Custom Truck One Source (NYSE: CTOS) raised its full-year 2026 adjusted EBITDA and Specialty Equipment Rentals revenue outlooks after record third-quarter revenue and stronger rental activity in its core transmission and distribution markets. The company maintained its consolidated revenue forecast and said demand linked to grid investment remained strong into the fourth quarter.
Third-quarter consolidated revenue rose 3% year over year to $495 million. Rental revenue increased to $153 million from $127 million, offsetting a decline in equipment sales to $310 million from $321 million. Parts and services revenue was $33 million, compared with $34 million a year earlier.
Non-GAAP adjusted gross profit increased 9% to $170 million, while consolidated adjusted EBITDA climbed 16% to $111 million. The adjusted EBITDA margin was about 22.4%, up from roughly 19.9% in the prior-year quarter. On a GAAP basis, net income was $2 million, compared with a $6 million loss in the third quarter of 2025.
Rental demand drives earnings growth
Specialty Equipment Rentals, or SER, generated $223 million of segment revenue, up 18% year over year, while segment adjusted EBITDA rose 23% to $122 million on the presentation’s reported basis. Rental revenue grew 20%, supported by higher fleet deployment and utilization, and equipment sales increased 14%.
Average original equipment cost, or OEC, on rent reached $1.395 billion, an increase of $132 million from the prior-year quarter. Average fleet utilization rose 220 basis points to 81.5%, and annualized on-rent yield increased 120 basis points to 39.4%. The company attributed the gains primarily to continued momentum in transmission and distribution markets.
Custom Truck said rental activity remained strong early in the fourth quarter, with OEC on rent above $1.5 billion and utilization exceeding 84%. The company noted that these quarterly averages remained above year-earlier levels.
Specialty Truck Equipment & Manufacturing, or STEM, reported segment revenue of $442 million, up 8%. Segment adjusted EBITDA increased to $37 million from $18 million on the presentation’s reported basis. Growth was driven by higher intersegment sales associated with investment in the rental fleet, while external equipment sales declined to $270 million from $286 million.
The company said third-party sales were affected by the movement of some sales into the second quarter, delays related to a chassis vendor recall and hailstorm damage. Sales order backlog stood at $342 million at quarter-end and had increased to almost $400 million early in the fourth quarter, supported by order flow and year-over-year growth in quoting activity. Custom Truck cautioned that backlog should not be viewed as an accurate measure of future sales.
2026 adjusted EBITDA outlook raised
Custom Truck now expects full-year adjusted EBITDA of $447.5 million to $460 million, up from its previous range of $437.5 million to $455 million. That would represent growth of 17% to 20% from 2025.
The company also raised its SER revenue forecast to $870 million to $890 million from $850 million to $875 million, citing OEC on rent, utilization and margin performance ahead of its expectations. Management said transmission and distribution demand was at record levels, with additional growth supported by vocational markets.
The consolidated revenue outlook was affirmed at $2.1 billion to $2.2 billion, representing projected growth of 8% to 13%. STEM revenue is expected to range from $1.63 billion to $1.70 billion, compared with $1.655 billion in 2025. The company expects third-party STEM revenue to grow 3% to 10%, while overall segment sales are affected by an anticipated year-over-year reduction in sales to SER.
Strategic fleet investment prompted Custom Truck to raise its 2026 net rental capital expenditure forecast to $210 million to $230 million from $170 million to $200 million. Gross rental capital expenditures are projected at $400 million to $430 million. Levered free cash flow is expected to be slightly positive for the year, compared with $4 million generated through the first nine months.
Net leverage declined to 3.70 times at the end of the quarter from 4.53 times a year earlier, even as ending fleet OEC increased $143 million to a record $1.765 billion. Management continues to expect net leverage to be meaningfully below 4 times by year-end 2026 and is targeting 3 times in 2027. Available liquidity was reported at $537 million, with no significant debt maturities until 2029.
The outlook remains subject to risks including labor and equipment costs, tariffs and other changes in U.S. trade policy, supply-chain disruptions, the availability of chassis and other components, fleet-management execution, interest rates and broader economic conditions. The company also noted that significant indebtedness could constrain cash availability and access to additional capital.
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