Custom Truck One Source, Inc. (CTOS) 2025 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Custom Truck One Sources fourth quarter and full year 2025 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 One Source.

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-looking 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 factors section of the company's filings with the FCC.

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 this morning.

That press release and our 4th quarter investor presentation are posted on the investor relations section of our website. This morning we also filed our 2025 10-K with the SEC.

Today's discussion of our results of operations for Custom Truck One Source Inc. or Custom Truck is presented on a historical basis as of before the three months and year ended December 31, 2025 in prior periods.

Joining me today are Ryan Mcmonagle, CEO, and Chris Eperjesy, CFO. I will now turn the call over to Ryan.

Thanks, Brian, and good morning, everyone. We delivered a strong finish to 2025 with record quarterly revenue driven by continued momentum in our core in markets and strong execution by our team. In the fourth quarter we generated revenue of $528 million. Adjusted EBITDA was $121 million up more than 18% year over year. For the full year 2025, we saw record revenue of $1.944 billion up 8%, and adjusted EBITDA was $384 million up 13% compared to 2024 and ahead of the midpoint of our guidance.

The key driver of our performance in the quarter was continued strength in our rental business as the improvements we saw in the 3rd quarter in the transmission and distribution markets continued in the Q4.

Our rental fleet averaged just under 84% utilization during the quarter, the highest in almost 3 years, supported by continued growth in OpEx on rents.

Average OpEx on rent in Q4 was just under $1.4 billion up 14% year over year.

During Q4, both utilization and OpEx on rent reached historically high levels, while we saw the anticipated seasonal slowdown in both measures in December.

So far in 2026, both have rebounded as expected, with utilization currently at approximately 82% and OpEx on rent well above the year end level.

We ended the year with total OpEx of $1.64 billion the highest quarter end level in our history.

Supporting our expectation for continued growth in our rental business.

Our trucks and equipment continue to power the people who strengthen and build critical infrastructure in the US and Canada.

The market has been focused on the durability of demand in TND and our ability to convert improving rental KPIs into earnings and cash flow.

And we believe our Q4 results speak directly to that.

Bidding activity and ongoing conversations with our customers lead us to believe that these conditions will persist through 2026 and beyond.

While TES performance in the 4th quarter was below our expectations.

In-market demand is healthy and order activity remains strong. While TES saw sequential revenue growth in the quarter, revenue was down 8% year over year, primarily due to our customers pulling forward capital spending to earlier in the year in anticipation of potential tariffs and price increases, and an atypical year-end dynamic in which some customers deferred deliveries in the 2026.

Additionally, we did not fully experience the anticipated lift in spending of our customers, taking advantage of the accelerated depreciation provisions in last year's federal tax and spending bill. Despite those facts, TES finished the year with revenue of $1.1 billion up 4% for the full year, and our highest annual level ever.

New sales order backlog ended the year at $335 million up more than $55 million or 20% from Q3.

Our backlog has continued to grow so far in 2026 and as of yesterday stands at around $370 million as we've noted in prior periods, backlog can move quarter to quarter with delivery timing and production schedules, so we also focus on order activity and conversion.

We saw strong year over year net order growth of 21% in Q4 driven by year over year growth of 12% and orders one during the quarter.

With particular strength coming from local and regional customers.

Despite slower growth in the infrastructure and market, the continued strength and order growth in our ongoing conversations with our customers provide us with the confidence to expect another year of growth in TES.

This confidence is increased by our recently announced strategic partnership with Hab, a manufacturer of truck-mounted cranes and forklifts.

This partnership strengthens our ability to serve customers across multiple in markets while supporting our long-term growth strategy.

It broadens our product portfolio, enhances our service capabilities, and allows us to deliver more complete solutions in key markets we already serve, such as building supply, forestry, and rail.

In addition, this year to better support our TES customers post sale and grow our parts and service revenue, we are investing in a focused initiative to expand our aftermarket service capacity. This effort, which will impact multiple locations in our existing branch network, will ensure that our TES customers continue to get the high level of post sale service that they have come to expect from Custom truck.

Both the H app partnership and our expanded parts and service offering highlight our commitment to continuing to invest in TES and position our sales business to grow its presence and market share and to strengthen our connection with our customers.

Before I turn it over to Chris, I want to highlight a few items related to 2026.

First, beginning with the quarter ending March 31, 2026, we will move from our current three segment reporting and we'll report results under two segments, specialty equipment rentals or SER and specialty truck equipment and manufacturing.

Or STEM.

This change aligns our segment reporting with how we currently evaluate the business and provides enhanced transparency to investors with a clear basis of comparison to the industry peers of each of our primary businesses.

We plan to provide additional details prior to reporting Q1 2026 earnings, including recasting historical financials and our 2026 guidance to align with the new reporting structure.

Second, we are providing our full year 2026 outlook. We expect revenue in the range of $2.005 billion to $2.12 billion in adjusted EBITDA in the range of $410 million to $435 million.

Chris will provide additional details in a few minutes.

Our 2026 guidance reflects our continued optimism about our business as long-term sustained in-market demand buoyed by secular mega trends and our ability to provide exceptional execution on behalf of our customers set 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 strong results in 2025.

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 consolidated results for the quarter and full year, then discuss segment performance, our balance sheet, liquidity, and leverage, and finally our 2026 outlook.

Our 4th quarter and full year 2025 results reflect stronger operating performance across the business and improved rental fundamentals, particularly in our TNDN markets.

For the fourth quarter, total revenue was $528 million and adjusted EBITDA was $121 million. For the full year, record revenue of $1.944 billion was 8% ahead of 2024 and adjusted EBITDA was $384 million a year over year increase of 13%.

Before I move to the segments, a quick note on our GAAP results. For the fourth quarter, GAAP net income was approximately $21 million and for the full year, GAAP net loss was approximately $31 million. Year over year comparability on net income was impacted by the $23.5 million gain on a sale leaseback transaction in the fourth quarter of 2024.

Excluding that prior year's sale lease back gain, underlying net income improved meaningfully year over year, reflecting higher gross profit, discipline, SG&A management, and lower interest expense.

Turning to our segments, in ERS fourth quarter revenue was $207 million up 20% versus the same period last year, driven by strong double-digit growth in both rental revenue and rental sales activity.

For the full year, ERS saw 17% year over year revenue growth.

We finished 2025 with rental adjusted gross margin and rental sales gross margin at the highest quarterly levels of the year, allowing ERS to grow its adjusted gross margin for the year despite a less favorable mix of rental and rental sales.

A strong performance in ERS in the fourth quarter and for the full year was driven by significant improvement in our key rental KPIs throughout the year. In Q4, utilization averaged 83.6%, up approximately 470 basis points versus Q4 2024.

Average OpEx on rent in the quarter was $1.38 billion up $166 million or 14% versus the same period in 2024.

For the year, average utilization and OpEx on rent were up more than 500 basis points and 14% respectively.

On rent yield in the fourth quarter was 38.7%, reflecting both sequential quarterly and year over year increases.

On rent yield remained within our targeted upper 30s to low 40s range, and we continue to see opportunities for rate improvement as transmission mix grows and pricing discipline holds.

Our improved metrics throughout 2025 reflect both increased rental activity and the continued scaling of our fleet to meet demands. Net rental CapEx in Q4 was more than $40 million and our fleet age at year end was just over 2.9 years.

Our OpEx and the rental fleet ended the year at almost $1.64 billion up more than $120 million versus the end of 2024 and up $15 million in the quarter.

The growth in OpEx reflects our strategic investment given the strong demand environment we continue to experience across our primary end markets, particularly in T&D.

While we expect to continue to invest in the fleet in 2026, we expect maintenance caps to be lower in 2026 compared to 2025, which should contribute to increased free cash flow generation this year.

In PES 4th quarter equipment sales were $284 million. As Ryan noted, the year over year decline primarily reflects purchase timing, including equipment purchases pulled forward earlier in the year and continued pricing pressure on certain truck sales.

While quarterly revenue was down versus the fourth quarter of 2024, full year TES revenue was up 4% and set a new annual record.

Gross margin in the segment was 15.6% in Q4, the highest quarter of the year, and up from 15% in Q3.

The improvement reflects our expectation that market pricing pressure would ease somewhat in the second half of the year as inventory levels began to come more into balance.

Importantly, our new sales backlog ended Q4 at $335 million up more than $55 million sequentially and within our expected range of roughly 4 to 6 months.

We've continued to see strong order growth so far in 2026, and our backlog currently stands at approximately $370 million up more than 10% since year end.

In APS, the fourth quarter revenue was $37 million. Gross margin remained stable at 27%.

Full year APS gross margin was just under 24%, a year over year improvement of almost 120 basis points.

Turning to the balance sheet and liquidity, with 2025 adjusted EBIT of $384 million and net debt of $1.65 billion we finished the year with net leverage of 4.3 times.

This represents an improvement of almost a quarter turn from the end of 2,024.5 turn from quarter end high of 4.8 times at the end of Q1 2025.

Availability under our ABL was $248 million as of December 31, and based on our borrowing base, we have more than $200 million of additional availability that we can potentially access by upsizing our existing facility.

Free cash flow generation and deleveraging remain key focus areas for us. We made tangible progress in the 4th quarter. Inventory declined by more than $100 million during Q4, which supports lower working capital needs and lower interest expense on our variable rate floor plan liabilities over time.

We expect to continue to reduce inventory and floor plan balances in 2026, which will contribute to free cash flow generation.

With respect to our 2026 guidance, the macro demand environment across our key end markets remains very strong.

We expect the TES segment to continue to benefit from a favorable macro demand environment as well as our strong relationships with our key customers and chatsis and attachment suppliers.

Our strong order backlog supports this.

In our ERS segment, OpEx on rent and utilization reached historically high levels in the second half of fiscal 2025, and we expect this trend to continue in 2026.

Demand for our equipment that serves the TND utility markets continues at record levels, and we expect the vocational rental market to provide incremental growth as we further penetrate this expanding end market.

We finished 2025 with an average age of our fleet at just over 2.9 years, down more than a year since the beginning of fiscal 2022.

As a result, we expect to be able to significantly reduce our overall investment in our rental fleet in 2026 while continuing to generate growth.

We expect to grow our rental fleet based on net OpEx by mid-single-digits in 2026, with a net investment in our rental fleet of approximately $150 million to $170 million a meaningful reduction from over $250 million in 2025.

After prior years' investments in inventory driven by the strong demand environment, we expect to continue to make progress on further networking capital improvements in 2026 as we continue on our path of reducing inventory months on hand to our targeted range of below 6 months.

As a result, we expect to generate more than $50 million of leveraged free cash flow and reduce our net leverage ratio to meaningfully below 4 times by the end of fiscal 2026 while progressing toward a 3 times net leverage target in 2027.

Our initial 2026 guidance reflects total revenue in the range of $2.005 billion to $2.12 billion and adjusted EBITA in the range of $410 million to $435 million resulting in year over year revenue growth of 3% to 9% and adjusted EBITDA growth of 7% to 13%.

We expect non-rental capbacks of $40 million to $50 million.

Our segment guidance for 2026 is as follows. We are projecting ERS revenue of $725 million to $760 million TES revenue of $1.125 billion to $1.2 billion and APS revenue of $155 million to $160 million.

Finally, as Ryan mentioned, beginning in Q1 2026, we will report our results under two reportable segments, Specialty equipment rentals or FER.

And specialty truck equipment and manufacturing or STEM.

Upon implementation, the new FER segment will consist of our historical ERS segment and a portion of our historical APS segment, and the new STEM segment will consist of our historical TES segment and a portion of our historical APS segment.

We will also begin reflecting intercompany activity between the two segments which will ultimately be eliminated in consolidation.

This new segment reporting reflects how we currently manage the business and how we allocate resources, and we believe this new presentation better reflects the positioning of custom truck strategies and operations portfolio.

In early April we will provide more information, including a recasting of certain historical financial information to align with and provide comparability to the new two segment reporting going forward.

We also will recast our guidance based on new two segment reporting at that time.

We believe our new segment realignment will better reflect key economic drivers, capital intensity, and margin profiles of the respective new segments, as well as align our external reporting with how management allocates capital and evaluates performance.

In addition, we believe this change will allow us to provide a clearer picture of the true earnings potential of each segment.

In closing, I want to echo Ryan's comments regarding our continued strong business outlook. Despite significant macroeconomic uncertainty last year, our 2025 results and the continued strong fundamentals of our end markets allow us to be optimistic about the long-term demand drivers in our industry and our ability to produce significant adjusted EBITDA growth this year.

With that operator, we can open up the lines for questions.

Thank you. (Operator Instructions) Scott Schniberger from Oppenheimer. Your line is open.

Hey, good morning, guys. It's Daniel I for Scott.

Thank you for taking our question. Regarding the guidance, what do you expect to see in the market to achieve the high end of that range and what could be, potential upside drivers?

Thanks. Yeah, no, Daniel, good to talk to you and look, I think our guidance is really an indication of what we see happening in the market right now. So we're seeing really strong P&D demand, Daniel, so I think, the high end would be that continuing or improving kind of throughout the year, and then I think it would be some of the vocational market or the infrastructure market, seeing a pick up. So we're starting to see some positive trends so far this year.

But I think that would be picking up even further and obviously, any of the kind of political or economic uncertainty that's out there right now, obviously if that calms or there's less of that would, that would, I think be a positive tailwind for us as well.

Yeah, thank you. OpEx on rent yield, inflected to year over year expansion in the fourth quarter.

How do you view the pricing environment and the pricing as a contributor on a go forward basis? Thanks.

Yeah, so, we're seeing, good demand there, Daniel, so you're right, it did inflect, to the positive. I think OpEx on rent was up, meaningfully, versus where it was this time last year, last Q4 of 2024. And so we're seeing, the opportunity to increase price. Obviously there's some inflation, coming through there in terms of the cost of adding new assets into the rental fleet, but we did pass some price increases through the beginning of the year, at the end of last year, beginning of this year, so starting to see some of that you see in the numbers that Chris reported in terms of on rent yield as well.

Got it. Thank you. I'll turn it over.

Thanks, Dany.

Michael Shlisky, DA Davidson

Hi, good morning. Thanks for taking my questions. The 84% almost you saw in 4Q for utilization, multi-year high, but you've always said it sounds like it's a little bit above what you used to call your sweet spot and around 80%. Operationally, have you gotten to a point where you can sustainably keep it at 84 and Be able to serve customers properly and given that you're not going to be investing much in as much in '26 in some new assets, just give us a sense as to how you're going to balance the availability of assets and what looks like to be a little bit higher, utilization going forward.

Yeah, Mike, good to talk to you and thanks for the question. I'd say this, I think the team has done a great job of of executing on the execution side of keeping the fleet up and running. And, so I think we're really proud of how the team is performing there, I would still say the right way to think about normalized levels is that high 70s to low 80s, as kind of that Q4 is generally when utilization peaks just because of all the transmission equipment that's going out after the summer, and so that's what we saw really at the beginning of Q4. And so I think the team's done a good job. I think execution is important. I think, as we have de-aged the fleet, so the fleet is now under 3 years. I think we said 2.9 years is the age of the fleet. And so obviously that helps in keeping utilization high, standpoint.

And so I think we're in a good position, heading in, heading into Q1. I mentioned in my comments that we're back at about 82% is where we are now from a utilization perspective and again that's a that's a very strong level from an overall utilization perspective.

And being where you are now and maybe just through most of the 1st quarter here, have you seen any one time storm impacts in the northeast and parts of the country that saw some big time snow and some of the clogged drains and downed power lines, etc. Or was it a very much a TND focused, everyday business.

Yeah, it, it's a, I'd say it's the latter D&D focused everyday business. We're seeing strong demand and transmission, right now, and then I'd say good continued demand on the distribution side of things.

And then lastly from my end, some quarters you give us a sense of the first half versus second half, how you might be earning, if there's any unusual seasonality in any given quarter of the year. Anything you can comment on 2026, 1st half, second half, anything being pulled forward in the first quarter, etc.

Yeah Mike, this is Chris. I think historically we've talked about, kind of the first half, second half split being, on the revenue side, mid to, let's say high 40% 1st half, and then, low 50s, kind of mid-50s second half of the year, similar on EBITDA. EBITDA is a little more, I would say a broader spread, so mid-40s to kind of mid-50s in the second half of the year on the EBITA side.

Just to give a little bit of color for Q1, we do expect it to be a strong quarter, I think, directionally we think top-line revenue will be up kind of mid to high single-digits, and EBITA we think will be, up double-digits year over year, and, based on Ryan's comments, it's going to be a big driver of that clearly is going to be our rental business, so I would, index higher on rental, versus new sales, but, we think it's going to be a strong first quarter.

Outstanding.

Thank you. I'll pass it along.

Thanks, Mike.

Justin Hawke, Robert W. Baird.

Oh great, thanks for taking my question here this morning. I guess I just wanted to, and I appreciate it, as always, the commentary about, the orders being the driver of the TES segment. But I guess if I just, look at, I guess the backlog where you were a year ago, you did, you had $370 million of backlog, you did 1.1 billion. Blog is a little bit lower, I guess in February it's probably about flattish, but you're looking for pretty good growth there. So I was just thinking about the order trends and given the pull forward and demand that you saw in 25, maybe just talk about the cadence. Of how you expect, the TES segment to perform throughout the year and just the confidence behind it.

Thank you.

Yeah, Justin, good to talk to you and thanks for the question. Look, I think 4% growth for the year. I think we feel good kind of with that number for last year for 2025. You're right, the leading number that we're watching, and there's two numbers that we're watching one is backlog, so it was up sequentially. It was up sequentially from Q3 to Q4, up 20%. And then the number that I watched closely is orders 1. So orders 1 in the quarter we're up 12% versus versus last fourth quarter. And so I think that's a positive indicator. And then as we talked about, sitting here as of yesterday, I think we gave guidance that backlog was up to $370 million, so it's back right to that 44 months on hand. Number, which is, broad so I think we've given in the past and so I think.

That's that plus obviously how the first two months are shaping up, are where we have some comfort, in the growth range that we provided which I think is 3% to 9% growth, for the segment, and I think that feels pretty good.

You remember last year we saw Q2 was a very big quarter for us last year because we felt it was that real big pull forward from some of the tariff activity. So I would think about smoothing it out a little bit, but I don't know, Chris, if you want to give any more color on quarters and TES.

In particular. No, I think. Brian nailed it. We did have, I think we mentioned in Q2 that we had two months that were, above $100 million, which was the first non-December months that were, so as you're, as you are looking at how this year is going to play out, certainly Q2 of this past year was much stronger than, what would typically happen for the reasons Brian just kind of laid out.

Okay, yeah, that, that's, so, yeah, so 2, a little bit of a headwind, probably 3 q and 4 q, maybe a little bit of a benefit just from smoothing that out, I guess would be the summary.

Yeah.

I guess my next question, I think one of the other factors you were thinking about in the past for demand in 26 on the sales side was, some of the emission standards that we're going to be hitting in 27 that looks like, those have kind of been pushed back. I'm just curious, if that's.

You know something that that you're seeing is any any deferrals on on that side or anything from the admission standards thank you.

Yeah, it's a great question, and we're still watching it. The EPA EPA mandate 2027 is still in play. I think we're still waiting on more clarity around the warranty component of that in particular, still, so, I think if you look at the order boards from some of the OEMs, especially around Class A chassis, at the beginning of this year, I think they would say that they're seeing some pre-buy activity from some of the over the road. Customers, I would say we haven't seen a lot of it, yet. There could be a little bit of an uptick this year, from pre-buy, but I, we feel like we're in a great position with our chassis OEM suppliers. Got good inventory on the ground, and then we just have such good relationships with those OEMs that we feel like we'll be able to continue to get the chassis that we need, to meet demand from our customers.

Okay, all right, great, perfect, thank you guys.

Thanks, Justin. Nicole DeBlase, Stifel.

Hi, good morning from Deutsche Bank. Yeah, this is, Megan Kaplan offering a Collaze, so I don't know what happened there. So yeah, thanks for taking my question. You continue to speak about the strength of Vocational. So kind of just like wondering what gives you confidence in that sustainability and any part of occasional, in particular that's standing out.

Yeah, I would say we're seeing good strength in transmission and distribution in particular, so I think that's where we're seeing good demand. Which obviously is into our forestry business as well right now. So I think we're seeing really good demand there. I think we did make the mention that we didn't see as big of a pre-buy, we didn't see as big of a year-end buy, excuse me, in some of the vocational categories. So, dump trucks, water trucks, service trucks, roll-offs, a lot of those are where we normally see, a big year and buy where we did not. See that happen, last year we're seeing decent order uptick in those categories and so I think that's where we have some level of confidence that that will improve heading into 2026, but I think the broad theme of transmission and distribution, which is 55% to 60% of our overall revenue, is certainly where we're seeing the strongest demand right now.

Okay, that's helpful. And then on gross margins, so they were up year over year in ERS but down in TRS relative to prior year. So do you have, any color on that and maybe, the outlook for those segments, in 2026 in terms of growth, gross margins?

Yeah, this is Chris. I'll start, we've kind of given an indication. I think I heard you ask about PBS, so I just want to make sure, we've given kind of guidance that our range is to be within a 15% to 18%, gross margin range over a kind of a cycle, we had throughout the year we talked about the pricing pressure that there was more product available out there, so we were seeing some of that, and so we were at the lower end of that range, we started out the year at just over 15 and.

Q3 was 15, but then we did see about a 60 basis point, increase here in Q4 to 15.6, but I think the way to continue to think about it is, we're going to, target to stay within that range and, do everything we can on the cost side, and we're opportunistically we can take pricing, we will, but, no specific guidance to give other than the guidance we've given, to stay within that narrow range.

And on the, yeah, oh, I have the same question on ERS as well.

So ERS, just focusing on rental, we've talked about low to mid kind of 70% adjusted gross profit range, we are much stronger than that in Q4, I think it's the highest it's been in some time, certainly, the past couple of years it's 78%. That really was driven by high, utilization, lower repair and maintenance relative to the size of the fleet, and so, we would expect, with this higher level of utilization that we should be able to continue to stay in that mid 70% plus range, and then on the used equipment side, we've been in that, roughly, mid-20s to high 20s range, and, don't expect it to be any different than that on a go forward basis.

Okay, perfect. Thank you for your time and I will pass it on.

Brian Brophy, Stifel

Yeah, thanks. Good morning, everybody. Appreciate you taking the question. I guess with net CapEx coming down this year, curious how much you expect to age the fleet by as a result and how much runway is there to continue to age the fleet after this year.

Thanks.

Yeah, great question and good to talk to you. Look, I think, the fleet is young right right now at 2.9 years, and so we think there is the ability to age the fleet, if you, months, I think would be the right guidance, not. Years, with kind of the activity of this year, and the fleet being so young at 2.9 years, and I think there's plenty of room, to be able to age it. So I think it's in a good spot and we've talked about, Chris' guide Chris's guidance was.

Lowering the maintenance cap component, still being able to grow the fleet overall in 2026, and so you're right that there will be some aging. I don't, we don't expect it to have a meaningful impact in gross margin or utilization performance of the fleet, and so we think it's it's a good time to do that with the main environment as strong as it is right now.

Yeah, and I think another way to characterize it is if you look at over the last four years, on average it's been about a quarter of a year to 0.3 years kind of de-aging of the fleet each year. I think the important point is it won't de-age, we won't be continuing to de-age, so they'll, that's really where we're picking up the bulk of the kind of net investment this year.

Understood, that's helpful. And then any color on what drove SG&A lower relative to a year ago in the 4th quarter and how are you guys thinking about SG&A this year? Thanks.

Yeah, we have been taking a closer look at SG&A and, where possible, being, I'm trying to think of the best way to describe it, we certainly have made in certain places some cuts. We're certainly looking at controlling our spending everywhere we can. The way I would look at 2026 is modest growth, so low single-digit type of growth, and so I wouldn't expect there to be any material increase year over year.

Appreciate it. I'll pass it on.

Again, (Operator Instructions) Abe Landa, Bank of America.

Good morning.

Thank you for taking my questions. Maybe just first, on the inventory levels I've been kind of moving lower. How much lower do you kind of expect it to be this year? What's the potential impact on the, floor plan?

And maybe how much, current month on hand do you have?

I'll start. So we finished the year at $930 million. I think our net investment in inventory, which is the way we look at it, so we look at inventory left the floor plan payables, was about $275 million. We've given guidance that on our whole goods inventory side, which is the bulk, the vast majority of our inventory, we're our target is to get below 6 times, which we think we can get close to that by the end of this year, which would be roughly another $100 million. Maybe a little bit more than that, but roughly $100 million of gross inventory, and then typically the way we think about that is 50% to 30% of that would flow through to the net inventory number, as we, pay down the floor plan of call it 70% to 85% of the value of the inventory and so, it would probably provide between $25 million and $50 million of net working capital pickup in 2026.

That's very helpful, and then maybe a question on the resegmentation, I guess.

Why today is there any sort of like structure or any cost actions that need to be associated with it and I guess lastly like is there anything we should read into.

The remation about maybe like the future of Custom truck 1 source whether it's one or two entities.

I wouldn't read anything into it, currently this year, this is the way we're managing the business. We think it'll provide a little bit better clarity, to investors, in terms of how they look at the business because they are two very unique businesses with, different investment profiles. One is a little more asset intensive. One is a little bit asset light. Margin profiles are different, and the APS segment really is supportive of those two different segments and. If you look on the ERS side, it really is, supporting, keeping the rental fleet up and running, and so, we just felt like we're, today we're running the business really as these two segments, and we think it makes more sense to report that way.

And there's no associated cost with the.

Certainly nothing to do with the resegmentation. We certainly are always looking at our cost structure in any given year, we have continuous improvement and other initiatives that we do, but I wouldn't say there's, anything specifically related to the resegmentation. We always look at our sites, we rationalize sites, we add sites, that I would say is not directly correlated with the resegmentation.

Great, thank you for answering my question.

And that concludes our question-and-answer session. I will now turn the call back over to Ryan McMonagle 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.

This concludes today's conference call.

Thank you for your participation. You may now disconnect.