Custom Truck One Source, Inc. Q2 FY2025 earnings call

• Custom Truck had 21% revenue growth and 17% adjusted EBITDA growth in Q2 2025 vs Q2 2024, with solid fundamentals in core end markets. - In ERS, utility contractor activity was strong, rental demand was robust with average OEC on rent over $1.2 billion (16% y-o-y increase) and average utilization near 78%. - TES had outstanding sales performance, with 2 consecutive months of sales over $100 million in Q2, significant year-over-year and sequential growth. - Macroeconomic factors: Federal spending/tax bill beneficial, tariffs with limited direct cost impact in 2025, emission standards uncertainty with Congress revoking California's waivers. - Regular engagement with customers/suppliers to navigate macro environment, strong intra-quarter order flow.

In the ERS segment, Q2 2025 revenue was $170 million, up more than 23% from Q2 2024. Adjusted gross profit was $100 million, up 20% from Q2 2024, with adjusted gross margin 59% (slightly lower due to higher mix of rental asset sales). Rental revenue and rental asset sales were up, average OEC on rent was over $1.2 billion, and average utilization was just under 78%. For the TES segment, Q2 2025 sales were $303 million, up more than 22% year-over-year and more than 30% sequentially. It achieved several milestones, including 2 consecutive months of sales over $100 million. Gross margin in the segment was 15.5% in Q2, down from Q2 2024 but up from Q1. The APS business had Q2 2025 revenue of $38 million, up 3% compared to Q2 2024 and 6% sequentially, with adjusted gross margin 26% (up year-over-year and sequentially).

• Reaffirmed fiscal 2025 revenue guidance: $1.97 billion to $2.06 billion. - Adjusted EBITDA guidance: $370 million to $390 million. - Net rental CapEx guidance: approximately $200 million. - Target to reduce net leverage below 3x by end of fiscal 2026, with expectation to generate meaningful levered free cash flow in 2025 (> $50 million).

• Tariff uncertainties: Potential cost impact in future quarters as tariffs are monitored. - Emission standards: Uncertainty from EPA/CARB decisions, including court challenges to revoked California waivers and lack of clarity on 2027 low NOx standards. - Macroeconomic volatility: Uncertainty related to new equipment purchase decisions from smaller customers.

Q: Update on tariff impact to 2025 and quarterly cadence of the impact A: Tariffs will have a minimal direct cost impact on the business in 2025. Some cost impact will be seen in Q3 and Q4 2025, with management planning to manage through it as they head into 2026 Q: Backlog has declined quarter-over-quarter and year-over-year. Is that a concern? And does the quarter-to-quarter decline reflect the business returning to a more seasonal pattern? And expectation for backlog at year-end A: Revenue was up 21% in the quarter. Strong orders won, with signed orders from local and regional customers up more than 45% year-over-year. Feeling good about the back half of the year, with an implied good growth rate in the back half of the year