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nescospecialty.com

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About Nesco Holdings

Nesco provides specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America. Nesco 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.

Nesco Holdings Headquarters Location

3112 East State Road 124

Bluffton, Indiana, 46714,

United States

8002520043

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Latest Nesco Holdings News

16:05 EDT Custom Truck One Source, Inc. Reports Strong Quarterly Gross Profit Growth

Aug 9, 2022

News provided by Share this article Share this article KANSAS CITY, Mo., Aug. 9, 2022 /PRNewswire/ -- Custom Truck One Source, Inc. ("CTOS," "we," "our," or the "Company") (NYSE: CTOS ), 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, 2022. Our results are reported for our three segments: Equipment Rental Solutions ("ERS"), Truck and Equipment Sales ("TES") and Aftermarket Parts and Services ("APS"). ERS encompasses our core rental business, inclusive of sales of rental equipment to our customers. TES encompasses our specialized truck and equipment production and sales activities. APS encompasses sales and rentals of parts, tools and other supplies to our customers, as well as our aftermarket repair service operations. CTOS Second Quarter Highlights Total quarterly revenue of $362.1 million, with growth in rental revenue of 13.7% from continued strong rental demand Quarterly gross profit improvement of $36.1 million, or 77.3%, to $82.8 million compared to $46.7 million for second quarter 2021 Gross profit, excluding rental equipment depreciation, increased 27.0% to $126.1 million compared to $99.3 million pro forma second quarter 2021 Quarterly net income of $13.6 million, including $6.0 million related to the continuing post-acquisition integration related expenses, compared to a net loss of $129.4 million in second quarter 2021 Quarterly Adjusted EBITDA of $85.4 million compared to $70.2 million in second quarter 2021 Updating full-year revenue and Adjusted EBITDA guidance Announced appointment of Christopher J. Eperjesy as Chief Financial Officer Announced a stock repurchase program for up to $30 million of the Company's common stock "Our entire team delivered strong second quarter results despite the continued headwinds stemming from supply chain constraints and inflation. I am proud that we achieved record production levels, completing more vehicles in the second quarter of 2022 than any other quarter in our history," said Fred Ross, Chief Executive Officer of CTOS. "While we are disappointed by the limitations caused by certain constrained production inputs, our second quarter results and the improving production momentum position us well for the second half of the year. We continue to focus on operational optimization so we can fully realize the benefits of our scale and our one-stop-shop business model. Custom Truck's commitment to our customers remains unmatched and we are steadfastly focused on meeting continued very strong customer demand across all three of our business segments." Summary Actual Financial Results $                  91,477 1 - 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 United States generally accepted accounting principles in the U.S. ("GAAP") is included at the end of this press release. Summary Pro Forma Financial Results1 The summary combined financial data below for the six months ended June 30, 2021 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 (the "Acquisition") 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) $                143,106 1 - The above pro forma information is presented for the six-month period ended June 30, 2021, in accordance with Article 11 of Regulation S-X. The information presented gives effect to the following as if they occurred on January 1, 2020: (i) the Acquisition, (ii) borrowings under the senior secured notes and the asset-based credit facility used to repay certain debt in connection with the Acquisition, (iii) extinguishment of Custom Truck LP's prior credit facility and term loan borrowings assumed in the Acquisition and immediately repaid on April 1, 2021, and (iv) extinguishment of Nesco Holdings' prior credit facility and its senior secured notes 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 GAAP is included at the end of this press release. Summary Actual Financial Results by Segment Segment performance is presented below for the three months ended June 30, 2022 and 2021 and March 31, 2022, and for the six months ended June 30, 2022 and 2021. Segment performance for the six months ended June 30, 2021, includes Custom Truck LP from April 1, 2021 to June 30, 2021. Equipment Rental Solutions (a) Ending OEC — original equipment cost ("OEC") is the original equipment cost of units at a given point in time. (b) Average OEC on rent — Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period. (c) 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. (d) OEC on rent yield ("ORY") — a measure of return realized by our 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. (e) 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. Sales order backlog should not be considered an accurate measure of future net sales. Management Commentary Total revenue in the second quarter of 2022 was characterized by strong customer demand for rental equipment and for parts sales and service. Second quarter 2022 rental revenue increased 13.7% to $112.1 million, compared to $98.5 million in the second quarter of 2021, reflecting our continued expansion of our rental fleet and pricing gains. Parts sales and service revenue increased 9.2% to $31.5 million, compared to $28.9 million in the second quarter of 2021. Equipment sales decreased 11.8% in the second quarter of 2022 to $218.5 million, compared to $247.7 million in the second quarter of 2021 impacted by continued supply chain challenges. In our ERS segment, rental revenue in the second quarter of 2022 was $108.1 million compared to $95.1 million in the second quarter of 2021, a 13.7% increase. Fleet utilization remained relatively steady at 83% compared to 81% in the second quarter of 2021. Gross profit (excluding depreciation) in the segment was $87.0 million, compared to $65.6 million in the second quarter of 2021, representing strong growth over the prior year period. Revenue in our TES segment declined 15.7%, to $181.3 million in the second quarter of 2022, from $215.1 million in the second quarter of 2021, as a result of supply chain challenges relating to the segment's inventory suppliers. Gross profit improved by 33.6% to $27.1 million in the second quarter of 2022 compared to $20.3 million in the second quarter of 2021. Despite the impact on second quarter sales volume, TES continued to see strength in product demand as sales order backlog grew by 13.2% to $664.0 million compared to the end of the first quarter of 2022, and is up almost 200% from the second quarter of 2021. APS segment revenue experienced an increase of $3.1 million, or 9.7%, in the second quarter of 2022, to $35.5 million, as compared to $32.4 million in the second quarter of 2021, driven by growth in volume of parts sales and tools and accessories rentals. Gross profit margin in the segment saw significant improvement from the impact of operational improvements in our distribution network, pricing gains and increased rentals. Net income was $13.6 million in the second quarter of 2022 compared to a net loss of $129.4 million for the second quarter of 2021. Second quarter 2022 includes mark-to-market income of $13.1 million on the Company's stock purchase warrants. Second quarter 2021 included significant expenses associated with the acquisition of Custom Truck LP, including loss on extinguishment of debt and other transaction expenses. This represents our first positive net income quarter since the merger was announced in April of 2021. Adjusted EBITDA for the second quarter of 2022 was $85.4 million, compared to $70.2 million for the second quarter of 2021. The increase in Adjusted EBITDA was largely driven by growth in rental and pricing gains that contributed to margin expansion in all three of our segments. CTOS had cash and cash equivalents of $28.5 million as of June 30, 2022, and debt outstanding net of cash and cash equivalents ("net debt"), including finance leases, was $1,361.4 million as of June 30, 2022. Our net leverage ratio, which is net debt divided by Adjusted EBITDA, was 3.81 as of June 30, 2022. Availability under the senior secured credit facility was $310.2 million as of June 30, 2022. For the six months ended June 30, 2022, we added $127.2 million to our rental fleet. 2022 Outlook Update Based on year-to-date performance, continued market strength, our current sales order backlog, and the ongoing supply chain environment, we are updating our full-year revenue and Adjusted EBITDA guidance at this time. Supply chain challenges are primarily impacting our ability to deliver new vehicles to TES customers. We are reaffirming guidance for the ERS and APS segments. 2022 Consolidated Outlook $150 million 1 - 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. Recent Events As we announced last week, the Company's Board of Directors appointed Christopher J. Eperjesy to serve as Chief Financial Officer, effective August 15, 2022. Mr. Eperjesy succeeds Todd Barrett, who will continue his role as Chief Accounting Officer. Last week, we also announced that our Board of Directors authorized a stock repurchase program for up to $30 million of the Company's common stock. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, or otherwise, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of its common stock, and the repurchase program may be suspended or discontinued at any time at the Company's discretion. CONFERENCE CALL INFORMATION The Company has scheduled a conference call at 5:00 P.M. Eastern Time on August 9, 2022, to discuss its second quarter 2022 financial results. A webcast will be publicly available at: investors.customtruck.com. To listen by phone, please dial 1-855-327-6837 or 1-631-891-4304. A replay of the call will be available until midnight, Tuesday, August 16, 2022, by dialing 1-844-512-2921 or 1-412-317‑6671 and entering passcode 10019703. 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 9,600 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, as amended, 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 the Nesco Holdings and Custom Truck LP businesses and fully realizing the anticipated benefits of the Acquisition; as well as significant transaction and transition costs that we will continue to incur following the Acquisition; material disruptions to our operation and manufacturing locations as a result of public health concerns, including the COVID-19 pandemic, equipment failures, natural disasters, work stoppages, power outages or other reasons; the cyclical nature 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; our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner; and our inability to manage our rental equipment in an effective manner; any further increase in the cost of new equipment that we purchase for use in our rental fleet or for our sales inventory; disruptions in our supply chain as a result of the ongoing COVID-19 pandemic; aging or obsolescence of our existing equipment, and the fluctuations of market value thereof; our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries; e; 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 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; potential impairment charges; 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, the environment, government contracts, and data privacy and data security; the interest of our majority stockholder, which may not be consistent with the other stockholders; 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; our inability to attract and retain highly skilled personnel and our inability to retain our senior management; our inability to generate cash, which could lead to a default; significant operating and financial restrictions imposed by the Indenture and the ABL Credit Agreement; increases in unionization rate in our workforce; changes in interest rates, which could increase our debt service obligations on the variable rate indebtedness and decrease our net income and cash flows; and the phase-out of LIBOR and uncertainty as to its replacement. 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, 2021, and its subsequent reports filed with the Securities and Exchange Commission. 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 (844) 403-6138 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 from April 1, 2021. Accordingly, the financial information presented under GAAP for the six-month period ended June 30, 2022 is not comparable to the financial information of the six-month period ended June 30, 2021. As a result, we have included information on a "pro forma 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 is presented to facilitate comparisons with our results following the Acquisition. This information has been prepared in accordance with Article 11 of 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 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; (4) adjusts interest expense, including amortization of debt issuance costs, to reflect borrowings on the ABL Facility and issuance of the 2029 Secured Notes, as if the funds had been borrowed and the 2029 Secured Notes had been issued 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 income (loss) to Pro Forma Adjusted EBITDA for the three and six-month period ended June 30, 2021 in this press release. CUSTOM TRUCK ONE SOURCE, INC. SCHEDULE 1 — ADJUSTED EBITDA RECONCILIATION (unaudited) The Adjusted EBITDA Reconciliation for the six months ended June 30, 2021 includes the results of Custom Truck LP from April 1, 2021 to June 30, 2021. Three Months Ended June 30, Six Months Ended June 30, Three Months $             91,477 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, which are recognized within operating expenses in our consolidated Statements of Comprehensive Net Income (Loss). 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. Three Months Ended June 30, Six Months Ended June 30, Three Months Ended

Nesco Holdings Acquisitions

2 Acquisitions

Nesco Holdings acquired 2 companies. Their latest acquisition was Custom Truck One Source on April 01, 2021.

Date

Investment Stage

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Total Funding

Note

Sources

4/1/2021

Private Equity

$99M

$45.38M

Acquired

8

9/23/2019

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$99M

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10

Date

4/1/2021

9/23/2019

Investment Stage

Private Equity

Companies

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Valuation

$99M

$99M

Total Funding

$45.38M

Note

Acquired

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Sources

8

10

Nesco Holdings Partners & Customers

2 Partners and customers

Nesco Holdings has 2 strategic partners and customers. Nesco Holdings recently partnered with We4Sea on August 8, 2017.

Date

Type

Business Partner

Country

News Snippet

Sources

8/9/2017

Vendor

Netherlands

We4Sea, efficiency solutions for ships

Nescos has selected We4Sea to monitor and report CO2-emissions for their fleet .

1

7/12/2016

Vendor

United States

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10

Date

8/9/2017

7/12/2016

Type

Vendor

Vendor

Business Partner

Country

Netherlands

United States

News Snippet

We4Sea, efficiency solutions for ships

Nescos has selected We4Sea to monitor and report CO2-emissions for their fleet .

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Sources

1

10

Nesco Holdings Team

1 Team Member

Nesco Holdings has 1 team member, including former Controller, Wesley LaRue.

Name

Work History

Title

Status

Wesley LaRue

Controller

Former

Name

Wesley LaRue

Work History

Title

Controller

Status

Former

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