10-Q: Custom Truck One Source Q1 2026 Financial Results

Custom Truck One Source reports Q1 2026 revenue of $461.6 million, driven by strong rental demand and equipment sales.

Summary

• Total revenue increased 9.3% year-over-year to $461.6 million.
• Net loss narrowed to $4.1 million from $17.8 million in the prior year period.
• Operating income rose significantly to $31.5 million compared to $12.4 million in Q1 2025.
• Adjusted EBITDA for the quarter reached $98.0 million, up from $73.4 million in Q1 2025.
• The company implemented a new two-segment reporting structure: Specialty Equipment Rentals (SER) and Specialty Truck Equipment & Manufacturing (STEM).

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, as the company successfully narrowed its net loss and demonstrated strong growth in its core rental segment, despite the challenges of high inventory levels and debt.

Positives

• Rental revenue grew 18.0% to $137.2 million, supported by an 11.8% increase in average OEC on rent.
• Fleet utilization improved to 81.4% from 77.7% in the prior year period.
• Operating income increased by 153.7% year-over-year.
• Net leverage ratio improved to 4.02x from 4.31x at year-end 2025.
• Interest expense decreased due to lower inventory levels and reduced floorplan financing costs.

Negatives

• The company reported a net loss of $4.1 million for the quarter.
• Inventory levels increased to $1.02 billion from $930.9 million at year-end 2025.
• Operating cash flow declined to $23.8 million from $55.6 million in Q1 2025, primarily due to higher inventory investment.
• Parts sales and services revenue saw a slight decline of 1.0%.

Risks

• Significant indebtedness could limit financial flexibility and access to capital.
• Exposure to variable interest rates on $1.43 billion of debt.
• Supply chain disruptions and potential increases in raw material or equipment costs.
• Dependence on infrastructure spending and government contracts.
• Potential for losses on receivables in excess of recorded reserves.

Future Outlook

The company believes its liquidity sources and operating cash flows are sufficient to address operating, debt service, and capital requirements over the next 12 months and beyond.

Management Comments

• Management noted that the new segment structure better represents the financial profile and economics of the rental and sales & manufacturing businesses.
• Management stated that the increase in net income was primarily due to higher operating income resulting from higher rental revenue and strong new equipment sales.

Industry Context

StockSavvy.ai notes that the company's shift toward a two-segment reporting model (SER and STEM) aligns with industry trends of separating high-margin rental operations from capital-intensive manufacturing and sales, allowing for better performance tracking against peers like United Rentals or specialized truck manufacturers.

Comparison to Industry Standards

• The company's fleet utilization of 81.4% remains competitive within the specialty equipment rental sector.
• The focus on infrastructure-related end-markets (utilities, telecommunications) provides a defensive moat compared to general construction equipment rental companies.

Corporate Governance

Legal Proceedings

• The company is currently under audit by the IRS regarding federal excise tax withholdings for 2015, with an assessment of $2.4 million; management does not believe a loss is probable.

Related Party Transactions

• Transactions with R&M Equipment Rental (partially owned by management).
• Transactions with entities owned by Platinum Equity, LLC (major shareholder).
• Purchases of products and aircraft charter services from entities owned by management.

Stakeholder Impact

• Shareholders benefit from improved operating margins and reduced net leverage.
• Creditors benefit from the company's ability to maintain compliance with debt covenants and improve EBITDA.

Next Steps

• Continue monitoring the $1.9 million remaining under the stock repurchase program.
• Manage the maturity of the PNC Equipment Finance, LLC facility on August 25, 2026.

Key Dates

Recommendation

While the company shows strong operational improvement and revenue growth, the high debt load and net loss position warrant a cautious 'hold' until the company demonstrates consistent profitability and further deleveraging.

Keywords

Custom Truck One Source, CTOS, Specialty Equipment Rentals, Truck Equipment Manufacturing, Infrastructure Equipment, Heavy-duty Trucks, Rental Fleet