Custom Truck One Source (CTOS 0.24%), a provider of specialty equipment rentals, sales, and services focused on infrastructure markets, released its second-quarter 2025 results on July 30, 2025. The top-line result stood out, with revenue (GAAP) reaching $511.5 million, up from analyst expectations of $461.0 million. However, the company reported a net loss of $28.4 million (GAAP) (a diluted loss per share of $0.13), significantly wider than the $0.05 GAAP loss per share analysts estimated. While the revenue beat was substantial, margin compression and increased tax expense weighed on profitability. Management described broad-based demand across end-markets and reaffirmed annual revenue and adjusted EBITDA guidance, indicating ongoing confidence in business momentum.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS, Diluted (GAAP) | ($0.13) | ($0.05) | ($0.10) | (30.0%) |
| Revenue (GAAP) | $511.5 million | $461.0 million | $423.0 million | 20.9% |
| Adjusted Gross Profit | $156.5 million | $133.9 million | 17.0% | |
| Net Income (Loss) | ($28.4 million) | ($24.5 million) | (15.9%) | |
| Adjusted EBITDA | $93.4 million | $80.1 million | 16.7% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Understanding the Business and Its Recent Focus
Custom Truck One Source supplies and services specialized heavy equipment used for critical infrastructure projects. It focuses on rental, sales, and aftermarket parts and services, targeting sectors like electric utility transmission and distribution, telecommunications, and rail. Its offerings range from aerial lifts and digger derricks to utility trucks, which are crucial for grid upgrades, electrification, and communications infrastructure.
Recent years have seen Custom Truck lean into its integrated "one-stop-shop" model, combining equipment rental, new and used truck sales, and maintenance support under one roof. This approach allows it to adapt to changing customer needs, whether projects require a quick rental or a long-term purchase. Maintaining a young, national fleet and expanding geographic coverage are key to capitalizing on steady demand in infrastructure spending and capturing recurring aftermarket business.
Quarter Highlights: Strong Demand, Margin Pressure, and Growth in Key Segments
The quarter saw revenue surge 20.9 %, outpacing estimates and marking robust year-over-year growth. The Equipment Rental Solutions segment, which includes daily and project-based equipment rentals, saw rental revenue climb 16.9% compared to Q2 2024, and Rental equipment sales increased 39.9% compared to the second quarter of 2024. Utilization of the rental fleet rose to 77.6%, reflecting greater demand, while the average original equipment cost (OEC) on rent increased by 15.6% to $1.207 billion. However, OEC on rent yield—a measure of the rental return on the cost of equipment—edged down to 38.6% from 40.0% in Q2 2024, hinting at stable but not rising rental rates.
Truck and Equipment Sales, which accounts for customer equipment purchases, posted a 22.4% increase in segment revenue compared to Q2 2024 and achieved its second-highest quarterly sales ever. Backlog, or the value of signed but unfilled orders, ended the quarter at $334.8 million, lower than both the previous quarter and prior year but still within management's expected four-to-six-month window. Signed orders rose just under 35% year over year, with signed orders from local and regional customers up more than 45%, demonstrating healthy demand and supporting management’s outlook.
The Aftermarket Parts and Services division, focused on repair and maintenance, delivered modest revenue growth at 2.6% (GAAP), but saw gross profit increase 26.6% compared to the second quarter of 2024. This segment benefits as customers choose to maintain or upgrade existing assets.
Gross profit (GAAP) and adjusted EBITDA (non-GAAP) both increased by double digits. The overall net loss (GAAP) widened, with management attributing most of this increase to higher income tax expense. Although cash taxes paid remained low, the accounting charge reduced reported profitability for the quarter. No material one-time events beyond these tax impacts were disclosed.
Looking Ahead: Guidance and Investment Focus
Management reaffirmed its outlook for fiscal 2025, guiding for total revenue between $1.97 billion and $2.06 billion and adjusted EBITDA (non-GAAP) between $370 million and $390 million. Segment targets, including ERS, Truck and Equipment Sales, and Aftermarket Parts and Services, remain unchanged. The company reiterated its plan to generate over $50 million in levered free cash flow and described ongoing investment in fleet expansion and deployment as part of its growth strategy. No changes were disclosed regarding dividend policy. NYSE:CTOS does not currently pay a dividend.
Investors looking ahead may want to watch indicators such as fleet utilization, order flow, and margin progression. Although Equipment Sales backlog declined 9% compared to Q4 2024, management views it as normalization rather than a warning sign, and strong signed order growth supports demand expectations. The company continues to focus on reducing inventory in the latter half of the year, which could free up cash and improve its leverage ratio. Segment profitability and the ability to convert revenue growth into higher net income remain key areas for future monitoring.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
