CTOS earnings call summary

Prepared Highlights

• Record Q4 revenue: $528M, with adjusted EBITDA of $121M (up >18% YoY) (CEO, CFO, prepared)
• Full-year 2025 record revenue: $1,944M (up 8% YoY); adjusted EBITDA $384M (up 13% YoY, ahead of guidance midpoint) (CEO, CFO, prepared)
• ERS (Equipment Rental Solutions) Q4: revenue $207M (up 20% YoY); full-year revenue up 17% (CFO)
• ERS rental KPIs: Q4 utilization 83.6% (highest in ~3 years, up ~470 bps YoY); average OEC on rent $1.38B (up 14% YoY); on-rent yield 38.7% (CFO)
• ERS total OEC year-end: ~$1.64B (record level, up >$120M vs. end of 2024) (CEO, CFO)
• TES (Truck Equipment Sales) Q4: equipment sales $284M (down 8% YoY); full-year TES revenue $1.1B (up 4% YoY, highest annual level) (CEO, CFO)
• TES gross margin Q4: 15.6% (highest quarter of the year, up from 15.0% in Q3) (CFO)
• New sales order backlog: $335M at Q4 end (up >$55M, or 20% vs. Q3); as of March 9, 2026, backlog ~$370M (CEO, CFO)
• APS (Aftermarket Parts & Service) Q4: revenue $37M; gross margin 27% stable; full-year gross margin ~24% (up ~120 bps YoY) (CFO)
• Net rental CapEx Q4: >$40M; fleet age at year-end ~2.9 years (CFO)
• Net leverage: 4.3x at year-end (improved from ~4.6x at end of 2024 and 4.8x mid-2025); ABL availability $248M; >$200M additional potential availability (CFO)
• Inventory: declined >$100M in Q4; expected further reduction in 2026 (CFO)

Official guidance (CFO, prepared):

• Full-year 2026: revenue $2,005M–$2,120M; adjusted EBITDA $410M–$435M (YoY revenue +3%–9%, adjusted EBITDA +7%–13%)
• 2026 segment guidance: ERS revenue $725M–$760M; TES revenue $1,125M–$1,200M; APS revenue $155M–$160M
• 2026 rental fleet net investment: ~$150M–$170M (vs. >$250M in 2025); net OEC growth mid-single digits
• 2026 non-rental CapEx: $40M–$50M
• 2026 levered free cash flow: >$50M; net leverage expected to decline to meaningfully below 4x by year-end, progressing toward 3x in 2027

Mgmt quotes:

• “We delivered a strong finish to 2025 with record quarterly revenue driven by continued momentum in our core end markets, and strong execution by our team.” — CEO
• “Our rental fleet averaged just under 84% utilization during the quarter, the highest in almost three years.” — CEO
• “While TES performance in the fourth quarter was below our expectations, end market demand is healthy and order activity remains strong.” — CEO
• “Our 2026 guidance reflects our continued optimism about our business, as long-term sustained end market demand buoyed by secular megatrends… set us apart from our competition.” — CEO
• “We expect to generate more than $50,000,000 of levered free cash flow and reduce our net leverage ratio to meaningfully below 4x by the end of fiscal 2026.” — CFO

Prepared Metrics

Q&A Batch (6-7 of 7)

Q6 — Brian Brophy

• Topic: Fleet aging, CapEx reduction, and SG&A outlook
• Key points:
  • Fleet age currently 2.9 years; expected to age by months (not years) in 2026 due to lower net CapEx.
  • No meaningful impact on gross margin or utilization expected from aging; demand environment described as strong.
  • SG&A in 2026 expected to see low single-digit growth, with no material year-over-year increase.
• Mgmt stance: Bullish — fleet is young enough to absorb aging without harming performance, and SG&A discipline supports margin stability.

Q7 — Abe Landa

• Topic: Inventory reduction, floor plan impact, and re-segmentation rationale
• Key points:
  • Gross inventory target: below 6 months by end of 2026, implying ~$100M reduction from $930M year-end level.
  • Net working capital pickup from inventory: $25M–$50M in 2026 (30%–50% of gross reduction flows through net after floor plan paydown).
  • Re-segmentation into ERS and APS reflects how business is run; no associated cost actions or structural changes.
• Mgmt stance: Neutral — re-segmentation is for investor clarity, not a signal of future entity changes; inventory reduction is a normal working capital management step.