CTOS

• Consolidated Financial Results

  • Q2 2026 consolidated revenue hit a record $563 million, up 10% year-over-year, and adjusted EBITDA was $117 million, up 25% year-over-year
  • GAAP net income was $10 million (5 cents per diluted share) in Q2 2026, compared to a net loss of $28 million in Q2 2025; first half 2026 GAAP net income totaled $6 million
  • End of Q2 2026 net leverage was 3.85x, a 0.17x sequential improvement and 0.8x improvement year-over-year; availability under the company's ABL facility was $229 million as of June 30, 2026, with up to an additional $240 million of potential availability under the existing facility
  • Levered free cash flow improved ~$40 million year-over-year through the first half of 2026

• End Market & Operational Highlights

  • Management believes SER is in the early stages of a once-in-a-generation transmission demand super cycle, with sustained strong demand from transmission and distribution (T&D) utility markets
  • SER's young average fleet age (just over 3 years) is a competitive advantage that positions the company well to meet customer demand across the U.S. and Canada
  • STEM achieved record Q2 equipment sales, with strong order flow and ongoing demand for transmission-focused utility equipment; while infrastructure end market growth has been slower, management still expects full-year third-party revenue growth for the segment
  • The company completed record Q2 deliveries that reduced the STEM backlog, but intra-quarter order flow remains strong and the backlog has grown so far in Q3 2026, reaching over $340 million as of the call
  • The company is well positioned to navigate upcoming 2027 EPA NOx emission regulation changes due to its current inventory position, completed pre-buy actions, and strong relationships with chassis OEM partners
  • Free cash flow generation and deleveraging remain core company priorities

• Full-year 2026 consolidated revenue guidance is raised to $2.1 billion to $2.2 billion, representing 8% to 13% year-over-year growth, from prior lower estimates
• Full-year 2026 adjusted EBITDA guidance is raised to $437.5 million to $455 million, representing 14% to 19% year-over-year growth
• SER 2026 full-year revenue guidance is set at $850 million to $875 million; STEM 2026 full-year revenue guidance is set at $1.263 billion to $1.7 billion, with expected third-party new sales revenue growth of 3% to 10% overall STEM sales are expected to be marginally down to up 3% year-over-year, with the variance from lower intersegment sales due to reduced SER maintenance capex in 2026
• 2026 net rental fleet capex guidance is revised to a range of $170 million to $200 million, a modest increase from the company's prior estimate, but still a meaningful reduction from 2025's $250+ million in net fleet capex; this revised plan will deliver mid-single-digit net OEC growth in 2026
• Non-rental capex is still expected to come in between $40 million and $50 million for full-year 2026
• Management expects to generate over $50 million in levered free cash flow in 2026, reduce year-end 2026 net leverage to meaningfully below 4x, and progress toward a 3x net leverage target in 2027
• The company expects to reduce inventory and floor plan balances in the second half of 2026, working toward a target inventory level of below six months
• Q3 2026 consolidated revenue and adjusted EBITDA are expected to increase year-over-year, but be modestly lower than Q2 2026 levels, due to timing shifts of certain deliveries that were pulled forward into Q2 from the second half; full-year guidance is unchanged by this quarterly shift

1. Specialty Equipment Rentals (SER): Third-party revenue (excluding intersegment sales) was $219 million, up 20% year-over-year. Segment-adjusted EBITDA was $117 million, up 26% year-over-year, with a segment-adjusted EBITDA margin of 53% (up 700 basis points year-over-year). SER contributed 38.9% of consolidated third-party revenue in Q2 2026. Key KPIs: 81.6% average fleet utilization (up 400 bps YoY), $1.37 billion average original equipment cost (OEC) on rent (up 13% YoY), 39.4% on-rent yield, total end-of-quarter fleet OEC of $1.68 billion (up $120 million YoY, up $24 million sequentially), average fleet age of just over 3 years. Net rental capex for the quarter was $36 million.

2. Specialty Truck Equipment and Manufacturing (STEM): Third-party revenue was $345 million (a quarterly record), up 5% year-over-year, contributing 61.1% of consolidated third-party revenue in Q2 2026. Segment-adjusted EBITDA was $37 million, with a segment-adjusted EBITDA margin of 8.5%. End-of-quarter new sales order backlog was $322 million, down $89 million sequentially due to record Q2 deliveries. June 2026 quoting activity increased 26% year-over-year.

• Forward-looking statements about future performance are inherently uncertain, and actual results may differ materially from current expectations due to unidentified factors referenced in the company's SEC filings
• Broader macroeconomic uncertainty could impact end market demand and operational performance
• Upcoming 2027 EPA NOx emission regulation changes may create industry headwinds, though management believes the company is well positioned to absorb these changes
• STEM backlog at the end of Q2 was equivalent to approximately 3.5 months of new sales, which is just below the company's target 4 to 6 month range

Q: On behalf of Cantor Fitzgerald, Sweta Rakhecha asks to quantify the amount of revenue and adjusted EBITDA pulled forward into Q2 2026 from the second half of 2026, and clarify whether the shifted volume came originally from Q3 or Q4, after management noted that some deliveries shifted into Q2 from the second half.

A: The call experienced technical difficulties immediately after this question was asked, so management did not provide an answer on the record before the call cut off. No additional questions were posed or answered during the portion of the Q&A session included in the provided transcript.