Custom Truck One Source’s first quarter drew a negative market reaction as revenue growth fell short of Wall Street’s expectations. Management attributed the slower top-line growth to ongoing economic uncertainty and shifting customer preferences, particularly as some customers deferred equipment purchases in favor of rentals. CEO Ryan McMonagle highlighted robust demand in the company’s core utility end markets, stating, “Average utilization in the quarter was just under 78%, up 440 basis points versus Q1 of last year,” reflecting continued strength in the rental segment. However, softness among smaller customers and margin pressure from product mix weighed on results.
Is now the time to buy CTOS? Find out in our full research report (it’s free).
Custom Truck One Source (CTOS) Q1 CY2025 Highlights:
- Revenue: $422.2 million vs analyst estimates of $435.5 million (2.7% year-on-year growth, 3% miss)
- Adjusted EPS: -$0.05 vs analyst estimates of -$0.05 (in line)
- Adjusted EBITDA: $73.43 million vs analyst estimates of $78.2 million (17.4% margin, 6.1% miss)
- The company reconfirmed its revenue guidance for the full year of $2.02 billion at the midpoint
- EBITDA guidance for the full year is $380 million at the midpoint, above analyst estimates of $375.9 million
- Operating Margin: 2.9%, down from 4.5% in the same quarter last year
- Backlog: $420.1 million at quarter end
- Market Capitalization: $1.11 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Custom Truck One Source’s Q1 Earnings Call
- Nicole Sheree (Deutsche Bank): Asked what underpins confidence in accelerating revenue growth for the rest of the year. CEO Ryan McMonagle pointed to strong rental growth in ERS, a rebound in TES order flow, and a historically stronger second half for sales.
- Nicole Sheree (Deutsche Bank): Inquired if federal infrastructure spending pauses might delay TES demand. McMonagle responded that current backlog and customer conversations show no sign of project delays, and noted the rental model provides flexibility if purchasing is deferred.
- Tami Zakaria (JPMorgan): Sought detail on inventory increases and tariff mitigation. McMonagle explained inventory was pulled forward to offset potential price hikes, and that supplier relationships and sourcing adjustments help manage tariff risks.
- Tami Zakaria (JPMorgan): Asked whether inventory reduction would be linear or back-end weighted. McMonagle stated reductions would be more heavily weighted to the second half of the year, following earlier inventory builds.
- Brian Brophy (Stifel): Queried about ERS rental rate trends and TES gross margin outlook. CFO Chris Eperjesy said rental yields remained steady, with limited upside, and TES margins are expected to remain in the 15–18% range, impacted by product mix and customer composition.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will be tracking (1) the pace at which TES backlog converts into equipment sales and margin recovery, (2) the ability to maintain high utilization rates in the rental fleet amid shifting customer demand, and (3) updates on tariff impacts and inventory normalization. We will also monitor progress toward free cash flow generation and leverage reduction targets.
Custom Truck One Source currently trades at $4.92, up from $4.01 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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