8-K: Custom Truck One Source Reports Strong Q2 2026 Results

Custom Truck One Source announced record second quarter revenue of $563.4 million and increased full-year 2026 guidance for both revenue and Adjusted EBITDA.

Summary

• Custom Truck One Source (CTOS) reported record second quarter 2026 revenue of $563.4 million, a 10.2% increase year-over-year.
• Gross profit rose by 20.9% to $124.0 million, and Adjusted Gross Profit increased by 15.6% to $180.9 million.
• Net income for the quarter was $10.4 million, a significant improvement from a net loss of $28.4 million in Q2 2025.
• Adjusted EBITDA grew by 25.0% to $116.8 million.
• The company increased its full-year 2026 revenue guidance to $2.1 billion $2.2 billion and Adjusted EBITDA guidance to $437.5 million $455 million.
• Net leverage ratio improved to 3.85x, down from 4.02x in the prior quarter and 4.31x at year-end 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a positive report, with strong revenue and Adjusted EBITDA growth, coupled with increased guidance and a reduced net leverage ratio.

Positives

• Record second quarter revenue of $563.4 million, up 10.2% year-over-year.
• Significant improvement in net income to $10.4 million from a net loss of $28.4 million in the prior year's quarter.
• Adjusted EBITDA increased by 25.0% to $116.8 million.
• Increased full-year 2026 revenue guidance to $2.1 billion $2.2 billion.
• Increased full-year 2026 Adjusted EBITDA guidance to $437.5 million $455 million.
• Reduced net leverage ratio to 3.85x, crossing below 4.0x.
• Average OEC on rent increased by 13.1% year-over-year.
• Rental fleet utilization improved to 81.6%.

Negatives

• Sales order backlog in the STEM segment was down 3.7% compared to the second quarter of 2025, sitting modestly below the targeted range.
• The company expects third quarter revenue and Adjusted EBITDA to be modestly below the second quarter due to the timing of equipment deliveries.

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.
• Competition in the equipment dealership and rental industries.
• Increases in unionization rate in the workforce.
• Inability to attract and retain key personnel.
• Material disruptions to operations due to public health concerns, equipment failures, natural disasters, work stoppages, or power outages.
• Uncertainty relating to macroeconomic conditions and unfavorable conditions in the capital and credit markets.

Future Outlook

The company is increasing its full-year 2026 guidance, expecting revenue to increase 8% to 13% year-over-year and Adjusted EBITDA to increase 14% to 19%. Net rental fleet investment is projected to be $170 million to $200 million. Levered free cash flow is expected to exceed $50 million, with the net leverage ratio expected to be meaningfully below four times by year-end 2026 and below three times in 2027. SER segment revenue is projected between $850 million and $875 million, and STEM segment revenue between $1.63 billion and $1.70 billion.

Management Comments

• "In the second quarter, we delivered record quarterly revenue and substantial year-over-year growth in revenue and Adjusted EBITDA of 10% and 25%, respectively."
• "Sustained strength in our core T&D markets remains the primary driver of performance within our SER segment and for the Company as a whole."
• "We are optimistic about the second half of 2026, as CTOS remains well-positioned to benefit from secular tailwinds in data center investment, electrification, utility grid upgrades and infrastructure spending."
• "Our focus for the remainder of 2026 is on disciplined execution converting strong end-market demand into profitable growth, cash generation and further balance sheet improvement."
• "We expect third quarter revenue and Adjusted EBITDA to be up year-over-year but, modestly below the second quarter, as certain third-party new equipment and used equipment sales, including rental purchase option buyouts, were delivered in the second quarter rather than the second half."

Industry Context

StockSavvy.ai notes that Custom Truck One Source's strong performance aligns with broader industry trends of increased investment in utility transmission and distribution, data center expansion, and general infrastructure upgrades, which are driving demand for specialty equipment rentals and manufacturing.

Stakeholder Impact

• Shareholders: Positive impact expected from increased revenue and EBITDA guidance, improved leverage, and potential for increased shareholder value.
• Creditors: Positive impact from reduced net leverage ratio, strengthening the company's financial position.
• Employees: Continued demand in core markets may lead to job security and potential growth opportunities.
• Customers: Continued strong demand for equipment and services to support infrastructure projects.

Next Steps

• Continue focus on disciplined execution to convert end-market demand into profitable growth.
• Generate cash and further improve the balance sheet.
• Invest selectively to support customer long-term needs.
• Translate performance into meaningful free cash flow generation.
• Achieve net leverage ratio below three times in 2027.

Key Dates

Recommendation

The company is showing strong operational improvements and has increased guidance, which is positive. However, the STEM backlog is slightly below target, and the Q3 outlook is modestly lower than Q2 due to timing. While the deleveraging is positive, the overall debt level remains significant. A 'hold' recommendation reflects the positive momentum balanced against these considerations and the need to see sustained performance and further debt reduction.

Keywords

Specialty Equipment Rentals, Specialty Truck Equipment, Adjusted EBITDA, Revenue Guidance, Net Leverage Ratio, Fleet Utilization, Infrastructure Spending, Electric Utility