During a fireside chat hosted by Oppenheimer’s Scott Schneeberger, executives from Custom Truck One Source (CTOS) discussed robust demand in the specialty rental equipment sector, particularly within utility transmission and distribution.
According to CEO Ryan McMonagle, the Specialty Equipment Rental (SER) division has expanded to roughly 10,400 units and is valued at about $1.66 billion, marking the company’s highest point ever. Approximately 75% of this fleet is utility equipment, focusing on transmission and distribution which includes bucket trucks and digger derricks, while the other 25% comprises specialty vehicles such as vacuum and dump trucks.
McMonagle noted that fleet utilization was 81.4% in Q1 and has seen an uptick entering Q2, with average rental periods between 12 and 13 months currently nearing the upper bounds. He mentioned that the fleet is under three years old and typically lasts 10 to 15 years.
Utility Demand as a Growth Catalyst
McMonagle emphasized that the transmission and distribution (T&D) market is Custom Truck’s largest, accounting for approximately 60% of overall revenue and about 75% of rental revenue. He identified grid modernization and electrification as vital long-term growth factors.
Backlog Trends and Pricing Environment
McMonagle indicated that the company’s backlog is stabilizing towards a historical norm of four to six months after peaking amid COVID-19 disruptions. The backlog reached 4.5 months by the end of Q1, with an increase of over $70 million noted during the quarter. Demand in T&D remains particularly strong, with improvements also being observed in the infrastructure sector.
Financial Performance and Future Outlook
First-quarter revenue saw a 9% increase, while adjusted EBITDA rose by 33%, driven by a nearly 20% year-over-year growth in rental revenue. The company anticipates capital expenditures of $150 million to $170 million in rental for 2026, with priorities on deleveraging and achieving over $50 million in levered free cash flow.
Improved Supply Chain Conditions
Supply chain relationships have strengthened, and the overall condition has improved significantly since 2020. McMonagle confirmed that the company is well-positioned to meet its growth goals for the upcoming years.
