0001709682-26-000018
SEC filingRevenue grew 9.3% YoY driven by rental and equipment sales, narrowing net loss to $4.1 million.
For the three months ended March 31, 2026, total revenue increased 9.3% to $461.6 million from $422.2 million in the same period of 2025. The growth was driven by a 18.0% increase in rental revenue to $137.2 million, reflecting higher average OEC on rent (+11.8%) and improved fleet utilization (81.4% vs. 77.7%). Equipment sales rose 6.9% to $292.6 million, supported by strong demand for new specialty trucks. Parts sales and services were essentially flat at $31.8 million.
Gross profit grew 20.5% to $103.1 million, with gross margin expanding 200 basis points to 22.3% from 20.3%. The improvement was driven by a favorable revenue mix shift toward higher-margin rental revenue and lower cost of revenue as a percentage of sales (65.5% vs. 67.9%). Depreciation of rental equipment increased 12.2% to $56.2 million, in line with higher rental equipment levels.
Operating income surged 153.7% to $31.5 million from $12.4 million, as operating expenses declined 2.1% to $71.6 million, primarily due to lower stock compensation and IT software amortization. Total other expense decreased 6.9% to $35.3 million, reflecting lower floorplan interest expense from reduced inventory levels. Net loss narrowed 76.9% to $4.1 million from $17.8 million, driven by higher operating income.
Specialty Equipment Rentals (SER): Segment revenue from external customers increased 16.0% to $193.8 million, led by an 18.0% rise in rental revenue and a 26.5% increase in equipment sales (driven by higher buyout activity on rental contracts with purchase options). Parts sales and services declined 10.5% due to fewer tool kits sold. Intersegment sales fell 41.5% as fewer units were identified as rental asset disposals. Adjusted EBITDA grew 22.6% to $105.5 million, with margin expanding to 54.4% from 47.3%, reflecting higher rental activity and operating leverage.
Specialty Truck Equipment & Manufacturing (STEM): External revenue rose 5.0% to $267.9 million, driven by a 4.4% increase in equipment sales (demand in service vehicles) and a 16.7% increase in parts sales and services (higher service activity and replacement parts demand). Intersegment sales were flat at $95.5 million. Adjusted EBITDA surged 149.5% to $32.7 million, supported by higher gross profit and a 20.9% decline in floorplan interest expense due to lower inventory levels.
The MD&A does not provide explicit forward guidance. Management notes that sales order backlog was $411.3 million as of March 31, 2026, down 2.1% from $420.1 million a year earlier but up 22.7% from $335.3 million at December 31, 2025, indicating a sequential improvement in demand. The company believes its liquidity sources and operating cash flows are sufficient to address operating, debt service, and capital requirements over the next 12 months. Key strategic priorities include managing rental fleet age and mix, leveraging the new two-segment structure (SER and STEM) to better reflect the economics of rental and sales/manufacturing businesses, and maintaining compliance with debt covenants (Net Leverage Ratio of 4.02x as of March 31, 2026).
Cash and equivalents were $9.6M as of March 31, 2026, down from $6.3M at year-end 2025 but still low relative to total debt of $1.648B. Inventory surged 10% to $1.022B, driven by whole goods inventory of $899M. Total assets stood at $3.547B. The company had $256.9M available under its ABL facility, providing liquidity.
Purchase commitments are disclosed as cancellable with a notification period, so no specific total amount is recorded. Floor plan payables totaled $740M (trade $323M, non-trade $417M), with interest expense of $10.5M in Q1 2026. Deferred revenue and customer deposits were $15.9M, including $4.6M deferred rental revenue.
No share repurchases occurred in Q1 2026; $1.9M remains authorized. Debt net decreased $11.2M, primarily from ABL facility repayments. Capital expenditures were $107.0M (23.2% of revenue), heavily weighted toward rental equipment ($96.9M). No dividends were paid.
The company reorganized into two segments: SER (Specialty Equipment Rentals) and STEM (Specialty Truck Equipment & Manufacturing). SER generated $193.8M external revenue (+16% YoY) with $105.5M Adjusted EBITDA; STEM had $267.9M revenue (+5% YoY) and $32.7M Adjusted EBITDA. Intersegment sales were $6.8M (SER to STEM) and $95.5M (STEM to SER). Geographically, 98.6% of total revenue came from the United States ($455.0M), with Canada contributing $6.6M.
Net loss improved from ($17.8M) to ($4.1M), yet operating cash flow dropped sharply from $55.6M to $23.8M. The divergence is largely due to a massive $92.6M inventory build (vs. $26.3M in prior year), which consumed cash despite higher non-cash add-backs (depreciation up to $68.2M). Capex intensity remained high: $96.9M on rental equipment plus $10.1M on non-rental property and cloud computing, totaling $107.0M. This far exceeded CFO, resulting in negative free cash flow. Financing activities provided $38.6M, primarily from net floor plan payables ($50.8M) and revolving credit facility net repayments ($10.0M). No share repurchases or dividends were made in the current period. The company relied on debt and floor plan financing to bridge the cash gap. Anomalies include a $7.6M outflow from customer deposits/deferred revenue and a $2.4M provision for receivables, but no unusual tax payments.