Custom Truck One Source, Inc. Q4 FY2025 earnings call

• 2025 ended strongly with record quarterly revenue. Rental business strong in Q4 with fleet utilization ~84% (highest in almost 3 years) and OEC on rent up 14% y-o-y.
• TES had Q4 performance below expectations but full year revenue up 4% to $1.1 billion.
• Strategic partnership with HIAP to strengthen service and product portfolio.
• Plan to move to two segments (SDR and STEM) starting Q1 2026 for enhanced transparency.

In the fourth quarter, revenue was $528 million. Full year 2025 revenue was $1.944 billion. ERS: Q4 revenue $207 million, up 20% y-o-y; full year 17% y-o-y growth. TES: Q4 equipment sales $284 million, full year revenue $1.1 billion, up 4%. APS: Q4 revenue $37 million, full year gross margin just under 24%, up ~120 basis points y-o-y.

• 2026 revenue expected in range of $2.005 to $2.12 billion, adjusted EBITDA $410 to $435 million.
• Segment guidance: ERS $725 to $760 million, TES $1.125 to $1.2 billion, APS $155 to $160 million.
• Plan to reduce maintenance capex in rental fleet in 2026, expect more than $50 million leverage free cash flow and reduce net leverage ratio below 4 times by end of 2026.

• Macro economic uncertainty could impact demand.
• Price pressure on certain truck sales.
• Inventory management challenges.
• Uncertainty around emission standards policy and its impact on demand.

Q: Regarding the guidance, what do you expect to see in the market to achieve the high end of that range?

A: Strong P&D demand continuing or improving, vocational or infrastructure market picking up, and less political/economic uncertainty.

Q: How do you view the pricing environment and pricing as a contributor on a go-forward basis?

A: Seeing good demand, passed price increases earlier, opportunity to increase price with some inflation in adding new assets.

Q: Operationally, have you gotten to a point where you can sustainably keep it at 84 and be able to serve customers properly?

A: Team has done great job, fleet de-aged to 2.9 years, back to ~82% utilization in Q1, T&D-focused demand.

Q: Talk about the cadence of how you expect the TES segment to perform throughout the year and the confidence behind it?

A: Backlog up sequentially, orders up 12% y-o-y, Q2 2025 was strong due to pull forward, expecting smoothing out in 2026.

Q: Any color on what drove SG&A lower relative to a year ago in the fourth quarter and how are you guys thinking about SG&A this year?

A: Made cuts in certain places, controlling spending, modest growth expected in 2026, low single-digit growth.

Q: How much lower do you kind of expect inventory to be this year and potential impact on the floor plan?

A: Target to get below six months on hand, roughly $100 million gross inventory reduction, providing net working capital pickup.

Q: Why today with the resegmentation?

A: Manages business as two segments with different investment profiles, provides better clarity to investors, no associated cost with resegmentation.