The Specialty Truck Equipment and Manufacturing (STEM) segment recorded an 8% increase in total revenue during the third quarter of 2026 compared with the prior-year period. Growth was supported by higher intercompany sales to the SER segment as CTOS allocated additional equipment to its rental fleet.However, new equipment sales declined 5.5%, primarily because of lower third-party unit sales volumes. The company said its decision to prioritize production for rental fleet investment reduced the number of units available for third-party customers during the quarter.
Third-party deliveries were also affected by a vendor recall and unusual hailstorm damage to finished vehicle inventory at CTOS’s Kansas City facility. Together, these issues delayed more than $20 million in sales that management expects to complete during the fourth quarter.The company characterized these delays as temporary timing issues rather than a deterioration in underlying customer demand. Excluding the delayed deliveries, third-party STEM revenue would have exceeded the level recorded in the third quarter of 2025.
STEM segment Adjusted EBITDA totaled $36.6 million during the quarter. The company noted that comparisons with the prior-year period are affected by changes in intersegment sales accounting, as 2025 segment results reflected intersegment sales at no margin.The segment’s sales order backlog increased 22% year over year and 6% sequentially to approximately $342 million. This represented around 3.8 months of trailing 12-month third-party new equipment sales, slightly below the company’s targeted range of four to six months.
Third-quarter orders increased 22% year over year, supported by demand from utility, vacuum, refuse, rail and trailer markets. CTOS expects this order activity to support revenue conversion in the fourth quarter and into 2027.Management expects fourth-quarter third-party new equipment sales to increase at a mid-to-high-teens percentage rate year over year as delayed deliveries are completed and product availability and lead times improve.
CTOS Raises Full-Year 2026 Financial Guidance
Following its third-quarter performance, CTOS increased its full-year 2026 Adjusted EBITDA guidance to a range of $447.5 million to $460 million, compared with its previous forecast of $437.5 million to $455 million. The revised outlook represents expected growth of approximately 17% to 20% compared with 2025.The company also raised its 2026 SER segment revenue guidance to between $870 million and $890 million, up from the previous range of $850 million to $875 million. The adjustment reflects continued strength in utility transmission and distribution markets and the company’s expectations for sustained rental demand.
Consolidated revenue is expected to increase between 8% and 13% year over year. Management also expects total STEM revenue to range from marginally lower to 3% higher than in 2025, with performance now anticipated toward the upper end of that range as intercompany sales to support rental fleet expansion supplement third-party revenue.CTOS expects third-party new equipment sales revenue in STEM to increase between 3% and 10% for the full year. Strong customer demand, improving product availability and the completion of delayed deliveries are expected to support fourth-quarter performance.The company said third-quarter orders and its existing backlog provide a foundation for continued business activity in the coming quarters, particularly in utility and infrastructure-related markets.
Higher Rental Fleet Investment to Support Long-Term Growth
CTOS increased its planned 2026 net rental fleet investment to between $210 million and $230 million, compared with its previous forecast of $170 million to $200 million. Net rental fleet investment represents equipment purchases less proceeds from equipment sales.The revised investment plan reflects the company’s intention to capitalize on strong demand for specialty rental equipment, particularly in long-term transmission projects and other high-return applications.
Gross rental fleet investment for the SER segment is expected to reach approximately $400 million to $430 million in 2026. The company expects incremental spending to focus on transmission rentals and specialized equipment categories where customer demand is visible and expected returns remain attractive.Management said the timing of equipment deliveries means the additional investment will contribute only modestly to revenue and earnings during 2026. A larger portion of the financial benefit is expected to materialize in 2027.
Although the higher investment level will reduce near-term cash flow, CTOS views the spending as a strategic allocation of capital toward opportunities that can support sustained rental growth. The company expects ending fleet OEC to increase by a mid-to-high single-digit percentage in 2026.
The investment strategy is supported by continued demand from utilities upgrading electricity networks, expanding transmission capacity and responding to increasing power requirements from electrification and data centers.CTOS also expects infrastructure spending and growth across other industrial markets to create opportunities for its specialty equipment and manufacturing businesses.
Cash Flow and Leverage Remain Key Priorities
Despite stronger earnings expectations, CTOS revised its full-year 2026 levered free cash flow outlook to slightly positive, compared with its previous expectation of more than $50 million.The change reflects higher planned rental fleet investment and working capital requirements associated with business growth. Management described the decision as a deliberate reallocation of cash flow toward rental assets expected to generate attractive returns over the longer term.At September 30, 2026, the company held $14.6 million in cash and cash equivalents. Total debt outstanding was $1.666 billion, while net debt stood at approximately $1.652 billion.
CTOS ended the quarter with a net leverage ratio of 3.70 times, improving from 4.31 times at the end of 2025 and 4.53 times at the end of the third quarter of 2025. The reduction occurred even as the company expanded its ending rental fleet OEC by $143 million year over year.Availability under the company’s senior secured credit facility totaled $234.3 million at the end of September. Based on its borrowing base, CTOS also reported approximately $288 million in additional suppressed availability that could be accessed by increasing the size of the existing facility.
Management expects the net leverage ratio to remain meaningfully below four times at the end of fiscal 2026. The company continues to target a ratio below three times in 2027, supported by earnings growth, disciplined capital allocation and continued debt reduction.Inventory totaled $1.016 billion at the end of the third quarter, down $26 million from the second quarter. CTOS expects year-end 2026 inventory months on hand to remain approximately flat compared with year-end 2025 as it prepares for anticipated 2027 growth and builds chassis inventory ahead of new emissions regulations.
Management Highlights Strong Market Opportunities
Ryan McMonagle, Chief Executive Officer of CTOS, said strong demand across core transmission and distribution markets drove significant year-over-year earnings growth and supported the company’s decision to increase its full-year guidance for the third time in 2026.McMonagle highlighted record average OEC on rent, utilization of 81.5% and total fleet OEC of $1.76 billion as indicators of continued strength in the rental business. He also pointed to STEM’s 22% increase in orders and its $342 million backlog as positive signs for future performance.He said CTOS is positioned to benefit from long-term trends, including electricity grid upgrades, transmission expansion, electrification, data center-driven power demand and infrastructure investment. The company’s strategy remains focused on profitable growth, strategic capital deployment, free cash flow generation and reducing leverage.
Chief Financial Officer Chris Eperjesy similarly emphasized the strength of transmission-related demand, describing current conditions as the early stages of a potentially significant transmission investment cycle.Eperjesy said the higher rental fleet investment forecast reflects visible, long-duration demand and attractive expected returns. Although the additional spending will moderate 2026 free cash flow, the company anticipates a larger earnings contribution from the new equipment in 2027.He also noted that more than $20 million in delayed STEM deliveries remain in backlog and are expected to ship during the fourth quarter. With orders increasing and rental demand remaining strong, management expects fourth-quarter consolidated revenue and Adjusted EBITDA to rise both sequentially and year over year.CTOS expects its rental fleet expansion, strong order activity and continued investment in utility infrastructure to support growth beyond 2026. The company believes the combination of transmission demand, electrification, data center development and infrastructure spending will create additional opportunities across its rental and manufacturing operations.
Management expects the incremental rental fleet investment to contribute more substantially to earnings in 2027, while continued operating performance and cash generation should support further deleveraging.
The company reported that trailing 12-month Adjusted EBITDA had exceeded $446 million and said it currently expects another year of double-digit Adjusted EBITDA growth in 2027.
With record rental performance, higher full-year guidance, a growing equipment backlog and an expanded investment plan, Custom Truck One Source is positioning its business to capture long-term infrastructure demand while maintaining a focus on profitability, capital discipline and balance sheet improvement.
About
Custom Truck One Source delivered record third-quarter 2026 results, driven by strong rental demand, improved profitability and continued investment in specialty equipment. The company’s decision to raise its full-year Adjusted EBITDA and SER revenue guidance reflects confidence in sustained demand from utility transmission and distribution, grid modernization, electrification and data center infrastructure. Despite higher planned rental fleet investment and lower expected free cash flow in 2026, CTOS remains focused on profitable growth, reducing debt and strengthening its financial position. With a growing equipment backlog and additional rental fleet capacity, the company expects continued growth and a stronger earnings contribution in 2027.