Custom Truck One Source (NYSE:CTOS) reported a “strong finish” to 2025, highlighted by record quarterly and annual revenue and improved rental fundamentals, according to management’s remarks on the company’s fourth-quarter and full-year 2025 earnings call.
Fourth-quarter results driven by rental momentum
CEO Ryan McMonagle said fourth-quarter revenue reached a record $528 million, with adjusted EBITDA of $121 million, up more than 18% year over year. For the full year, the company posted record revenue of $1.944 billion, up 8% from 2024, and adjusted EBITDA of $384 million, up 13% and above the midpoint of guidance.
Average OEC on rent in the quarter was just under $1.4 billion, up 14% year over year, and management said both utilization and OEC on rent reached historically high levels during the quarter. While the company experienced an anticipated seasonal slowdown in December, McMonagle said early 2026 trends have rebounded, with utilization around 82% and OEC on rent “well above” the year-end level.
Segment performance: Rentals strong, sales softer than expected in Q4
CFO Chris Eperjesy said the company’s results reflected “stronger operating performance across the business and improved rental fundamentals,” especially in T&D markets. On a GAAP basis, the company reported fourth-quarter net income of approximately $21 million, but a full-year GAAP net loss of approximately $31 million. Eperjesy noted year-over-year comparability was affected by a $23.5 million gain from a sale-leaseback transaction in the fourth quarter of 2024; excluding that gain, he said underlying net income improved on higher gross profit, disciplined SG&A management, and lower interest expense.
- ERS (Equipment Rental Solutions): Fourth-quarter revenue was $207 million, up 20% year over year, driven by double-digit growth in both rental revenue and rental sales activity. Full-year ERS revenue grew 17%. Utilization averaged 83.6% in Q4, up roughly 470 basis points from Q4 2024, and average OEC on rent was $1.38 billion, up $166 million, or 14%. On-rent yield in Q4 was 38.7%, with management citing opportunities for further rate improvement as transmission mix grows and pricing discipline holds.
- TES (Truck and Equipment Sales): Fourth-quarter equipment sales were $284 million, and management said performance was below expectations. McMonagle said revenue declined 8% year over year, largely due to customers pulling forward capital spending earlier in the year amid anticipated tariffs and price increases, along with an “atypical year-end dynamic” where some customers deferred deliveries into 2026. Eperjesy also cited continued pricing pressure on certain truck sales. For the full year, TES revenue totaled $1.1 billion, up 4% and the highest annual level in the segment’s history.
- APS: Fourth-quarter revenue was $37 million, with gross margin stable at 27%. Full-year APS gross margin was just under 24%, improving by almost 120 basis points year over year.
In TES, management emphasized improving order trends. New sales backlog ended 2025 at $335 million, up more than $55 million, or 20%, from the third quarter. McMonagle said backlog has continued to grow in early 2026 and stood at around $370 million as of the day before the call, while noting backlog can move based on delivery timing and production schedules.
Strategic initiatives: Hiab partnership and aftermarket investment
McMonagle highlighted a strategic partnership with Hiab, a manufacturer of truck-mounted cranes and forklifts. He said the partnership broadens the company’s product portfolio, enhances service capabilities, and supports delivering more complete solutions in markets the company already serves, including building supply, forestry, and rail.
He also said the company is investing in a focused initiative to expand aftermarket service capacity across multiple locations to support TES customers post-sale and grow parts and service revenue.
Balance sheet, fleet investment, and free cash flow focus
Eperjesy said the company ended 2025 with net debt of $1.65 billion and net leverage of 4.3x, improving from year-end 2024 and from a high of 4.8x at the end of the first quarter of 2025. Availability under the asset-based lending facility was $248 million at December 31, and management said more than $200 million of additional availability could potentially be accessed by upsizing the existing facility.
Management also pointed to working capital progress, with inventory declining by more than $100 million in the fourth quarter. Eperjesy said this should support lower working capital needs and lower interest expense on variable-rate floor plan liabilities over time, and added the company expects continued reductions in inventory and floor plan balances in 2026.
In rentals, Eperjesy said net rental capital expenditures were more than $40 million in Q4, and the fleet age at year-end was just over 2.9 years. Total rental fleet OEC ended the year at almost $1.64 billion, a company record and up more than $120 million versus the end of 2024. Looking to 2026, management expects to continue investing but with lower maintenance capex, which it said should contribute to higher free cash flow.
2026 outlook and reporting changes
The company provided full-year 2026 guidance calling for revenue of $2.005 billion to $2.12 billion and adjusted EBITDA of $410 million to $435 million. Eperjesy said this implies year-over-year growth of 3% to 9% in revenue and 7% to 13% in adjusted EBITDA. The company also expects non-rental capex of $40 million to $50 million.
By segment under the current structure, the company projected:
- ERS revenue: $725 million to $760 million
- TES revenue: $1.125 billion to $1.2 billion
- APS revenue: $155 million to $160 million
Management said it expects to generate more than $50 million of levered free cash flow in 2026 and reduce net leverage to “meaningfully below 4x” by the end of fiscal 2026, while progressing toward a 3x net leverage target in 2027. Eperjesy also outlined plans to reduce net investment in the rental fleet to approximately $150 million to $170 million in 2026, down from more than $250 million in 2025, while growing the rental fleet (by net OEC) at a mid-single-digit rate.
Beginning with the quarter ending March 31, 2026, the company will shift to two reportable segments: Specialty Equipment Rentals (SER) and Specialty Truck Equipment and Manufacturing (STEM). SER will include the historical ERS segment and a portion of APS, while STEM will include the historical TES segment and a portion of APS. Management said it will provide additional details, including recast historical financials and recast guidance, in early April.
In the Q&A, executives said normalized utilization should be viewed as high 70s to low 80s, with fourth-quarter levels typically peaking seasonally due to transmission equipment demand. Management also said it passed price increases through at the end of 2025 and beginning of 2026 and continues to see opportunities for rate improvement in rentals. For early 2026, Eperjesy said the company expects a strong first quarter, with revenue up mid- to high-single digits year over year and EBITDA up double digits, driven primarily by rentals.
About Custom Truck One Source (NYSE:CTOS)
Custom Truck One Source, Inc (NYSE: CTOS) is a North American provider of specialty rental equipment, parts and services. The company’s fleet encompasses a wide range of assets, including cranes, aerial work platforms, trench safety and shoring equipment, fluid management solutions, generators and other industrial machinery. Customers rely on Custom Truck One Source to support projects in construction, energy, telecommunications, industrial manufacturing, municipalities and large-scale events.
Headquartered in Plano, Texas, Custom Truck One Source has expanded through a combination of organic growth and strategic acquisitions to establish a network of more than 140 branch locations across the United States and Canada.
