Custom Truck One Source (NYSE: CTOS) reported record second-quarter revenue of $563 million, a 10% increase year over year. Adjusted EBITDA rose 25% to $117 million, driven by strong performance in the Specialty Equipment Rentals segment and record equipment sales in the Specialty Truck segment.

The company raised its full-year 2026 guidance, now projecting consolidated revenue between $2.1 billion and $2.2 billion and Adjusted EBITDA between $437.5 million and $455 million. This upward revision reflects sustained demand in transmission and distribution markets and robust order flow in truck equipment manufacturing.

Segment Performance Highlights

The Specialty Equipment Rentals (SER) segment delivered third-party revenue of $219 million, up 20% YoY. Segment Adjusted EBITDA margin expanded by more than 700 basis points to 53%. Key rental metrics showed significant improvement:

• Average fleet utilization reached 81.6%, up 400 basis points YoY.
• Original Equipment Cost (OEC) on rent averaged $1.37 billion, up 13% YoY.
• Total OEC in the rental fleet ended the quarter at $1.68 billion, a historical high.

The Specialty Truck, Equipment and Manufacturing (STEM) segment achieved record quarterly third-party revenue of $345 million, up 5% YoY. New sales backlog stood at $322 million at quarter-end, down $89 million sequentially due to record deliveries, though intra-quarter order flow remained strong with quoting activity up 26% YoY.

Financial Metrics Overview

What the Numbers Show

A divergence exists between STEM’s backlog decline and its revenue growth. While new sales backlog fell $89 million sequentially to $322 million, this reduction was attributed to record deliveries rather than weak demand. Management noted that intra-quarter order flow remains strong, with backlog growing so far in Q3 to over $340 million. This suggests that the backlog decrease reflects efficient conversion of orders into revenue rather than a slowdown in customer interest, supported by June quoting activity rising 26% YoY.

Balance Sheet and Outlook

Net leverage improved to 3.85 times at quarter-end, down from approximately 4.65 times a year ago. Levered free cash flow improved by approximately $40 million in the first half compared to the prior-year period. The company expects to reduce net leverage to meaningfully below 4 times by year-end 2026.

Management highlighted a "once-in-a-generation" transmission demand super cycle as a key driver for continued growth. Despite macroeconomic uncertainty, the company maintains confidence in long-term demand drivers, particularly in utility and infrastructure sectors.

Custom Truck One Source, Inc. (CTOS) delivered a record second quarter in 2026, reporting total revenue of $563.4 million — an increase of $52.0 million, or 10.2%, compared to the second quarter of 2025. The company swung to a net income of $10.4 million from a net loss of $(28.4) million in the same period last year, an improvement of $38.8 million. Earnings per share (EPS) came in at $0.05 on both a basic and diluted basis, surpassing the analyst consensus estimate of $0.01 by 400%. Buoyed by record first-half results and sustained strength in its transmission and distribution (T&D) end markets, management raised its full-year 2026 revenue and Adjusted EBITDA guidance.

Q2 2026 Financial Highlights

The following table summarizes the key consolidated financial results for the three months ended June 30, 2026, compared to the prior-year period.

Revenue growth was driven by a 20.1% increase in rental revenue to $145.1 million, reflecting higher average fleet utilization (81.6% vs. 77.6%) and a 13.1% year-over-year increase in average OEC on rent. The company ended the quarter with total OEC of $1.68 billion, the highest quarter-end level in its history. Adjusted EBITDA of $116.8 million represented a 25.0% increase, largely driven by expanded gross profit.

Segment Performance

Beginning January 1, 2026, CTOS reports results under two segments: Specialty Equipment Rentals (SER) and Specialty Truck Equipment & Manufacturing (STEM). The following tables present segment-level performance for the three months ended June 30, 2026.

Specialty Equipment Rentals (SER)

SER Adjusted EBITDA increased 26.2% compared to the second quarter of 2025. Rental equipment sales within SER increased 30.3%, driven by higher buyout activity on rental contracts with purchase options. OEC on rent yield improved 80 basis points to 39.4%.

Specialty Truck Equipment & Manufacturing (STEM)

STEM had a record quarter, with external customer revenue of $345 million and equipment sales of $332 million. Equipment sales increased 4.9% year-over-year, driven by demand for utility and forestry vehicles. STEM's sales order backlog stood at $322,470 thousand at quarter-end, approximately 3.5 months of LTM third-party new sales, modestly below the targeted range of four to six months.

Balance Sheet and Leverage

As of June 30, 2026, cash and cash equivalents were $10.3 million, total debt outstanding was $1,673.2 million, and net debt was $1,662.9 million. The company reduced its net leverage ratio to 3.85x, crossing below 4.0x for the first time, compared to 4.02x at the end of Q1 2026 and 4.31x at year-end 2025. Availability under the senior secured credit facility was $229.4 million, with an additional $242.0 million of suppressed availability accessible by upsizing the existing facility.

Management Commentary

"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," said Ryan McMonagle, Chief Executive Officer of CTOS. "Our rental fleet achieved average utilization of 81.6% for the quarter, up 400 basis points from a year ago, and we ended the quarter with total OEC of $1.68 billion, the highest quarter-end level in our history." McMonagle added that the company remains well-positioned to benefit from secular tailwinds in data center investment, electrification, utility grid upgrades, and infrastructure spending.

CFO Chris Eperjesy noted that third quarter revenue and Adjusted EBITDA are expected to be up year-over-year but modestly below the second quarter, as certain equipment and used equipment sales — including rental purchase option buyouts — were delivered in Q2 rather than the second half. "That timing shifts results between quarters, not out of the year, and it is reflected in our raised full-year ranges," Eperjesy said.

Updated 2026 Full-Year Guidance

Given record first-half results and continued momentum in the rental business, CTOS raised its full-year 2026 outlook. The updated guidance is presented below.

Additional full-year guidance includes net rental fleet investment (purchases less proceeds) of approximately $170 million to $200 million, levered free cash flow expected to exceed $50 million, and a net leverage ratio expected to be meaningfully below 4.0x by fiscal year-end. The company's longer-term target remains achieving a net leverage ratio below 3.0x in 2027.