CTOS 2026年第3四半期決算説明会：過去最高のレンタル需要を背景にEBITDAガイダンスを上方修正

要点

• Custom Truck One Sourceの2026年第3四半期の売上高は前年同期比3%増の4億9,500万ドルとなり、調整後EBITDAは16%増の1億1,100万ドルとなりました。
• 調整後EBITDAマージンは約250ベーシスポイント拡大して22.4%となり、4四半期連続で20%を上回りました。GAAP純利益は前年同期の約600万ドルの純損失から200万ドル超（希薄化後1株当たり0.01ドル）に改善しました。
• レンタル部門は過去最高の実績を記録しました。売上高は18%増の2億2,300万ドル、レンタル収入は20%増の1億5,300万ドル、部門調整後EBITDAは約23%増の1億2,200万ドルとなりました。
• 平均レンタルフリート稼働率は220ベーシスポイント上昇し81.5%に達しました。稼働中の平均OECは13億9,000万ドルを超え、稼働利回りは39.4%、調整後レンタル売上総利益率は約79%となりました。
• 経営陣は2026年通期の調整後EBITDA予想を3度目の上方修正とし、4億4,750万〜4億6,000万ドルとしました。連結売上高予想は21億〜22億ドルで据え置きました。
• 同社は送電需要に対応するため、2026年の純レンタルフリート投資計画を2億1,000万〜2億3,000万ドルに引き上げました。その結果、経営陣はレバード・フリー・キャッシュ・フローについて、従来予想の5,000万ドル超からわずかなプラスにとどまると予想しています。

主要財務データ

事業および業績動向

レンタル事業の実績は、送配電市場における過去最高の需要によって牽引されました。稼働中の平均OECは前年同期比で1億3,200万ドル以上増加し、13億9,000万ドルを超えました。四半期末のレンタルフリートOECは17億6,000万ドルを超え、前四半期比で約8,600万ドル増加、2025年第3四半期比で1億4,000万ドル以上増加しました。

稼働利回りは39.4%となり、前年同期比で120ベーシスポイント上昇しました。経営陣によると、12月に実施した値上げの効果が業績に反映され続けているほか、送電向け製品構成比の高さが利回りを下支えしたとのことです。レンタルフリートの平均経年数は3年弱でした。

第4四半期の初期指標は引き続き好調です。電話会議の時点で稼働中のOECは15億ドルを超え、稼働率は84%を上回りました。経営陣は年末年始にかけて季節的な減速を見込んでいるものの、供給が限定的であるため顧客が送電用機材を維持する可能性があるとみています。

STEM部門の売上高は8%増加したものの、サードパーティ向け売上高は5%減少しました。同社は自社レンタルフリート向けの生産を優先したほか、シャシーベンダーのリコールやカンザスシティ施設での降雹被害により、2,000万ドルを超える機器販売が遅延しました。経営陣はこれらの納入が第4四半期に収益認識されると予想しており、電話会議の時点ですでに大半が完了したと述べています。

新品機器の販売受注残（バックログ）は第3四半期末時点で3億4,200万ドルとなり、前四半期比で1,900万ドル増加、前年同期比で22%増加しました。経営陣によると、受注残はその後、第4四半期に約4億ドルまで拡大したとのことです。

経営陣の見通し（ガイダンス）

経営陣は第4四半期の連結売上高と調整後EBITDAが、前四半期比および前年同期比の双方で増加すると見込んでいます。遅延していた第3四半期の納入が完了することから、STEMサードパーティ向け新品販売は10%台半ば〜後半のペースで成長する見込みです。

同社は期末のネットレバレッジが4倍を大幅に下回る水準にとどまると予想しており、2027年には3倍未満を目指す目標を維持しています。また、経営陣はレンタルフリート投資と堅調な送電需要に支えられ、2027年の調整後EBITDAも2桁成長を示すと現時点で予想しています。

フル稼働時には、約6,000万ドルの追加フリート投資により、年換算で約2,000万ドルの売上高と1,500万ドルの調整後EBITDAが生み出されると見込まれています。収益への貢献の大半は2027年に見込まれます。

リスクおよび注視事項

• レンタルフリート投資の増加により、2026年のレバード・フリー・キャッシュ・フロー予想が5,000万ドル超からわずかなプラスへと縮小しました。
• 第4四半期の業績は、報告期間をまたいで移動する可能性があるSTEMの出荷やレンタル機器の販売タイミングに左右されやすい状況が続いています。
• 年末年始にかけてレンタル稼働率が季節的に低下する可能性がありますが、経営陣は旺盛な送電需要が低下を抑えると見込んでいます。
• シャシーのリコールおよび降雹被害により、第3四半期の売上高のうち2,000万ドル超の計上が遅延しました。降雹関連の費用は100万ドルの自己免責金額を除き保険で補填され、リコールの修理費用はOEMメーカーが負担しています。
• 同社は2027年の排出ガス規制を見据えてシャシーや在庫の確保を進めています。経営陣は期末の在庫手持月数が2025年末とほぼ同水準になると見込んでいます。

アナリスト質疑応答のハイライト

経営陣は送電需要について、「数十年に一度」のサイクルとなる可能性があると語りました。通常は数週間から数ヶ月程度だったリードタイムに対し、現在顧客との対話では2027年、場合によっては2028年に開始するプロジェクトが対象となっています。

同社によると、需要はデータセンターだけに起因するものではありません。電力網の近代化、送電線の増強、保守活動、認可された配電料金改定も需要を支えています。データセンターは主要な電力消費源として、また関連する建設活動を通じて間接的に貢献しています。

経営陣は、主要なレンタル収入とレンタルフリート機器販売との構成比によって変動するものの、レンタル部門の調整後EBITDAマージンモデルとして50%台前半〜半ばが合理的な水準であるとみています。

価格引き上げの機会は2027年まで続く可能性があります。経営陣は旺盛な需要、前回の値上げ効果の継続、利回りの高い送電向け製品構成比を挙げるとともに、将来の価格改定がサプライヤーのコスト上昇を相殺する可能性もあると指摘しました。

2027年における3倍未満へのレバレッジ引き下げ（デレバレッジ）は、調整後EBITDAの成長と負債削減の双方が寄与すると見込まれます。経営陣は運転資本の改善や純フリート投資の減少による効果も期待していますが、2027年の詳細な予想については第4四半期決算発表時に公表する計画です。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Custom Truck One source's Third Quarter 2026 Earnings Conference Call. Please note, this conference call is being recorded. I would now like to hand the conference over to your host today, Brian Perman, Vice President of Investor Relations for Custom Truck One Source.

Brian Perman

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 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 third quarter investor presentation are posted on the Investor Relations section of our website. Yesterday afternoon, we also filed our third quarter 2026 10-Q 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 or for the 3 months ended September 30, 2026 in prior periods. Joining me today are Ryan McMonagle, CEO; and Christopher Eperjesy, CFO. I will now turn the call over to Ryan.

Ryan McMonagle

Thanks, Brian, and good morning, everyone. Custom Truck delivered another strong quarter led by record performance in our rental business. Third quarter adjusted EBITDA was $111 million, up 16% year-over-year, and adjusted EBITDA was up 24% through the first 9 months. SER Segment revenue was up 18% and STEM segment revenue was up 8% year-over-year. Consolidated revenue finished at $495 million of -- on the strength of these results, we are raising our full year adjusted EBITDA guidance for the third time this year. SER continues to deliver consistently strong performance. Driven by record demand in the transmission and distribution or T&D markets.

Our rental fleet averaged 81.5% utilization during the third quarter, up 220 basis points from Q3 of last year. This was supported by record levels of OEC on rent, which averaged just under $1.4 billion in Q3, up more than 10% year-over-year. So far in Q4, both measures have remained quite strong, with OEC on rent currently greater than $1.5 billion and utilization surpassing 84%. As I said last quarter, we believe that we are in the early stages of what could be a once-in-a-generation transmission demand super cycle, which are SCR third quarter results support. We ended the third quarter with total OEC of over $1.76 billion, up almost $86 million in the quarter and the highest quarter end level in our history.

The continued investment in our rental fleet reflects sustained record level demand and supports our expected continued growth in SCR for the remainder of the year and into 2027. Given the additional growth CapEx in our fleet year-to-date, our average fleet age is just under 3 years old which we continue to believe is 1 of the youngest fleets in the industry and positions us well to support our customers' needs across the country. I want to spend a minute on capital allocation because it was the most important decision we made this quarter.

Demand from our transmission customers, much of it tied to long duration projects has continued to build beyond what our original fleet plan assumed. We chose to meet that demand. We are raising our 2026 net rental fleet investment to $210 million to $230 million, with the incremental dollars going into long-term transmission rentals and high-return specialty products, and we directed STEM production capacity to our own fleet to get these units on rent faster. These are the highest return dollars we can deploy. Rental gross margins were nearly 79% in the quarter in on-rent yield was over 39%. The trade-off is timing, levered free cash flow this year will now be slightly positive rather than the more than $50 million we had expected and most of the earnings from these units arrive in 2027.

To size that, at today's rental rates and utilization, roughly $60 million of fleet generates approximately $20 million of annualized revenue and $15 million of annualized adjusted EBITDA. So the incremental units we are adding this year should be a meaningful contributor in 2027 with only a modest contribution in 2026, given delivery timing. Even with that investment, net leverage fell to 3.7x this quarter, down sequentially from Q2, and we remain committed to getting below 3x in 2027.

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 deleveraging, and we believe our trending results over recent quarters speak directly to that. bidding activity in ongoing conversations with our customers lead us to believe that these conditions will persist into the fourth quarter and beyond. Our STEM segment had a solid quarter, with strong order flow, third quarter orders were up 22% year-over-year, even as third-party deliveries were affected by timing.

For Q3, overall STEM revenue was up more than 8% and while third-party revenue, excluding sales to our SCR segment was down 5% versus Q3 of 2025. I Third-party revenue in the quarter was impacted by our strategic decision to prioritize additional investment in the rental fleet to take advantage of current and anticipated rental demand. As we noted in August, certain third-party new equipment sales were delivered in the second quarter rather than in the second half, which also weighs on the third quarter comparison.

Additionally, STEM saw more than $20 million of delayed new equipment sales in Q3, resulting from a chassis vendor recall as well as the need to repair damage to some of our vehicle inventory from a hailstorm at our Kansas City facility during the quarter. Excluding these delayed deliveries, STEM third-party revenue would have been up year-over-year. We believe these are short-term timing issues and that the sales will be recognized in the fourth quarter. We continue to have a high degree of confidence in our STEM business and are affirming our STEM revenue guidance for 2026. The New sales order backlog ended the third quarter at $342 million, up $19 million from the end of Q2 and up 22% year-over-year.

Intra-quarter order flow remained strong in Q3 and our backlog has grown so far in Q4. We continue to see strong sales demand in the utility end market focused on both transmission and distribution equipment. In the infrastructure end market, we have seen less growth. However, third quarter orders grew strongly in several categories. And together with our ongoing conversations with our customers and the pace of bidding activity, this gives us the confidence to expect another year of growth in third-party customer revenue for STEM. With respect to the EPA 27 NOx emission regulations, Little has changed since the EPA introduced its proposed changes to the rules in early July.

Given our current inventory position, the chassis prebuy actions we have already taken and our strong relationships with our chassis OEM partners, we continue to believe that CTOS is well positioned to navigate the impact of the upcoming emission standard changes. Given our strong year-to-date performance, robust conditions in the T&D end markets and our outlook for the rest of the year, we are raising our full year 2026 consolidated adjusted EBITDA guidance for the third time this year and now expect a range of $447.5 million to $460 million. We are also raising our SCR segment revenue guidance to $870 million to $890 million and are affirming our previous consolidated revenue guidance in the range of $2.1 billion to $2.2 billion.

Long-term sustained in-market demand boomed 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 the 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 deliver our strong results in the third 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.

Christopher Eperjesy

Thanks, Ryan, and good morning, everyone. I'll start with consolidated results for the quarter, then discuss segment performance. our balance sheet, liquidity and leverage; and finally, our updated 2026 outlook. Our third quarter 2026 results reflect strong operating performance across the business and record rental fundamentals particularly in our T&D end markets. For the third quarter, total revenue was $495 million, and adjusted EBITDA was $111 million representing 3% and 16% growth, respectively, versus Q3 2025. Adjusted EBITDA margin was 22.4%, up roughly 250 basis points year-over-year our fourth consecutive quarter above 20%.

On a GAAP basis, third quarter net income was over $2 million or $0.01 per diluted share compared with a net loss of just under $6 million a year ago. Year-to-date, net income is almost $9 million versus a net loss of just under $52 million in the same period last year. About $11 million of that year-over-year improvement reflects a favorable income tax swing a $2 million benefit this year, which includes a discrete benefit from a reduction in our valuation allowance versus roughly $9 million of tax expense in the prior year period. The balance was driven by higher operating income and lower interest expense.

Turning to our segments. SCR delivered record results in Q3 with total revenue of $223 million up 18% versus Q3 2025, driven by strong double-digit growth in both rental revenue and rental equipment sales activity. Rental revenue of $153 million grew 20% year-over-year, and rental equipment sales grew 14%. RPO activity in Q3 remained strong highlighting the continued robust demand for our equipment. Third-party revenue, excluding intersegment sales, was $212 million in the quarter, up 16% year-over-year. Segment adjusted EBITDA of $122 million was up approximately 23% year-over-year with segment adjusted EBITDA margin of 54.6% and up almost 220 basis points versus Q3 2025.

Our key rental KPIs and SER remain very strong and have expectations in Q3 and continuing the momentum we've experienced in recent quarters. In Q3, utilization averaged 81.5%, up 220 basis points versus Q3 of last year. Average OEC on rent in the quarter was over $1.39 billion, up more than $132 million or more than 10% versus the same period in 2025. On rent yield in the third quarter was 39.4%, flat sequentially and up 120 basis points year-over-year. On rent yield remains 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.

Adjusted rental gross margin was approximately 79% in the quarter, above the mid-70s range we discussed last quarter, reflecting high utilization, the continued flow-through from our December price increase and our focus on controlling costs. Net rental CapEx in Q3 was $114 million, and our fleet age at quarter end was just under 3 years, a modest decrease from the end of last quarter driven by our increased growth CapEx. Our OEC in the rental fleet ended the quarter at over $1.76 billion, up more than $140 million versus the end of Q3 2025 and by almost $86 million sequentially. The increase reflects strategic and disciplined fleet investment in the face of strong demand, particularly in T&D.

In STEM, third quarter total revenue was $442 million, up 8% year-over-year. Third-party revenue, excluding sales to our SCR segment, was $283 million, down 5% versus Q3 of 2025. As Ryan mentioned, sales to third parties were down year-over-year as we chose to strategically prioritize our production for additional investment in the rental fleet to take advantage of current and anticipated rental demand. As we noted last quarter, certain third-party new equipment sales were delivered in the second quarter rather than in the second half, which also weighs on the third quarter comparison. In addition, sales were negatively impacted by more than $20 million of sales delayed by a chassis vendor recall as well as the need to repair damage to some of our vehicle inventory from a hailstorm that occurred during the quarter.

We believe these events represent temporary timing issues and that the delayed sales will be completed in the fourth quarter. Stem segment adjusted EBITDA was $37 million and segment adjusted EBITDA margin was 8.3% 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 margin in the quarter was slightly lower, largely as a result of mix. Our new sales backlog ended Q3 at $342 million, up $19 million sequentially and at 3.8 months, just below our targeted range of 4 to 6 months of new equipment sales. We've seen strong order growth so far in Q4 and our backlog currently stands at almost $400 million.

Turning to the balance sheet and liquidity. With LTM adjusted EBITDA of $446 million and net debt of $1.65 billion, we finished Q3 with net leverage of 3.7x. This represents a sequential quarterly improvement of 0.15 turns and more than a 0.8 turn improvement versus the end of Q3 2025. Notably, net debt is essentially flat year-over-year even as we have grown our rental fleet by more than $140 million of OEC. Availability under our ABL was $234 million as of September 30 and based on our borrowing base, we have just under $290 million of additional availability that we could potentially access via our existing facilities.

Inventory ended the third quarter at $1.016 billion, down $26 million from the end of the second quarter. The increase in our inventory during the first half of this year was largely planned, reflecting chassis and whole goods positioning ahead of scheduled second half deliveries. As we prepare for our expected growth in 2027 and chassis receipts under our previously discussed prebuy program ahead of 2027 emissions regulations, we now expect year-end 2026 inventory month on hand to be approximately flat with year-end 2025.

With respect to our 2026 guidance, the demand environment across our key end markets remains very strong. For our SCR segment, demand for equipment serving the T&D markets remains at record levels, led by transmission demand. Total average OEC on rent was up more than $132 million year-over-year in the third quarter, driven by transmission, further penetration of the vocational rental market where we see on rent increased approximately $45 million year-over-year and is expected to provide incremental growth. We expect our key rental KPIs to remain strong in Q4 with the typical seasonal reduction around the holidays.

For STEM, we expect fourth quarter third-party new sales to increase at a mid- to high teens rate year-over-year as the deliveries that were delayed in the third quarter are completed. STEM sales expectations are supported by continued strong customer demand, improving product availability and lead times and relationships with key customers and chassis and attachment suppliers. Our order backlog trends support this. Turning to the cash flow and capital allocation.

Through the first 9 months, levered free cash flow was approximately $4 million, an improvement of about $79 million versus the prior year period. Given the demand trends in our T&D markets, we are increasing our 2026 net rental fleet investment to $210 million to $230 million about $35 million above the midpoint of our prior range, which corresponds to gross fleet investment of approximately $400 million to $430 million.

The incremental spending is concentrated in long-term transmission rentals and high-return specialty products and support high single-digit ending OEC growth this year. Even with this increase, net fleet investment remains below the more than $250 million we invested in 2025. Rental equipment we add today earns an on-rent yield near 40% and rental gross margins in the high 70s. As a result of the additional fleet investment, together with year-end inventory months on hand that we now expect to be roughly flat with last year, we now expect 2026 levered free cash flow to be slightly positive compared to our prior expectation of more than $50 million.

Both our investments in 2027 earnings. As Ryan noted, the incremental fleet alone represents roughly $15 million of annualized adjusted EBITDA once fully on rent. We expect to finish 2026 with net leverage well below 4x, and we continue to target below 3x in 2027, driven by adjusted EBITDA growth and improved levered free cash flow resulting from lower net fleet investment and reduced inventory levels in 2027. We're affirming our 2026 consolidated revenue guidance of $2.1 billion to $2.2 billion or year-over-year growth of 8% to 13%. Given the strong environment in the T&D end markets and overall strength across both of our segments, we are raising both the bottom and top ends of our adjusted EBITDA guidance and now project a range of $447.5 million to $460 million, resulting in year-over-year growth of 17% to 20%.

We still expect nonrental CapEx of $40 million to $50 million. We are increasing our SER revenue guidance for 2026 as well, projecting a range of $870 million to $890 million. We continue to project STEM revenue of $1.63 billion 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 results now expected towards the upper end of that range is higher than planned intersegment sales to support our rental fleet growth, supplement third-party growth.

For the fourth quarter, we expect consolidated revenue and adjusted EBITDA to be up both sequentially and year-over-year. So far in the fourth quarter, our OEC on rent is significantly above prior year levels. We expect both OECM rent and utilization to grow sequentially. On a consolidated basis, 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 17% to 20% adjusted EBITDA growth this year.

With LTM adjusted EBITDA now about $446 million, we currently expect another year of double-digit adjusted EBITDA growth in 2027. We will provide full 2027 guidance when we report fourth quarter results early next year. With that, operator, we can open the line for questions.

Operator

[Operator Instructions]

Your first question comes from the line of Michael Shlisky with D.A. Davidson. Your line is open. Please go ahead.

質疑応答

Michael Shlisky

Can we start with your comments, Ryan, on the utilization in the current quarter? I think you mentioned it exceeded 84% at this point of the year. But do you expect that to come down and kind of be more normalized in that low that you've seen by the end of the quarter as the assets that you're trying to roll out, I would assume still have some ways to go for the rest of the quarter here. Or do you think A4 was actually okay and maybe at the high end of that sweet spot range?

Ryan McMonagle

Yes, it's a good question, Michael, there's 2 things, I think, that are really worth highlighting. One, we're seeing -- it generally increases this time of the year. So really late October into November really is 1 that we'll continue to build, and that's what we're seeing currently. So that's trending. But the demand for transmission, Mike, right now is so strong. that certainly, as we're talking internally, I think there will be some customers who decide to keep equipment rather than returning it, which is what normally happens during the holidays. Just because it may not be available for them after the holidays.

And so I think it will -- and I think Chris made a comment that it will slow down a little bit into December, but we think it will not be a significant into the end of the year just because the demand environment right there might get so good that I think people don't will lose some of that transmission here in particular.

Michael Shlisky

Got it. Great. And then your comment that you've made all along here about really good demand. It sounds like it's both transmission and distribution. Is a lot of that really still depends on data centers in the AI and various communities? Or is it really the other drivers that you've had, which are just ongoing grid hardening and maintenance and expansion for everyday activity is not limited to 2 data centers. I guess I'm kind of curious, are you getting any pushback or anyone saying, we're going to be holding off a little bit of that data set activity late 2026 to '27 as communities speak out actually passes, et cetera? Or are you still seeing -- just trying to max from the older drivers?

Ryan McMonagle

Yes, we're still seeing -- it's a great question. And we're still seeing good growth, Mike. And so I think you're right. As we've talked about in the past, -- it's we're not data center specific that when a new data center is announced, somehow that drives incremental demand for specific CTOS equipment. It's much more that that's just the consumer of power. And so I think a lot of what we're seeing right now, we would be talking about even if it was just the grid upgrade and some of the modernization it was happening certainly, data centers are consumer power.

So that's a very good thing for us. But we are seeing a lot -- we have our own construction trackers that we're tracking on the transmission side as we talk to our customers, they're all talking about new projects that are going into construction. There's obviously a lot of line upgrades that are happening right now. And then you're correct, Distribution is also in a very good spot. Right now, and we're seeing rate cases continue to be approved. And so we're seeing when we look forward with our own forecasting, it feels like '27 and really into '28, it will continue to be a very strong demand environment. which should benefit custom truck and certainly with some of the other macro dynamics going on will benefit the rental fleet in particular.

Michael Shlisky

Got it. And maybe the last 1 for me. The impact from the hail storm. I was curious rebethat was covered by any kind of assurance hits going to be the fourth quarter. And then even the product recall, you have to actually send back or did they have your tech take care of the call? And are you going to be paid for that as well? .

Christopher Eperjesy

Yes, Mike, this is Chris. In terms of the hailstorm in the big picture, it was relatively immaterial. And yes, it's covered by insurance. We had a $1 million deductible on our policy, and it did go GA, but not much above that. And on the second one, we're working with the dealers to get the repairs done and the OEM is covering those costs. .

Ryan McMonagle

And again, we think both of those will kind of unwind here in the fourth quarter.

Operator

Your next question comes from the line of Manish Somaiya with Cantor Fitzgerald.

Manish Somaiya

Ryan, Chris, Brian and the team, my first question is on SCR margins, which were quite impressive this quarter at 54.6%. And -- how should we think about those margins as we move ahead is the mid-50 the right normalized range? Or is this sort of a temporary blip? Maybe if we can start there.

Christopher Eperjesy

Yes, Mike. It's -- or sorry, Manish, it's Chris. If you look back, I think we've been living kind of in that low to mid-50s for the past few quarters. I would expect that we can continue to live there. There may be some upside, a little bit of upside there. But the answer is yes. I think modeling kind of in the low to mid-50s is a reasonable number.

Ryan McMonagle

A lot of them in is would just be a function of mix to between core rental revenue and then what assets are sold out of the rental fleet. And so -- so that would -- that's really...

Manish Somaiya

Okay. And then I think on the pricing front sorry, Ryan, I don't know if I interrupted on something. [Technical Difficulty] The line just going to cut off a little bit. Okay. Sorry. On the pricing that we had at 39.4%, again, despite all the growth that you had on the fleet side, maybe if you can just give us a sense on what you're seeing what the opportunity is for higher pricing as we go into '27. I think you guys have alluded to the fact that the transmission markets are quite strong as we move into '27 and into '28 as well. But again, just trying to understand what the flexibility might be on the pricing front with the strong demand.

Ryan McMonagle

Yes. I think there should -- I think it should be a good demand environment. And so that means it should be a pricing opportunity. I think we're seeing the price increase that we actually took last December, continue to roll through. we're seeing some of the benefit of transmission is typically a higher rate or higher on-readyield. So we're seeing some positive mix that way. And then yes, I would expect as we start to think about guidance into '27 that there will be the opportunity to increase price. Some of that will be to take care of some of the cost increases, right, that we're seeing from our suppliers heading into '27, but it should be an opportunity to increase price as well. .

Manish Somaiya

And just on the infrastructure markets. The transport bill, I guess, is still out there pending some permanency and then on the telecom side, I think you did kind of mention bed that could potentially help that market. So perhaps if you can just give us your sense as to you're thinking about the transportation bill, those markets plus potentially the positive impact from beat as we kind of look ahead?

Ryan McMonagle

Yes. It's -- look, infrastructure transmission and distribution has been incredibly strong, right? And I think that's certainly what we're seeing, and that shows up more in our rental fleet as we talked about. On the infrastructure side, specifically, we're seeing some pockets of growth, some things like our dump truck and water truck and some of our heavy haul tractor and trailer product categories are really beginning to pick up. Some of that is related to more data center construction. So there's some positive from data center construction we haven't seen a big lift yet from bad. As you know, telecom is a small part of our business, but we have not seen that materialize yet in any significant list. .

Manish Somaiya

Right. And then just lastly, on the leverage metrics that you laid out for '27 below 3x in '27. How should we think about the deleveraging as far as the mix between EBITDA growth and debt pay down. For modeling purposes, is it safe to assume sort of like a 50-50 type scenario?

Christopher Eperjesy

This is Chris again. We haven't really given specific guidance for next year yet, and we will come out of Q4. So we have given a little bit of guidance indicating that we're going to have double-digit EBITDA growth next year. But the answer to your question is it will be a combination of both. Certainly, there's going to be a part of the deleveraging that comes from that double-digit EBITDA growth, but we're also going to continue to focus on generating free cash flow and paying down debt. So it will be a combination of Boston coming out of Q4, we'll give a lot more granularity on kind of the path to get there.

Operator

Your next question comes from the line of Scott Schneeberger with Oppenheimer & Co.

Daniel Hultberg

It's Daniel on for Scott. I'm curious, could you please provide some color on the drivers of the backlog for STEM and how we should think about stem generally as it pertains to that as we look into next year as it pertains to the double-digit adjusted EBITDA growth. So a little bit more color on the outlook for Samples.

Ryan McMonagle

Yes. Look, we -- as we talked about, we saw backlog and order conversion, both increased in the quarter, which to us is a positive indicator heading into Q4, which is typically in this quarter. generally for STEM. So I think you'll see good growth there. And then I think year-to-date, year-to-date STEM third-party revenue is up, I think it's like 1.5%. If I'm not mistaken, and if you think about overall revenue year-to-date, it's up 5%, which includes adding the assets into the rental fleet.

And so I think it will look similar as you're starting to think about what next year can look like. we see opportunities to grow. We'll obviously be thoughtful on how we invest in the rental fleet. But I think that kind of mid-single-digit growth is why we've continued to hold guide from a STEM revenue perspective as well.

Daniel Hultberg

Got it. And also, as you think about the pull forward effect here from the fleet investment, I mean, it makes sense given the growth environment you are seeing. But as we think about the pull-forward impact on CapEx and free cash flow, into this year that could catch up next year. How should we think about the magnitude of that, please?

Ryan McMonagle

I'll start, and Chris can add some color I mentioned in my comments that it was about $60 million is what we were talking about in terms of sizing that. And so you can think about that as a meaningful portion of the levered free cash flow we would have generated otherwise. And then we've tried to quantify that for $42 million. I think I said about $15 million of annualized EBITDA. And so to me, that's a pretty easy payback scenario as you start to think about 2027 and think about a 3x leverage target on that incremental and then obviously the cash flow that generates next year or 2.

But I think that's probably the right way to think about sizing it. It should be additional growth for the SCR for the rental fleet heading into 2027 and that would help quantify some of the cash impact as well.

Christopher Eperjesy

Probably the only other thing I'd add is if you think about it year-over-year, the rental fleet is up about $150 million Leverage is down 1.8x, and we've been able to do that with slightly positive levered free cash flow. So I think we feel like it was a really good investment to set us up for next year, as Ryan just kind of laid out the impact.

Daniel Hultberg

Got it. Final 1 for me. I know the debt mentioned disciplined SG&A management in the SCR sec. Could you guys please elaborate on that, if there's any nuances we should think about?

Ryan McMonagle

No, I think it's just an area that we continue to stay focused on is let's be efficient with how we're spending SG&A. The teams have done a great job from a footprint perspective and then obviously, from a managing company overall cost perspective as well. So I think we feel like we're well positioned heading into the last quarter and heading into 2027 as well. .

Operator

Your next question comes from the line of Brian Brophy with Stifel.

Brian Brophy

Curious how far out some of the large transmission projects are that you're talking with customers currently? And what you would typically see in a more normalized demand environment?

Ryan McMonagle

Yes. It's -- and I think that's why we say it's such a great demand environment, Brian, is because the dynamic has certainly changed. So we're talking about projects, obviously, now that are starting in '27 and some that are even starting in 2028. And that's just a new dynamic. For us, generally, it's about projects that are starting in the next few weeks or maybe it's months in advance. And so that's, I think, why we made the decision to invest additional capital into the rental fleet, too, is that when we're making that investment, it's for projects that are imminent, right, that we're deploying that capital right away. .

And so I feel really good about that. And then the visibility forward has continued to stay very strong, which is why I think we're optimistic about the growth we're seeing in 2027 and even into 2028 as well.

Brian Brophy

That's -- yes, I appreciate it. That's very helpful. And then I guess just on the $20 million that was deferred in the quarter in STEM, how much of that has already been delivered here in October versus how much are you expecting kind of later in the quarter?

Ryan McMonagle

Yes. I think the majority has already been delivered. And so it's obviously, as we're working through some of the recall issues, which as Chris mentioned, the OEM and the dealer are both helping us kind of daily with that work through those issues. We're able to deliver that those trucks. So I think the majority of it has been delivered and the rest we'll finish kind of over the rest of the quarter. .

Operator

Your next question comes from the line of Naim Kaplan with Deutsche Bank.

Naim Kaplan

On the line for the cold delay. So yes, the first one, you described the current transmission market as potentially once in a generation cycle. So just wondering maybe if we can get a view into like the customer conversations, maybe like what's changed most meaningfully with respect to those customer conversations, let's say, the past 6 months or so?

Ryan McMonagle

Yes. It's I think it's 2 things. It's a great question. And I think it's why we're as optimistic as we are and obviously why we made the investment that we did. But there's an increase in both new projects, right? So we're seeing new projects that are going into construction, right, which I think a lot of that is some of the regulatory changes we're starting to see the benefits of, and that will continue to accelerate. And then we're seeing some of the maintenance work on those lines also happening, too.

So I think it's a combination of both. And I think as we listen to our customers, they're saying the same thing that their backlogs are increasing, that their expectations for 2027 and 2028 are increasing as well. And then when we track the data ourselves from the publicly available sources. That's what you're seeing, right? As the forecast continue to increase every time we do a data pool. And so I think it's why we're as optimistic as we are that this will continue for the foreseeable future.

Naim Kaplan

That's very helpful. And then kind of looking at 4Q, so if you do the bridge full year guidance implies $550 million to $580 million revenue like $120 million or so, $130 million to the $135 million adjusted EBITDA in 4Q. So just trying to maybe get a better understanding of like the key assumptions behind the range, particularly around maybe like state delivery timing and the SCR utilization?

Christopher Eperjesy

Yes. This is Chris. That is 1 of the challenges we always have in Q4 is what's going to ship in the fourth quarter on the STEM side. because things can pull forward from January, things push out to Q1. And then on the SCR side, we have pretty good visibility, as Ryan walked through on the rental side, which is a little bit more challenging as the rental asset sales were either the customer has the right to buy a unit or comes to us and wants to buy a unit. And that's why we've left a little bit of a range in our guidance is because those variables are difficult to predict. Sitting here today, I think our commentary on the rental side is we're seeing good utilization, good OEC on rent.

It's now over $1.5 billion in Q3. I think, on average, it was $1.39 billion, $4.395 billion we've continued to see growth. But overall, I think we feel very good overall about the business, certainly on the rental side, and that's why we kept a narrower range but still a reasonable range to kind of take into account some of those variables that could either pull in or push out certainly on the stem side.

Operator

Your next question comes from the line of Justin Hauke with Baird. .

Justin Hauke

Great. I guess I just wanted to ask 1 the free cash flow as we look into next year. I mean, obviously, I think it makes sense, the pull forward on the CapEx and the returns you outlined. I mean, that's obvious. But you did reiterate the 3x levered by the end of '27. And I guess, I don't know what double-digit EBITDA growth means necessarily, but it would imply that there still is like, I think, a pretty meaningful free cash flow to kind of drive that. And so I guess the question is, I think part of the opportunity for you guys has been that you have a lot of excess fleet that you can deploy. And I'm just curious about your thinking for next year. If you continue to see the strong growth what keeps the CapEx from kind of having to continue to be a factor there to support that. .

Ryan McMonagle

Yes, it's a great question. I'll start and I'll let Chris chime in. But Justin, I think you got 3 things that we like to talk about there. One, you're going to have an increased EBITDA, right? the cash flow that, that generates. So I think you'll see the benefit of that heading into 2027. We'll continue to work on net working capital. Here, we talked about, Chris mentioned some of the strategic investments we've made to get in front on chassis heading into 2027 so I think some of that we should benefit from heading into 2027. And then you're right, we just -- as the fleet grows, as you think about CapEx into next year, I think there's just the opportunity to continue to use the fleet to generate cash. as well.

So as Chris mentioned, it will be a mix of EBITDA growth is when we said double digit. We've got to -- we'll give more firm guidance on what we're in double digit, obviously, that growth will come from? And then you're right, that implies some amount of free cash flow, which would be more consistent with what we originally said for '26, obviously, with some of the growth that we're seeing from EDA and I think you get kind of right there.

Operator

There are no further questions at this time. I will now turn the call back to CEO, Ryan McMonagle for closing remarks.

Ryan McMonagle

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.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.