Daniel

Daniel asked about Custom Truck One Source's visibility for sustaining momentum into 2026, particularly regarding demand in the utility sector and the ERS segment's OEC on rent yield and pricing environment.

Answer

CEO Ryan McMonagle highlighted strong demand in the utility and T&D sectors, especially transmission, driven by secular growth in electricity demand. He noted increased investment in the rental fleet, with OEC on rent averaging $1.26 billion and utilization above 80%. Regarding ERS on-rent yield, Mr. McMonagle stated it's within the guided high 30s-low 40s range, with recent increases in September and October due to a shift towards transmission and pricing opportunities from higher utilization.

Daniel from Reuters asked for confirmation on the actual tariff rate being applied under USMCA rules during the first half of the year and for examples of specific components with alleviated tariff rates.

Answer

An executive, likely CFO Eiji Fujimura, declined to provide specific tariff rates, citing the need to protect sensitive cost structure information. However, he provided an example of a high-rate area, noting that critical hybrid system components like batteries, motors, and PCUs imported from Japan face higher tariffs. He emphasized that a key strategic focus is to localize the production of these next-generation hybrid parts in the United States.

Daniel from Reuters asked for the effective USMCA tariff rate for the first half of the year or, alternatively, for examples of components that benefit from alleviated tariff rates.

Answer

CFO Eiji Fujimura refrained from disclosing the effective tariff rate, as it would reveal sensitive cost structure details. Instead of naming low-rate parts, he highlighted that critical hybrid system components imported from Japan, such as batteries, motors, and PCUs, are subject to higher rates, reinforcing the strategic importance of localizing their production in the US.

Daniel, on behalf of Jeff Van Rhee, asked for more detail on the mega bank deal's implementation process and revenue recognition ramp. He also questioned the drivers behind the strong sequential Q4 guidance, the long-term growth formula for fiscal 2026, and the reasons for the sequential subscription revenue decline in Q3.

Answer

CEO Ashutosh Roy described the bank's implementation as fairly standard for a large enterprise, though noted the client's advanced internal AI teams are a key factor. CFO Eric Smit clarified that revenue from the deal will ramp up from the beginning of the contract. Smit attributed the strong Q4 guidance primarily to this large deal's impact. For fiscal 2026, Roy expects to see the top-line impact from AI knowledge investments, with Smit adding that Knowledge ARR growth in the high teens is the target. Regarding the Q3 sequential decline, Smit cited fewer days in the quarter, the timing of deal closures, and a catch-up effect from the prior quarter.

Daniel, on behalf of Jeff Van Rhee, asked about the go-to-market strategy for the new SurePay product and the key learnings and momentum drivers behind the 401(k) offering.

Answer

CEO Pat Goepel explained that SurePay is in an early rollout phase with 500 clients, focusing on replacing existing pay cards and paper checks. Regarding the 401(k) product, he acknowledged a year-long learning curve but stated they have now found their rhythm, established a dedicated sales team, and are seeing momentum accelerate, expecting a record month for unit sales.