CTOS earnings analysis
What we found in CTOS's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
CTOS delivered a strong Q2, with revenue up 10.2% year over year to $563.446 million, gross margin up 200 basis points to 22.0%, and net income of $10.399 million versus a $28.380 million loss. Both newly recast segments increased EBITDA, particularly SER, where higher fleet utilization, average OEC on rent, and rental-equipment sales drove performance. The main offset is weaker cash conversion: six-month operating cash flow declined to $68.186 million amid an inventory build, while net debt increased to $1.663 billion even as the leverage ratio improved to 3.85x.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue growth and return to profitability
- Q2 revenue was $563.446 million, up $51.963 million or 10.2% from $511.483 million a year ago and up 22.1% from $461.622 million in Q1. Diluted EPS was $0.05 versus a $0.13 loss in Q2 2025 and a $0.02 loss in Q1.
- Margins improved sharply year over year
- Gross margin expanded 200 basis points year over year to 22.0% from 20.0%, while operating income rose 66.9% to $46.615 million. Operating margin improved to 8.3% from 5.5% a year ago and 6.8% in Q1, although gross margin was 30 basis points below Q1's 22.3%.
- SER led growth on rental activity
- SER external revenue increased 19.7% to $218.819 million, led by rental revenue growth of 20.1% to $145.060 million and rental-equipment sales growth of 30.3% to $51.659 million. SER Adjusted EBITDA increased 26.2% to $117.199 million.
- STEM EBITDA accelerated despite modest sales growth
- STEM external revenue grew 4.9% to $344.627 million and Adjusted EBITDA increased 54.7% to $37.217 million. Management attributed equipment-sales growth to utility and forestry vehicle demand, while floor-plan interest expense declined 19.1% to $11.139 million.
- Rental fleet utilization and yield improved
- Fleet indicators strengthened: average OEC on rent rose 13.1% to $1.366 billion, utilization increased 4.0 percentage points to 81.6%, and OEC-on-rent yield improved 0.8 percentage points to 39.4%.
- Leverage ratio improved on EBITDA growth
- Net leverage fell to 3.85x at June 30 from 4.02x at March 31 as LTM Adjusted EBITDA increased to $431.444 million from $408.118 million, despite net debt rising to $1.663 billion from $1.639 billion.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Cash conversion weakened on inventory build
- Operating cash flow declined to $68.186 million for the first six months of 2026 from $181.353 million a year earlier, which management attributes to a higher increase in inventory on hand. Investing cash use was $106.224 million, exceeding operating cash flow by $38.038 million.
- Large unhedged variable-rate debt exposure
- Net debt was $1.663 billion at June 30, including $1.481 billion of variable-rate debt. Management estimates that each 12.5-basis-point rate change would change annual interest expense by approximately $1.9 million; the company currently has no interest-rate hedges.
- Near-term facility renewal and backlog decline
- The $397.0 million non-trade floor-plan facility matures on August 25, 2026 and is expected to be renewed on substantially consistent terms. In addition, sales-order backlog fell 21.6% sequentially to $322.470 million from $411.311 million.
- No material risk-factor updates reported
- Item 1A states that no material changes occurred to risk factors from the 2025 Form 10-K. The unchanged risk profile nonetheless includes $1.663 billion of net debt and $10.3 million of cash at June 30, 2026.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $0.05
- Gross margin
- 22.0%
- Operating margin
- 8.3%
- Segment
- SER external revenue: $218.819 million, up 19.7% year over year and 12.9% sequentially; segment Adjusted EBITDA: $117.199 million, up 26.2% year over year.
- Segment
- STEM external revenue: $344.627 million, up 4.9% year over year and 28.7% sequentially; segment Adjusted EBITDA: $37.217 million, up 54.7% year over year.
What they said about what is next.
The 10-Q does not provide quantitative revenue, EPS, or EBITDA guidance. Management states liquidity sources and operating cash flow are sufficient for operating, debt-service, and rental-fleet investment requirements over the next 12 months and beyond; quantitative outlook was provided separately in the earnings release.
The filing reads better than the one before it.
What came before.
- 10-Q · April 27, 2026
- Custom Truck One Source reported Q1 2026 revenue of $461,622,000, up $39,390,000 or 9.3% year-over-year driven by higher rental revenue and equipment sales; gross margin improved to 22.3% (from 20.3% a year ago) and…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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