8-K: Custom Truck One Source Reports Strong Q2 2025 Growth, Reaffirms Full-Year Guidance

Custom Truck One Source, Inc. announced robust second-quarter 2025 financial results, with significant revenue and Adjusted EBITDA growth across all segments, leading to a reaffirmation of its full-year 2025 guidance.

Summary

• Total revenue reached $511.5 million for Q2 2025, an increase of $88.5 million or 20.9% compared to Q2 2024.
• Gross profit was $102.5 million, up $13.3 million or 14.9% year-over-year.
• Adjusted Gross Profit increased by $22.7 million or 17.0% to $156.5 million.
• Net loss for the quarter was $28.4 million, an increase of $3.9 million or 15.9% compared to Q2 2024, primarily due to higher income tax expense.
• Adjusted EBITDA grew by $13.4 million or 16.7% to $93.4 million.
• Average Original Equipment Cost (OEC) on rent increased by $162.5 million or 15.6% compared to Q2 2024.
• Rental fleet utilization was just under 78%, a significant improvement from the same period last year and in line with expectations.
• Ending OEC reached $1.56 billion, marking the highest in the company's history.
• Truck and Equipment Sales (TES) segment sales were up more than 22% year-over-year, achieving the second highest quarter of sales ever.
• Overall signed orders in the quarter increased by just under 35% year-over-year, with signed orders from local and regional customers up more than 45%.
• The TES backlog was down 9% compared to Q4 2024 but remains within the expected range of four to six months.
• Cash and cash equivalents stood at $5.3 million as of June 30, 2025.
• Total Debt outstanding was $1,630.7 million, and Net Debt was $1,625.4 million as of June 30, 2025.
• The Net Leverage Ratio improved to 4.66x as of June 30, 2025, down from 4.80x as of March 31, 2025.
• Availability under the senior secured credit facility was $275.7 million, with an additional $231.1 million of suppressed availability for potential upsizing.
• The company reaffirmed its full-year 2025 guidance for revenue ($1,970 million $2,060 million) and Adjusted EBITDA ($370 million $390 million).

Sentiment

Score: 8

Explanation: The company reported strong revenue and Adjusted EBITDA growth across all segments, reaffirmed its full-year guidance, and expects to generate significant free cash flow and reduce leverage. While net loss increased due to tax adjustments, the overall operational performance and future outlook are positive, indicating strong underlying business momentum.

Positives

• Achieved strong year-over-year total revenue growth of 20.9% to $511.5 million.
• Delivered robust Adjusted EBITDA growth of 16.7% to $93.4 million.
• Experienced growth in every business segment (Equipment Rental Solutions, Truck and Equipment Sales, Aftermarket Parts and Services).
• Equipment Rental Solutions (ERS) segment saw significant increases in rental revenue (17%) and rental asset sales (40%) year-over-year.
• Improved rental fleet utilization to just under 78%, which is a significant improvement from the prior year and met expectations.
• Ended the quarter with a record-high total OEC of $1.56 billion, positioning for future growth.
• Truck and Equipment Sales (TES) achieved its second highest quarter of sales ever, with sales up over 22% year-over-year.
• Overall signed orders increased by nearly 35% year-over-year, indicating strong future demand.
• Reaffirmed full-year 2025 guidance for both revenue and Adjusted EBITDA, signaling management confidence.
• Expects to grow the rental fleet by at least mid-single digits by year-end.
• Anticipates generating more than $50 million of levered free cash flow in 2025.
• Projects a meaningful reduction in the net leverage ratio by the end of the fiscal year.
• Lower interest expense on variable-rate floor plan liabilities contributed to Adjusted EBITDA growth.

Negatives

• Net loss increased by 15.9% to $28.4 million in Q2 2025 compared to Q2 2024.
• The increase in net loss was primarily attributed to higher income tax expense ($17.478 million in Q2 2025 vs. $3.070 million in Q2 2024).
• Consolidated parts sales and service revenue remained flat year-over-year.
• The TES sales order backlog was down 9% compared to Q4 2024, although it remains within the expected range.
• The company maintains a high level of total debt at $1,630.7 million and net debt at $1,625.4 million.

Risks

• Increases in labor costs.
• Changes in U.S. trade policy, including tariffs.
• Inability to obtain raw materials, component parts, and/or finished goods in a timely and cost-effective manner.
• Inability to manage rental equipment effectively.
• Competition in the equipment dealership and rental industries.
• Sales order backlog may not be indicative of the level of future revenues.
• Increases in unionization rate in the workforce.
• Inability to attract and retain key personnel, including management and skilled technicians.
• Material disruptions to operation and manufacturing locations as a result of public health concerns, equipment failures, natural disasters, work stoppages, power outages or other reasons.
• Any further increase in the cost of new equipment purchased for use in the rental fleet or for sale as inventory.
• Aging or obsolescence of existing equipment, and the fluctuations of market value thereof.
• Disruptions in the supply chain.
• Business may be impacted by government spending.
• May experience losses in excess of recorded reserves for receivables.
• Uncertainty relating to macroeconomic conditions, unfavorable conditions in the capital and credit markets and customers' inability to obtain additional capital as required.
• Increases in price of fuel or freight.
• Regulatory, technological advancement, or other changes in core end-markets may affect customer spending.
• Strategic initiatives including acquisitions and divestitures may not be successful and may divert management's attention away from operations and could create general customer uncertainty.
• The interest of the majority stockholder, which may not be consistent with the other stockholders.
• Volatility of common stock market price.
• Significant indebtedness, which may adversely affect financial position, limit available cash and access to additional capital, prevent business growth and increase risk of default.
• Inability to generate cash, which could lead to a default.
• Significant operating and financial restrictions imposed by debt agreements.
• Changes in interest rates, which could increase debt service obligations on variable rate indebtedness and decrease net income and cash flows.
• Disruptions or security compromises affecting information technology systems or those of critical services providers could adversely affect operating results.
• Subject to complex laws and regulations, including environmental and safety regulations that can adversely affect cost, manner or feasibility of doing business.
• Subject to a series of risks related to climate change.
• Increased attention to, and evolving expectations for, sustainability and environmental, social and governance initiatives.

Future Outlook

The company reaffirmed its full-year 2025 revenue guidance of $1,970 million to $2,060 million and Adjusted EBITDA guidance of $370 million to $390 million, anticipating double-digit growth. It expects to grow its rental fleet by at least mid-single digits by year-end and generate more than $50 million of levered free cash flow, leading to a meaningful reduction in its net leverage ratio. The TES segment is expected to continue benefiting from strong macro demand and improved supply chain conditions, while the ERS segment anticipates strong long-term demand and growth in the vocational rental market.

Management Comments

• "Achieved strong year-over-year revenue growth of 21% and adjusted EBITDA growth of 17%, driven by growth in every segment."
• "Continue to see steady performance in our core T&D market, carrying forward our solid first quarter performance into the second quarter."
• "Resulted in significant year-over-year increases in rental revenue and rental asset sales within our ERS segment of 17% and 40%, respectively."
• "For the quarter, our rental fleet saw average utilization of just under 78%, a significant improvement versus the same period last year and in line with our expectations."
• "Average OEC on rent for the second quarter was more than $160 million higher than the same period last year and we ended the quarter with total OEC of $1.56 billion. This was up sequentially from the end of last quarter and the highest in our history, which we anticipate will support our expected growth within ERS for the remainder of 2025 and into 2026."
• "TES sales were up more than 22% year-over-year and achieved the second highest quarter of sales ever."
• "Sustained, robust demand for vocational vehicles across our end markets, particularly intra-quarter demand from local and regional customers, continues to drive the performance within the TES segment."
• "Signed orders in the quarter were up 30% on a year-over-year basis and we continue to believe that this current strong pace of customer orders and our existing TES backlog position us well to achieve the growth we expect in the segment this year."
• "Given current market conditions and ongoing customer conversations regarding demand for the second half of 2025, we continue to believe Custom Truck is well-positioned to benefit from secular tailwinds driven by data center investments, electrification, and utility grid upgrades. As a result, we are reaffirming our 2025 guidance."

Industry Context

The company is benefiting from secular tailwinds driven by data center investments, electrification, and utility grid upgrades, which are increasing demand for specialty equipment in electric utility, telecom, and rail markets. The robust demand for vocational vehicles across end markets, particularly from local and regional customers, aligns with ongoing infrastructure development and upgrades, indicating a favorable market environment for the company's offerings.

Comparison to Industry Standards

• No specific comparable companies, projects, or results were mentioned in the filing for direct industry comparison.

Stakeholder Impact

• Shareholders: Positive impact from strong revenue and EBITDA growth, reaffirmed guidance, expected free cash flow generation, and leverage reduction. Potential negative from increased net loss and high debt levels.
• Employees: No direct impact mentioned, but continued growth and strong demand could imply stable or growing employment. Risks related to labor costs and inability to attract/retain key personnel are noted.
• Customers: Continued robust demand for vocational vehicles and strong relationships with key customers. Improved fleet utilization suggests better availability of rental equipment.
• Suppliers: Strong order flow and improved supply chain conditions suggest continued business. Risks related to inability to obtain raw materials/components are noted.
• Creditors: High total debt and net debt, but improving net leverage ratio and expected free cash flow generation could improve creditworthiness. Significant operating and financial restrictions imposed by debt agreements are noted.

Next Steps

• Hold a conference call at 9:00 a.m. ET on July 31, 2025, to discuss second quarter 2025 financial results.
• Make the webcast of the conference call publicly available at investors.customtruck.com.
• Provide a replay of the conference call until 11:59 p.m. ET, Thursday, August 7, 2025.
• Expect to grow the rental fleet (based on net OEC) by at least mid-single digits by the end of 2025.
• Anticipate making progress on unwinding significant strategic investment in inventory levels by the end of 2025.
• Target to generate more than $50 million of levered free cash flow in 2025.
• Aim to deliver a meaningful reduction in the net leverage ratio by the end of the fiscal year.

Key Dates

Recommendation

The company delivered strong top-line and Adjusted EBITDA growth, reaffirming its full-year guidance and signaling confidence in continued market demand driven by secular tailwinds. This indicates solid operational performance. However, the net loss increased due to higher income tax expense, and the company maintains a high net leverage ratio of 4.66x, despite a slight improvement. While management targets significant free cash flow generation and leverage reduction by year-end, the current debt levels and the reported net loss warrant a cautious approach. An investor would likely hold to observe sustained progress on debt reduction and a clear path to profitability before considering a stronger position.

Keywords

Specialty Equipment, Electric Utility, Telecom, Rail, Forestry, Waste Management, Infrastructure, Rental Equipment, Truck Sales, Aftermarket Services, Heavy Equipment, Vocational Vehicles, CTOS, Q2 2025 Earnings, Financial Results, Adjusted EBITDA, Revenue Growth, Fleet Utilization, Order Backlog, Capital Goods, Industrial Services