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…
Earnings analysis · 10-Q
CTOS earnings analysis
Filed August 3, 2026 · Our reading of the company's report
The latest report
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…
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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.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
Reported figures
- Earnings per share
- $0.05
What stood out
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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.
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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%.
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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.
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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.
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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%.
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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.
What to watch
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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.
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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.
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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.
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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.
Management's outlook
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.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.