Custom Truck One Source Q4 2025 Earnings Call - Rental rebound drives record revenue with utilization near 84%

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Custom Truck One Source’s fourth quarter and full year 2025 earnings conference call. Please note this conference call is being recorded. I would now like to hand the conference call over to your host today, Brian Perman, Vice President of Investor Relations for Custom Truck One Source.

Brian Perman, Vice President of Investor Relations, Custom Truck One Source: Thank you, operator, and good morning. Before we begin, we would like to remind you that management’s commentary and responses to questions on today’s call may include forward-looking statements which, by their nature, are uncertain and outside of the company’s control. Although these forward-looking statements are based on management’s current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of the company’s filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during the call in the press release we issued this morning. That press release and our fourth quarter investor presentation are posted on the Investor Relations section of our website. This morning, we also filed our 2025 10-K with the SEC.

Today’s discussion of our results of operations for Custom Truck One Source, Inc., or Custom Truck, is presented on a historical basis for the three months and year ended December 31, 2025, and prior periods. Joining me today are Ryan McMonagle, CEO, and Chris Eperjesy, CFO. I will now turn the call over to Ryan.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Thanks, Brian, and good morning, everyone. We delivered a strong finish to 2025, with record quarterly revenue driven by continued momentum in our core end markets and strong execution by our team. In the fourth quarter, we generated revenue of $528 million. Adjusted EBITDA was $121 million, up more than 18% year over year. For the full year 2025, we saw record revenue of $1.944 billion, up 8%, and adjusted EBITDA was $384 million, up 13% compared to 2024 and ahead of the midpoint of our guidance. The key driver of our performance in the quarter was continued strength in our rental business as the improvements we saw in the third quarter in the transmission and distribution markets continued into Q4.

Our rental fleet averaged just under 84% utilization during the quarter, the highest in almost three years, supported by continued growth in OEC on rent. Average OEC on rent in Q4 was just under $1.4 billion, up 14% year-over-year. During Q4, both utilization and OEC on rent reached historically high levels. While we saw the anticipated seasonal slowdown in both measures in December, so far in 2026, both have rebounded as expected, with utilization currently at approximately 82% and OEC on rent well above the year-end level. We ended the year with total OEC of $1.64 billion, the highest quarter-end level in our history, supporting our expectation for continued growth in our rental business. Our trucks and equipment continue to power the people who strengthen and build critical infrastructure in the U.S. and Canada.

The market has been focused on the durability of demand in T&D and our ability to convert improving rental KPIs into earnings and cash flow, and we believe our Q4 results speak directly to that. Bidding activity and ongoing conversations with our customers lead us to believe that these conditions will persist through 2026 and beyond. While TES performance in the fourth quarter was below our expectations, end market demand is healthy and order activity remains strong. While TES saw sequential revenue growth in the quarter, revenue was down 8% year-over-year, primarily due to our customers pulling forward capital spending to earlier in the year in anticipation of potential tariffs and price increases and an atypical year-end dynamic in which some customers deferred deliveries into 2026.

Additionally, we did not fully experience the anticipated lift in spending of our customers taking advantage of the accelerated depreciation provisions in last year’s federal tax and spending bill. Despite those facts, TES finished the year with revenue of $1.1 billion, up 4% for the full year and our highest annual level ever. New sales order backlog ended the year at $335 million, up more than $55 million or 20% from Q3. Our backlog has continued to grow so far in 2026, and as of yesterday, stands at around $370 million. As we’ve noted in prior periods, backlog can move quarter to quarter with delivery timing and production schedules, so we also focus on order activity and conversion.

We saw strong year-over-year net order growth of 21% in Q4, driven by year-over-year growth of 12% in orders won during the quarter, with particular strength coming from local and regional customers. Despite slower growth in the infrastructure end market, the continued strength in order growth and our ongoing conversations with our customers provide us with the confidence to expect another year of growth in TES. This confidence is increased by our recently announced strategic partnership with Hiab, a manufacturer of truck-mounted cranes and forklifts. This partnership strengthens our ability to serve customers across multiple end markets while supporting our long-term growth strategy. It broadens our product portfolio, enhances our service capabilities, and allows us to deliver more complete solutions in key markets we already serve, such as building supply, forestry, and rail.

In addition, this year, to better support our TES customers post-sale and grow our parts and service revenue, we are investing in a focused initiative to expand our aftermarket service capacity. This effort, which will impact multiple locations in our existing branch network, will ensure that our TES customers continue to get the high level of post-sale service that they have come to expect from Custom Truck. Both the Hiab partnership and our expanded parts and service offering highlight our commitment to continuing to invest in TES and position our sales business to grow its presence and market share and to strengthen our connection with our customers. Before I turn it over to Chris, I want to highlight a few items related to 2026.

First, beginning with the quarter ending March 31, 2026, we will move from our current three-segment reporting and will report results under two segments, Specialty Equipment Rentals, or SER, and Specialty Truck Equipment and Manufacturing, or STEM. This change aligns our segment reporting with how we currently evaluate the business and provides enhanced transparency to investors with a clear basis of comparison to the industry peers of each of our primary businesses. We plan to provide additional details prior to reporting Q1 2026 earnings, including recasting historical financials and our 2026 guidance to align with the new reporting structure. Second, we are providing our full year 2026 outlook. We expect revenue in the range of $2.005 billion-$2.12 billion and adjusted EBITDA in the range of $410 million-$435 million.

Chris will provide additional details in a few minutes. Our 2026 guidance reflects our continued optimism about our business as long-term, sustained end market demand, buoyed by secular mega trends and our ability to provide exceptional execution on behalf of our customers set us apart from our competition. Our long-standing relationships with our strategic suppliers and customers continue to be keys to our success. I continue to have the highest degree of confidence in the Custom Truck team and want to thank everyone for their hard work and dedication that helped achieve our strong results in 2025. We look forward to updating everyone soon. With that, I’ll turn it over to Chris to walk through the numbers in more detail.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Thanks, Ryan, and good morning, everyone. I’ll start with consolidated results for the quarter and full year, then discuss segment performance, our balance sheet, liquidity, and leverage, and finally, our 2026 outlook. Our fourth quarter and full year 2025 results reflect stronger operating performance across the business and improved rental fundamentals, particularly in our T&D end markets. For the fourth quarter, total revenue was $528 million, and adjusted EBITDA was $121 million. For the full year, record revenue of $1.944 billion was 8% ahead of 2024, and adjusted EBITDA was $384 million, a year-over-year increase of 13%. Before I move to the segments, a quick note on our GAAP results.

For the fourth quarter, GAAP net income was approximately $21 million, and for the full year, GAAP net loss was approximately $31 million. Year-over-year comparability on net income was impacted by the $23.5 million gain on a sale leaseback transaction in the fourth quarter of 2024. Excluding that prior year sale leaseback gain, underlying net income improved meaningfully year-over-year, reflecting higher gross profit, disciplined SG&A management, and lower interest expense. Turning to our segments, in ERS, fourth quarter revenue was $207 million, up 20% versus the same period last year, driven by strong double-digit growth in both rental revenue and rental sales activity. For the full year, ERS saw 17% year-over-year revenue growth.

We finished 2025 with rental adjusted gross margin and rental sales gross margin at the highest quarterly levels of the year, allowing ERS to grow its adjusted gross margin for the year despite a less favorable mix of rental and rental sales. The strong performance in ERS in the fourth quarter and for the full year was driven by significant improvement in our key rental KPIs throughout the year. In Q4, utilization averaged 83.6%, up approximately 470 basis points versus Q4 2024. Average OEC on rent in the quarter was $1.38 billion, up $166 million or 14% versus the same period in 2024. For the year, average utilization and OEC on rent were up more than 500 basis points and 14% respectively.

On-Rent Yield in the fourth quarter was 38.7%, reflecting both sequential quarterly and year-over-year increases. On-Rent Yield remained within our targeted upper 30s-low 40s range, and we continue to see opportunities for rate improvement as transmission mix grows and pricing discipline holds. Our improved metrics throughout 2025 reflect both increased rental activity and the continued scaling of our fleet to meet demand. Net rental CapEx in Q4 was more than $40 million, and our fleet age at year-end was just over 2.9 years. Our OEC in the rental fleet ended the year at almost $1.64 billion, up more than $120 million versus the end of 2024 and up $15 million in the quarter.

The growth in OEC reflects our strategic investment given the strong demand environment we continue to experience across our primary end markets, particularly in T&D. While we expect to continue to invest in the fleet in 2026, we expect maintenance CapEx to be lower in 2026 compared to 2025, which should contribute to increased free cash flow generation this year. In TES, fourth quarter equipment sales were $284 million. As Ryan noted, the year-over-year decline primarily reflects purchase timing, including equipment purchases pulled forward earlier in the year and continued pricing pressure on certain truck sales. While quarterly revenue was down versus the fourth quarter of 2024, full year TES revenue was up 4% and set a new annual record. Gross margin in the segment was 15.6% in Q4, the highest quarter of the year, and up from 15% in Q3.

The improvement reflects our expectation that market pricing pressure would ease somewhat in the second half of the year as inventory levels began to come more into balance. Importantly, our new sales backlog ended Q4 at $335 million, up more than $55 million sequentially and within our expected range of roughly 4-6 months. We’ve continued to see strong order growth so far in 2026, and our backlog currently stands at approximately $370 million, up more than 10% since year-end. In APS, the fourth quarter revenue was $37 million. Gross margin remained stable at 27%. Full year APS gross margin was just under 24%, a year-over-year improvement of almost 120 basis points. Turning to the balance sheet and liquidity.

With 2025 adjusted EBIT of $384 million and net debt of $1.65 billion, we finished the year with net leverage of 4.3 times. This represents an improvement of almost a quarter turn from the end of 2024 and a half turn from quarter end high of 4.8 times at the end of Q1 2025. Availability under our ABL was $248 million as of December 31, and based on our borrowing base, we have more than $200 million of additional availability that we can potentially access by upsizing our existing facility. Free cash flow generation and deleveraging remain key focus areas for us. We made tangible progress in the fourth quarter.

Inventory declined by more than $100 million during Q4, which supports lower working capital needs and lower interest expense on our variable rate floor plan liabilities over time. We expect to continue to reduce inventory and floor plan balances in 2026, which will contribute to free cash flow generation. With respect to our 2026 guidance, the macro demand environment across our key end markets remains very strong. We expect the TES segment to continue to benefit from a favorable macro demand environment as well as our strong relationships with our key customers and chassis and attachment suppliers. Our strong order backlog supports this. In our ERS segment, OEC on rent and utilization reached historically high levels in the second half of fiscal 2025, and we expect this trend to continue in 2026.

Demand for our equipment that serves the T&D utility markets continues at record levels, and we expect the vocational rental market to provide incremental growth as we further penetrate this expanding end market. We finished 2025 with an average age of our fleet at just over 2.9 years, down more than a year since the beginning of fiscal 2022. As a result, we expect to be able to significantly reduce our overall investment in our rental fleet in 2026 while continuing to generate growth. We expect to grow our rental fleet based on net OEC by mid-single digits in 2026, with a net investment in our rental fleet of approximately $150 million-$170 million, a meaningful reduction from over $250 million in 2025.

After prior years’ investments in inventory driven by the strong demand environment, we expect to continue to make progress on further net working capital improvements in 2026 as we continue on our path of reducing inventory months on hand to our targeted range of below six months. As a result, we expect to generate more than $50 million of levered Free Cash Flow and reduce our net leverage ratio to meaningfully below 4x by the end of fiscal 2026 while progressing toward a 3x net leverage target in 2027.

Our initial 2026 guidance reflects total revenue in the range of $2.005 billion-$2.12 billion and adjusted EBITDA in the range of $410 million-$435 million, resulting in year-over-year revenue growth of 3%-9% and adjusted EBITDA growth of 7%-13%. We expect non-rental CapEx of $40 million-$50 million. Our segment guidance for 2026 is as follows. We are projecting ERS revenue of $725 million-$760 million, TES revenue of $1.125 billion-$1.2 billion, and APS revenue of $155 million-$160 million.

Finally, as Ryan mentioned, beginning in Q1 2026, we will report our results under two reportable segments, Specialty Equipment Rentals, or SER, and Specialty Truck Equipment and Manufacturing, or STEM. Upon implementation, the new SER segment will consist of our historical ERS segment and a portion of our historical APS segment. The new STEM segment will consist of our historical TES segment and a portion of our historical APS segment. We will also begin reflecting intercompany activity between the two segments, which will ultimately be eliminated in consolidation. This new segment reporting reflects how we currently manage the business and how we allocate resources, and we believe this new presentation better reflects the positioning of Custom Truck strategies and operations portfolio.

In early April, we will provide more information, including a recasting of certain historical financial information to align with and provide comparability to the new two-segment reporting going forward. We also will recast our guidance based on new two-segment reporting at that time. We believe our new segment realignment will better reflect key economic drivers, capital intensity, and margin profiles of the respective new segments, as well as align our external reporting with how management allocates capital and evaluates performance. In addition, we believe this change will allow us to provide a clearer picture of the true earnings potential of each segment. In closing, I want to echo Ryan’s comments regarding our continued strong business outlook.

Despite significant macroeconomic uncertainty last year, our 2025 results and the continued strong fundamentals of our end markets allow us to be optimistic about the long-term demand drivers in our industry and our ability to produce significant adjusted EBITDA growth this year. With that, operator, we can open up the lines for questions.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question today comes from the line of Scott Schneeberger from Oppenheimer. Your line is open.

Daniel (on for Scott Schneeberger), Analyst, Oppenheimer: Hey, good morning, guys. It’s Daniel on for Scott. Thank you for taking our question. Regarding the guidance, what do you expect to see in the market to achieve the high end of that range? What could be, you know, potential upside drivers? Thanks.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. No, Daniel, good to talk to you. Look, I think our guidance is really an indication of what we see happening in the market right now. We’re seeing really strong P&D demand, Daniel. I think, you know, the high end would be that continuing or improving kind of throughout the year. I think it would be some of the vocational market or the infrastructure market, seeing a pickup. We’re starting to see some positive trends so far this year. You know, I think that would be picking up even further.

Obviously, you know, any of the kind of political or economic uncertainty that’s out there right now, obviously, if that calms or there’s less of that, you know, that would, you know, I think be a positive tailwind for us as well.

Daniel (on for Scott Schneeberger), Analyst, Oppenheimer: Got it. Thank you. OEC on rent yield inflected to year-over-year expansion in the fourth quarter. How do you view the pricing environment and pricing as a contributor on a go-forward basis? Thanks.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. We’re seeing good demand there, Daniel. You’re right, it did inflect to the positive. I think OEC on rent was up meaningfully versus where it was this time last year, last Q4 of 2024. We’re seeing the opportunity to increase price. Obviously, there’s some inflation coming through there in terms of the cost of adding new assets into the rental fleet. You know, we did pass some price increases through at the beginning of the year, at the end of last year, beginning of this year. Starting to see some of that you see in the numbers that Chris reported in terms of on-rent yield as well.

Daniel (on for Scott Schneeberger), Analyst, Oppenheimer: Got it. Thank you. I’ll turn it over.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Thanks, Daniel.

Operator: Your next question comes from the line of Michael Shlisky from D.A. Davidson & Co. Your line is open.

Michael Shlisky, Analyst, D.A. Davidson & Co.: Hi, good morning. Thanks for taking my questions. The eighty-four percent almost you saw in 4Q for utilization, multiyear high, but you’ve always said it sounds like it’s a little bit above what you used to call your sweet spot and around 80%. Operationally, have you gotten to a point where you can sustainably keep it at 84% and be able to serve customers properly? Given that you’re not gonna be investing as much in 2026 in some new assets, just give us a sense as to how you’re gonna balance the availability of assets and what looks like to be a little bit higher, you know, utilization going forward.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Yeah. Mike, good to talk to you, and thanks for the question. I’d say this. I think the team has done a great job of executing on the execution side of keeping the fleet up and running. I think we’re really proud of how the team is performing there. You know, I would still say the right way to think about normalized levels is that high 70s-low 80s%. As you know, kind of that Q4 is generally when utilization peaks just because of all the transmission equipment that’s going out after the summer.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: That’s what we saw really at the beginning of Q4. I think the team’s done a good job. I think execution is important. I think, as you know, we have de-aged the fleet, so the fleet is now under three years. I think we said 2.9 years is the age of the fleet, and so obviously that helps from keeping utilization high, standpoint. I think we’re in a good position, heading in. Heading into Q1, I mentioned in my comments that we’re back at about 82%, is where we are, now from a utilization perspective. Again, that’s a very strong level, from an overall utilization perspective.

Michael Shlisky, Analyst, D.A. Davidson & Co.: Being where you are now and maybe just through most of the first quarter here, have you seen any, you know, one-time storm impacts in the Northeast and parts of the country that saw some big time snow and some of the clogged drains and downed power lines, et cetera? Or was it very much a T&D focus to your everyday business?

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. It’s a. I’d say it’s the latter. It’s T&D-focused everyday business. We’re seeing strong demand in transmission right now, and then I’d say good continued demand on the distribution side of things.

Michael Shlisky, Analyst, D.A. Davidson & Co.: Lastly from my end. Some quarters you give us a sense of first half versus second half, how you might be earning, if there’s any unusual seasonality in any given quarter of the year. Anything you can comment on 2026, first half, second half, anything being pulled forward to the first quarter, et cetera?

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Yeah, Mike, this is Chris. You know, I think historically we’ve talked about, you know, kind of the first half, second half split being, you know, on the revenue side, you know, mid- to, let’s say, high 40% first half and then, you know, mid- to low 50s, kinda mid-50s second half of the year. Similar on EBITDA. EBITDA is a little more, you know, I would say a broader spread, so mid-40s to kinda mid-50s in the second half of the year on the EBITDA side. You know, just to give a little bit of color for Q1, we do expect it to be a strong quarter. You know, I think, you know, directionally, we think top line revenue will be up kind of mid- to high single digits%, and EBITDA, we think will be, you know, up double digits% year-over-year.

You know, based on Ryan’s comments, you know, it’s gonna be a big driver of that clearly is gonna be our rental business. I would, you know, index higher on rental versus new sales. You know, we think it’s gonna be a strong first quarter.

Michael Shlisky, Analyst, D.A. Davidson & Co.: Outstanding. Thank you. I’ll pass it along.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Thanks, Mike.

Operator: Your next question comes from the line of Justin Hauke from Robert W. Baird & Co. Your line is open.

Justin Hauke, Analyst, Robert W. Baird & Co.: Oh, great. Thanks for taking my question here this morning. I guess I just wanted to, and I appreciate, as always, you know, the commentary about, you know, the orders being the driver of the TES segment. But I guess if I just, you know, look at, I guess, the backlog where you were a year ago, you know, you had $370 million of backlog, you did $1.1 billion. Backlog’s a little bit lower. I guess in February it’s probably about flattish, but, you know, you’re looking for pretty good growth there.

I was just thinking about the order trends and given the pull forward and demand that you saw in 2025, maybe just talk about the cadence of how you expect the TES segment to perform throughout the year and just the confidence behind it. Thank you.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. Justin, good to talk to you, and thanks for the question. You know, look, I think 4% growth for the year, I think we feel good kinda with that number for last year for 2025. You’re right. The leading number that we’re watching. There’s two numbers that we’re watching. One is backlog. So it was up sequentially. It was up sequentially from Q3 to Q4, up 20%. Then the number that I watch closely is orders won. So orders won in the quarter were up 12% versus last fourth quarter. I think that’s a positive indicator. Then as we’ve talked about, sitting here as of yesterday, I think we gave guidance that backlog was up to $370 million.

It’s back right to that 4.4 months on hand number, which is.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Yeah

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: You know, broad guidance that I think we’ve given in the past. I think that’s that plus obviously how the first two months are shaping up are where we have some comfort in the growth range that we provided, which I think is 3%-9% growth for the segment. I think that feels pretty good. Do remember last year we saw Q2 was a very big quarter for us last year because we felt it was that real big pull forward from some of the tariff activity. I would think about smoothing it out a little bit. I don’t know, Chris, if you wanna give any more color on quarters and TES in particular.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: No, I think Ryan nailed it. You know, we did have, I think we mentioned in Q2 that we had two months that were, you know, above $100 million, which were the first non-December months that were. As you’re looking at how this year is gonna play out, certainly Q2 of this past year was much stronger than, you know, what would typically happen for the reasons Ryan just kinda laid out.

Justin Hauke, Analyst, Robert W. Baird & Co.: Okay. Yeah, 2Q a little bit of a headwind, probably 3Q and 4Q, maybe a little bit of a benefit just from smoothing that out, I guess, would be the summary.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. Yes.

Justin Hauke, Analyst, Robert W. Baird & Co.: I guess my next question, you know, I think one of the other factors you were kinda thinking about in the past for demand in 2026 on the sales side was some of the emission standards that we’re gonna be hitting in 2027 that looks like, you know, those have kinda been pushed back. I’m just curious, you know, if that’s you know something that you’re seeing is any deferrals on that side or anything from the emission standards. Thank you.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. It’s a great question, and we’re still watching it. The EPA mandate 2027 is still in play. I think we’re still waiting on more clarity around the warranty component of that in particular. You know, I think if you look at the order boards from some of the OEMs, especially around Class 8 chassis at the beginning of this year, I think they would say that they’re seeing some pre-buy activity from some of the over-the-road customers. I would say we haven’t seen a lot of it yet. There could be a little bit of an uptick this year from pre-buy. We feel like we’re in a great position with our chassis OEM suppliers. Got good inventory on the ground.

We just have such good relationships with those OEMs that we feel like we’ll be able to continue to get the chassis that we need to meet demand from our customers.

Justin Hauke, Analyst, Robert W. Baird & Co.: Okay. All right. Great. Perfect. Thank you, guys.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Thanks, Justin.

Operator: Your next question comes from a line of Nicole DeBlase from Stifel. Your line is open.

Nathan Kaplan, Analyst, Deutsche Bank: Hi, good morning from Deutsche Bank. Nathan Kaplan for Nicole DeBlase. I don’t know what happened there. Thanks for taking my question. You continue to speak about the strength of vocational. Kind of just like wondering what gives you confidence in that sustainability and any part of vocational in particular that’s standing out?

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. I would say we’re seeing good strength in transmission and distribution in particular. I think that’s where we’re seeing good demand, which obviously is into our forestry business as well right now. I think we’re seeing really good demand there. I think we did make the mention that we didn’t see as big of a year-end buy, excuse me, in some of the vocational categories. You know, dump trucks, water trucks, service trucks, roll-offs, a lot of those are where we normally see a big year-end buy where we did not see that happen last year. We’re seeing decent order uptick in those categories.

I think that’s, you know, that’s where we have some level of confidence that that will improve heading into 2026. I think the, you know, the broad theme of transmission and distribution, which as you know is 55%-60% of our overall revenue, is certainly where we’re seeing the strongest demand right now.

Nathan Kaplan, Analyst, Deutsche Bank: Okay, that’s helpful. On gross margins, so they were up year-over-year in ERS, but down in TES relative to prior year. Do you have any color on that and maybe the outlook for those segments in 2026 in terms of growth, gross margins?

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: This is Chris. I’ll start. You know, we’ve kind of given an indication. I think I heard you ask about PBS, so I just wanna make sure. You know, we’ve given kind of guidance that our range is to be within a 15%-18% gross margin range over a kind of a cycle. You know, we had throughout the year, we talked about the pricing pressure, that there was more product available out there, so we were seeing some of that. We were at the lower end of that range. You know, we started out the year at just over 15%, and Q3 was 15%. We did see about a 60 basis point increase here in Q4 to 15.6%.

I think the way to continue to think about it is, you know, we’re gonna, you know, target to stay within that range and, you know, do everything we can on the cost side. Where opportunistically we can take pricing, we will. You know, no specific guidance to give other than the guidance we’ve given, you know, to stay within that narrow range.

Nathan Kaplan, Analyst, Deutsche Bank: On the same question on ERS as well.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: ERS, you know, just focusing on rental. You know, we’ve talked about low to mid, kind of 70% adjusted gross profit range. You know, we are much stronger than that in Q4. I think it’s the highest it’s been in some time. Certainly, you know, the past couple of years at 78%. You know, that really was driven by high utilization, lower repair and maintenance relative to the size of the fleet. You know, we would expect, you know, with this higher level of utilization that we should be able to continue to stay in that mid-70% plus range.

You know, on the used equipment side, you know, we’ve been in that roughly mid-20s to high 20s% range and, you know, don’t expect it to be any different than that on a go-forward basis.

Nathan Kaplan, Analyst, Deutsche Bank: Okay, perfect. Thank you for your time, and I will pass it on.

Operator: Your next question comes from a line of Brian Brophy from Stifel. Your line is open.

Brian Brophy, Analyst, Stifel: Yeah, thanks. Good morning, everybody. Appreciate you taking the question. I guess with net CapEx coming down this year, curious how much you expect to age the fleet by as a result, and how much runway is there to continue to age the fleet after this year? Thanks.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Yeah. Great question, and good to talk to you. You know, look, I think the fleet is young, right now at 2.9 years. We think there is the ability to age the fleet. You know, if you know, months, I think would be the right guidance, not years, with the activity of this year. The fleet being so young at 2.9 years, I think there’s plenty of room to be able to age it. I think it’s in a good spot. We’ve talked about, you know, as Chris’s guidance was, lowering the maintenance CapEx component, still being able to grow the fleet overall, in 2026. You, you’re right that there will be some aging.

We don’t expect it to have a meaningful impact in gross margin or utilization performance in the fleet. We think it’s a good time to do that with the demand environment as strong as it is right now.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Yeah. I think another way to characterize it is if you look out over the last four years, on average, it’s been about a quarter of a year to 0.3 years kind of de-aging of the fleet each year. I think the important point is it won’t de-age. You know, we won’t be continuing to de-age. They’ll, you know, that’s really where we’re picking up the bulk of the kind of net investment this year.

Brian Brophy, Analyst, Stifel: Understood. That’s helpful. 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? Thanks.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Yeah, you know, we have been taking a closer look at SG&A and, you know, where possible, you know, being, you know, I’m trying to think of the best way to describe it. We certainly have made in certain places some cuts. We’re certainly looking at controlling our spending everywhere we can. The way I would look at 2026 is modest growth, so low single-digit type of growth. You know, so I wouldn’t expect there to be any material increase year-over-year.

Brian Brophy, Analyst, Stifel: Appreciate it. I’ll pass it on.

Operator: Again, if you’d like to ask a question, press star one in your telephone keypad. Your next question comes from the line of Abe Landa from Bank of America. Your line is open.

Abe Landa, Analyst, Bank of America: Good morning. Thank you for taking my questions. Maybe just first on the inventory levels have been kind of moving lower. How much lower do you kind of expect it to be this year? What’s the potential impact on the floor plan? And then maybe how much current months on hand do you have?

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: I’ll start. We finished the year at $930 million. I think our net investment in inventory, which is the way we look at it, so we look at inventory less the floor plan payables, was about $275 million. You know, we’ve given guidance that on our whole goods inventory side, which is the bulk, vast majority of our inventory, our target is to get below 6x, which we think we can get close to that by the end of this year, which would be roughly another $100 million, maybe a little bit more than that, but roughly $100 million of gross inventory.

Typically the way we think about that is 50%-30% of that would flow through to the net inventory number as we, you know, pay down the floor plan of call it 70%-85% of the value of the inventory. You know, it would probably provide between $25 million and $50 million of net working capital pickup in 2026.

Abe Landa, Analyst, Bank of America: That’s very helpful. Then maybe a question on the resegmentation. I guess why today? Is there any sort of like structure or any cost actions that are associated with it? I guess lastly, like is there anything we should read into the resegmentation about maybe like the future of Custom Truck One Source, whether it’s one or two entities?

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: I wouldn’t read anything into it. You know, currently this year, this is the way we’re managing the business. We think it’ll provide a little bit better clarity, you know, to investors, in terms of how they look at the business because they are two very unique businesses with, you know, different investment profiles. One is a little more asset-intensive, one is a little bit asset-light. Margin profiles are different. The APS segment really is supportive of those two different segments. You know, if you look on the ERS side, it really is, you know, supporting keeping the rental fleet up and running. We just felt like we’re, you know, today we’re running the business really as these two segments, and we think it makes more sense to report that way.

Abe Landa, Analyst, Bank of America: there’s no associated costs with the.

Chris Eperjesy, Chief Financial Officer, Custom Truck One Source: Certainly nothing to do with the resegmentation. We certainly are always looking at our cost structure in any given year. You know, we have continuous improvement in other initiatives that we do. I wouldn’t say there’s, you know, anything specifically related to the resegmentation. We always look at our sites. We rationalize sites. We add sites. You know, that I would say is, you know, is not directly correlated with the resegmentation.

Abe Landa, Analyst, Bank of America: Great. Thank you for answering my question.

Operator: That concludes our question and answer session. I will now turn the call back over to Ryan McMonagle for closing remarks.

Ryan McMonagle, Chief Executive Officer, Custom Truck One Source: Thanks everyone for your time today and your interest in Custom Truck. We appreciate the continued engagement and look forward to updating you next quarter. In the meantime, please don’t hesitate to reach out with any questions. Thank you again.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.