📢 Earnings Summary — CTOS

CTOS delivered another strong quarter with 8% revenue growth and 20% adjusted EBITDA growth, driven by robust T&D demand and disciplined execution in ERS and TES. Rental KPIs continued to strengthen, with utilization above 79% and OEC on rent up 17% y/y, prompting accelerated fleet investment to position for 2026. TES sales rose 6% with orders and backlog building into Q4, aided by anticipated benefits from accelerated depreciation. Management reaffirmed full-year revenue and EBITDA guidance, while nudging ERS to the upper half of its range and TES to the low end. Despite higher CapEx and lower-than-planned 2025 free cash flow, liquidity remains solid and leverage improved, with a path to sub-3x by FY2026. Macro and tariff-related caution persists, but secular grid investment tailwinds support a positive outlook.

📈 Growth Highlights

• Total revenue up 8% y/y to $482M; adjusted gross profit up 13% to $156M; adjusted EBITDA up 20% to $96M
• ERS revenue up >12% y/y to $169M; rental revenue up 18% y/y
• Average utilization >79% (+600 bps y/y), highest in 2+ years; Q4-to-date utilization >80%
• Average OEC on rent >$1.26B (+17% y/y); exited Q3 >$1.3B; total rental fleet OEC >$1.62B (+~$130M y/y)
• TES equipment sales $275M (+6% y/y); YTD TES sales +8.5% vs prior year
• APS revenue $38M (+3% y/y); APS adjusted gross margin >26% (up y/y and sequentially)
• TES net orders $220M (+24% y/y); strong intra-quarter orders with local/regional customers +40% y/y; overall orders +30%+; Q4-to-date backlog >$350M

🔨 Business Development

• Accelerated rental fleet CapEx to meet sustained T&D demand; 2025 net rental CapEx now ~$250M
• Investing $10–15M incremental non-rental CapEx to expand production/manufacturing capacity at Kansas City campus (land, building, equipment)
• Maintaining tariff mitigation measures; expect limited direct cost impact in 2025
• Leveraging long-standing supplier relationships (chassis, bodies, attachments) to support TES production and delivery
• Targeting Q4 sales uplift from accelerated depreciation provisions benefiting new/used vehicle sales

💵 Financial Performance

• Q3 revenue $482M; adjusted gross profit $156M; adjusted EBITDA $96M; LTM adjusted EBITDA $365M
• ERS adjusted gross profit $104M (+19% y/y); ERS adjusted gross margin 62% (+370 bps y/y)
• ERS rental margins ~76%; rental asset sales margins mid-20%; on-rent yield 38.2% (within high-30s to low-40s target range)
• TES gross margin 15% in Q3; expected to improve as market supply normalizes
• Q3 net rental CapEx $79M; rental fleet age <3 years; fleet OEC >$1.62B at quarter end
• Inventory reduced ~$54M in Q3; floor plan balances down ~$57M
• 2025 guidance reaffirmed: revenue $1.97–$2.06B; adjusted EBITDA $370–$390M; ERS revenues to upper half of $660–$690M; TES to low end of $1.16–$1.21B
• 2025 levered free cash flow now expected below prior ~$50M target; Q4 expected to generate FCF but full-year not meaningful

🏦 Capital & Funding

• ABL borrowings $708M at Q3 end; $238M availability plus >$230M suppressed availability
• Net leverage 4.53x (sequential improvement); targeting <3x by end of FY2026 via levered FCF
• Inventory reduction plan: down $125–$150M vs YE 2024 by Q4 2025; longer-term goal of ~6 months whole goods inventory by end of FY2026
• Non-rental CapEx elevated in 2025 for KC expansion; expected to normalize to $25–$40M annually thereafter

🧠 Operations & Strategy

• Prioritizing T&D end-market demand; mix shifting toward higher-yield transmission work
• Maintaining fleet utilization in mid-70% to mid-80% across most categories; Q4-to-date above 80%
• Continuing fleet growth in Q4 to deliver high single-digit OEC growth vs YE 2024
• Pricing managed to market; modest yield improvement expected as utilization tightens and transmission mix rises
• Sourcing and inventory strategies in place to mitigate tariff exposure and support production

🌍 Market Outlook

• Secular T&D growth driven by rising electricity demand and AI power needs; ~$600B U.S. IOU T&D CapEx projected for 2025–2029
• Industry spending expected to grow ~10% annually; transmission >15% CAGR through 2029
• Strong intra-quarter order flow as equipment availability improves; customers placing orders closer to need
• TES backlog building in Q4 to >$350M; Q4 historically strongest TES sales quarter
• Expect TES margins to improve as vocational equipment supply balances; consolidated 2025 guidance reaffirmed with ERS strong and TES toward low end

⚠ Risks & Headwinds

• Customer hesitancy on new equipment due to macro uncertainty, high interest rates, and tariff-related inflation
• Elevated supply of certain vocational vehicles pressuring TES gross margins near term
• 2025 free cash flow below prior target due to higher rental and non-rental CapEx and timing of inventory reductions
• Leverage remains elevated at 4.53x; execution risk in reducing to <3x by FY2026
• Tariff environment remains an indirect demand headwind despite limited direct cost impact

AI-generated earnings recap sourced from company results & conference call observations. Not investment advice — verify with official filings.