Custom Truck One Source, Inc. Reports Combined 27% Revenue Increase for Second Quarter 2021

KANSAS CITY, Mo., Aug. 12, 2021 /PRNewswire/ — Custom Truck One Source, Inc. (NYSE: CTOS, «CTOS» or the «Company»), a…

KANSAS CITY, Mo., Aug. 12, 2021 /PRNewswire/ — Custom Truck One Source, Inc. (NYSE: CTOS, «CTOS» or the «Company»), a leading provider of specialty equipment to the electric utility, telecom, rail and other infrastructure-related end markets, today reported financial results for its second quarterly period ended June 30, 2021.

On April 1, 2021, the Company, formerly known as Nesco Holdings, Inc. («Nesco Holdings»), through its subsidiary, closed on the acquisition of Custom Truck One Source, L.P. («Custom Truck LP») (the «Acquisition»). The Acquisition creates a leading, one-stop shop for specialty equipment serving highly attractive and growing infrastructure end markets, including electric utility transmission and distribution («T&D»), telecom, rail and other national infrastructure initiatives. Our reported results include Custom Truck LP only for the period subsequent to the Acquisition. We also provide key operational metrics on a combined basis, pro forma combined results of operations (excluding results of operations at the segment level) for the three months ended June 30, 2020 and the six month periods ended June 30, 2020 and June 30, 2021 in accordance with Article 11 of Regulation S-X, and combined results of operations by segment, assuming the Acquisition had occurred on January 1, 2020. We believe such combined information is a better representation of how the combined company has performed over time. Following the transaction, we have expanded our reporting segments from two segments to three segments. The Equipment Rental Solutions («ERS») segment encompasses our core rental business, inclusive of sales of rental equipment to our customers. The Truck and Equipment Sales («TES») segment encompasses our specialized truck and equipment production and sales activities. Finally, the Aftermarket Parts and Services («APS») segment encompasses sales of parts, tools and other supplies to our customers, as well as our aftermarket repair service operations.

CTOS Second Quarter 2021 Highlights

Custom Truck LP’s results are included in the below summary only beginning on April 1, 2021.

  • Closed on the Acquisition
  • New senior secured asset-based credit facility and senior secured second lien notes reduced weighted average interest rate on senior debt to 4.4% from 7.7%
  • Total revenue of $375.1 million compared to $68.5 million for second quarter 2020, including $247.7 million in equipment sales compared to $10.4 million for second quarter 2020
  • Net loss of $129.4 million, including $61.7 million in debt extinguishment charges, $24.6 million in transaction and integration related expenses and purchase accounting inventory mark-up amortization of $9.4 million, compared to $13.2 million in second quarter 2020
  • Adjusted EBITDA of $70.2 million, after expensing $8.4 million of charges primarily related to increased reserves of leasing receivables and inventories, compared to $26.2 million in second quarter 2020
  • Cash flow from operating activities of $57.2 million, or $11.5 million including net repayments on non-trade floorplan financing, for the six months ended June 30, 2021, compared to $19.7 million for the six months ended June 30, 2020
  • Reduced borrowings on the ABL Facility by $30.0 million

CTOS Second Quarter 2021 Compared To Combined Results for Second Quarter 2020

Amounts represent Nesco Holdings and Custom Truck LP combined for second quarter 2021 and 2020.

  • Total revenues were $375.1 million compared to $294.5 million of pro forma results for second quarter 2020, an increase of 27.4%
  • Equipment sales revenue was $247.7 million compared to $167.8 million of pro forma results for second quarter 2020, an increase of 47.6%
  • Equipment sales order backlog was $222.7 million compared to $82.9 million
  • Rental revenues were $98.5 million compared to $96.1 million of pro forma results for second quarter 2020, an increase of 2.6%
  • Fleet utilization was 81% compared to 71%, a 14% improvement
  • Net loss was $129.4 million compared to $18.6 million of pro forma net loss for second quarter 2020, including $61.7 million in debt extinguishment charges, $24.6 million in transaction and integration related expenses and purchase accounting inventory mark-up amortization of $9.4 million
  • Adjusted EBITDA was $70.2 million, after expensing $8.4 million of charges primarily related to increased reserves of leasing receivables and inventories, compared to $64.0 million of pro forma Adjusted EBITDA for second quarter 2020 

«We are one quarter into the combination of Nesco and Custom Truck, and I couldn’t be happier with the progress we have made on integrating the two companies while continuing to deliver excellent results for our customers and shareholders,» said Fred Ross, Chief Executive Officer of CTOS. «In addition, the tailwinds supporting our end markets are very strong, driving incredible demand for our products, both for rental and sales.  While we are not completely immune to the current challenges related to supply chains and inflationary pressures, our scale, and our unique business model put us in the best position relative to our competition and ensure that we can continue to provide excellent customer service and create shareholder value.»

Summary Actual and Pro Forma Financial Results1

The summary combined financial data below for the three months ended June 30, 2021 presents actual results. The data for the three months ended June 30, 2020 and six months ended June 30, 2021 and 2020 is presented on a pro forma basis to give effect to the following as if they occurred on January 1, 2020: (i) the acquisition of Custom Truck LP and related impacts of purchase accounting, (ii) borrowings under the new debt structure and (iii) repayment of previously existing debt of Nesco Holdings and Custom Truck LP.


Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021

Actual


2020

Pro Forma


2021

Pro Forma


2020

Pro Forma

Revenue

$

375,111



$

294,506



$

769,881



$

648,345


Gross profit

$

46,690



$

43,716



$

139,406



$

102,815


Net loss

$

(129,356)



$

(18,602)



$

(51,284)



$

(117,196)


Adjusted EBITDA2

$

70,241



$

63,998



$

143,106



$

137,547



1 – The above pro forma information is presented for the three month period ended June 30, 2020 and six month periods ended June 30, 2021 and 2020 in accordance with Article 11 of Regulation S-X. Pro forma information for the three months ended June 30, 2021 is not presented because the results of operations of Custom Truck LP have been included with those of the Company for that period. The information presented gives effect to the following as if they occurred on January 1, 2020: (i) the Acquisition, (ii) borrowings under the 2029 Secured Notes and the ABL Facility used to repay certain debt in connection with the Acquisition, (iii) extinguishment of the Custom Truck LP Credit Facility and term loan assumed in the Acquisition and immediately repaid on the Closing Date, and (iv) extinguishment of Nesco’s 2019 Credit Facility and Nesco’s Senior Secured Notes due 2024 repaid in connection with the Acquisition. The pro forma information is not necessarily indicative of the Company’s results of operations had the Acquisition been completed on January 1, 2020, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or revenue opportunities that could result from the Acquisition.


2 – Adjusted EBITDA is a non-GAAP financial measure. Further information and reconciliations for our non-GAAP measures to the most directly comparable financial measure under generally accepted accounting principles in the U.S. («GAAP») is included at the end of this press release.

Summary Financial Results by Segment — GAAP

Segment performance presented below for the three and six months ended June 30, 2021 include Custom Truck LP from April 1, 2021 to June 30, 2021. Segment performance for the three and six months ended June 30, 2020 represent those of Nesco Holdings and is not comparable.

Equipment Rental Solutions (ERS)



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Rental revenue

$

95,081



$

43,025



$

139,811



$

90,078


Equipment sales

32,555



4,982



43,040



14,075


Total revenue

127,636



48,007



182,851



104,153


Cost of revenue, excluding depreciation

62,053



16,772



84,330



37,438


Depreciation of rental equipment

42,192



18,559



59,077



37,535


Total cost of revenue

104,245



35,331



143,407



74,973


Gross profit

$

23,391



$

12,676



$

39,444



$

29,180




Truck and Equipment Sales (TES)



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Equipment sales

$

215,120



$

5,418



$

222,622



$

12,995


Cost of equipment sales

194,810



4,777



201,735



11,431


Gross profit

$

20,310



$

641



$

20,887



$

1,564




Aftermarket Parts and Services (APS)



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Rental revenue

$

3,458



$

3,959



$

7,017



$

7,900


Parts and services revenue

28,897



11,097



40,920



25,176


Total revenue

32,355



15,056



47,937



33,076


Cost of revenue

28,379



10,894



39,413



23,802


Depreciation of rental equipment

987



1,137



1,946



2,273


Total cost of revenue

29,366



12,031



41,359



26,075


Gross profit

$

2,989



$

3,025



$

6,578



$

7,001


Summary Combined Non-GAAP Financial Results by Segment

The combined results by operating segment presented below are presented for the three and six month periods ended June 30, 2021 and 2020 as if Custom Truck LP and Nesco Holdings had operated together for all periods. This presentation excludes the impact of purchase accounting.


Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Equipment Rental Solutions (ERS)








Rental revenue

$

95,081



$

92,127



$

191,784



$

194,816


Rental equipment sales

32,555



30,163



91,713



82,247


Revenue

127,636



122,290



283,497



277,063


Cost of revenue

49,013



46,971



120,410



113,849


Depreciation of rental equipment

37,661



43,002



77,303



87,103


Gross profit

$

40,962



$

32,317



$

85,784



$

76,111


Gross profit, excluding rental equipment depreciation1

$

78,623



$

75,319



$

163,087



$

163,214



1 – Gross profit excluding rental equipment depreciation is a non-GAAP financial measure, which the Company calculates as segment gross profit plus depreciation of rental equipment.



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Truck and Equipment Sales (TES)








Revenue

$

215,120



$

137,630



$

419,905



$

299,360


Cost of equipment sales

189,496



122,034



372,897



265,228


Gross profit

$

25,624



$

15,596



$

47,008



$

34,132





Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Aftermarket Parts and Services (APS)








Revenue

$

32,355



$

34,586



$

66,480



$

71,922


Cost of revenue

26,875



27,794



53,950



58,051


Gross profit

$

5,480



$

6,792



$

12,530



$

13,871


Summary Combined Operating Metrics

The combined operating metrics presented below are presented for the three and six month periods ended June 30, 2021 and 2020 as if Custom Truck LP and Nesco Holdings had operated together for all periods.



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)


2021


2020


2021


2020

Average OEC on rent(a)


$

1,084,709



$

956,589



$

1,066,318



$

1,007,173


Fleet utilization(b)


81

%


71

%


80

%


74

%

OEC on rent yield(c)


38

%


38

%


37

%


38

%

Sales order backlog(d) (as of period end)


$

222,661



$

82,856



$

222,661



$

82,856




(a) 

Average OEC on rent — original equipment cost («OEC») on rent is the original equipment cost of units rented to customers at a given point in time. Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period.

(b) 

Fleet utilization — total number of days the rental equipment was rented during a specified period of time divided by the total number of days available during the same period and weighted based on OEC.

(c) 

OEC on rent yield («ORY») — a measure of return realized by our on rental fleet during a 12-month period. ORY is calculated as rental revenue (excluding freight recovery and ancillary fees) during the stated period divided by the Average OEC on Rent for the same period. For period less than 12 months, the ORY is adjusted to an annualized basis.

(d) 

Sales order backlog — purchase orders received for products expected to be shipped within the next 12 months, although shipment dates are subject to change due to design modifications or changes in other customer requirements. Order backlog should not be considered an accurate measure of future net sales.

Management Commentary

Management commentary below is based on the combined results of Custom Truck LP and Nesco Holdings for the three and six month periods ended June 30, 2021 and 2020 as if the companies had operated together for all periods.

Total revenue for CTOS in the second quarter was $375.1 million, an increase of 27.4% from the second quarter of 2020, driven by strong customer demand for new and used equipment following a period of tepid demand in 2020 that was impacted by the global health pandemic. Expectations related to infrastructure investments in T&D and Telecom have contributed to increased levels of customer buys, including rental equipment sales, which improved $2.4 million to $32.6 million as compared to $30.2 million in the second quarter of 2020. Sales of new and used equipment were $215.1 million compared to $137.6 million in the second quarter of 2020, an increase of 56.3%. Sales order backlog grew to $222.7 million compared to $82.9 million as of the end of the second quarter of 2020, and increase of 168.7%.

In our ERS segment, demand for equipment remained solid as combined rental revenue was $95.1 million compared to $92.1 million in the second quarter of 2020. Fleet utilization improved to 81% from 71%. Activity in the T&D sector, driven by renewable generation projects and aging-infrastructure improvement work, was somewhat tempered as elevated temperatures across North America has caused a shift in the normal seasonal uptick in grid work. While utilization improved steadily, rental revenue growth compared to the second quarter of 2020 continues to be negatively impacted by the size of the fleet, which was approximately $30 million smaller compared to last year.  The decline in fleet size is a result of the strong customer buy-out demand we experienced in late 2020 and early 2021. Combined gross profit (excluding depreciation) in the segment was $78.6 million, representing a 4.4% increase, compared to $75.3 million in the second quarter of 2020. Higher levels of rental equipment sales, which on a combined basis represented 25.5% of total ERS segment revenue compared to 24.7% in the prior year, impacted the segment’s gross profit growth. Increased maintenance activity on the rental fleet in the current period, which followed a curtailment of maintenance work in the prior year due to the global health pandemic, also affected gross profit growth.

On a combined basis, revenue in our APS segment was affected by the increase repair and maintenance activity on the rental fleet, which resulted in fewer in-house technician hours being available for outside service. Sluggish performance for the Nesco Holdings parts, tools and accessories business (formerly our «PTA» segment) also contributed to the decline. Segment revenue decreased by $2.2 million (or 6.5%) to $32.4 million as compared to $34.6 million in the second quarter of 2020. For the year-to-date period, segment revenue decreased by $5.4 million (or 7.6%) to $66.5 million as compared to $71.9 million in 2020.

Net loss was $129.4 million compared to pro forma net loss of $18.6 million for the second quarter of 2020 ($51.3 million pro forma compared to $117.2 million pro forma for the six-month period of 2020). Significant transaction related expenses were drivers of the increase for the quarterly and year-to-date periods.

Adjusted EBITDA on a combined basis was $70.2 million, which is not adjusted to exclude the expensing of $8.4 million in charges primarily related to increases in reserves of leasing receivables and inventories, compared to $64.0 million on a pro forma basis for the second quarter of 2020 ($143.1 million pro forma compared to $137.5 million pro forma for the six-month period of 2020). The increase in Adjusted EBITDA was largely driven by the strong improvement in new and used sales activity.

CTOS had cash and cash equivalents of $27.2 million as of June 30, 2021, and net debt outstanding, including capital leases, was $1.3 billion as of June 30, 2021. Availability under the senior secured credit facility was $355.2 million as of June 30, 2021. This compares to cash and cash equivalents of $27.0 million as of April 1, 2021, and net debt outstanding, including capital leases, of $1.4 billion as of April 1, 2021.

2021 Outlook

Based on the Company’s year-to-date results, current backlog and management’s outlook for the rental fleet for remainder of the year, the Company is providing full-year 2021 guidance for the first time since the closing of the Acquisition. This guidance is presented on an «as reported» basis, including only Custom Truck LP’s results for the nine-month period from April 1, 2021 to December 31, 2021, as well as on a «combined» basis, as if Custom Truck LP and Nesco Holdings had operated together for the entirety of 2021. This guidance is subject to risks and uncertainties described in the «Forward-Looking Statements» section below. The guidance is presented below.



2021 Outlook


2021 Combined Outlook

Total revenue


$1.10 billion – $1.20 billion


$1.50 billion – $1.55 billion

Adjusted EBITDA1, 2, 3


$270 million – $290 million


$320 million – $340 million


1 – Combined Outlook includes pro forma results for the quarter ended March 31, 2021.


2 – Management’s guidance for Adjusted EBITDA is not adjusted to exclude the impact of $8.4 million of charges primarily related to the increases in reserves for leasing receivables and inventories.


3 – Management’s guidance for Adjusted EBITDA excludes the purchase price adjustments recorded by the Company in the current quarterly and six-month period ended June 30, 2021, which adjustments consist of those certain reserve increases totaling $8.4 million relating to receivables and inventories. CTOS is not able to forecast net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP net income including, but not limited to, customer buyout requests on rentals with rental purchase options, income tax expense and changes in fair value of derivative financial instruments. Adjusted EBITDA should not be used to predict net income as the difference between the two measures is variable.

CONFERENCE CALL INFORMATION

The Company has scheduled a conference call at 5:00 P.M. Eastern Time on August 12, 2021, to discuss its second quarter 2021 financial results. A webcast will be publicly available investors.customtruck.com. To listen by phone, please dial 1-800-920-2986 or 1-212-231-2939. A replay of the call will be available until midnight, Thursday, August 19, 2021, by dialing 1-844-512-2921 or 1-412-317-6671 and entering passcode 21996430.

ABOUT CTOS

CTOS is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America. CTOS offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade and installation of critical infrastructure assets, including electric lines, telecommunications networks and rail systems. The Company’s coast-to-coast rental fleet of more than 8,800 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, hi-rail equipment, repair parts, tools and accessories. For more information, please visit investors.customtruck.com.

FORWARD-LOOKING STATEMENTS

This press release includes «forward-looking statements» within the meaning of the «safe harbor» provisions of the United States Private Securities Litigation Reform Act of 1995 and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.  When used in this press release, the words «estimates,» «projected,» «expects,» «anticipates,» «forecasts,» «plans,» «intends,» «believes,» «seeks,» «may,» «will,» «should,» «future,» «propose» and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s management’s control, that could cause actual results or outcomes to differ materially from those discussed in this press release. This press release is based on certain assumptions that the Company’s management has made in light of its experience in the industry, as well as the Company’s perceptions of historical trends, current conditions, expected future developments and other factors the Company believes are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect the Company’s actual performance and results and could cause actual results to differ materially from those expressed in this press release. Important factors, among others, that may affect actual results or outcomes include: difficulty in integrating Nesco Holdings and Custom Truck LP businesses and fully realizing the anticipated benefits of the Acquisition; public health crisis such as the COVID-19 pandemic; the cyclicality of demand for our products and services and our vulnerability to industry, regional and national downturns, which impact, among others, our ability to manage our rental equipment; fluctuation of our revenue and operating results; our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner; competition, which may have a material adverse effect on our business by reducing our ability to increase or maintain revenues or profitability; any further increase in the cost of new equipment that we purchase for use in our rental fleet or for our sales inventory; aging or obsolescence of our existing equipment, and the fluctuations of market value thereof; uncertainties in the success of our future acquisitions or integration of companies that we acquire; our inability to recruit and retain the experienced personnel we need to compete in our industries; further unionization of our workforce; disruptions in our information technology systems or a compromise of our system security, limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, and implement strategic initiatives; unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required; our inability to renew our leases upon their expiration; our failure to keep pace with technological developments; our dependence on a limited number of manufacturers and suppliers and on third-party contractors to provide us with various services to assist us with conducting our business; risks related to our operations outside of the United States, including changes in local political or economic conditions,  foreign exchange risks and compliance risks with local laws and regulations; potential impairment charges and our inability to collect on contracts with customers; failure of federal and state legislative and regulatory developments that encourage electric power transmission infrastructure spending to translate into demand for our equipment; material disruptions to our operation and manufacturing locations as a result of public health concerns, equipment failures, natural disasters, work stoppages, power outages or other reasons; changes to international trade agreements, tariffs, import and excise duties, taxes or other governmental rules and regulations; our exposure to various risks related to legal proceedings or claims, and our failure to comply with relevant laws and regulations, including those related to occupational health and safety, environment and government contract; significant transaction and transition costs that we will continue to incur following the Acquisition; the interest of our majority shareholder, which may not be consistent with the other shareholders; our significant indebtedness, which may adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and increase our risk of default; significant operating and financial restrictions imposed by the agreements governing our existing debt; and uncertainties related to our variable rate indebtedness.  For a more complete description of these and other possible risks and uncertainties, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and its subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements.

INVESTOR CONTACT

Brian Perman, Vice President, Investor Relations

(844) 403-6138

investors@customtruck.com

 

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


The condensed consolidated statements of operations presented below for the three and six months ended June 30, 2021 include the results of Custom Truck LP from April 1, 2021 to June 30, 2021. The condensed consolidated statements of operations for the three and six months ended June 30, 2020 represent those of Nesco Holdings before the acquisition of Custom Truck LP and, therefore, are not comparable.



Three Months Ended June 30,


Six Months Ended June 30,

(in $000s except per share data)

2021


2020


2021


2020

Revenue








Rental revenue

$

98,539



$

46,984



$

146,828



$

97,978


Equipment sales

247,675



10,400



265,662



27,070


Parts sales and services

28,897



11,097



40,920



25,176


Total Revenue

375,111



68,481



453,410



150,224


Cost of Revenue








Cost of rental revenue

29,013



14,906



45,941



29,392


Depreciation of rental equipment

43,179



19,696



61,023



39,808


Cost of equipment sales

229,339



8,313



243,004



22,695


Cost of parts sales and services

26,890



9,224



36,533



20,584


Total cost of revenue

328,421



52,139



386,501



112,479


Gross Profit

46,690



16,342



66,909



37,745


Operating Expenses








Selling, general and administrative expenses

51,264



11,754



63,314



24,193


Amortization

13,332



772



14,086



1,463


Non-rental depreciation

951



28



972



53


Transaction expenses and other

24,575



1,269



35,023



2,721


Total Operating Expenses

90,122



13,823



113,395



28,430


Operating (Loss) Income

(43,432)



2,519



(46,486)



9,315


Other Expense








Loss on extinguishment of debt

61,695





61,695




Interest expense, net

19,723



15,949



34,629



31,963


Financing and other expense (income)

(2,058)



783



3,799



6,804


Total other expense

79,360



16,732



100,123



38,767


Loss Before Income Taxes

(122,792)



(14,213)



(146,609)



(29,452)


Income Tax Expense (Benefit)

6,564



(1,063)



10,654



(333)


Net Loss

$

(129,356)



$

(13,150)



$

(157,263)



$

(29,119)










Basic and Diluted Net Loss Per Share

$

(0.53)



$

(0.27)



$

(1.07)



$

(0.59)


 

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


The condensed consolidated balance sheet as of June 30, 2021 presented below includes Custom Truck LP and, as of December 31, 2020, condensed consolidated balance sheet represents Nesco Holdings before the acquisition of Custom Truck LP and, therefore, is not comparable.


(in $000s)

June 30, 2021


December 31, 2020

Assets




Current Assets




Cash and cash equivalents

$

27,210



$

3,412


Accounts receivable, net

151,497



60,933


Financing receivables, net

22,334




Inventory

414,461



31,367


Prepaid expenses and other

15,639



7,530


Total current assets

631,141



103,242


Property and equipment, net

112,055



6,269


Rental equipment, net

865,976



335,812


Goodwill

680,295



238,052


Intangible assets, net

354,493



67,579


Deferred income taxes



16,952


Operating lease assets

38,249




Other assets

20,318



498


Total Assets

$

2,702,527



$

768,404


Liabilities and Stockholders’ Equity (Deficit)




Current Liabilities




Accounts payable

$

95,246



$

31,829


Accrued expenses

52,395



31,991


Deferred revenue and customer deposits

21,300



975


Floor plan payables – trade

84,063




Floor plan payables – non-trade

168,263




Operating lease liabilities – current

4,967




Current maturities of long-term debt

6,037



1,280


Current portion of finance lease obligations

4,815



5,276


Total current liabilities

437,086



71,351


Long-term debt, net

1,304,284



715,858


Finance leases

6,976



5,250


Operating lease liabilities – noncurrent

33,493




Deferred income taxes

19,597




Derivative and warrants liabilities

27,203



7,012


Total long-term liabilities

1,391,553



728,120


Commitments and contingencies




Stockholders’ Equity (Deficit)




Common stock

25



5


Treasury stock

(2,256)




Additional paid-in capital

1,499,371



434,917


Accumulated deficit

(623,252)



(465,989)


Total stockholders’ equity (deficit)

873,888



(31,067)


Total Liabilities and Stockholders’ Equity (Deficit)

$

2,702,527



$

768,404


 

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


The condensed consolidated statement of cash flows presented below for the six months ended June 30, 2021 includes the cash flows of Custom Truck LP from April 1, 2021 to June 30, 2021. The condensed consolidated statement of cash flows for the six months ended June 30, 2020 represents the cash flows of Nesco Holdings. These statements are not comparable.



Six Months Ended June 30,

(in $000s)

2021


2020

Operating activities




Net loss

$

(157,263)



$

(29,119)


Adjustments to reconcile net loss to net cash flow from operating activities:




Depreciation and amortization

79,163



43,126


Amortization of debt issuance costs

2,239



1,515


Loss on extinguishment of debt

61,695




Provision for losses on accounts receivable

6,177



1,421


Share-based compensation

7,860



1,012


(Gain) loss on sale of rental equipment

2,882



(3,838)


Gain on insurance proceeds – damaged equipment

(650)



(233)


Change in fair value of derivative and warrants

6,880



6,767


Deferred tax expense (benefit)

9,849



979


Changes in assets and liabilities:




Accounts and financing receivables

(13,141)



10,935


Inventories

43,553



(4,313)


Prepaid expenses and other

(2,852)



(152)


Operating lease assets and liabilities

220




Accounts payable

11,937



(6,988)


Accrued expenses and other liabilities

(13)



(385)


Floor plan payables – trade, net

(6,927)




Customer deposits and deferred revenue

5,616



(1,058)


Net cash flow from operating activities

57,225



19,669


Investing activities




Acquisition of business, net of cash acquired

(1,334,285)




Purchases of rental equipment

(65,873)



(55,421)


Proceeds from sale of rental equipment

40,447



19,005


Insurance proceeds – damaged equipment

1,261



2,191


Other investing activities, net

(1,777)



(1,002)


Net cash flow from investing activities

(1,360,227)



(35,227)


Financing activities




Proceeds from debt

947,420




Proceeds from issuance of common stock

883,000




Payment of common stock issuance costs

(6,386)




Payment of premiums on debt extinguishment

(53,469)




Share-based payments

(586)




Borrowings under revolving credit facilities

441,084



37,574


Repayments under revolving credit facilities

(307,055)



(19,074)


Repayments of notes payable

(494,220)



(232)


Finance lease payments

(2,579)



(3,712)


Acquisition of inventory through floor plan payables – non-trade

84,619




Repayment of floor plan payables – non-trade

(130,334)




Payment of debt issuance costs

(34,694)




Net cash flow from financing activities

1,326,800



14,556


Net Change in Cash

23,798



(1,002)


Cash at Beginning of Period

3,412



6,302


Cash at End of Period

$

27,210



$

5,300











Six Months Ended March 31,

(in $000s)

2021


2020

Supplemental Cash Flow Information




Cash paid for interest

$

40,227



$

29,502


Cash paid for income taxes

122



156


Non-Cash Investing and Financing Activities:




Non-cash consideration – acquisition of business

187,935




Transfer of inventory to rental equipment

4,052



5,203


Rental equipment and property and equipment purchases in accounts payable

298



2,316


Rental equipment sales in accounts receivable

2,077



2,453



CUSTOM TRUCK ONE SOURCE, INC.

NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

In our press release and schedules, and on the related conference call, we report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles («GAAP»). We utilize these financial measures to manage our business on a day-to-day basis and some of these measures are commonly used in our industry to evaluate performance. We believe these non-GAAP measures provide  investors expanded insight to assess performance, in addition to the standard GAAP-based financial measures. The press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to. Although management evaluates and presents these non-GAAP measures for the reasons described herein, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income/loss, earnings/loss per share or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Custom Truck LP became a wholly owned subsidiary of the Company on April 1, 2021. The Company’s condensed consolidated financial statements prepared under GAAP include Custom Truck LP as of June 30, 2021 and for the period from April 1, 2021 to June 30, 2021. Information presented for the six months ended June 30, 2021 and for the three and six months ended June 30, 2020 are those of Nesco Holdings. Accordingly, the financial information presented under GAAP for the current periods is not comparable to those of corresponding prior periods. As a result, we have included information on a «combined basis» as further described below, which we believe provides for more meaningful year-over-year comparability.

Pro Forma Financial Information. The unaudited pro forma combined financial information presented on the subsequent pages give effect to the Company’s acquisition of Custom Truck LP, as if the Acquisition had occurred on January 1, 2020, and are presented to facilitate comparisons with our results following the acquisition. This information has been prepared in accordance with Article 11 of the Regulation S-X. Such unaudited pro forma combined financial information also uses the estimated fair value of assets and liabilities on April 1, 2021, the closing date of the Acquisition, and makes the following assumptions: (1) removes acquisition-related costs and charges that were recognized in the Company’s condensed consolidated financial statements in the three and six months ended June 30, 2021 and applies these costs and charges to the three and six months ended June 30, 2020, as if the transactions had occurred on January 1, 2020; (2) removes the loss on the extinguishment of debt that was recognized in the Company’s condensed consolidated financial statements in the three and six months ended June 30, 2021 and applies the charge to the three and six months ended June 30, 2020, as if the debt extinguishment giving rise to the loss had occurred on January 1, 2020; (3) adjusts for the impacts of purchase accounting in the three and six months ended June 30, 2021 and 2020; (4) adjusts interest expense, including amortization of debt issuance costs, to reflect borrowings on the ABL Facility and issuance of the 2029 Senior Secured Notes, as if the funds had been borrowed on January 1, 2020 and used to repay pre-acquisition debt; and, (5) adjusts for the income tax effect using a tax rate of 25%.

Pro Forma Adjusted EBITDA. We present Pro Forma Adjusted EBITDA as if the Acquisition had occurred on January 1, 2020. Refer to the reconciliation of pro forma combined net loss to Pro Forma Adjusted EBITDA for the three and six-month periods ended June 30, 2021 and 2020 in this press release.

Combined Financial Results by Segment. We present financial results for each of our three segments on a combined basis, as if the Acquisition had occurred on January 1, 2020. This combined presentation differs from the presentation of pro forma financial information described above, in that our Combined Financial Results by Segment presentation excludes the impact of purchase accounting on segment revenues, cost of revenues and gross profit. Additionally, GAAP requires the results of acquired businesses to be included with those of the acquiring entity only from the date of acquisition; therefore, our presentation of Combined Financial Results by Segment for current and comparable prior periods (e.g. periods prior to the Acquisition) is a Non-GAAP basis of presentation. Because of the complimentary nature of the businesses of Custom Truck LP and Nesco Holdings, as well as the disparity in measures such as total revenue and total assets between Custom Truck LP and Nesco Holdings, we believe presenting the two entities on a combined basis for the three and six months ended June 30, 2021 and 2020 provides useful information to the users of our financial statements. Refer to the reconciliation of the combined segment data to the most comparable GAAP measure for the three and six months ended June 30, 2021 and 2020 in this press release.  

Adjusted Net Working Capital. We present Adjusted Net Working Capital, which we define as total current assets excluding cash and cash equivalents, trade and financing receivables, and mark-up to inventory values from purchase accounting, less non-interest bearing current liabilities. The presentation of Adjusted Net Working Capital in this press release compares the measure of the Company as of June 30, 2021, which includes Custom Truck LP, to the same measure as if Nesco Holdings and Custom Truck LP had been combined on March 31, 2021 without further adjustments, which is a Non-GAAP basis of presentation.

CUSTOM TRUCK ONE SOURCE, INC.

SCHEDULE 1 — ADJUSTED EBITDA RECONCILIATION

(unaudited)


The Adjusted EBITDA Reconciliation presented below for the three and six months ended June 30, 2021 include the results of Custom Truck LP from April 1, 2021 to June 30, 2021. The Adjusted EBITDA Reconciliation for the three and six months ended June 30, 2020 represent those of Nesco Holdings and are not comparable.



Three Months Ended June 30,


Six Months Ended June 30,

(in $000s)

2021

Actual


2020

Actual


2021

Actual


2020

Actual

Net loss

$

(129,356)



$

(13,150)



$

(157,263)



$

(29,119)


Interest expense

17,602



15,949



32,508



31,963


Income tax expense (benefit)

6,564



(1,063)



10,654



(333)


Depreciation and amortization

60,062



21,358



79,163



43,126


EBITDA

(45,128)



23,094



(34,938)



45,637


Adjustments:








Non-cash purchase accounting impact (1)

21,387



178



21,440



1,095


Transaction and process improvement costs (2)

24,601



1,639



35,345



3,718


Loss on extinguishment of debt (3)

61,695





61,695




Sales-type lease adjustment (4)

(510)





(510)




Share-based payments (5)

7,162



453



7,860



1,012


Change in fair value of derivative and warrants (6)

1,034



804



6,880



6,767


  Adjusted EBITDA

$

70,241



$

26,168



$

97,772



$

58,229




Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes, depreciation and amortization, and further adjusted for non-cash purchase accounting impact, transaction and process improvement costs, including business integration expenses, share-based payments, the change in fair value of derivative instruments, sales-type lease adjustment, and other special charges that are not expected to recur. This non-GAAP measure is subject to certain limitations.



(1)

Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment and inventory sold. The equipment and inventory acquired received a purchase accounting step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to our credit agreement.

(2)

Represents transaction costs related to acquisitions of businesses, including post-acquisition integration costs. These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses.

(3)

Loss on extinguishment of debt represents a special charge, which is not expected to recur. Such charges are adjustments pursuant to our credit agreement.

(4)

Represents the adjustment for the impact of sales-type lease accounting for certain leases containing rental purchase options (or «RPOs»), as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. This adjustment is made pursuant to our credit agreement.

(5)

Represents non-cash stock compensation expense associated with the issuance of stock options and restricted stock units.

(6)

Represents the charge to earnings for our interest rate collar and the change in fair value of the liability for warrants.

 



CUSTOM TRUCK ONE SOURCE, INC.

SCHEDULE 2 — RECONCILIATION OF COMBINED NON-GAAP FINANCIAL RESULTS BY SEGMENT

(unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Equipment Rental Solutions (ERS)








Rental revenue, as reported

(a)


$

43,025



$

139,811



$

90,078


Add: Custom Truck LP rental revenue (b)

(a)


49,102



51,973



104,738


Rental revenue, non-GAAP

(a)


$

92,127



$

191,784



$

194,816


Rental equipment sales, as reported

(a)


$

4,982



$

43,040



$

14,075


Add: Custom Truck LP equipment sales (b)

(a)


25,181



48,673



68,172


Equipment sales revenue, non-GAAP

(a)


$

30,163



$

91,713



$

82,247


Cost of revenue, as reported

$

62,053



$

16,772



$

84,330



$

37,438


Add: Custom Truck LP cost of revenue (b)



30,199



49,120



76,411


Deduct: purchase accounting (c)

(13,040)





(13,040)




Cost of revenue, non-GAAP

$

49,013



$

46,971



$

120,410



$

113,849


Depreciation of rental equipment, as reported

$

42,192



$

18,559



$

59,077



$

37,535


Add: Custom Truck LP depreciation of rental equipment (b)



24,443



22,757



49,568


Deduct: purchase accounting (c)

(4,531)





(4,531)




Depreciation of rental equipment, non-GAAP

$

37,661



$

43,002



$

77,303



$

87,103


Truck and Equipment Sales (TES)








Revenue, as reported

(a)


$

5,418



$

222,622



$

12,995


Add: Custom Truck LP revenue (b)

(a)


132,212



197,283



286,365


Revenue, non-GAAP

(a)


$

137,630



$

419,905



$

299,360


Cost of equipment sales, as reported

$

194,810



$

4,777



$

201,735



$

11,431


Add: Custom Truck LP cost of equipment sales (b)



117,257



176,476



253,797


Deduct: purchase accounting (c)

(5,314)





(5,314)




Cost of equipment sales, non-GAAP

$

189,496



$

122,034



$

372,897



$

265,228


Aftermarket Parts and Services (APS)








Revenue, as reported

(a)


$

15,056



$

47,937



$

33,076


Add: Custom Truck LP revenue (b)

(a)


19,530



18,543



38,846


Revenue, non-GAAP

(a)


$

34,586



$

66,480



$

71,922


Cost of revenue, as reported

$

29,366



$

12,031



$

41,359



$

26,075


Add: Custom Truck LP cost of revenue (b)



15,763



15,082



31,976


Deduct: purchase accounting (c)

(2,491)





(2,491)




Cost of revenue, non-GAAP

$

26,875



$

27,794



$

53,950



$

58,051




(a)

Revenue of Custom Truck LP has been included since the date of the Acquisition.

(b)

Includes financial results of Custom Truck LP for the three and six months ended June 30, 2021 and 2020; excludes the impact of purchase accounting.

(c)

Consolidated GAAP cost of revenue for the three and six months ended June 30, 2021 includes the impact of purchase accounting.

 

CUSTOM TRUCK ONE SOURCE, INC.

SCHEDULE 3 — ADJUSTED NET WORKING CAPITAL

(unaudited)





Combined1

March 31, 2021

(in $000s)

June 30, 2021


Current Assets




Cash and cash equivalents

$

27,210



$

8,429


Accounts receivable, net

151,497



150,458


Financing receivables, net

22,334



18,665


Inventory

414,461



443,500


Prepaid expenses and other

15,639



24,049


Total current assets

631,141



645,101


Current Liabilities




Accounts payable

95,246



86,960


Accrued expenses

52,395



55,793


Deferred revenue and customer deposits

21,300



14,839


Floor plan payables – trade

84,063



90,990


Floor plan payables – non-trade

168,263



213,978


Operating lease liabilities – current

4,967




Current maturities of long-term debt

6,037



13,456


Current portion of finance lease obligations

4,815



5,059


Total current liabilities

437,086



481,075


Working capital

194,055



164,026


Adjustments:




Cash and cash equivalents

(27,210)



(8,429)


Financing receivables, net

(22,334)



(18,665)


Impact of purchase accounting inventory mark-up

(9,883)




Current maturities of long-term debt

6,037



13,456


Current portion of finance lease obligations

4,815



5,059


Accrued interest expense

12,836



8,293


Adjusted net working capital

$

158,316



$

163,740


Adjusted Net Working Capital is a non-GAAP financial measure defined by the Company as total current assets excluding cash and cash equivalents, trade and financing receivables, mark-up to inventory values from purchase accounting, less non-interest bearing current liabilities. This non-GAAP measure is subject to certain limitations.

1 – The following table reconciles consolidated balance sheets of Nesco Holdings and Custom Truck LP as of March 31, 2021. Such information excludes the effects of the Acquisition and related financing transactions and, thus, is presented on a non-GAAP basis. This non-GAAP presentation is subject to certain limitations.


Nesco Holdings

March 31, 2021


Custom Truck LP

March 31, 2021


Combined

March 31, 2021

(in $000s)



Current Assets






Cash and cash equivalents

$

3,191



$

5,238



$

8,429


Accounts receivable, net

54,415



96,043



150,458


Financing receivables, net



18,665



18,665


Inventory

33,665



409,835



443,500


Prepaid expenses and other

13,075



10,974



24,049


Total current assets

104,346



540,755



645,101


Current Liabilities






Accounts payable

27,972



58,988



86,960


Accrued expenses

30,156



25,637



55,793


Deferred revenue and customer deposits

776



14,063



14,839


Floor plan payables – trade



90,990



90,990


Floor plan payables – non-trade



213,978



213,978


Current maturities of long-term debt

1,111



12,345



13,456


Current portion of finance lease obligations

5,059





5,059


Total current liabilities

65,074



416,001



481,075


 

CUSTOM TRUCK ONE SOURCE, INC.

SCHEDULE 4 — SUPPLEMENTAL PRO FORMA INFORMATION

(unaudited)


Pro Forma Combined Statements of Operations — Three Months Ended June 30, 2021


(in $000s)

Custom Truck

One Source, Inc.


Pro Forma

Adjustmentsa


Pro Forma

Combined

Rental revenue

$

98,539



$



$

98,539


Equipment sales

247,675





247,675


Parts sales and services

28,897





28,897


Total revenue

375,111





375,111


Cost of revenue

285,242



(9,388)


b

275,854


Depreciation of rental equipment

43,179





43,179


Total cost of revenue

328,421



(9,388)



319,033


Gross profit

46,690



9,388



56,078


Selling, general and administrative

51,264





51,264


Amortization

13,332





13,332


Non-rental depreciation

951





951


Transaction expenses and other

24,575



(24,575)


c


Total operating expenses

90,122



(24,575)



65,547


Operating income (loss)

(43,432)



33,963



(9,469)


Loss on extinguishment of debt

61,695



(61,695)


d


Interest expense, net

19,723





19,723


Finance and other expense (income)

(2,058)





(2,058)


Total other expense

79,360



(61,695)



17,665


Income (loss) before taxes

(122,792)



95,658



(27,134)


Taxes

6,564



23,915


e

30,479


Net income (loss)

$

(129,356)



$

71,743



$

(57,613)




a.

The pro forma adjustments give effect to the following as if they occurred on January 1, 2020: (i) the Acquisition (ii) and extinguishment of Nesco Holdings’ 2019 Credit Facility and its Senior Secured Notes due 2024 repaid in connection with the Acquisition. The adjustments also give effect to transaction expenses directly attributable to the Acquisition.

b. 

Represents the elimination from cost of revenue, the run-off of the estimated step-up in fair value of inventory acquired that was recognized in the Company’s consolidated financial statements for the three months ended June 30, 2021. The impact of the step-up is reflected as an adjustment to the comparable prior period (e.g. June 30, 2020) as if the Acquisition had occurred on January 1, 2020.

c. 

Represents the elimination of transaction expenses recognized in the Company’s consolidated financial statements for the three months ended June 30, 2021. The expenses were directly attributable to the Acquisition and are reflected as adjustments to the comparable prior period (e.g. June 30, 2020) as if the Acquisition had occurred on January 1, 2020.

d. 

Represents the elimination of the loss on extinguishment of debt recognized in the Company’s consolidated financial statements for the three months ended June 30, 2021 as though the repayment of the 2019 Credit Facility and 2024 Secured Notes had occurred on January 1, 2020.

e. 

Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%.

 

Pro Forma Combined Statements of Operations — Three Months Ended June 30, 2020


(in $000s)

Nesco Holdings


Custom Truck LP


Pro Forma

Adjustmentsa


Pro Forma

Combined

Rental revenue

$

46,984



$

49,103



$



$

96,087


Equipment sales

10,400



157,392





167,792


Parts sales and services

11,097



19,530





30,627


Total revenue

68,481



226,025





294,506


Cost of revenue

32,443



163,219



8,858


b

204,520


Depreciation of rental equipment

19,696



24,442



2,132


c

46,270


Total cost of revenue

52,139



187,661



10,990



250,790


Gross profit

16,342



38,364



(10,990)



43,716


Selling, general and administrative

11,754



27,341





39,095


Amortization

772



1,985



3,595


d

6,352


Non-rental depreciation

28



1,190



(354)


d

864


Transaction expenses and other

1,269







1,269


Total operating expenses

13,823



30,516



3,241



47,580


Operating income (loss)

2,519



7,848



(14,231)



(3,864)


Interest expense, net

15,949



13,237



(10,529)


e

18,657


Finance and other expense (income)

783



(2,713)





(1,930)


Total other expense

16,732



10,524



(10,529)



16,727


Income (loss) before taxes

(14,213)



(2,676)



(3,702)



(20,591)


Taxes

(1,063)





(926)


f

(1,989)


Net income (loss)

$

(13,150)



$

(2,676)



$

(2,776)



$

(18,602)




a.

The pro forma adjustments give effect to the following as if they occurred on January 1, 2020: (i) the Acquisition, (ii) the extinguishment of Nesco Holdings’ 2019 Credit Facility and its Senior Secured Notes due 2024 repaid in connection with the Acquisition and (iii) the extinguishment of the outstanding borrowings of Custom Truck LP’s credit facility and term loan that was repaid on the closing of the Acquisition.

b. 

Represents adjustments to cost of revenue for (i) the run-off of the estimated step-up in fair value of inventory acquired and (ii) a reduction to depreciation expense for the difference between historical depreciation and estimated depreciation of the preliminary fair value of the property and equipment.

c. 

Represents the adjustment for depreciation of rental fleet relating to the estimated mark-up to fair value from purchase accounting as a result of the Acquisition.

d. 

Represents the differential in other amortization and depreciation related to the estimated fair value of the identified intangible assets from purchase accounting as a result of the Acquisition.

e. 

Reflects the differential in interest expense, inclusive of amortization of capitalized debt issuance costs, related to the Company’s debt structure after the Acquisition as though the following had occurred on January 1, 2020: (i) borrowings under the ABL Facility; (ii) repayment of the 2019 Credit Facility; (iii) repayment of 2024 Secured Notes; (iv) repayment of Custom Truck LP’s borrowings under its revolving credit and term loan facility; and, (v) borrowing under the 2029 Secured Notes.

f. 

Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%.

 

Pro Forma Combined Statements of Operations — Six Months Ended June 30, 2021


(in $000s)

Nesco Holdings


Custom Truck LP


Pro Forma

Adjustmentsa


Pro Forma

Combined

Rental revenue

$

90,561



$

108,240



$



$

198,801


Equipment sales

27,572



484,045





511,617


Parts sales and services

23,226



36,237





59,463


Total revenue

141,359



628,522





769,881


Cost of revenue

74,924



470,387



(1,342)


b

543,969


Depreciation of rental equipment

33,358



45,891



7,257


c

86,506


Total cost of revenue

108,282



516,278



5,915



630,475


Gross profit

33,077



112,244



(5,915)



139,406


Selling, general and administrative

29,943



67,798





97,741


Amortization

8,508



1,990



9,170


d

19,668


Non-rental depreciation

42



2,241



(894)


d

1,389


Transaction expenses and other

28,539



11,738



(40,277)


e


Total operating expenses

67,032



83,767



(32,001)



118,798


Operating income (loss)

(33,955)



28,477



26,086



20,608


Loss on extinguishment of debt

61,695





(61,695)


f


Interest expense, net

32,054



12,567



(9,042)


g

35,579


Finance and other expense (income)

6,929



(5,476)





1,453


Total other expense

100,678



7,091



(70,737)



37,032


Income (loss) before taxes

(134,633)



21,386



96,823



(16,424)


Taxes

10,084



570



24,206


h

34,860


Net income (loss)

$

(144,717)



$

20,816



$

72,617



$

(51,284)




a.

The pro forma adjustments give effect to the following as if they occurred on January 1, 2020: (i) the Acquisition, (ii) the extinguishment of Nesco Holdings’ 2019 Credit Facility and its Senior Secured Notes due 2024 repaid in connection with the Acquisition and (iii) the extinguishment of the outstanding borrowings of Custom Truck LP’s credit facility and term loan that was repaid on the closing of the Acquisition.

b. 

Represents adjustments to cost of revenue for a reduction to depreciation expense for the difference between historical depreciation and estimated depreciation of the preliminary fair value of the property and equipment.

c. 

Represents the adjustment for depreciation of rental fleet relating to the estimated mark-up to fair value from purchase accounting as a result of the Acquisition.

d. 

Represents the differential in other amortization and depreciation related to the estimated fair value of the identified intangible assets from purchase accounting as a result of the Acquisition.

e. 

Represents the elimination of transaction expenses recognized in the Company’s consolidated financial statements for the six months ended June 30, 2021. The expenses were directly attributable to the Acquisition and are reflected as adjustments to the comparable prior period (e.g. June 30, 2020) as if the Acquisition had occurred on January 1, 2020.

f. 

Represents the elimination of the loss on extinguishment of debt recognized in the Company’s consolidated financial statements for the six months ended June 30, 2021 as though the repayment of the 2019 Credit Facility and 2024 Secured Notes had occurred on January 1, 2020.

g. 

Reflects the differential in interest expense, inclusive of amortization of capitalized debt issuance costs, related to the Company’s debt structure after the Acquisition as though the following had occurred on January 1, 2020: (i) borrowings under the ABL Facility; (ii) repayment of the 2019 Credit Facility; (iii) repayment of 2024 Secured Notes; (iv) repayment of Custom Truck LP’s borrowings under its revolving credit and term loan facility; and, (v) borrowing under the 2029 Secured Notes.

h. 

Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%.

 

Pro Forma Combined Statements of Operations — Six Months Ended June 30, 2020


(in $000s)

Nesco Holdings


Custom Truck LP


Pro Forma

Adjustmentsa


Pro Forma

Combined

Rental revenue

$

97,978



$

104,738



$



$

202,716


Equipment sales

27,070



354,537





381,607


Parts sales and services

25,176



38,846





64,022


Total revenue

150,224



498,121





648,345


Cost of revenue

72,671



362,184



17,719


b

452,574


Depreciation of rental equipment

39,808



49,568



3,580


c

92,956


Total cost of revenue

112,479



411,752



21,299



545,530


Gross profit

37,745



86,369



(21,299)



102,815


Selling, general and administrative

24,193



59,170





83,363


Amortization

1,463



4,398



6,762


d

12,623


Non-rental depreciation

53



2,375



(706)


d

1,722


Transaction expenses and other

2,721





40,277


e

42,998


Total operating expenses

28,430



65,943



46,333



140,706


Operating income (loss)

9,315



20,426



(67,632)



(37,891)


Loss on extinguishment of debt





61,695


f

61,695


Interest expense, net

31,963



32,937



(24,676)


g

40,224


Finance and other expense (income)

6,804



(2,922)





3,882


Total other expense

38,767



30,015



37,019



105,801


Income (loss) before taxes

(29,452)



(9,589)



(104,651)



(143,692)


Taxes

(333)





(26,163)


h

(26,496)


Net income (loss)

$

(29,119)



$

(9,589)



$

(78,488)



$

(117,196)




a.

The pro forma adjustments give effect to the following as if they occurred on January 1, 2020: (i) the Acquisition, (ii) the extinguishment of Nesco Holdings’ 2019 Credit Facility and its Senior Secured Notes due 2024 repaid in connection with the Acquisition and (iii) the extinguishment of the outstanding borrowings of Custom Truck LP’s credit facility and term loan that was repaid on the closing of the Acquisition.

b. 

Represents adjustments to cost of revenue for (i) the run-off of the estimated step-up in fair value of inventory acquired and (ii) a reduction to depreciation expense for the difference between historical depreciation and estimated depreciation of the preliminary fair value of the property and equipment.

c. 

Represents the adjustment for depreciation of rental fleet relating to the estimated mark-up to fair value from purchase accounting as a result of the Acquisition.

d. 

Represents the differential in other amortization and depreciation related to the estimated fair value of the identified intangible assets from purchase accounting as a result of the Acquisition.

e. 

Represents transaction expenses directly attributable to the Acquisition as if the Acquisition had occurred on January 1, 2020.

f. 

Represents the loss on extinguishment of debt as though the repayment of the 2019 Credit Facility and 2024 Secured Notes had occurred on January 1, 2020.

g. 

Reflects the differential in interest expense, inclusive of amortization of capitalized debt issuance costs, related to the Company’s debt structure after the Acquisition as though the following had occurred on January 1, 2020: (i) borrowings under the ABL Facility; (ii) repayment of the 2019 Credit Facility; (iii) repayment of 2024 Secured Notes; (iv) repayment of Custom Truck LP’s borrowings under its revolving credit and term loan facility; and, (v) borrowing under the 2029 Secured Notes.

h. 

Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%.

 

Reconciliation of Pro Forma Net Loss to Pro Forma Adjusted EBITDA

The following table provides a reconciliation of pro forma net loss to pro forma Adjusted EBITDA:



Three Months Ended

June 30,


Six Months Ended

June 30,

(in $000s)

2021


2020


2021


2020

Net income (loss)

$

(57,613)



$

(18,602)



$

(51,284)



$

(117,196)


Interest expense

17,602



13,939



30,979



29,442


Income tax expense

30,479



(1,989)



34,860



(26,496)


Depreciation and amortization

60,062



55,957



111,887



112,223


EBITDA

50,530



49,305



126,442



(2,027)


Adjustments:








Non-cash purchase accounting impact

11,999



9,781



313



20,387


Transaction and process improvement costs

26



2,307



409



48,548


Loss on extinguishment of debt







61,695


Sales-type lease adjustment

(510)



886



645



256


Share-based payments

7,162



915



8,417



1,921


Change in fair value of derivative and warrants

1,034



804



6,880



6,767


Adjusted EBITDA

$

70,241



$

63,998



$

143,106



$

137,547


 

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SOURCE Custom Truck One Source, Inc.