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Ladies and gentlemen, thank you for standing by and welcome to Custom Truck OneSource's second quarter 2026 earnings conference call. Please note this conference call is being recorded. I would now like to hand the conference call over to your host today, Brian Perman, Vice President of Investor Relations for Custom Truck oneSource. Thank you, Operator, and good morning. Before we begin, we would like to remind you that management's commentary and responses to questions on today's call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-thinking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of the Company's Filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during the call in the press release we issued yesterday after the market closed. That press release and our second quarter investor presentation are posted on the investor relations section of our website. Yesterday afternoon, we also filed our second-quarter 2026 10Q with the SEC. Today's discussion of our results of operations for Custom Truck OneSource Inc. or Custom truck is presented on a historical basis as of or for the three months ended June 30th, 2026 and prior periods. Also a reminder that beginning last quarter, our financial reporting now reflects our two new reportable segments, specialty equipment rentals or SER and specialty truck equipment and manufacturing or STEM. While our 2026 results in our earnings press release and SEC filing reflect the application of intersegment pricing and margins as per accounting requirements for intersegments sales, the segment results for 2025 reflect the intersegment sales with no margin as no intersegement agreement was in place in the period. For an illustrative comparison of what the 2025 results would have been had interseacement sales been reflected with the appropriate gross margin and had other internal accounting policies been in place at the time, please see the appendix of the Q2 investor presentation posted on our investor relations website. Joining me today are Ryan McMonigle, CEO, and Chris Epperjesse, CFO. I will now turn the call over to Ryan. Thanks, Brian, and good morning, everyone. We delivered record revenue in the second quarter, having a strong first half, driven by continued strong momentum in our core end markets and outstanding execution by our team. In the second corner, we generated revenue of $563 million and adjusted EBITDA of $117 million, up 10% and 25% year-over-year, respectively. Our specialty equipment rental segment continues to deliver consistently strong performance, driven by sustained and growing demand in the transmission and distribution, or T&D, markets. Our rental fleet averaged 81.6% utilization during the quarter, up 400 basis points from Q2 of last year. This was supported by continued robust levels of OEC on rent, which averaged $1.37 billion in Q2, up 13% year over year. So far in Q3, both measures have continued to show year over year growth. We believe that we are in the early stages of what could be a once-in-a-generation transmission demand super cycle. We ended the quarter with total OEC of $1.68 billion, the highest quarter end level in our history, which will support our expected continued growth in SER revenues in the second half of this year. Also, our average fleet age is just over three years old, which we believe is one of the youngest fleets in the industry and positions us well to support our customers' needs across the country. Our trucks and equipment continue to power the people who strengthen and build critical infrastructure in the U.S. and Canada. The market has been focused on the durability of demand in T&D and our ability to convert improving rental KPIs into earnings and cash flow, and we believe our trending results over recent quarters speak directly to that. Bidding activity and ongoing conversations with our customers lead us to believe that these conditions will persist through the remainder of 2026 and beyond. Our specialty truck equipment and manufacturing segment had record performance in the second quarter, with equipment sales reaching an all-time quarterly high for the company and reflecting continued healthy in-market demand and order flow. For Q2, stim revenue excluding sales to our ser segment was up five percent versus q2 of 2025 which at the time was a record for non-fourth quarter equipment sales new sales order backlog ended the second quarter at 322 million dollars down 89 million dollars from the end of q1 on record q2 deliveries despite the decrease in our backlog in q2 intra-quarter order flow remains strong and our backlog has grown so far in Q3. We continue to see strong sales demand in the utility end market, especially focused on transmission equipment. In the infrastructure end market we have seen less growth but our ongoing conversations with our customers and the pace of bidding and our order activity combine to provide us with the confidence to expect another year of growth and third-party customer revenue for STEM. With respect to the EPA 27 NOx emission regulations, the EPA introduced its proposed changes to the rules in early July, which maintained the 2027 NOx standards while adding non-conformance penalty provisions. The regulations are expected to be finalized later this year. Given our current inventory position, the chassis pre-buy actions we have already taken, and our strong relationships with our chassis OEM partners, we believe CTAS is well-positioned to navigate the impact of the upcoming emission standards changes. Given our strong year-to-date performance, robust conditions in the T&D and markets, and our outlook for the rest of the year, we are increasing our previous full-year 2026 consolidated revenue and adjusted EBITDA outlooks. We expect consolidated revenue in the range of $2.1 to $2,2 billion and adjusted EBITDA in the range of 437.5 to $455 million. Long-term sustained in-market demand buoyed by secular megatrends combined with our ability to provide exceptional execution on behalf of our customers sets us apart from our competition. Our long-standing relationships with our strategic suppliers and customers continue to be keys to our success. I continue to have the highest degree of confidence in the custom truck team and want to thank everyone for their hard work and dedication that helped achieve our extraordinary results in the second quarter. We look forward to updating everyone soon with that i'll turn it over to chris to walk through the numbers in more detail thanks ryan and good morning everyone i'll start with the consolidated results for the quarter then discuss segment performance our balance sheet liquidity and leverage and finally our updated 2026 outlook our second quarter 2026 results reflect stronger operating performance across the business and improved rental fundamentals, particularly in our T&D end markets. For the second quarter, total revenue was $563 million, and adjusted EBITDA was $117 million, representing 10% and 25% growth, respectively, versus Q2 2025. On a gap basis, second quarter net income was $10 million, or 5 cents per diluted share, compared with a net loss of $28 million a year ago, bringing first half net income to $6 million. About $19 million of that year-over-year improvement reflects a favorable income tax swing, as the prior year quarter carried a tax expense related to an adjustment in our estimated effective tax rate. The balance was driven by higher operating income. Turning to our segments, in SCR, second quarter third-party revenue, excluding intersegment sales, was $219 million, up 20% year-over-year, driven by strong double-digit growth in both rental revenue and rental equipment sales activity. Rental sales activity benefited from an increase in RPO activity in Q2 versus the same period last year. Segment-adjusted EBITDA of $117 million was up 26% year-over-year, with segment-adjusted EBITDA margin of 53%, up more than 700 basis points versus Q2 2025. Our key rental KPIs in SCR remained quite strong in Q2, continuing the momentum we've experienced in recent quarters. In Q2 utilization averaged 81.6%, up 400 basis points versus Q2 2025. Average OEC on rent in the quarter was $1.37 billion, up almost $160 million or 13% versus the same period in 2025. On-rent yield in the second quarter was 39.4%, reflecting both sequential and year-over-year increases for the quarter. On- rent yield remained within our targeted upper 30s to low 40s percent range, and we continue to see opportunities for rate improvement as transmission mix grows and pricing discipline holds. Our historically strong rental KPIs reflect both increased rental activity and the continued scaling of our fleet to meet demand. Net rental capex in Q2 was $36 million and our fleet age at quarter end was just over three years, a modest increase from the end of last quarter, which is consistent with our plan to reduce maintenance capex and age the fleet somewhat this year. Our OEC and the rental fleet ended the quarter at almost $1.68 billion, up approximately $120 million versus the end of Q2 2025, and by almost $24 million sequentially. The increase reflects disciplined fleet investment in the face of strong demand, particularly in T&D. While we expect to continue to invest in the fleet in 2026, our planned decrease in maintenance capbacks in 2027 compared to 2025 should contribute to increased free cash flow generation this year versus last year. In STEM, second quarter third-party revenue was $345 million, a quarterly record in up 5% versus Q2 of 2025, which previously represented our highest non-fourth quarter revenue in our history. STEM segment adjusted EBITDA was $37 million, and segment adjusted EBITTA margin was 8.5% in the quarter. Recall that our 2025 segment adjusted EBITda does not include any margin on intersegment sales, while 2026 segment adjusted EBitda does. STEM gross margins in the order were slightly lower as a result of increased sales to national accounts, which tend to carry modestly lower margins. Our new sales backlog ended Q2 at $322 million, down $89 million sequentially on record Q2 deliveries, and at approximately three and a half months, just below our targeted range of four to six months of new sales. June quoting activity increased 26% year over year, supporting expected growth in our order intake in the second half. We've seen strong order growth so far in Q3 and our backlog currently stands at more than $340 million. Turning to the balance sheet and liquidity, with LTM adjusted EBITDA of more than 431 million dollars and net debt of 1.66 billion dollars, we finished Q2 with net leverage of 3.85 times. This represents a sequential quarterly improvement of 0.17 turns and more than a 0.8 turn improvement versus the end of Q2 2025. Availability under our ABL was $229 million as of June 30th, and based on our borrowing base, we have more than $240 million of additional availability that we can potentially access via our existing facility. Free cash flow generation and deleveraging remain key focus areas for us. The increase in our inventory during the first half was largely planned, reflecting chassis and whole goods positioning ahead of scheduled second half deliveries together with the chassis pre-buy actions Ryan discussed. Even with that increase, we expect to reduce inventory and floor plan balances during the second half of 2026, which should support improved free cash flow generation. Through the first half of the year, levered free cash will improve by approximately $40 million versus the prior year period. With respect to our 2026 guidance, the demand environment across our key end markets remains very strong. We expect the STEM segment to continue to benefit from an overall favorable macro demand environment, as well as our strong relationship with our key customers and chassis and attachment suppliers. Our order backlog supports this. In our SER segment, what we see on rent and utilization reached historically high levels in the second half of fiscal 2025, and consistent with our year-to-date results, we expect those levels to continue building sequentially in the first half of the year. the second half of 2026. Demand for our equipment that serves the T&D utility markets continues at record levels and we expect the locational rental market to provide incremental growth as we further penetrate this expanding end market. Given our young fleet age we continue to expect to be able to significantly reduce our overall investment in our rental fleet in 2026 versus 2025 while continuing to generate growth the small increase in our fleet age to just over three years in the second quarter reflects us however giving demand trends in our tnd end markets we plan to modestly increase our net investment in our rental fleet from our previous estimate and now expect a range of 170 million dollars to 200 million dollars which supports mid single digit net oec growth this year. This represents a meaningful reduction from over $250 million in net fleet capex in 2025. After prior year's investments in inventory driven by the strong demand environment, we expect to continue making progress on further net working capital improvements in 2026 as we continue on our path of reducing inventory levels on hand for a target level of below six months. As a result, we continue to expect to generate more than $50 million of levered free cash flow and reduce our net leverage ratio to meaningfully below four times by year-end 2026 while progressing towards our three times net leverage target in 2027. Our increased 2026 revenue guidance reflects consolidated revenue in the range of $2.1 to $2,2 billion or year-over-year growth of 8% to 13%. Given the strong environment in the T&D and markets and overall strength across both of our segments, we are also raising both the bottom and top ends of our adjusted EBITDA guidance and now project a range of $437.5 to $455 million, resulting in year-over-year growth of 14 to 19 percent. We still expect non-rental CapEx of $40 million to $50 million. We are increasing our segment guidance for 2026 as well. We are projecting SCR revenue of $850 to $875 million, and STEM revenue of $1.63 to $1,7 billion, with STEM third-party new sales revenue growth of 3% to 10%. Overall STEM sales are expected to be down marginally to up 3%, with the variance attributable solely to a year-over-year reduction in intersegment sales due to lower SCR maintenance rental capex spending this year. For the third quarter, we expect consolidated revenue and adjusted EBITDA to be up year over year though modestly below second quarter levels. A portion of our second quarter new and used equipment deliveries including RPO buyouts had been planned for the second half. That timing shifted results between quarters but did not reduce the full year expectations reflected in the ranges we raised today. Our rental business enters the third quarter with OEC on rent and utilization above prior year levels. We expect both to grow sequentially with year-over-year growth rates naturally moderating from here as we lap a second half of 2025 that posted the largest increase in OECD on rent in our history. The fourth quarter remains our historically strongest quarter. In closing, I want to echo Ryan's comments regarding our continued strong business outlook. Despite broader macroeconomic uncertainty, recent results and end market fundamentals support our confidence in the long-term demand drivers and our ability to deliver meaningful adjusted EBITDA growth this year. With that, operator, we can open the line for questions. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question is from Sweta Rakhecha from Cantor Fitzgerald. Your line is now open. Please go ahead. Hi. Good morning, Ryan and Chris. Shweta here on behalf of Manish. Congrats on the great quarter. My first question is on the quarterly cadence, given that you've indicated that third-party new equipment sales and used equipment sales, and IPO buyouts have shifted from the second half into 2Q. Can you help us quantify the revenue and the adjusted EBITDA that is being pull forward and clarify how much of it came from cq versus 4q i can repeat the question basically she was asking this is chris she was talking about the cadence q2 q3 first half second half and so i think the way i'd answer that sweater is um you know in typically in especially in q2 and q3 uh we you know we have seen historically some push forwards and push outs so to quantify the net is a little more challenging but maybe just to give you a little bit of color what we're expecting in q3 um you know if you look back last year we saw q3 growth of roughly 20 percent uh even a year over year you know what we were expecting this year um is we're expecting both revenue and ebitda to grow kind of high single digit percentage range uh you know while coming in below the second quarter levels that we has mentioned really which just reflects the delivery and rpo buyouts that shifted into q2 from the second half um and then historically we've given guidance of the split first half second half which has been you know anywhere 45 to 47 first half and then uh 55 to kind of 57 in this second half of the year um this year you know we think because of that pull forward and just the timing of last year's ramp up on oec on rent in the second half of the year that is likely to be more of a 48 52 percent kind of split first half 48 second half uh 52 um you know and then looking at q4 that typically is our seasonally strongest quarter and we'd expect that to continue to be the same this year your next question comes from michael schliske with d.a davidson and co your line is now open please go ahead good morning thanks for taking my questions here can you hear me okay yep you can hear you good to talk to you okay good because i couldn't hear you for a few moments there thank you um okay um you had mentioned uh intra quarter order flow was strong perhaps i missed this but could you maybe just share with us how much were orders up year over year in the stent in the stem segment where they were put in the backlog or they made it through within the quarter yeah it's a good question mike we uh we saw converted orders up kind of in that low single digits range uh and then orders quotes were up up in the double digit range uh so that's kind of a good a good leading indicator for the back half of the year gotcha uh thanks for that and i also wanted to ask about the the emissions and changes i mean basically basically your customers aren't really hauling freight they're not looking to be out on the road uh you know 12 hours a day driving around do you consider the emission changes really just a inflation uh item that they need to pass along and if so i mean have the customers had a really negative reaction to the fact that because of things that are out of your control, you're going to have to raise prices a bit? Yeah, it's an interesting one to work through, and it still feels like some of the regulation is still being finalized, but I think the non-conformance penalties have been announced, and we're estimating those are in kind of the $4,500 to $7,000 range, depending on spec, and obviously a few of the factors in there um and that's that's to continue running on the same engines right that we're running on today and so we've taken the position like as you know that let's buy ford a little bit um just the economics of the non-conformance penalty to us makes sense to carry more inventory heading into 2027 and then obviously the for us the engine that that is most impacted is the l9 engine which is shifting to the X10 engine from Cummins. So we're watching that closely, and Cummings is now saying they'll be in production, full production on the X-10 later in Q3 of next year. So we are watching how that plays through, but yes, it's going to be a cost increase for our customers, and we're obviously doing everything we can to mitigate that heading into 27. Thanks for that, Ryan. And maybe lastly, just the map and the slide deck, how close are you to opening up some of those lesser served markets right now, like the New York, New Jersey metro area, the Carolinas, et cetera, the other items that you mentioned on the slide back. I did see an opening in the Northwest. What might be next on the calendar for you for spending your footprint here? Yep, we're working on all those markets. So that's, you know, those are areas where there's clearly opportunity to grow. um and so you know i don't i don we're not expecting any other openings this year um and so those would be uh kind of in the years ahead and that would be fairly consistent with how we guided a couple locations opening a couple of locations this year great thanks so much thanks mike good to talk to you Your next question is from Naeem Kaplan with Deutsche Bank. Your line is now open. Please go ahead. Naeim Kaplan Hi, good morning. This is Naeam Onshor, Nicole DeBlaze. So, my first question, you consistently highlighted that your long-term demand is underpinned by major federal funding packages, including the IJA, the IRA, and the chips act so given that you know we're getting later into 2026 do you describe how these federal dollars are translating into actual order flow you know what percentage of the 200 322 million dollars stem backlog or sdr booking pipeline directly tied to projects receiving federal subsidies or grants and in which fiscal year do you project um the legislative tailwinds you know could reach their peak contribution to top line growth yeah uh good question and i'm i'll um try to answer it with maybe kind of broad comments about our in market demand so we're seeing right now we're seeing really strong demand in transmission and distribution i would argue that is less kind of backstop by some of the federal funding programs obviously there are some grants and approvals that are going on out there so i'd say those are less directly impacted by federal spending dollars they are impacted by some of the regulatory improvements right that we're seeing on that side of the business um and so i think that's where we're seeing really strong demand right now you know in some of our our our prepared comments we mentioned the infrastructure side of things which would be more directly impacted by some of those federal spending we have yet to see that pick up in a meaningful way um and i would expect that you know as those dollars are released it's uh it's kind of a future benefit uh later this year really into next year that we would begin to see some of those uh some of dollars really impact backlog and ultimately our revenue got it that is helpful and then uh one question on ser if i may so uh yeah ser average fluidization reached 81.6 percent um so you know this utilization uh is at the very high end of your historical target ranges but you know with the young average fleet of about three years is 81 to 82 sustainable run rate in the supply environment or should we model a normal normalization back down to like the high 70s as you raise net net rent net rental capex um as you're raising net rental capital brings new fleet online in the second half i think that low 80s is a good spot to live right you know and i think a couple things are are benefiting that, right? You mentioned the few days, which I think is positive. And then certainly as you're heading into a transmission cycle, those projects are generally longer duration projects, which should benefit utilization, kind of where it is, or even climbing into the fall, which is generally what happens in our business. All right. Thank you very much. I'll pass it on. Good to talk to you. Your next question is from Justin Huck from Baird. Your line is now open. Please go ahead. Oh, great. Yes, I guess, Chris, you kind of answered this question with the seasonality, but I was just wondering if you could quantify the pull forward of orders that you saw in 2Q that were expected in 3Q. And then I guess maybe a broader question is just, is some of that people converting from what would otherwise have been a rental and they want to own equipment ahead of kind of, you know, long-term visibility or what's driving that? Yeah, I'll let Chris start maybe on the seasonality, Justin, then I can give you some commentary on what's driven it. Yeah, Justin. It's hard to quantify because there would have been pull forward and push out last year as well. And so I don't want to give you give a gross number when it really should be a net number. but you know it was tens of millions i guess between both new sales and new sales um but again last year there would have been a similar pull forward related to some of the chat some of the pre-buy pre-tariff to get ahead of the tariff pre-by last year um and i'll let ryan answer the second part yeah and then justin we we've talked about this in the past certainly when you know several years ago when the business was um performing well but we see kind of that some of that pre-buy is just a good indicator of long-term demand and so some of that showed up and chris mentioned on both sides but some of those showed up in our uh rental asset sales line um and that's that was customers who wanted to go ahead and have their equipment you know for for the long term um and so you know that's you take that as a good indicator of future demand as well great um and i guess my second question i apologize if if you gave this number i didn't hear it but um obviously the uh levered free cash flow guidance isn't uh changed but you did talk about um you know holding the inventories up or i guess investing a little bit more there um they were up sequentially are you still expecting kind of 100 million of inventory benefit for the year and i think you know on a working capital basis i think it was supposed to be a little closer to 30 to 40 million just trying to see if there was any change in uh kind of the inventory expectations the you know sitting here today that is still our target um you know i think more importantly we still feel comfortable we'll be above the 50 million of levered free cash flow you know how that comes you know even a growth versus networking capital versus other you know potential cash flow triggers you know they're kind of moving parts but i think we still you know feel like there's a path to get the numbers that you just quoted great thank you your next question is from scott schneeberger from oppenheimer your line is now open please go ahead Thank you very much. Good morning all and congratulations on the strong quarter. Ryan, I very much appreciate the transition demand super cycle phrase coined. I'd like to dig in a little bit there. Could you talk, maybe take us a little bit deeper about what is driving in transmission, what you're seeing there, how sustainable is it, why cleaning it, a super cycle, and then maybe some digging into just some other verticals that are very strong. Are you seeing a lot of data center and obviously transmission related enabling of power tied to it? Just a bit digging in more to the end markets. Thanks. Yeah, no, good to talk to Scott, and yeah, happy to do that. There's a couple things I think that we're really lasered in on. One is obviously a lot of what our customers are saying, so both our public company customers and kind of what they've reported even in this quarter and how they're talking about it, but maybe more importantly for us is what our kind of day-to-day conversations are with those customers. And so there's a lot of planning going on for new lines that are beginning, you know, that are being prepared, that are being designed, and that the equipment is beginning to be staged. And so for us, that's really kind of that indicator of, hey, this is a long-term cycle. So it's projects, you Know, that don't begin until 2027 and really into 2028 as well. And so I think that's where, you Now, the tone of the conversation has changed meaningfully. So we obviously that's what we're listening to most closely. A lot of kind of the industry aggregators of what's going on with line miles completes and expected starts, obviously, is strong and encouraging there as well. So so I'd say that's kind of a fundamental thing, Scott, that really gives us comfort that this is the beginning of early, early innings, beginnings of a very long cycle here, which generally is how transmission plays if you look back historically as well So I'd say that's certainly where the strongest is. And then to ask about some of the other end markets, distribution is still good. It does feel like maybe there are some IOU dollars shifting from distribution and transmission to meet the demand that we're seeing in the short term. and then you're right Scott things like data centers are a they're a good tailwind they're good tailwind for us you know but not not fundamentally worth driving kind of the growth that we're seeing in the TMD and market thanks appreciate that Ryan then um can we talk a little bit about pricing obviously a lot of a lot dynamics impacting how pricing is right now how it is going to be going forward um oec yield on rent has been accelerating in the in the in each of the quarters of the first half coming into some tougher comps and obviously you know engine changes in the next year um can you just speak about appetite of the customers um on taking pricing it seems like it's pretty good right now uh and there's understanding of of of cost pressure but just where you think that can go over let's say the next two to six quarters please thanks yeah i'll start and chris you can can kind of give some historical perspective too but um uh look scott two things are going on right now there's obviously when there's strong demand you know where we obviously want to be competitive and price and take price kind of where we can the other dynamic that we've talked about too is as transmission picks up right it's generally at a higher on-rank yield than distribution um and so you're seeing a little bit of that impact in our business today as we talk about this transmission super cycle of this period right that we're going into so i think we talked about on the q1 call we took price up about five percent and obviously the way that gets applied is it's not just a peanut butter spread but we took the price up about five at the very end of last year beginning of this year no probably the only other thing i would add you know is we've talked about kind of wanting to live in that 15 to 18 percent range on new sales um you know we're at the lower end of that range right now and largely that was driven in this quarter really high volume with some mix to some larger customers and then some product mix but you know we still feel comfortable that we can live in that range uh you know and get you know certainly towards the higher end of that range as demand continues to to be strong in the next year Thanks. And just following on that, how important a driver is it of the margin expansion? And what do you see as the primary drivers of margin expansion in the SCR segment? That's all. Thanks. I can start. We've lived in that mid 70% kind of gross margin range, certainly on the rental side, which we think is a good spot. We typically have said we want to be in the kind of low to mid 70s and we're at the higher end of that range you know i i guess the way to answer it is we think that's sustainable uh you know there could be some upside there but we feel really comfortable kind of where we're living right now in that mid 70s percent range thank you thanks scott there are no further questions at this time i will now turn the call back to ceo ryan mcmonigal for closing remarks Thanks, everyone, for your time today and your interest in Custom Truck. We appreciate the continued engagement and look forward to updating you next quarter. In the meantime, please don't hesitate to reach out with any questions. Thank you again, and have a great day. This concludes today's call. Thank You for attending. You may now disconnect.